A recent KPMG survey of senior executives revealed that most felt that cost reductions made during the recession were not sustainable, and half said they did not have a clear enough view of their cost base.
During the project build phase, the cost of support functions is only a small proportion of the total, yet will rise in significance once the mine is operational, so must be kept in check from the start. Value can also be leaked from contracts if suppliers are allowed to widen the scope of activity and materials.
Building cost awareness
Companies must educate staff on where value can be created and destroyed. This does not necessarily mean buying the cheapest items, and everyone should recognize the impact of purchases on productivity and efficiency.
Embedding finance professionals in the project onsite can facilitate greater cost-consciousness. Systems must provide accurate cost management information, and cost performance commitments should be linked to results and aligned with incentives.
Checking your cost barometer
By gauging attitudes and behavior, KPMG can help foster a culture where staff considers the wider cost-benefits of their decisions. Our Commercial Engagement Index captures how employees feel about issues such as ownership of and accountability for cost, clarity of cost goals, and cost management skills.