Process Optimization in the Mining Industry - Codelco · Process Optimization in the Mining Industry ... product development or supply chain. ... 07_Marcelo Annarumma Process Optimization

© 2008 IBM Corporation

Process Optimization in the Mining Industry

Helping Mining Companies achieve levels of efficiency not thought possible before

Marcelo Annarumma, Ph.D.June 12th, 2008

© 2008 IBM Corporation2

Trends in the Mining Industry

The quest for efficiency: a practical example

Process integration and optimization: The Component Business Modeling technique

Agenda


The global mining industry is going through a major transformation resulting in challenges and opportunities

Industry Consolidation

Ongoing global industry consolidation requiring adjustment in the business model and flexible information systems to support the operations in a global scale

Strong Demand

Industrialization in Asia creating strong demand for commodities (e.g. copper, nickel, aluminium and iron ore)

Rise of Asian mining and metals conglomerates

Increase Production with Tight Supply

In response to increased demand, existing operations are running at maximum capacity

Expansion projects have to be executed

Tight supply situation for consumables (e.g. tires, explosives) and for heavy equipments

Price Volatility

Management of commodity prices, exchange risks and capacity constraints increasing in complexity and importance

Corporate Social Responsibility

Manage impact of mining activities on the community, the environment and people

Skills shortages

The number of skilled resources continues to decline and costs are increasing

A globally dispersed workforce that needs to apply expertise locally and regionally

Different expectations of newer employees; generation gaps that must be taken seriously


Mine 1

Mine 2

Mine 1

Mine 2

Mine n

Mine m

Mine 1

Mine 2

Mine o

...

PelletsMills

Different Types of Pellets

HomogenizedOre Stockpiles

CarDumpers

ConveyorSystem

CarDumpers


ConveyorSystem

Screening Facilities

HomogenizedLump Stockpiles

PORT COMPLEX

RAILROAD SYSTEM

MINING COMPLEXES

OreRefinement

Process

LumpSinterFeeds

PelletFeeds

For Each Mine

DOMESTICMARKET

Iron Ore Supply Chain - Challenges


Mine 1

Mine 2

Mine 1

Mine 2

Mine n

Mine m

Mine 1

Mine 2

Mine o

...

PelletsMills



CarDumpers

ConveyorSystem

CarDumpers


ConveyorSystem



PORT COMPLEX

RAILROAD SYSTEM

MINING COMPLEXES

OreRefinement

Process

LumpSinterFeeds

PelletFeeds

For Each Mine

DOMESTICMARKET

Iron Ore Supply Chain – Optimization Approach

PUSHPUSH

Extract raw materials from the mines

Maximize production

PULLPULL

“Assemble” raw materials into ore and pellet products

Just in time delivery


Mine 1

Mine 2

Mine 1

Mine 2

Mine n

Mine m

Mine 1

Mine 2

Mine o

...

PelletsMills



CarDumpers

ConveyorSystem

CarDumpers


ConveyorSystem



PORT COMPLEX

RAILROAD SYSTEM

MINING COMPLEXES

OreRefinement

Process

LumpSinterFeeds

PelletFeeds

For Each Mine

DOMESTICMARKET


Upstream Optimization

Allocates recipes for each order by choosing an optimal recipe from a large number of pre-generated recipes for each product

Generate schedules for mines and loading sites, trying to satisfy required dates at port delivery times

Downstream Initial Optimization

Generate an initial solution for the pellet mills, domestic customer deliveries, piers and ships


Mine 1

Mine 2

Mine 1

Mine 2

Mine n

Mine m

Mine 1

Mine 2

Mine o

...

PelletsMills



CarDumpers

ConveyorSystem

CarDumpers


ConveyorSystem



PORT COMPLEX

RAILROAD SYSTEM

MINING COMPLEXES

OreRefinement

Process

LumpSinterFeeds

PelletFeeds

For Each Mine

DOMESTICMARKET


Downstream Final Optimization

Generate a final solution for the pellet mills, domestic customer deliveries, piers and ships, using the Upstream Optimization solution as an input to restore feasibility

Upstream Optimization

Allocates recipes for each order by choosing an optimal recipe from a large number of pre-generated recipes for each product

Generate schedules for mines and loading sites, trying to satisfy required dates at port delivery times


A company can follow a three-step approach to become more efficient and successful

Decide which markets and which customers the company will serve

Look at the different important functions of the company

For each important company function, ask five questions

Which markets and customers around the world offer the greatest profit and revenue potential?

A component business model (CBM) is a useful tool to get a view into all the major functions of a company

1. Where should it be done?

2. Who does it?

3. What enablers are used?

4. How well does it all integrate together?

5. Is it innovative?

Step 1 Step 2 Step 3


The Component Business Modeling technique

Component Business Modeling (CBM) supplies a framework to identify the company’s important components, as well as identifying the components that can provide

differentiation

Plan

Control

Execute

Production Equipm.& Plant Management

Sales &Service

DistributionBusinessDevelopment

BusinessAdministration

Consider the major functional areas of a company

Across 3 dimensions


A Business Component Map is a tabular view of the business components in the scope of interest

Controlling

Executing

Directing Business Planning

Business Unit Tracking Sales

ManagementCredit

AssessmentReconciliation

Compliance

Staff Appraisals

Relationship Management

Sector Management

Product Management

Production Administration

Product FulfillmentSales

Marketing Campaigns

Product Directory

Credit Administration

Customer Accounts

GeneralLedger

Document Management

Customer Dialogue

Contact Routing

StaffAdministration


New Business Development


Servicing & Sales

Product Fulfillment

Financial Control and Accounting

Sector Planning

Portfolio Planning

Account Planning Sales Planning Fulfillment

Planning

Fulfillment Planning

A Business Component is a part of an enterprise that has the potential to operate independently, in the extreme as a separate company, or as part of another company.

