M

PrNick SeiersenCorporate Supply Chain ManagerKGHM International

Ch

I t t d A t Integrated Asset Management: How well

iare you using Best ractices in your Supply hain and Maintenance

operations?p

We are a Top 10 Cu ProduceWe are a Top 10 Cu Produceresources

Resource base

Southern Copper 58 2

Codelco 93.2

Copper content, in million tons

4 KGHM PM + I 2010* 37.5

Freeport 55.8

Southern Copper 58.2

6 KGHM PM 2010* 29.3

Anglo American 31.6

BHP Billiton 35.2

6

Rio Tinto 17.0

Xstrata 18.1

KGHM PM 2010 29.3

QUX 2010 8.2

Antofagasta 8.9

RAO Norilsk 9.1

Source: Production - CRU Copper Quarterly Industry and Market Outlook, Oct. 2011; Resources – Broo

Q

* Excluding Afton-Ajax project where KGHM has a 51% stake in 1.3 M tonnes of Cu resources

r, & Top 5 in terms of Cur, & Top 5 in terms of Cu

Mined copper production

Freeport 1,441

Codelco 1,757

In thousand tons, 2010

700

907Xstrata

BHP Billiton 1,134

Freeport 1,441

Rio Tinto

7 635

645

700

KGHM PM + I 2018E

Anglo American

Rio Tinto

8

508

526

589

Glencore

KGHM PM + I 2010

Grupo Mexico

10101

425

488

KGHM I 2010

KGHM PM 2010

Southern Copper

ok Hunt (A Wood Mackenzie Company); KGHM reports

KGHM I 2010

KGHM in the World

B fit f I t t d A t MBenefits of Integrated Asset M

It focuses on working together to achievg gEliminate the “We” and “They” environm

together” corporate cultureLearn from each other to achieve leadin

OP

INFLUENCERS

Learn from each other to achieve leadinComparing apples to oranges

Adm

OBJECTIVE

Equipment Availability

Logi

Main

ReliaAssetEffectiveness

Capital Cost

Prev

Relia

Life-CycleCost

Maintenance Cost

Prev

Plan

Unpl

Operating Cost Brea

M tManagement

ve leading practicesg pment and achieve the “All of us in this

ng practicesPERFORMANCE DRIVERSPERATIONAL FACTORS

ng practices

ministration• Effective maintenance management• Communications with ops and planning

S li fstics

ntainability (MTTR)

ability (MTBF)

• Supplier performance• Supply & materials performance• Facilities and resources effectiveness• Supply cycle time performance

• Maintenance, planning & scheduling performance• Availability of skilled workforce• Equipment design & usage

ventive & Predictive Mtce

ability (MTBF) • Equipment design & usage

• Effective preventive/ predictive Maintenance• Equipment ownership and operator care• Root-cause and reliability analysis• Availability of skilled workforce

• Balance of maintenance tactics• Reliability and predictabilityventive & Predictive Mtce

ned Corrective Mtce

lanned Corrective Mtce

• Reliability and predictability• Planning and Scheduling effectiveness• Planning and scheduling Effectiveness• Materials management & communications• Effective preventive/ predictive Maintenance• Effective preventive/ predictive maintenance• Maintenance, planning and scheduling

akdowns • Ops/ maintenance communications• Effective preventive/ predictive maintenance• Ops/ maintenance responsiveness and learning

A Quick Primer on BenchmarkA Quick Primer on Benchmark

Three tiers of benchmarking:

N i l• Numerical

• Appropriate use of Best Practice

• Targeted Peer Reviews: Assess

known to be particularly good inknown to be particularly good in

kingking

es (Capability Maturity)

sment of practice of organizations

specific disciplinesspecific disciplines

Project Context

S li it d t KGHM I t t• Scope was limited to KGHM Internat• High NPV mines were included. Sma

declined• Maintenance & Supply Chain had re

processes and KPI’s• Capability Maturity measurement haCapability Maturity measurement ha

Maintenance at some sites and was • Culture: KGHMI is center-led not cen

All it f lt th t th l d i• All sites felt that they were already in

ti l ti ltional operations onlyaller operations were invited but

ecently developed defined standard

ad been attempted before inad been attempted before in not well received

ntralized (sites did not have to buy-in)t t f “i iti ti l d”n a state of “initiative overload”

Project ContextProject ContextIntegrated ProcessesSupply Chain Processes

ContractsContracts PurchasingPurchasing LogisticLogistic

Supply Chain Processes

M i t P

17 Processes were defined in SC

IdentifyWork

IdentifyWork

PlanPlan ScheduleSchedule

Maintenance Processes

Production Processes

6 Processes were defined in Mtce

DrillDrill BlastBlast LoadLoad

Production Processes

cscs InventoryInventoryTo optimize Production, MTCE and SC processes must not only work well, they must work well together.

