A copper mine owned by a multinational company needed to improve and sustain its competitiveness in costs after falling to the fourth quartile in the industry. Matrix’s support focused on identifying opportunities to improve efficiency in contracted services, identifying potential savings which widely exceeded the company’s preliminary estimates.
Context
A multinational mining company required a plan to capture savings in order to revert, as quickly as possible, its poor performance in operating costs at its flagship copper mine in Chile.
In this context, Matrix’s support allowed the company to improve management of its portfolio of contracted services, equivalent to 40% of its annual budget.
Detected opportunities
Matrix’s initial diagnosis identified multiple sources of inefficiency in the management of the services contracted by the mining company. There was low global visibility around spending controls, some roles were duplicated, and there was a lack of accountability surrounding functions in the organization linked to contractor management, as well as an absence of Service Level Agreements (SLAs) aligned to the business.
As a result of the collaboration between Matrix and the company’s key agents in this area, we agreed to tackle five priority issues.
Significantly reduce times involved throughout the contracting process – from the definition of the scope of the service to contracting and execution.
Adjust third-party service SLAs, reducing their scope, establishing measured targets, and eliminating duplicate activities.
Consolidate and centralize services shared by different operations through a new management and accountability model that is sustainable in the long term.
Adjust the portfolio of external and internal activities along the value chain and support areas.
Leverage economies of scale in services provided by third parties to these contractors.
Preliminary estimates of the different initiatives in the five priority areas suggested potential savings of more than US$60 million annually (widely exceeding the company’s original target).
The following phase focused on developing, evaluating, and planning the most important initiatives in order to accelerate the capture of benefits and force a mindset shift regarding how third-party services are managed in order to sustain the improvements.
Proposed actions
The Matrix team proposed concrete actions in three areas to capitalize savings in the short term and begin transforming the way the company operates and manages contracts.
First, redesign the interaction process with contractors, particularly the stages of accreditation, activation, and execution of the service. It was proposed that several tasks should be simplified or digitalized, irrelevant tasks eliminated, and a technological platform implemented to integrate and give visibility to completion status throughout all stages.
Second, centralize and optimize management of smaller support vehicles through a new organization dedicated to equipment assignment. This allowed for the standardization of vehicle fleet and purchase and contract prices.
Third, optimize the fleet of company and contractor trucks through standardization of rental fees with a single supplier and a redesign of the internal transport system.
The Matrix team supported these recommendations through robust business cases which quantified the impact and investments, identified the risks and mitigations, and generated action plans to ensure their implementation.
