October 12, 2012

Are You an Asset or a Cost?

To justify an automation investment to top management, you’ve got to educate all stakeholders. A combination of two different approaches can yield the best results.
Are You an Asset or a Cost?

“Approach justifying your automation investment as a sales job to top management,” said John Dolenc, principle engineer at Emerson. Dolenc’s remarks came during a well-attended session at the 2012 Emerson Global Users Exchange.

First, Dolenc said, you need to understand what plant management’s and operations’ attitude about automation: Is what you do thought of as an asset or cost?

Never fail to educate all stakeholders, especially plant staff, on the capabilities of automation, said Dolenc. To make your case for modernization, identify key business and operational issues, usually tied to key performance indicators (KPIs). Note where the standards have been set, and be able to measure actual performance against those standards.

According to Dolenc, there are two approaches to making your case: one focuses on sustaining plant operations, while the other emphasizes return on investment (ROI). He actually favors a hybrid model incorporating both arguments. Answers to the following questions drive the sustaining-current-operations approach:

• What are your unscheduled downtime incidents due to system failure?
• Is it still cost-effective to support the old system? Is it obsolete? You don’t want to be buying replacement parts on e-Bay.
• Is your legacy system capable of flexibility to respond to new business opportunities?
• Do you lack the ability to increase capacity to drive more sales?
• Is the loss of operational intellectual talent (seasoned professionals retiring) going to affect the legacy system’s efficiency?
• What is the financial risk of a shutdown? This should include hardware replacement and labor to repair and clean up, value of lost production multiplied by the probability of such a failure.
• What is the effect of environment—dirty conditions, extremes in temperature, etc.—on your plant’s hardware life? It can be one of the biggest contributors to a short life span for equipment.

The ROI approach to justification includes a discussion of benefits of modernization to the bottom line. Related questions include: Will we be able to increase capacity or charge a higher price? Can we reduce costs? Are we risking health and safety violations and possible fines by not modernizing our automation?

You must understand the business drivers, review historic KPIs and audit existing processes for poor performance or variability, says Dolenc. Define areas where new automation modernization will improve these KPIs. “You will have to talk and work together with plant management, operations, reliability & maintenance, even marketing and sales to get an idea of new products that might be coming down the line,” he said. Also, meet with accounting to understand revenue generation and the production costs and how these are charged.

Some places to look for poor performance to make your case include:

• Variability—poor control, inconsistent batch operations
• Deteriorating conditions—corrosion, degradation of catalyst
• Manual operations—a good indication where losing seasoned pros is going to hurt
• Plant Availability—unscheduled outages

“Any control system is not infinite. Something will have to do be done, eventually. Doing nothing is not an option,” said Dolenc. Consider first using the sustaining-current-operations approach to modernizing the automation infrastructure, then use the proposed new infrastructure as a basis to justify improvements to ROI.

Production and profitability are dependent on working together in unison, and you need complex, advanced controls to “push the envelope,” said Dolenc. But when a company does modernized its automation architecture, it can expect benefits that include: energy savings, reduction of variability, increased capacity, asset management/maintenance improvements, and automation of start up, switch over and shut down sequencing.