A business component is a logical view of part of an enterprise that includes the resources, people, technology and know-how necessary to deliver some value.

Columns are Business Competencies, defined as large business or functional areas with characteristic skills and capabilities, for example, product development or supply chain.

An Accountability Level characterizes the scope and intent of activity and decision-making. The three levels used in CBM are Directing, Controlling and Executing.

Directing is about strategy, overall direction and policy.Controlling is about monitoring, managing exceptions and tactical decision making.Executing is about doing the work.


For example, we can use evaluation criteria to produce a ‘heat map’ to help select and prioritise improvement projects

C = Competitive

Target CompetencyB = Base

Revenue / CostRevenue

Cost

(H, M, or L)

“Hot” Component

controlling

executing

directing Business Planning

Business Unit Tracking

Sales Management

Credit Assessment Reconciliation

Compliance

Staff Appraisals


Sector Management

Product Management

Production Administration

Product FulfillmentSales

Marketing Campaigns

Product Directory

Credit Administration

Customer Accounts

GeneralLedger

Document Management

Customer Dialogue

Contact Routing

StaffAdministration


New Business Development

Relationship Management Servicing & Sales Product Fulfillment Financial Control

and Accounting

Sector Planning Portfolio PlanningAccount Planning Sales Planning Fulfillment Planning

Fulfillment Planning

M L

M L

M L

H L

L L

M LL L

L H

M M

M L

M L

M L

M L

M L

M L

M L

M L M L

M L M L

M L

L M

L M

L MM L

Revenue/Profit improvement opportunity

Cost control opportunity

D = Differentiated


Control & Manage

Strategy & Planning

New Business Opportunities & Divesting

Business Administration

Exploration, Appraisal &

Approval

Operate

Mine Development

and Extraction

Mine Logistics

Plant Operations Engineering

Mineral Resource Strategy

Exploration Strategy

Alliance & Partner Strategy

Manage Data

Manage & Prioritize Portfolio of

Opportunities, Include Exits

Strategic Relationship Management

Acquire Data

Opportunity Origination / Deal

CaptureAnalyze & Select

High Value Opportunities

Secure Services & Materials (SCM)

Data Acquisition, Process,

Interpretation and Management

Strategy

Exploration Protocol

Appraisal & Approval Strategy

Exploration Management

Appraisal Management

Exploration Data Processing

Exploration Data Interpretation

Exploration Program Execution

Mineral Resource Modeling

Exception Drilling

Ore Body Strategy (Group)

Mine Plan Strategy (LOM)

Operational Plan (2 yrs)

Mine Design & Scheduling

Manage Extraction Plan

Manage Construction Schedule & Plans

Manage Development Plan

Construct and Abandon Facilities

Drill & Complete Main Haulage Development

Characterize / Evaluating Reserves

Expand Infrastructure

Reclaim Infrastructure

Mine Production Strategy

Production Benchmarks & Criteria

Manage Mineral Reserves

Manage Production

Implement Production Plans

Maintain & Improve Equipment

Performance

Surveying / Sampling

Plant Operations Planning

Plant Optimization

Energy Strategy

Asset Monitoring and Predictive Maintenance

Engineering Design

Engineering / Maintenance

Management and Scheduling

Maintenance and Engineering Execution

Plant Operation Management

Recovery

Mineral Reserve Reconciliation

Horizontal Planning

Vertical Strategy

Vertical / Inclined Planning

Horizontal Strategy

Slimes/Waste/ Water Management

Strategy

Slimes /Waste/ Water Management

Slimes / Waste /Water Handling

Business Strategy

Sustainability & GRI Reporting

Investor Relations Strategy

Financial Control

Governance, Risk and Legal Compliance

Business Performance Management

HR Management

Financial Accounting

Legal & Company Secretarial Services

Treasury

IT Systems & Operations

Capital FundingGovernance, Risk and

Legal compliance executionAuditing

Mining Operations

Short Term Mine Plan (6 Months)

Utilities Strategy

Service Strategy

Utilities Planning

Services Planning

Surface Strategy

Surface Planning

SHEC

Health Strategy

Safety Strategy

Environment Strategy

Environmental Impact planning

Governance Compliance

Corporate Social Responsibility

Strategy

Compiling SHEC reports (Periodic &

Exception)

Fitness for Work execution

Policies and Procedures

SHEC Monitoring

SHEC Legal Compliance

OccupationalEnvironmental

Impact planning

Risk Management

Operational Risk Management

Performance Benchmarks & Criteria

Corporate Strategy

Manage Performance (Plan vs. Actual)

Geological mapping

Deliver Utilities

Deliver Services

Deliver Horizontal

Deliver Vertical / Inclined

Deliver Surface

Metal Accounting and Reconciliation

Technology StrategyEngineering

Capacity PlanningMaintenance and

Replacement Strategy

Repair Management

QA/QC

Security

Develop & Secure Knowledge & Intellectual Property (Innovation)

Management of Equipment

performance

Plant Production Strategy

Project Management

Skills development & Training

Hospital & Clinic Operations

Hospital & Clinic Management

Property Management

Property Administration


Improved processes can help leading mining companies achieve levels of efficiency not thought possible before

Just some examples:

Management of globally integrated enterprises

End-to-end mining supply chain optimization

Safety, security and regulatory compliance

Integration of ERP-MES solutions for mining

Workforce management for mining

End-to-end fleet and asset monitoring

Process consistency and standardization

Port & shipping optimization


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Documents

Process Optimization in the Mining Industry - Codelco · Process Optimization in the Mining Industry ... product development or supply chain. ... 07_Marcelo Annarumma Process Optimization