Professional Documents
Culture Documents
Agenda
1. Statistics
2. Planning in the Mining
Sector
4. Driving Value in
Operations
5. Putting it all together
May
Slide 2
1.
Statistics
PwC Perspective
We often observe that management views the budgeting process as a
control mechanism to achieve a target and culturally start to think
within its boundaries.
This mindset keeps an organization focused inwards and limits the
value it can provide to manage a business which naturally is externally
focused.
May
Slide 4
Business planning
Financial planning continues to be of limited value and mired with conservatism.
Extended financial planning and forecasting cycle times delay decision-making;
Financial drivers and metrics dont align with strategies;
The Finance functions ownership of planning projections adds frustration with many
planning and forecasting functions;
Dissatisfaction with financial planning echoes across the organization from executives
who cant trust the accuracy, functions which feel lack of ownership due to forced
top down budgets, front line managers who question the amount of time spent on
budget analysis.
It imperative for businesses to reassess and transform the value of the overall financial planning process.
PwC Mining Conference
2015 Americas' School of Mines
May
Slide 5
2%
36%
38%
Source: APQC Dynamic Planning, Forecasting, and Performance Management: Survey Summary Report - November 2014
PwC Mining Conference
2015 Americas' School of Mines
May
Slide 6
Low
Performer
Median
High
Performer
$1.45
$0.66
$0.28
All Companies
$0.68
$0.36
$0.14
Large Companies
Low
Performer
Median
High
Performer
$1.04
$0.48
$0.19
All Companies
$0.44
$0.24
$0.09
Large Companies
Source: PwC client Business Planning Assessment and APQC benchmarking data (2013)
2015 Americas' School of Mines
Low
Performer
Median
High
Performer
14
4 Large Companies
Low
Performer
Median
High
Performer
103
60
30
All Companies
145
59
30
Large Companies
All Companies
Source: PwC client Business Planning Assessment and APQC benchmarking data (2013)
2015 Americas' School of Mines
1.
Develop
Targets
6.
Submit
Final
Budget
~251,000
person
hours
dedicated
to
the
BP
at
an
estimated
cost
of
$16M
2.
Create
Strategic
Plan
5.
Post-Target
Build
Out
Standard
cycle
time
of
203
days
(FP&A)
3.
Collect
Budget
Inputs
4.
Operationalize
Budget
Targets
May
Slide 9
2.
Planning and
the Mining
Sector
Declining
profitability as low
yield ore bodies
become
uneconomical
Shareholders
are
increasingly
focused on
results
An effective, value-based planning process can help mines operate more effectively and address
stakeholder needs
2015 Americas' School of Mines
12
Feb
Mar
Apr
May
Jun
Jul
Preparation
Aug
Sep
Formulation
Oct
Nov
Approval
Dec
Implementation
Mid-Year
Reserves and
Resources
Strategize
Strategic Drivers
Objective and goals
Scenario Planning
Metrics/Dimensions
Plan
Budgets
Forecasts
Models
Approvals
Consolidate
Consolidation
Inter-company
Allocations
Currency
Database
Actual & Plan Data Relational and Multi-Dimensional Structured and Unstructured
Data Transformation
Mine Site 1
Mine Site 2
Mine Site 3
Mine Site 4
Finance
Finance
Finance
Finance
Mine
Planning &
Scheduling
Geological
Database
Safety
Incident
Management
Asset
Management
System
Mine
Planning &
Scheduling
Geological
Database
Safety
Incident
Management
Asset
Management
System
Mine
Planning &
Scheduling
Geological
Database
Safety
Incident
Management
Asset
Management
System
Information
Delivery
Analyze
Management
Statutory
Compliance
Alerts
Corrective Triggers
Management
Applications
Data Flow
Controls
Consistent Process
Database
ETL
Technologies
Mine
Planning &
Scheduling
Geological
Database
Safety
Incident
Management
Asset
Management
System
Source
Data
Legacy / manual
systems at the mine
site that dont
integrate to corporate
databases
Lack of integration
between operational
and financial systems
Lack of necessary
investments to
maintain / enhance
technical
infrastructure
Poor data quality /
lack of consistent
definitions across
sites
Duplication of effort
and numerous ad-hoc
requests
3.
Value based
planning and
forecasting
May
Slide 19
Customer centric
Predictable
Rapid change
Domestic centric
Global
Intangible value
Central control
20
TRADITIONAL
VALUE BASED
Cost
Value
Complex
Structured
Rigid
Dynamic
Unresponsive
Adaptive
Inefficient
Leveraged
Controlling
Motivating
May
Slide 21
To
Setting goals
Performance
measurement
Reporting &
control
Forecasting
Systems
22
Goals
Annual Linear
Process
Annual
Budget
Performance
Targets
Actual
Performance
Comparison
Assumptions
Strategy
External
Drivers
Actions
Measure
Performance
Dynamic
Business
Planning
Performance
Scorecard
Internal
business
model
Continual Adaptive
Process
Business
Plan
23
VBP Cycle
Strategy
External Drivers
Actions
Business
Simulation
Learning
and
Adaption
Dynamic
Business
Planning
Internal
business model
Measure
Performance
Forecasts
Performance
Scorecard
Business Plan
Rewards
24
Dynamic
Anticipatory
Fixed
Low
Collaborative
High
Slide 25
Functional dimension
Provides complete flexibility in budget layout and format
Allows for effective operating, capital budgeting and balance sheet
budgeting
Caters for any type of cost modelling for both fixed and variable
costs
Handles any type of re-allocations between cost centres, projects,
companies, etc.
