Transcription
Okay, hi guys, again. Uh, I guess we'll get started. I'm not sure if everybody's in or not. Um, I'll get Carmen to come on the stage. And again, welcome to our weekly webinar series. Uh, we're offering these webinars, uh, during COVID-19 period on topics of build awareness and improvement methodology and tools that we used in past. So, on today's topic is a cost reduction case study, which is from a Canadian mining operation. It will be presented by Carmen Ciriello. He's a founding member and a senior partner in Analyze Improve. He's been involved in condition improvement for over 25 years and has global experience working directly in operations, technical, and corporate environments. He is a Master Black Belt in Lean Six Sigma. And on today's topic, he has successfully delivered numerous continuous improvement projects designed to improve productivity, both to increase throughput and to reduce cost. Carmen is multilingual, including French. So, those of you who are more comfortable in interacting in French with him, feel free.
Before I hand over the stage to him, a little bit on the structure of our talk today. We'll start with the presentation on the topic. While the presentation is occurring, you can ask any question that you may have in the questions tab on the right side of your screen. Carmen will keep an eye on the questions during the presentation and will then answer them at the end. Uh, we'll also have an opportunity to talk face-to-face and discuss any further questions or interesting points through a Google Meet session after the webinar has ended. A link is present in the chat window for you to attend the socializing piece or webinar, if you want. Uh, without further ado, let me hand this over to Carmen.
Great, thanks Austin. Hi everyone, and and welcome. Uh, thank you for joining us today for this webinar. It's great to have you all with us, uh, this morning. Basically, what we'll do is we'll be going through the steps that were taken to achieve major cost reduction at a client site. Now, the steps that you'll see there, they're very clear steps, a clear path that was taken towards cost reduction. You'll see some logical steps that were followed, and the idea here is, as much as possible, attempted to sustain those cost reduction gains, basically. Now, some of the details are obviously not shown for privacy reasons for the client, but I can definitely try to answer any of your specific questions you may have at the end of this webinar. So, on that, enjoy the next 15 to 20 minutes.
Ladies and gentlemen, obviously we're having, uh, technical difficulties with the video, so we'll go at Plan B. There's always at least a Plan B or C. What I'll do is I will simply present it live. I have the presentation here, and let's see if I can do this without making anything crash. Screen sharing, application, slideshow. All right, and I will just make sure that, uh, you guys can all see my screen. Awesome. Just give me, send me a little text if everything's fine. There are a lot of BBS, seems to be okay. All right, let's get the show on the road.
So, here's the cost reduction strategy that was used for a specific client. And starting at the 12 o'clock mark, we had departmental cost reduction initiatives, number one, procurement and service strategy, organizational optimization, performance metrics, process stabilization, and bottleneck production strategy. And by putting them all together, the the goal was to create, um, sort of a, a path towards a major cost reduction. This was not just, uh, small improvements in cost. The the objective was to to achieve major savings in cost. What you see on the right-hand side with the arrow is sort of that the path or some of the tools that were used, including Define, Measure, Analyze, and Improve. Heavy dose of change management, as you'll see when you're dealing with cost reduction. Change management is an amazing, incredible part of it in terms of building engagement and sustaining the gains as much as possible. The the effort, sure, there's going to be those one-time savings opportunities, but as much as possible, you want to set it up so that the gains are sustainable over the course of many months and years.
Let's take a look at each one one at a time. So, departmental cost reduction. This is, uh, this is a great place to start. The the idea of those six steps is there's a logic to it, and you want to start with the ones that are maybe, uh, easier. Uh, also a way of building engagement. There's many reasons why you want to flow in that specific order. So, this is a great place to start. You're building a lot of engagement and buy-in for the effort. Different levels of the organization, different areas, different departments. You you can include operations, we include mobile maintenance, equipment maintenance, and especially support groups, right? It's not just about production or operations. Support groups, whether they be accounting, house, whatever the case may be, everyone gets involved, and everyone got involved in in coming up with ideas for for cost reduction, looking at data, looking at opportunities, and and targeting those savings.
