COMMERCIAL AND OPERATIONAL GAP ANALYSIS BETWEEN GRO AND GGV

Project 1: June 2015

Understanding, developing and growing the business relationship between GRO and GGV as well, securing the long term contract

GRINDROD LIMITED |

PROJECT SCOPE

Understanding the contract of a major

operation site (GGV), perform a gap analysis between the contract and actual operations and identify operating

inefficiencies

Develop a commercial excel dashboard which

will aid the commercial and

operations departments in monitoring the

existing contract

Provide recommendations on how to improve client relationships and /or

reduce costs, operation

inefficiencies and quantify the benefits that can be realised

from the project

GRINDROD LIMITED |

PROJECT REQUIRMENTS

• The presentation will transmit two equally important points1. What has been done, what needs to continue to be done and what additional work should be included

in the service to GGV if the current contract between GRO and GGV will develop. 2. Ideas and possible solutions to GROs lead areas of vulnerability I have identified, being: A. The GGV contract is not long term yet and it is always a possibility that it can be lost to a competitor B. Harmony Gold (Welkom) is GROs largest customer, the healthy and positive contribution Harmony has

on GRO is also a major threat to the organisation. If GRO loses this contract the division is vulnerable to a complete shut down.

I. A lead problem that needs to be addressed in the company is the uneven spread of income. II. News searches have shown that demand in the mining sector and Harmony is not immune to this, as

immanent job cuts loom (approximately 2000) III. Therefore it may not be GROs service that leads us to losing the customer instead external factors that

we have no control over. The GGV contract has massive potential to not only mitigate the existing risk, but also open up doors for potential additional business.

In short GGV coal mine is GROs Gold mine

GRINDROD LIMITED |

INTRODUCTION

1GRO took over the in-house rail operations on 1 December 2014 and was tasked with, managing the staff, providing locomotives and carrying out head office activities 2On site GRO has supplied, three GS 7 - 3 axel Locos on site, 1 site supervisor 1 fitter, 4 drivers and 4 train assistance (10 staff in total) 3The customer supplies coal to Eskoms Majuba power station.4The contract stipulates that an essential minimum of 150 000 tonnes per month must be hauled at an agreed upon priced of R6.25 /ton. Thereafter a sliding pay scale applies 5However, the expected performance for GRO would be to deliver a monthly amount of 180 000 tones 6The contract was renewed on the 1st of May 2015 for a two month period till the 30th of June 2015

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KEY PERFORMANCE INDICATORS

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What Has Been Done

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CURRENT IMPROVEMENT PROCESSES IMPLEMENTED

The templates listed below have been created for the site supervisor to complete and returns daily : Safety Daily reporting of any incidents occurring on site Fuel Tracking and monitoring fuel consumption MaintenanceEnsuring maintenance work is completed, recorded and personal are made accountable for the daily maintenance. Turn around times Record the THT made for every load shunted

• These reports have been created for the purpose and benefit of data capturing assisting with, performance progress tracking, monitor trends which could assist in potential cost reductions and ensure the safety of staff and maintenance at GGV

• The reporting templates that have been developed will ultimately see GRO with data that will improve reporting and give accurate performance details between GRO and GGV

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EXCEL DASHBOARD CREATED

Achieved Mar 1 Apr - 05 Apr 06 Apr - 12 Apr 13 Apr - 19 Apr 20 Apr - 26 Apr 27 Apr - 30 Apr TotalWagons Planned 600 825 825 975 300 3525Wagons Achieved 3074 675 825 675 974 375 3524

Achieved Mar 1 Apr - 05 Apr 06 Apr - 12 Apr 13 Apr - 19 Apr 20 Apr - 26 Apr 27 Apr - 30 Apr TotalTrains Planned 8 11 11 13 4 47Trains Achieved 42 9 11 9 13 5 47

Achieved Mar 1 Apr - 05 Apr 06 Apr - 12 Apr 13 Apr - 19 Apr20 Apr - 26 Apr27 Apr - 30 Apr TotalTons Planned 34 800 47850 47850 56550 17248 200 000Tons Achieved 182090 38 918 47417 39047 56446 21535 203 363

Weekly Req 33333 46667 46667 46667 26667Success achieved achieved failed achieved failed

GGV Planned 200 000 Tons Req/ dayTons Railed 203 363 6667Outstanding tons -3 363

The above template was created using Microsoft Excel. Designed to deliver real time readings of site performances and monthly requirement forecasts, the dashboard assists with:

