COMPUTER BUSINESS REVIEW

Critical. Authoritative. Strategic.

TECHNEWS

CBR is proudly produced & published
by Technews
www.technews.co.za
Issue Date: January 2008

Debswana cuts costs, boosts profits

January 2008

Driven by escalating costs and static diamond prices, Debswana, the world’s largest producer of diamonds, embarked on a business process management (BPM) exercise to create an internal management style centred on continuous business process improvement.

Debswana Diamond Company, part of the greater De Beers group, is a 50-50 JV between the government of Botswana and De Beers. It employs more than 6000 people, mainly at the Jwaneng, Orapa and Letlhakane mines, which are located many hundreds of kilometres from each other, and from Gaborone, the capital of Botswana, where Debswana is headquartered. It generated just under 32 million carats of diamonds in the most recent reporting period, 2005, and revenue of 15,8 billion pula, up from 11,7 billion pula in 2004.
In 2005 the company identified an urgent need to cut costs, based on a steady decline in its profitability due to flat diamond prices; an increase in the volume of waste to ore ratio; an increase in maintenance costs; and the punitive costs of running the support services at each of the mines, where Debswana is responsible for maintenance of entire towns, including mine hospitals, schools, shops and other infrastructure.
A five-year project, 'The North Star', was launched, with cost reduction as one of the leverage areas. Process enhancement is just but one of the many initiatives aimed at achieving this.
"We understood that we could reduce costs through standardisation and optimisation of processes," says David Reetsang, business process project manager at Debswana Orapa mine. "This led us to launch a business process management (BPM) exercise."
The goal of the exercise was to introduce continuous business process improvement (BPI), rather than the more radical and once-off business process re-engineering (BPR). Existing processes are documented using the ARIS modelling toolset; these processes are then analysed and opportunities for improvement identified; the to-be process defined, and initial improvements implemented; this is an iterative process leading ultimately to a business managed through BPM, where measurements are defined, processes defined, and process orientation is embedded in the organisation.
"We worked with Real IRM as consultants in the three-month proof-of-concept. We subsequently developed an implementation framework that has allowed us to own the BPM process ourselves and undertake a mine-wide implementation," adds Reetsang. The proof-of-concept which was carried out in the HR recruitment sub-process came up with the following objectives:
* Put forward recommendations on improvement of the HR recruitment process.

* Establish a repeatable BPM capability within Orapa, Letlhakane and Damtshaa mines.

* Pilot and assess a methodology or framework that can be used for future initiatives.
"We are encountering a number of obstacles as we go along but fortunately the GM of the mines is the biggest supporter of the initiative and that goes a long way in changing the mindset," notes Reetsang. "Many people were resistant to change, especially when they realised that they had to do the same job for Debswana with less budget. Unfortunately, the economic realities of Debswana were not apparent to everyone."
Once those obstacles had been overcome, the results were highly encouraging, reports Reetsang: "We were able to reduce the recruitment cycle by more than 30%. Secondly, we established a BPM capability, in line with our objectives, that is sustainable, with effective knowledge transfer to internal resources."
Business feedback was also positive. On having considered the final report of the POC the GM wrote to Reetsang: "I accept all your recommendations. Please prepare a summary presentation for Exco at the next meeting focusing on your proposed changes to the HR processes going forward."
Debswana learnt a number of lessons during the BPM exercise:
* The company needed a full-time resource to run BPM.

* Its success depended on experienced resources from business, especially during the process analysis and improvement phase.

* The use of ARIS as a repository allowed re-use of process models for other projects, such as the Mining Information Management Systems (MIMS) project.
"Just the MIMS project saved the company many thousands of pulas (Botswana currency)," says Reetsang. "We did this by utilising the as-is models as the basis for business and requirements analysis phase of that project. There are other ongoing projects within the company which are using the constraints identified during the as-is process mapping as business cases."
This has empowered Debswana to lay a foundation for an enterprise architecture. "We are currently growing an enterprise architecture capability from the ground up. The business architecture we developed during the BPM project is providing a basis for the development of a full enterprise architecture which we believe will be business-responsive as it is based on the business model."
Debswana learnt some critical lessons. "First of all, BPM is sometimes seen in business as an 'event', rather than a long-term new way of doing business," says Reetsang. "For the BPM to endure, you need a strong and rigorous governance structure.
"You need to focus intensely on delivering value quickly through quick wins, and to address a specific business challenge - what we often refer to as a 'burning platform'. Without this focus and early value, process modelling becomes an academic, paper exercise.
"Thirdly, the business tended to view the proof-of-concept as a purely IT project, when it was anything but. To overcome this, you need experienced, full-time resources, who have a strong understanding of their processes."
Key success factors were easy to identify:
* Sponsorship of senior management.

* Rigorous process definition using a mature modelling toolset (ARIS).

* Simple and practical techniques were used to identify improvement opportunities.

* Rapid delivery - the pilot project took just 10 weeks.
"Debswana has laid a solid foundation for process-based business and continuous improvement," says Paul van der Merwe, consulting manager at Real IRM, South Africa's leading enterprise architecture specialist. "Like many mining and resources companies in southern Africa, the company will reap the benefits of this exercise for decades to come."
For more information contact Carla Bell, Real IRM, +27 (0)11 805 3734, carla.bell@realirm.co.za


Others who read this also read these articles

Search Site





Search Directory

  • Search for:





Subscribe

Previous Issues