Mastering Variability: Your Secret Weapon in Mining
Business Science Corporation
BSC is a 4th Industrial Revolution Boutique, Global Consulting firm, built, to enhance the prosperity of our clients
In the mining industry, the importance of variability in planning is often underestimated, yet it is crucial for creating realistic and achievable plans. This article highlights why understanding and incorporating variability is essential, particularly for group-level mining executives who are responsible for strategic planning and performance evaluation.
Budgeting and Its Importance
Budgeting serves as a vital tool for expressing strategic plans, setting priorities, and evaluating the achievement of objectives through measurable targets. In integrated business planning, budgeting is not just about numbers; it is a critical process that drives operational performance and sets clear expectations for both internal teams and stakeholders.
Budgets are created by merging data from various sources across the business, including actual performance data, nameplate capacities, and external benchmarking data. Factors such as the life of mine stage, ore body properties, economic climate, and operational efficiencies all play a significant role in shaping a realistic budget.
The Role of Operational Planning
Operational planning relies heavily on the budget to establish realistic targets. From the drill and blast process to ore handling and processing, variability is an often overlooked issue. Consider a system with two successive processes, each with an established capacity. The overall output of this system typically falls short of the combined capacities, despite assumptions to the contrary. Yet, many budgets set targets based on these established capacities, making them significantly less realistic.
This disconnect can have severe consequences, including eroding shareholder trust, placing undue stress on employees to meet unrealistic targets, and misdirecting efforts to identify and resolve performance issues.
Identifying and Addressing Issues
For instance, one process may underperform consistently, while another might perform better overall but with high variability. Determining the actual bottleneck is crucial for targeting continuous improvements effectively. Setting realistic targets for each process requires a deep understanding of their performance variability.
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At BSC, we employ analytical methods, such as Monte Carlo simulation, combined with robust variability data to enhance process reliability and confidence in plan achievability. Incorporating variability also allows businesses to integrate risk into their budgets, enabling methodical evaluation of plan aggressiveness and justifying budget choices with solid analytical underpinning.
Reflecting on Your Approach
How does your business view or utilize variability in planning and budgeting? How much consideration is given to it? Is the data you collect sufficient to derive high-quality variability metrics?
Understanding and incorporating variability in budgeting and operational planning can lead to more realistic targets, improved stakeholder confidence, and better overall performance. It’s time to re-evaluate your approach and ensure that variability is not just an afterthought but a fundamental aspect of your planning process.
By joining this conversation and sharing our collective experiences, we can better navigate these challenges and work towards a more efficient and innovative future for mining. Let's connect, share, and improve together.
About Business Science Corporation (BSC):
Business Science Corporation (BSC) is a leader in innovative business solutions, committed to transforming industries through cutting-edge technologies and expert consulting. Founded with a vision to drive sustainable growth and operational excellence, BSC specializes in providing comprehensive services in productivity science, data analytics, and digital transformation. Our dedicated team of professionals collaborates with clients across diverse sectors, including mining, manufacturing, and finance, to deliver tailored solutions that address complex challenges and foster long-term success.