A very big one was the whole idea of procurement and service strategy. This is a great place to attack as well. We got a lot of strong benefits in here, and they were basically in these specific buckets. So, the first one is the actual strategy of procurement. So, what we did is we went in and negotiated or renegotiated the rates of the highest cost vendors. The reason I say re or not, in some cases, there was not a negotiation that was done. It was almost, you know, the price was offered by the supplier, and and the client decided to pay it. So, there was never this back and forth to try and get the optimal conditions. We also offered extensions and or contracts in return for locked-in savings. There's a lot of things that can be done. You simply have to ask the question where you can have, as much as possible, some sort of a win-win strategy between the client and the suppliers. We also challenged single-source status. This is a very big area, a lot of controversy here because, you know, most most operations and maintenance like to have that single-source status for for very good reasons, but we have to challenge that and make sure that the reason is sound, and a heavy dose of analysis as well, analyzing the historical cost of items and also the demand, you know, of the items itself. And based on this, try and figure out what the cost reduction could and should be based on those of that data.
Another bucket is the actual support services. So, what is the service level you desire? It's kind of counterintuitive, right? We always think we want the best and the highest quality and everything that goes with it. But but everything works hand in hand. In some cases, we don't need the ultimate level of perfection. We don't need that high level of quality or service. So, we have to define that. So, one way of of getting savings is by reducing service levels and expectations. So, as an example, for maintenance service providers, a great way to that we started is to look at things that were non-critical processes or non-critical equipment and just ask for reduced service expectation. As an example, instead of having something that's serviced or analyzed weekly, maybe monthly or quarterly was was good enough because of the level of expectations. It was also a case where we had the contractors on site just in case, meaning just in case something broke down or just in case there was a need or an opportunity. But in a lot of those cases, they were available locally, so within a few hours' notice, you can have them on site anyway. So, it didn't make sense to pay for that round-the-clock continuous coverage if you can if you can sort of manage that on a need basis and with minimal risk.
Contractors. This was, uh, something that was immediately implemented. The immediate monitoring of of who was on site at any specific day, any specific week. Okay? And, uh, especially for a large company, it's, it's sometimes very hard to know exactly who's there. So, you may know company X is on site. This company X have three, uh, representatives or employees, or they have 15, or they have 20. So, we put in a process for monitoring that number and and also immediately removing or asking certain numbers of people to leave if it was above a certain threshold.
Another area we attacked is the best way to think of the category is is moratoriums and directives from the highest level of the organization. In this case, was the general manager. So, here's an example. A list of things that were done immediately. Over time, we're stopped. Tax usage, certain IT equipment ordering, hiring, rental agreements. The idea here is is twofold. One is you're getting immediate savings, but it also sends a very strong message. This whole idea of change management, a big part of it is here, where the the senior people are demonstrating how important, how critical the cost reduction is, and you demonstrate it this way with with these with this list. One little note on this list at the bottom is they don't have to be permanent, right? These are things that can be done at time equals zero, and you may want to write it out for a few weeks just to send that message, and then you can loosen them up a little bit as people understand the importance of attacking these items.
Third area is organizational optimization. Another very large area, a little bit tricky to roll out properly. A lot of the examples you'll see here is is often done improperly in industry, and and hopefully, you'll see some examples here, the proper way to roll it out. Uh, the first thing you have to do is actually review the design. So, that's what we did. We went in and we reviewed the organizational design, the the actual, uh, strategy for for the organization. What are they trying to do? Um, and basically, the the organizational design, the org chart, has to support that vision, has to support that strategy. So, a big part of that is to define the levels of work and the capabilities that are required. It's a lot of work that has to be done to understand that, but for the org chart to work, you have to understand what levels of work are expected at the different levels of the organization. And, you know, at a very high level, what that involves is need to have very distinct and clear levels of work that has to be defined. You need to elevate the organization. What I mean by elevate the organization is many times in any company, this company being no different, people tend to work lower than they're supposed to. So, a manager, perhaps, should be looking at the next three months of the company's performance, of the next six months, but perhaps the manager is working day-to-day or week-to-week. They're getting a little too much into the weeds. So, by doing this exercise, we're actually looking at where are the people working at versus where they should be working at.
