Summary—106
A mining contractor undertook an initiative to identify whether there was an opportunity to reset his company’s cost structure to become more competitive. Because pending CAPEX was unclear, the company was unable to pinpoint priorities for making improvements in operations. Additionally, a significant proportion of the company’s assets were unserviceable but not fully depreciated, which contributed to annual losses.
We performed a detailed equipment analysis to identify the most economical life cycle for each equipment type. For particular products, industry research confirmed a longer life was possible. With our research, we were able to negotiate enhanced service agreements to ensure that the maximum life cycle could be achieved while acceptable utilization levels were still maintained. The net result was a 10% reduction in operating costs and a 45% reduction in CAPEX.
Challenges
- Measuring equipment operating costsMeasuring equipment operating costs
- Lack of a profitable disposal at the end of the equipment life cycle
- Unable to create a competitive cost structure that would enable the company to win projects
- Unable to support a mixed fleet due to high cost structure
Results
- Predictable capital budget due to a new acquisition and disposition plan for equipment Predictable capital budget due to a new acquisition and disposition plan for equipment
- 50% increase in haul truck life cycle
- 10% operating cost reduction by implementing a new centerline cost and service model for every product
- 95% risk reduction with operating cost guarantees
- Established a predictable cost based on an engineered maintenance strategy
- Put in place a methodology for tracking performance to ensure achievement of that cost monthly
- 45% reduction in CAPEX, $100 million savings