AAOM Handbook

[OFFICIAL]

INTERNAL USE ONLY

CHAPTER 1: BUSINESS STRUCTURE PERFORMANCE MODEL BUILDING

1. INTRODUCTION Anglo American and its Business Units and Operations can understand what transform, transfer and store processes contribute to delivering Business Expectations with the Business Structure represented as either a Value Stream flow or Value Driver Trees depending on the interdependencies. The Business Structure must also contain associated service processes and productive unit facilities that subsequently inform the scope for Service Strategies. It is the accountability of the General Manager or Head of Function to define a Business Structurefor an operation or function at a level of work complexity 4.

The BSP model can be developed to model two types of interdependencies:

1. Value Stream that considers interdependencies across a level 2. Value Driver Tree that considers interdependencies between levels

The BSP model serves as a tool to set performance targets to meet business expectations to the required confidence level by identifying constraints and opportunities and testing scenarios. Constraints and opportunities to process performance fall into two distinct categories. The first category is the one that is most commonly recognized, limits in the capacity of one or more of the Business Structure elements i.e. bottlenecks. The second category of constraint is less commonly recognized, it is high variation in dependent processes, which restricts process performance just as effectively as a single bottleneck. Every constraint represents a potential opportunity to deliver improved process performance. Constraints and opportunities can be identified by looking in detail into the performance model of a process. The first type of constraints that should be identified and dealt with are those related to the less commonly recognized excessive variation. Reducing the effects of this variation typically yields several times the output benefit of trying to shift the process operating point without reducing the variation. When variation has been adequately dealt with, the capacity constraints in the process should then be dealt with. The dominant constraint across the value stream can be identified by examining the constrained probability distributions defined for each element of the calibrated Business Structure Performance Model. The width of the distribution will be an indication of where excessive variation may be a constraint. The skewness of a distribution, and the value of its end points, will be an indication of where capacity may be a constraint - a skewed distribution is typically associated with the increasing non-linearity that occurs towards the top of the performance/effort curve for a process. The unconstrained distributions identify the type of factors driving internal process performance and the degree of variability that may affect other processes. The outcome of testing scenarios in the calibrated Business Structure Performance model will allow constraints to be validated and the opportunities to move the process performance towards the required targets suggested. If testing of a scenario indicates that it is likely to be able to achieve the performance target confidence levels it needs to be further investigated in the Production and Service strategies.

Operational Planning: Building a Business Structure Performance Model Page 5 of 39