Eliminating forced or fake levels. Uh, this is usually a problem with with companies that have a long history, that have been around for a little while, and this was no different. What that means is sometimes you create a role or you create almost like a mini department that really doesn't have any fit in the org chart or doesn't have any fit in the strategy of the organization, but was done in order to accommodate a specific person. And and that's reviewed, and that's eliminated if it doesn't add any value to the company.
And the last one is direct reports must fit within an acceptable band. What this means is just like anything else in life, there is a theory that works within organizational optimization. And so, a supervisor should have, sort of, a minimum maximum number of people that report to him or her. So, in a standard organization, sort of a rule of thumb can change a little bit, but as a rule of thumb, it should be no less than three people, but no more than 20. So, if you see instances where you have less than three people reporting to you, or more than 20, that has to be challenged. What's the reason behind the, what's what's the purpose? Can things be merged? Is there a way of getting more efficient? And a lot of that was done with this specific client.
Headcount rationalization. Obviously, this is part of it. Whether we like it or not, we look at basically all the present roles that people had, the relationships, the reporting relationships between supervised and worker, and more importantly, is the skills that are required in the different groups and different departments. In the rationalization, look, you're looking, and we did the same thing. We looked at different opportunities that that existed in the existing org chart. Were there any inconsistencies? Things that didn't make sense today? Perhaps there was a logic behind it, you know, a year ago or five years ago, but looking at it in a very, uh, sort of a clean, crisp, uh, analysis doesn't make any sense anymore. And also, perhaps specific people, there may be specific people that are in the wrong role and you should be working in different areas or different departments. So, that that is part of the rationalization process.
Centralization. And doesn't always work. So, it's, uh, there's there's a joke about, you know, companies always do this. They go from a centralized to decentralize, back and forth, back and forth, depending on the flavor of the day. So, we weren't trying to do that specifically, but I was looking at, were there opportunities where centralization made sense, right? So, there were there are opportunities to improve efficiency. In some cases, because you have a centralized department, you can get better quality, uh, you can get better efficiencies and and transparencies of communication, everything that goes with with the centralized group. And in some cases, definitely, you can reduce headcount, which I'll talk a little bit about later. Not necessarily translates into full permanent layoffs, but sometimes can simply mean they're reassigned somewhere else where you can get better value for that person.
And succession planning is something else we we added to this work. If you're going to review org charts, if you're going to review centralization, all that stuff, we wanted to make sure that there was at least some form of succession planning process that it had to be developed and it had to be aligned. So, what were those? Just like anything else, what are the key roles? What are the key risks in the org chart? And make sure that where it was critical, then we had a succession plan put in place.
The fourth bucket is called the performance metrics. Basically, here the the activity at this point, now you're getting into a full-blown mapping exercise. You're mapping the different cost structures, you know, uh, whether they be, again, operational, maintenance, services, labor, energy, whatever the case may be. And you're trying to map it in order to understand the leverage points. And what I mean by leverage points is which of those factors, by making a small change, give you the the biggest bang for the buck? So, low effort giving you the largest cost savings. And by doing this mapping exercise, and in some cases, Monte Carlo analysis, you know, minimum, maximum, most likely type of analysis, then you're able to come up with a new list of items that that become strong leaders for cost reduction that perhaps haven't been looked at.
We're getting, uh, to the fifth one. So, now there's a little bit more homework that has to be done. This one's called process stabilization. A lot more analysis. So, in this case, what you're trying to do, the the concept behind stabilization is you're trying to eliminate both the extreme lows and extreme highs. So, with the extreme lows, meaning something bad happened, that something broke down, or we had lack of communication or mix-up, but we didn't follow the standard. There's many reasons for it. So, the reason that you want to look at this is you want to understand what caused this extreme low and maybe do a root cause analysis, find out what happened, solve it, mistake-proof it, and hopefully, it doesn't come back. But you also want to identify the extreme highs. We don't want any of this up and down, up and down. So, we want something that's a lot smoother, a lot flatter, and a lot of times in this case, uh, was was also seen, you actually want to pull back a little bit from these peaks. You want to stabilize it, and by stabilizing it, you actually have something that costs less to run. It's a lot more predictable and easier to operate.
