Maximizing machine production hours may destroy value

Most mine sites measure performance in terms of ore mined, waste moved or product produced. Production KPIs tend to manifest as a drive to maximize the working hours of equipment. The drive to achieve production (rather than value) KPIs often has some negative side effects that destroy the value that they seek to create. Maximizing equipment hours tends to reward the building of inventories, as to achieve high hours, machines need to work even when they are not required.

Inventories are heavy burden on project economics as they bring forward expenditure but not revenue. In order to achieve high production hours from, operating conditions need to be perfect to minimize lost time. This incurs a layer of additional cost that is often not justified by the additional output. Typically this manifests as addition support machines such as dozers and graders, more expensive roads, bigger workshops and more staff.

The solution is to accept that it is OK to park up machinery rather than build excessive inventory. We need to schedule for and measure against project value rather than production.