• Enabling head office in Sandton to monitor the daily performance standards of Grindrods performance at GGVs site in Mpumalanga

• Calculates the minimum weekly performance numbers that must be attained if GGVs targets are to be met, split between, number of Wagons, number of trains and total tonnages

• Notifies the user if the weekly performance has been met or not• Offers precise figures for on the total outstanding demand in respect to remaining days, if supply requirements are to be met• Calculates the performance forecast figures at the beginning of the month, giving the operating team accurate targets to work towards.• Eliminates communication complications that could quite possible jeopardise healthy prosperous

relationships

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PERFORMANCE TRENDS

Calculation for optimum performance in June in a perfect system

• According to the April Performance GRO can (ceteris paribus) comfortable achieve 1.7 trains a day each shunting 75 wagons with a minimum of 4312 tons. Therefore:

• (1.7 x 4312) x 31 = 227 242

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What must be done

WHAT MUST BE DONE

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WHAT NEED TO BE DONE

Efforts must be focused towards achieving, “seamless cross organisational integration” which will

inherently lead to a healthily long term relationship between all parties involved

Interlink and align GGV and GRO

Identify key players, once this is done GRO needs to understand exactly what there service

preferences are and ensure they are satisfied with the service they are getting from GRO

This contract will not be won in the long term by simple meeting the KPIs

Dynamic, efficient new ideas and approaches must be adopted to gain the upper hand

The following are ideas in achieving “seamless cross organisational integration”

1. Improve communication by sharing the excel dashboard with GGV (Tobie) allow them access

by way of weekly reporting

2. Perfect opportunity to work alongside TFR and achieve a Win, Win relationship

3. Align with Glencores “Safecoal” campaign

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DYNAMIC NEW WAYS “THE EXTRA GREEN MILE”

• * Reduction of Total Recordable Injury Frequency Rate(TRIFR)0%

• * A focus on fatal hazards• * Streamlining sustainable development

systems• * Consistent communication• * Ensure all employees onsite are aware and

capable of dealing with possible hazardous events

•* In order to improve operation efficiencies at GGV clear lines of communication is crucial

•* Currently, we see GRO and GGV tracking there own weekly performance standards in isolation

•* The excel “performance dashboard” GRO has developed should be pitched to GGV

•* This dashboard will assist GGV in reducing time wastage when recording performance, allowing management to focus on other key competencies

GRINDROD LIMITED |

GRO OPPORTUNITY WITH TFR

1. Spread of clients poorly skewed, with Welkom being the main contributor to income of the division. At the present moment, if Welkom is lost GRO may as well not exist.

GGV is the perfect opportunity to correct this error Strengthen the relationship between Transnet and GRO Execute a deal that has “front page” possibilities

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GGV GRO AND TFR COLLABERATION

Perfect opportunity for a winning relationship with TFR• Both parties are pushing for less Road more Rail• Majuba power station has the only tippler in South Africa• The current transportation split between road and rail is:• 420 000 tons/ month by rail• 740 000 tons/ month by road (700 tippler trucks/ day) • The goal will be to inverse the current split drastically• GRO need to make Eskom and Transnet aware of the opportunity that exists in rail to road

conversion at Majuba, financially, environmentally and too with respect to road safety• When this happens, demand for rail operations will be excessive, GRO need to be at the pinnacle of

this wave • The possibility of taking over the in house tippler operations may also exist

If GRO meets GGVs minimum rate requirement of 150 000 tons / month they will be responsible for 36 % of rail demand and 13% of the total transported coal supply to Eskoms Majuba power station

The following 5 stage cycle will be a good guideline on initiating this operation

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GGV GRO AND TFR COLLABERATION

Stage 1 : Diagnostics assessment at Majuba

Stage 2: Assessment of GGV Rail Road split.

Stage 3 : Financial

assessment at GRO

Stage 4: Approach

GGV with Win – Win solution

Stage 5 : Approach TFR

with Win – Win – Win approach

Understand the capacity which the site can handle and analyse if GRO can possible take over in house operations @ Majuba?

Comprehend the cost of road vs rail, see if there are reasons for not moving to rail, understand the road haulers contract with GGV. Gather all information to conclude if the cross over from Road to Rail can be achieved

Analyse all the gathered information. Then firstly, prove that it will be viable for GRO to go forward and perform these activities at a profit and secondly present it all visually

Reaching stage 4 and 5 will lead to greater quantities

hauled/ month which means greater profits!