Basically, in the second bullet there, it's a little bit of the same. Sometimes another benefit that that we were able to put in place by eliminating those those peaks is you're able to use that stability in order to catch up. So, in some cases, you can stop a piece of equipment or a parallel line and just allow maintenance to catch up, do some of its preventative maintenance, and and actually just make sure the equipment runs better over the long term. We identified and analyzed many of the unplanned downtime events. So, anything that was a process that was down and was not planned, we wanted to try and understand it, group it, create some form of a Pareto chart, and and try to solve that problem for the future. Define, investigate, verify, and ensure that anything that is a repeat event is is attacked. And in general, when we're talking about mistake-proofing, you're trying to reduce the the, uh, probability of the event happening or ideally eliminate it. You don't want it to ever happen again, right? And the way you do this actually is is, uh, [Music] we tried to prioritize it. It's it's very hard to do this across the board. This is some an issue that happens many times with companies. You take a tool and you apply it across, and it becomes very, very heavy. So, here what we did is we identified the critical processes and just focused on those critical elements and made sure that we understood the root cause and applied some mistake-proofing techniques. Essentially, as you see there on the slide, you treat it like an incident. So, an incident is not just something that's health and safety related. You can't have incidents that are production, operation, maintenance related as well. And the goal here was to generate at least one mistake-proofing activity or solution for every downtime event on a critical equipment. That was the goal with that exercise.
And last, number six, is bottleneck production strategy. So, at this point, what you're trying to do is is come up with an, an overall plan, an overall scenario and picture of the operation. So, identify the overall production bottlenecks. More importantly, what we tried to do is we identified the losses which cannot be caught up, which is the definition of the bottleneck. So, if you truly have something that's that's critical, that's a bottleneck, that hour that you lost is an hour that's lost forever. There is no catching up of that hour. So, we selected those those main constraints. It was, you know, that primary bottleneck, the secondary constraints, and essentially, we wanted to understand what they were, and that had major impacts on revenue when they were down. Okay? So, the idea here, once you know what those constraints are, so then you ensure that these processes are properly supported. Meaning, as soon as we were able to identify the the few, you know, one, two, three processes that were critical, those ones have to be supported 100%. There should be no reason whatsoever that they didn't have the right people, the right parts, the right inventory, whatever the case may be. There is no reason that they should be starved of any of that attention.
Of course, the flip side is all the other processes that are not as critical, that are not bottlenecks, that are not critical, they can be treated differently. They can be, for example, slowed down. In a few cases, we were able to do that. You can also try and eliminate wastes that that were associated with them. I already gave another example where where you can stop them a little bit more often, and we're able to do a lot more maintenance on those issues, on those pieces of equipment, because they weren't as critical. And yeah, so we looked at anything that had to do with overproduction, overprocessing, or just general wastes that were associated with some of these things and just removed them.
The, uh, the way for some of you have probably seen it, seen this tool before, but a really, really great way to both monitor the the efforts that were done with cost reduction and also present to to upper management is this this tool called the waterfall. And we used exactly the same tool, and basically, it's, it's been normalized so that the numbers are on a basis of 100 million, but it's exactly the same tool and magnitude that was used for this specific client. So, I'll walk through it very quickly just to give you an example.
So, here on the left, you start with what the budget was for the year. So, in this example, 100 million. And one thing that we did right away, which is a mistake that's often done with with other projects, is you have to actually understand what the reality is today. So, although the budget may have been 100, I wanted to understand, were there unplanned events that have already happened in the year? Are there other corrections because of volume or currency exchange? And are there other examples that we already know that we're going to overspend based on that budget? So, by doing that exercise right up front, that 100 million came up to actually, let's say, 109 million because of these negative corrections. So, we're not working off the 100 anymore. We're working off the 109. That's the true present state of spending for this specific example.