Enables easy implementation of strategic rolling forecasts, with
incorporation of actual monthly and year to date information
26
27
4.
Driving value
in operations
May
Slide 28
Strategy
Integrated
Planning
Reward &
Compensation
Performance
Appraisal
In Scope
Performance
Indicators
Report
&
Review
Out of Scope
Improved effectiveness
Enhanced understanding of the complex interrelationships between different parts of the business,
including multi-dimensional views
Improved identification of cost or capital improvement
opportunities
Increased efficiency
ACT
Assessment & Reward
Cycle
Identify and monitor
improvement
opportunities
Processes
Systems
Integrate performance
management in one management
decision making process to ensure
performance issues and risks are
considered when they matter most
and are acted upon in time
People
Organisation
DO
Execute operational plan
and risk management
strategies
Explicitly consider and
account for risks during
decision making
Slide 32
Business objectives
Determining KPIs
Value drivers
KPIs
Slide 33
Level 1
Senior
Management
Dashboards
Strategic
Level 2
Middle
Management
Dashboards
Tactical and
Functional
Level 3
Team
Management
Dashboards
Transactions
and
Operations
Level 4
Individual
Dashboards
Performance
and
Root Causes
Slide 34
2.
Identify
Major
Variances
Against Plan
1.
Collate and
Analyze Monthly
Results
Mining ($/t)
4.
Define
Mitigation
Projects/Action
Steps
Drilling ($/m)
Consumables ($/hr)
5.
Monitor
and Track
Progress of
Action Steps
Maintenance ($/hr)
Operational metrics
frequently drive cost
outcomes this linkage
is critical.
Mucking ($/t)
Hauling ($/t)
Mine Services ($)
Management ($)
Slide 35
Donts
Lacking management commitment and support
Underestimate change management required to drive
cultural change
Define strategy at corporate level and not communicating
it to the rest of the organisation
Starting with communications and change management
during the implementation phase, rather than during the
design phase of the programme
Focusing on meeting the budget instead of obtaining the
strategic objectives
Too much data, not enough insightful information
doesnt support management by exception
Incentive compensation linked to budgets which drives
sandbagging and avoidance of stretch targets and not
sufficiently linked to controllable performance
Implementing a fully equipped BI solution without
addressing underlying processes
Slide 36
Slide 37
Alignment
People
Slide 38
5.
Putting it all together
May
Slide 39
Making it Happen
Inextricably link planning and budgeting
Create and validate a prototype system
Make the most of existing IT investments
Plan for growth
Give attention to organizational issues
Allow user to choose functions
40
41
42
Conclusion
Successful companies see budgeting as the cornerstone to a closed-loop
system for management planning and decision making. Such a system
drives a companys quest for competitive advantage and consists of
interlinked management processes of which budgeting is central
turning strategic initiatives into plans and budgets that deliver expected
results
An effective VBP system harnesses the best thinking and collective
knowledge of all individuals who are most intimate with the operations
of the organization.
43
6.
Self assessment
May
Slide 44
45
46
7.
Improving
financial
performance
May
Slide 47
Productivity
Levers to
drive
financial
performance
Capital
Working Capital
Investment Capital
Levers
Corporate support teams and
management
Administration costs
Back office processes
Suppliers and spend
Consumables
Repair and maintenance
Examples
Align organization to leading practice on span of control
Align activities between mine sites and corporate to eliminate
duplication
Fully leverage current technology and tools
Complete spend analysis
Generate category strategies, aggregate demands, leverage supply
base, and conduct strategic negotiations
Develop strategies to reduce tire wear and explosive usage
Reduce maintenance contractor and supplier costs
Levers
Equipment planning and
scheduling
Labour planning and
scheduling
Equipment availability
Management reporting
Examples
Plan truck, hauler, shovel and drill selection and usage to achieve
profitable production
Plan crew sizes and shift patterns
Implement information based preventative and reliability
(MTBF) programs
Optimize intervals between shutdowns and overhauls
Link operational production reports and to financial outcomes
for integrated reporting
Stream line safety reporting to gather insight, prevent incidents
and achieve zero harm through shared learnings
Levers
Inventory
Payables
Projects
Project management and
control
Examples
Pool spare parts across sites through effective modeling and
inventory management
Maximize planned maintenance activities in order to minimize
required parts inventories
Work with suppliers to maximize payment terms and streamline
sourcing process
Manage project portfolio to ensure continued resource
development and production growth
Deliver the appropriate projects on time and on schedule
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