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.
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 the company’s portfolio of contracted services, equivalent to 40% of its annual budget.
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 about spending controls, some roles were duplicated and there was a lack of accountability around functions in the organization linked to contractor management: and an absence of Service Level Agreements (SLAs) aligned to the business.
As a result of joint work between Matrix and the main agents involved in the company, it was agreed to tackle five priority issues.
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 capture of the benefits and force a change of mentality in how third-party services are managed in order to sustain the improvements.
The Matrix team proposed concrete actions in three areas to capitalize savings in the short term and begin a transformation in the way the company operated and managed contracts:
First, redesign the interaction process with contractors, particularly the stages of accreditation, habilitation 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 viability to state of advance throughout all the stages.
Second, centralize and optimize management of smaller support vehicles through a new organization dedicated to assigning equipment. This allowed the vehicle fleet and purchase and hire prices to be standardized.
Third, optimize the pool 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.
The recommended initiatives led to annual savings of US$33 million and led to significant changes in the contract management model.
Through the plan, the time taken to implement a contract was cut by 70%, non-productive time among external staff was reduced by three hours per shift, fees charged for small equipment were brought down and utilization of the remaining fleet was increased by 80%. In addition, the truck fleet was reduced by 65%.