In this, the way I chose to to present it here is using these specific approaches or these specific tools with respect to cost reduction. So, in the first case, there's everything to do with waste reduction. The best way to think of this is sort of like low-hanging fruit, great way of engaging people. You don't need heavy, intense data analysis. A lot of it is based on observations and getting people to just speak up on things they already know and see on a day-to-day basis. So, that's waste reduction.
Then, technical projects, often called sort of Six Sigma projects. There's a lot more analysis and analytics involved. They also take a little longer to to solve, you know, it could be anywhere from a few months to six months. So, that gets captured here. And then, as you're locking in these savings, these are actual savings that are locked in and completed. Then it's very important also to capture the ones that are on standby, sort of on on, yeah, waiting to be executed. In in this example, with this client, we decided to divide them up between high and low potential. High potential simply meant the the project was well-defined, there was a good probability of success based on past history or just based on sort of the the experiences of the people involved. And then on the low potential side, they were usually either not well-defined yet, so you could go from low to high potential with a bit more homework, or they were projects that were a little bit more stretched. We weren't sure if they were going to work, but we still wanted to capture them. And then you add up all these green bars to come up with what the costs will now become as we put them all in place. So, this 109 would drop down to 95. And then the last part of a waterfall is very important. What did the client want in terms of expectations for the new cost structure, right? So, in this example, we still wanted to get to 90. We fell short. So, we weren't able to get to 90 with this game plan right here. And so, we say, okay, we still have an additional gap of five million. What else do we have on our list? What else do we have in our analysis that we can try to identify these five extra million and drop them into the left-hand side of these four bars, okay? So, great way again, uh, to not only monitor and but also to present and demonstrate the savings and where you're at with respect to cost reduction.
In summary, the the idea of a good cost reduction pathway and plan is there's a heavy, heavy amount of data analysis. You need to really understand the data, the historical data, you know, who's doing what, who's involved, contractors, consultants, consumables, whatever the case may be. You need to know where you're at today in order to understand where you can get tomorrow. Change management and engaging the workforce. I mean, that is always important in any improvement project, but I would say when you're dealing with cost reduction, it's very critical. People need to feel comfortable, they need to feel engaged on why they're doing this. There has to be a reason. We're doing this. Are we doing it to be better positioned for the future? Are we, in this client's case, they were doing it because the profit margins were very slim, and so the cost reduction would allow you to go from a loss scenario to a gain scenario. So, so that had to be communicated to the workforce. And as I mentioned before, uh, it was one of the things that that the client was very interested in is they had to be structured and sustainable, right? So, this is not something we wanted to do as a one-time savings effort. Yes, there are some one-timers, so there's no doubt about it. There's some things that you save once, and you should not discount it, you should capture it that way, but as much as possible, see if if you can lock them in in terms of a repeat saving, something that can be sustained over a longer period of time, for instance, renegotiating a contract over many years.
