After spending several hundreds of thousands, or just as often millions, of dollars building up infrastructure based on earlier-technology equipment, dumping it as “old and yukky” just because something “new and improved” has come out is fiscally irresponsible. Not only would you have to write off the old equipment (which the accounting department would rather depreciate over another two or three years–or more) and lay out the cost of the “new and improved” stuff, everyone in the plant would have to drop what they’re doing (hopefully, productive work) to take training classes on the “new and improved” stuff (which is definitely unproductive).
It’s interesting because it ties in with a draft of a paper that Emerson’s John Dolenc is writing about planning automation upgrades. You may recall John, an advanced automation services consultant, from an earlier post. One of his key points is that economic justifications based on obsolescence are a difficult route to take, unless the obsolete equipment is causing unplanned downtime. One problem is that it’s hard to quantify the improvement. Another is that the new equipment may be replaced “in-kind” where no benefit is received from its improved technologies–it simply mimics what the old equipment did.
He stresses a path which begins with the business objectives like increasing production capacity, reducing manufacturing costs, or increasing process flexibility to more quickly respond to customer demand. From these business objectives, an audit of the process unit should be done to identify areas for financial improvement.
This audit feeds a conceptual engineering study to develop the process automation modernization plan. John has developed these studies working with members from operations, maintenance, plant engineering and management, even sales and marketing to better understand the flexibility the plant’s customers require.
This study provides the business case whether to pursue the capital investment for modernization or to maintain the status quo. It may also identify quick opportunities for improvement with the existing equipment.
The draft also describes his methodology for moving forward with the modernization plan, which I’ll save for a future post.