No matter the industry in which it participates, companies strive to decrease operational costs, thereby enabling them to decrease the prices of their commodities.

The Australian mining sector is experiencing an enormous amount of pressure to reduce expenses in the face of falling mineral and resource demand. Cost-cutting can only get a company so far. Unless this measure coincides with significant productivity improvements, an operation may be forced to shut down.

A report released by the Australian Productivity Commission (PC) in 2015 noted that multi-factor productivity (MFP) growth declined 46 per cent between 2000-01 and 2012-13. The PC did note that output growth increased 9.1 per cent but capital input rose 11.8 per cent in 2013-14. 

The global mining sector isn't ignorant of the productivity issues it has been experiencing. What are companies doing to improve the situation?

1. Process integration and optimisation

Fostering productivity growth entails attaining a comprehensive understanding of an operation and identifying areas for improvement. This is the core principle associated with process integration and optimisation (PIO).

Developed by Metso Minerals Process Technology and Innovation (PTI), the practice obligates professionals to gather data on facility characteristics and processes to establish an administrative model that addresses holistic productivity issues. Professionals could collect information from whichever sources are available, from industrial measuring instruments to site audits. 

Instead of analysing and applying efficiencies to drilling, crushing, milling and other mining activities individually, PIO encourages a more cohesive approach, one that considers the impact of process-specific improvements across an entire operation. 

2. Reassessing metrics 

Statistics can be a powerful tool, if wielded correctly. However, even figures developed from the most robust data can be misinterpreted if analysts either don't know where to look or misunderstand a definition. 

For instance, McKinsey & Company noted that industry managers have typically measured labour productivity by final product output. However, the number of hours a person works isn't the only factor that impacts this particular metric. For instance, ore quality, machine operability and consumables (tyres and explosives) all have an effect on how much product a mine produces.

McKinsey asserted that decision-makers need to review their existing measurements to identify whatever handicaps may skew interpretations. Specifically, those in the mining industry can collate information pertaining to ore grade, depth and other mineral quality characteristics, all of which determine the value output. 

3. Rework external relationships 

Connections with equipment manufacturers, device instrumentation experts, logistics providers and customers can either make or break productivity. The Boston Consulting Group analysed this concern in one of its blog posts.

In regards to this concern, mines should determine which activities are best handled in house. Once decision-makers choose which tasks to outsource, they need to give considerable attention to designing value-adding contracts.

For example, when looking for a company to service level measurement instruments, asset managers need to find specialists capable of analysing the impact devices have on operations. This scrutiny could include identifying inaccurate instruments or revealing opportunities to improve access to operational data. If a technician can go beyond simply fixing devices, productivity improvements may follow. 

4. Isolate and eliminate constraints

Snowden Group, a consultancy specialising in the mining sector, discussed the Theory of Constraints (TOC), the concept that a specific bottleneck is hindering profit generation. Zeroing in on this constraint and nullifying it will generate a positive outcome. 

Managers may recognise that several processes perform functions at an adequate rate but identify one that has slower output. Snowden Group maintained that analysts need to scrutinise all factors associated with this process and determine how their characteristics contribute to bottlenecks.

Companies in the resources sector have their work cut out for them. Improving lacklustre conditions isn't going to happen overnight, but assiduous dedication can produce the results mines, quarries and other facilities are looking for.