And as a final note on this slide, there are definitely other approaches. I I don't mean to insinuate those are the only techniques available, but what's important is the idea of having something that's logical with the sort of the the quick wins at the beginning, and making sure that the approach is both, uh, yeah, customized to the situation and to the client needs. That that is probably the main takeaway in, uh, in this webinar. So, on that, I will thank you for your participation. I will now toggle back to the webinar screen. Okay, and I will take a look if there are any questions. Or and actually, what I'll do to give everyone a chance to catch up a little bit is if I go back to my presentation, there is a question that came up offline that that I just threw, uh, through a slide together, and it had to do with the reality that, uh, during this this COVID pandemic, that there's a very interesting scenario coming up where where companies are being forced to run with less people, and they're still getting a decent amount of production out of it, right? And and, uh, for for myself, there's a very strong analogy to when a company goes on strike duty, right? When a company does, uh, still operates during a strike, they often see the same thing where you see the ability to to produce at a certain level with less people. So, here's an example that this is actual numbers from a few of our past and present clients. You know, in some cases, they're using anywhere from 25 to 80% of resources and generating, you know, 75 to 100% of production levels, which is just incredible, right? And, uh, the question though, is it's kind of an open question, and we can we can just leave it as an open concept, is how and why is this happening, right? There's many typical reasons why you can get the same level production with less people. So, for instance, you can have reduced maintenance because you're hoping that this is not going to last very long. You you kind of cut back on your preventative maintenance, focus only on priorities, whether they be departmental or whatever you're making. You're only going to focus on what's truly critical. You definitely can get better consistencies in communication because there's less people. So, if you imagine a process that may have a dozen human beings in a regular process, when you're, uh, when you're on light duty, you may only have two or three people working on it, and all of a sudden, that that level of, uh, standardization and communication becomes super, super smooth, right? A higher focus and attention. There's other reasons as well, but these are some typical ones. And so, the the challenge here for us as a community and for companies is to try and understand what exactly is the reason you're gaining some of these added efficiencies, because some of them are short-term savings. What I mean by short-term is you can't actually sustain them over long-term. So, as an example, if you're not doing, uh, proper maintenance because you're thinking this is only going to last, you know, a month or two, that's fine. You could you could bank that savings today, but know that in in two, three, four months, that will come back, and then you will require to put that that time and effort and money back where you were skipping it before. Some cases, it's definitely a sustainable savings. For instance, you may learn that the the number of of workers you needed for a certain activity is not as much as you originally had. So, that is a learning that you could have and you could lock in for the future. So, just a little bit of food for thought for for those of you attending today's, uh, today's webinar.
Okay, I see, uh, I see a question. Is a management change type process used to ensure the savings are sustainable or do not introduce additional risk? Yeah, uh, good question. Management of change, uh, there was some of that that was used, but I have to admit, we took more of an approach of change management. And I, I will, uh, some of you will say, what's the difference, but I'll quickly go to a slide here just for your information. So, uh, it doesn't really matter what, uh, what the the approach is. What is important is some thought is is put together to understand what the risks are. So, whether it is, uh, some kind of management of change approach, but the approach we we took here is one that followed this model, which I won't go into today, but the the idea here is you want to look and you want to understand first, as a team, we wanted to understand this change that we're about to do. What is the positive of the change and the negative of not changing? And then the reverse, the negative of the change and the positive of not changing. And this had to be first internalized. So, we we debated this as a team, in sort of in-house, and then involve other people, right? Involved some of the workers to say, oh, okay, uh, yeah, that makes sense. Uh, I understand the purpose of the change, and I'm on board. I want to do this. And and that's one of the reasons, if if you remember, if we go back to, uh, you know, this pathway, one of the reasons we started here is because it goes hand in hand with that selling of the message and and getting buy-in. Is if you can explain it, if you, some people call it that burning platform, if everyone understands why we're trying to reduce costs, and then you get them involved on a departmental level, everyone gets involved. Even if it's something small, if you're in charge of office supplies, okay, your job is to save on ordering pens and paper. Well, 5% saving is 5% savings. There's no dollar amount that's too small or too big to make it on the list, basically. Good question, excellent question.
I'm just going to take a look. Okay, I'm not sure if there's any other. Oh, there is a question in the question page. Based on your experience, do you have a Pareto scale savings of the six areas, highest and lowest? Yeah, uh, very good question. I'll actually, I'll leave, I'll leave the slide on that's where it is. Um, it, as you can imagine, it varies quite a bit, right? But but I can give a little bit of my my gut feelings in terms of some of the experiences we had with the cost-saving initiatives. Procurement and service strategy is big, okay? The number two bucket, this one here, it's actually huge, uh, for for many reasons that I already mentioned, right? A lot of the, a lot of the attention that gets put into procurement and service strategies usually gets done at the very, very beginning. So, imagine you're a new company, or you're starting up a brand new mine. So, special attention is is, uh, is taken to say, oh, you know, we have to understand who's going to deliver it and what are the terms. But then it starts falling apart, right? There's not as much attention usually. I'm generalizing. There's not much attention that that's, uh, that's put into this, and because of that, it tends to get a lot of waste and a lot of fat gets built into these contracts, right? If I go back, uh, I'll show you a slide here. So, because of that, this area becomes a very large bucket for us when we do these cost reduction savings. The idea of challenging the single-source vendors is makes a big difference because as soon as you can get away from it, and I know there's a lot of people attending that have a lot of experience that's negative, right? If you don't do this properly and you switch to, well, anybody can supply this pump for us for this part, then it goes very bad, right? You're going to have difficulty with the parts, the reliability of the part. So, we're not talking about that. What we're talking about is if truly that that element of that part, we don't need it from the original source, then you could have tremendous, tremendous savings. I won't quote some of the specificness, but especially for parts, if you get away from the original provider and you can at least understand what's available out there, there's tremendous savings there.