ExecuteExecute CloseClose AnalyzeAnalyze

HaulHaul DumpDump Etc.Etc.

Objectives

• To build an un biased “Cold Eyesmaturity and compliance (Mainteintegrate)

• To have buy-in from the sites

• To establish a baseline of capabi• To improve networking between

information sharing)• To establish a “driver” for continu

s” measuring stick of process nance, Supply Chain & how they

ility maturity at all high NPV sitessites (facilitate collaboration &

uous improvement

ApproachApproachDevelop CMM:• Set expectations on What to measure and Why• Focus questions on those expectations and defin• Achieve consensus from the working grouPerform CMM:• Assessment• Analysis• Report• Present results• Present results• Improve

Initially lead by PwC but going forward

Y 1 KGH

Initially lead by PwC but going forward by KGHM

•Year 1

PwC / KGHM• Y

KGH

ne the capability definitionsp

this assessment process will be lead

HM / PwC

this assessment process will be lead

Year 2

HM / PwC• Year 3

KGHM

The toolThe tool

Wh t th O t t L k LikWhat the Output Looks Like

CMM Project Timeline

June 2012Sudbury AM Mtg

Jul - Dec 2012 Jan - Feb 2

Decision RFP/AFE & Selection

DesigTrai

Sudbury AM Mtg.

• All sites participated• Develop externally

• 4 RFP’s• 3 Responsesp y

• Cost Split• Committee review RFPs

• PwC awarded

Note:Criteria for RFP award: (i.e.

Bid b t t h• Bid scope best match • Least intrusive to sites• Estimated total cost of

2013 Mar - Apr 2013 Apr - Jun 2013

n & n Application Feedback

• Mar: Sudbury• CI on tool

• Site result sent• Follow up mtg.

• Apr: Robinson• 2014 Sierra Gorda

p g• Site comparison• AM Group review

Why did we award to PwC?)t RFP tto RFP request

sf initiative

Continuous ImprovementContinuous Improvement

• Suggestions to prioritize focus were made to the Site based on potentialmade to the Site based on potential value and difficulty to implement.

• Decision remains with the Site

DRAFT FOR DISCUSSION PURPOSES

Referenced the benefits of work already in progress:y p g• Reduced perception of

Initiative overload• Enhanced trust by giving

credit where it was due

Early ResultsEarly Results

Lessons learnedLessons learned

Site Consultation and Participation – Thpthey participated in its development.higher credibility as its was performe

Definition of assessment Target AreasDefinition of assessment Target Areas relevancy if very different areas are group size is too large. Scores will tei t t iti l b iimprovement opportunities less obvi

Specific Wording of Questions – the intfloor to general manager. Questionsg gthe organization understands the jar

Rapid Feedback - Commit to feed backspecific timeframe The shorter the tspecific timeframe. The shorter the t

he tool was relevant to each site as Also, the assessment itself has

ed by peers.– Assessment results will lose– Assessment results will lose combined in one assessment or the end towards “average” making ous.terview audience ranges from shop should be worded so that all levels of

rgon, acronyms and vocabulary.k to the assessed Area within a timeframe the bettertimeframe the better.

Key Summary PointsKey Summary Points

• The tool was designed to assess botf ti b t b tt till it ifi llfunctions but better still, it specificallytogether

• The tool is based on best practices fSCOR, PAS55 and the developing IS

• The project had better acceptance b• were consulted in the decision to do the p• participated in the design of the tool,participated in the design of the tool, • have ongoing participation in the executio• expanded their network by visiting other s

• A deliberate effort was made to creathe tool and for Continuous Improvem

th the Maintenance and Supply Chain h ll th ky measures how well they work

from industry recognized standards, SO55000

ecause sites:project,

on, andsites.

ate “pull” from the sites for the use of ment to be internally self motivated.

Mayo

yM

NicKGNiNico: 4

Integrated Asset llanagement: How well are

ou using Best Practices in l h i dyour Supply Chain and

Maintenance operations?ck Seiersen

GHM Internationalk i @k hck.seiersen@kghm.com

416 642 9214/c: 647 391 8360

When we workonce seemed

becomes i

k together, what d impossible inevitable.