1) Events that:

• Steal time and production
• Add to cost
• Cause out of control conditions
• Cause you to deviate from plan

2) A Philosophy:

• Plan and invest in prevention and appraisal activities
• Eliminate and prevent process failures
• Solve recurring problems

   

3) The difference between optimum and actual
....performance.

4) The Results of Problems interfering with
....Performance.

Dollars related to preventing problems.

• Scheduled Maintenance
• Road Maintenance
• Training

Dollars related to what never happened OR could have happened.

• Lost Production or Sales
• Recovery losses
• Productivity Losses (Operations and Maintenance)

Dollars related to events that should not have happened.

• Unscheduled Maintenance
• Premature Tire Failures
• Excess Power Costs
• Excess Reagent costs



• It captures the value of upside potential.
  
  
• It emphasizes the cost of recurring problems.
  
  
• It prioritizes what to fix first, second and third.
  
  
• It makes it OK to discuss “what’s not working”.
  
  
• It raises the urgency to fix problems that have become “part of the process”.
  
  
• It involves employees in solutions to problems.
  
  
• It changes a culture from being controlled by problems to being “in control”.
  
  

Hidden Opportunities and Costs are like Pockets of Ore... ...To remove them, you must mine with the right tools!

Your entire tool box should be focused on opportunities – finding them, tracking them, and turning them into cash. This means being honest about “what’s not working”. Once opportunities are revealed, they should be valued. The best tool for valuation of opportunities is called ‘Cost of Quality’ *. Cost of Quality was developed about 50 years ago as a method to capture costs related to quality control. Companies using the “out of the box” version of Cost of Quality sometimes become discouraged because it does not integrate well with production processes. However…

…Cost of Quality* specifically modified for mining processes and equipment can be effectively used to reduce problems and enables operations, maintenance and support functions (marketing, sourcing, etc.) to improve the bottom line.* By using this version of Cost of Quality, employees can “Go Exploring” for opportunities that would be otherwise be overlooked and can rank the financial impact of those opportunities on the bottom line. These opportunities currently prevent your company from maximizing the performance of the current asset base. Employees that have accepted recurring problems as “part of the process” will begin seeing problems as opportunities. They will understand the cost of recurring problems and will solve problems will a new sense of urgency.

Cost of Quality can be used to:

• Avoid Expansion Capital.
• Reveal and Understand Plant and Value Stream Bottlenecks by setting process optimums based on a “perfect world” scenario.
• Proactively Manage Equipment Delays (Maintenance
  and Operations).
     o Drills, Shovels, Trucks
     o Crushers, SAG and Ball Mills
     o Furnaces, Anode Plant, Refinery Equipment, Tankhouse
• Quantify Productivity Losses using Optimum Operating Hours and Optimum Throughput Rates (not Budget)
• Maximize Metal Recovery
• Identify Excess Costs embedded in the General Ledger.
• Measure “What’s Not Working” to get focused on the
  right things.
• Remove Non-Value-Added Costs and Process Inefficiencies.
• Value opportunities in RCM (FMECA)

How can COQ be applied to mining processes and equipment?

Here is a sample list of the types of events in the mining industry that can be valued and ranked using Cost of Quality:

• Loss of equipment availability and utilization
• Plan for maintenance or operating delays not followed
• Unplanned equipment delays (drills, shovels, trucks, mills, furnaces, tankhouse, longwalls, continuous miners, etc.)
• Product quality issues (downgraded material, recycle, contract penalties, etc.) – metals, coal, etc.
• Recovery losses
• All productivity losses for mobile and fixed plant equipment
• Out of control conditions in fixed plants
• “Surprises”
• 3rd party customer complaints
• Excess costs for product distribution
• Rework
• Stockpiles exceeding physical limits, resulting in shutdowns
• Overtime to make up for productivity losses
• Haul truck tire failures
• Excess power costs
• Excess reagent usage
• Belt failures
• Behind on waste removal
• Refractory brick wastage
• Lengthy fueling delays
• Shift Change over plan
• Over drilling or under drilling
• Excess Contractor Costs
• Labor costs related to firefighting
• Environmental spills
• Power failures
• Acts of God
• Business Interruption Insurance Claims
• Excess anode scrap

COQ Dollars also apply in support function departments (Maintenance, Marketing, Purchasing, Warehouse, Accounting, Environmental, etc.)

FAILURE COSTS

Internal Failure Costs

- tied to processes connected to internal customers and processes within their own departments. These costs relate to productivity losses and excess costs incurred as the result of process failures.

External Failure Costs