Raw materials. This is a good exercise as well. Uh, both, uh, Asam and I have done many examples in here. You try and understand what's going on in industry today. So, for instance, if there's a major price drop in oil or rubber or steel or whatever the case may be, you need to know that because if if certain commodity or certain element has dropped, then you make a sort of a link. You make a link with what, uh, what kind of products you're buying. You say, well, if rubber dropped or steel dropped, your fuel dropped, therefore the product you're delivering to me and the product you're providing to me should also have a major cost savings. So, you have to do your homework upfront. And, and this number two is is usually, I would say, one of the things that has at the very, very top of the Pareto chart. The other one that would be very big is, but it takes a little while to get there, is when you get to the back end, when you get to things that that identify the bottlenecks, and you could truly understand what those constraints are, they start generating a lot of the savings as well when you get to the back end.
Okay, let's see. More chat. Another comment. Please provide some examples on challenging the vendor. What was agreed upon versus what was actually supplied? Okay, yeah. Uh, let me go back to challenging the vendor. I'll go back to the slide so I can pick on things that are specific. Uh, it varied, uh, tremendously, right? So, in terms of, uh, what was negotiated. So, let's look at this one first. So, in terms of this, this extension, you know, a lot of times they were the contracts did not exist, or they were a one-year contract, and so that was a relatively simple exercise. We would say, okay, we'll, we'll offer you a three-year contract, but you, uh, you give us a 10 or 15% uh, savings over the three-year mark. A little bit of negotiation, of course, between the term and the rate, but that was fairly straightforward. I think in in in most of the cases that we did that, one, the vendors were totally on board, especially if they were small to mid-size. They wanted the stability, right? Everybody's searching for stability. So, the fact that you're able to sign a three-year or five-year contract with a mine means that you have some assurance that you'll, you'll get some cash over the next three to five years, even if it's a slightly reduced rate.
Linked to that is, uh, I, I believe they're still doing it, but it's what I often call the Walmart model, or, you know, I think GM does the same thing in a lot of these cases with the big companies. They'll have a major supplier, supplier that provides you with 80% of the units, but then you'll also have a minor supplier that supplies you with 20%. So, that technique is really good because with the 80%, you've got your your steady state, you have your ability to feed the parts that you need, but lurking in the shadows is the is the B supplier who is working really hard. They want to go from the 20% to the 80% and eventually become your major supplier. So, you can actually use that as a way to see, am I getting the best bang for the buck from my main supplier, and perhaps my secondary suppliers showing me ways of getting better returns, right?
Another example that I can show is this one here. This this was great as well, uh, great because it's a question we rarely ask. I, and I kind of alluded that in the video, we we always think, well, you know, I'll give you a specific example. If it's a camp, so the camp has cleaning, kitchen services, janitorial, whatever the case may be. So, so we challenged it, right? It's not, nothing's taboo, nothing's off the off the limits or out of scope. We challenged everything and say, what exactly are the expectations that we have in terms of cleaning that corridor, or cleaning our rooms, or cleaning the gymnasium, or whatever the case may be, right? So, if we don't ask that question, of course, the vendors say, oh, we clean that hallway 17 times a day because, well, we don't need to clean 17 times a day. Actually, once every three days is probably good enough, right? So, there were many of those examples that generated tremendous savings. The savings there is not about rates necessarily, it's more about the manpower that was required to generate the service levels that they thought you wanted. So, as soon as you reduce that service level in terms of, in this example, the camp, then you don't need 20 camp contractors. Maybe it dropped down to 15 or 14 or 12. You can remember the numbers by heart. The maintenance one is also one in terms of maintenance expectations, both internal and external, surprise supply maintenance, and yeah, that that was also an example where if it was not a critical process, or a process that was for all intents and purposes extremely stable and, uh, reliable and not critical, then yeah, we, we went in and reduced the the the maintenance expectation for that specific part.
Here, some specifics. Well, that list is already specific. Um, now, in terms of dollars, I think the biggest one obviously was overtime. Biggest both in terms of dollar value and message, right? So, the message being sent is you need to be more organized, and we're not gonna, we're not gonna just tack on overtime because we're not organized, because we didn't plan properly, or because we didn't do our homework properly. And yeah, so those, those are some examples of specifics. Hopefully, I answered your question, but if not, we'll have another chance afterwards to deal with some specifics.
There's a comment here from Ken. Just to add to what Carmen has said, my experience is that if you can define upfront what is being agreed upon, think about expected quantity, quality, resources, and time, then it is easier to go back and question the vendor expectation. I'm not mad. Yeah, uh, 100% agree with, uh, with Ken. The, uh, if it's done properly, properly, and you define those upfront, then you can, you have that already in your contract, right? You say, well, um, I defined what I expected in terms of quantity, quality, and, uh, to add to this, this, this concept that I can mention is you define those four things, but you also have to tell me, or I'm the client, I have to tell you which ones of those are the most important. What is the most important for me in terms of bills? If I can define that, then you, as a provider, can say, okay, I understood. You defined what your expectations are, and the most important is this specific, uh, bullet or this specific element. But it's never too late, right? Even if you don't have that in the contract today, in the example of the contracts, then when you review this as a contract vendor or or whatever, even if it's a part-time role, then you're able to do that at that point. It's okay, we didn't define it upfront, are bad, but let's try to find now. Let's try to define what the expectations of this department and of our company is when it comes to any of these service providers, whether they be material or whatever the case may be.
Great questions. I'm seeing if there's anything else that maybe I missed. Uh, one, one last part I didn't answer part of the question about the Pareto scale, highest and lowest. Uh, I would say on the lowest side, if you're looking at strictly dollars, that first, let me go back, this one here, departmental cost reduction. Sometimes it ends up being the smallest bar, but I already explained a few times why we do it, right? It's it's about engagement. It's about getting everyone on board. It's about teaching people the elements of waste. And as soon as you have people understanding waste, that great things happen because it's not just about cost reduction in terms of this, but it's about improving efficiency, getting more for what you have, because in the end, you know, it's it's a sort of a in versus out. So, I can reduce costs, but I may find great opportunities with for the same cost, I can get 20% more throughput or 20% more product, right? So, that's the reason for this number one. But strictly speaking from a Pareto scale, it usually tends to be on the low end of total costs received, especially if a company's been doing, you know, cost reduction initiatives over a long period of time.
Okay, I think, uh, I think we've covered most, if not all, the comments and questions. I'll wait for, uh, for Austin to get back. I will stop sharing my screen, I suppose. I'm great for you. Thanks, uh, uh, yeah, and if there aren't any more questions, obviously, as I was saying earlier, that there is a piece which we built in part of this webinar series, is engagement at the end of the pair. So, if you guys want to join, I'm sharing that link again in the comments there. Yes, hopefully, we'll see you for the next webinar.
Yeah, you, you cut out a little bit, but, uh, just in case you missed that, there is a link that was just sent. Uh, again, if you click on that link, you'll be able to join us face-to-face and have an informal chat on any of the topics we covered, or perhaps a topic that you just want to chat about offline. So, uh, with that, I want to thank each and every one of you for attending. And again, don't, don't hesitate to reach out to us if you have any questions by email. But otherwise, enjoy the rest of your day. Thank you very much.