When looking at justifying a control system modernization through a Return on Investment methodology, improvement opportunities obtained through automation improvements need to be found in the process unit. In this blog post, let’s look at how improvement opportunities can be identified.
There are limited areas that financial gains can be found in a processing facility.
- Increased revenue by either increasing capacity or price
- Reduced production costs such as raw material, energy, labor, maintenance and operating costs
- Reduced working capital costs such as inventory costs
One may notice that “improved quality” is not mentioned. That is not because improving quality is not important. On the contrary, improving quality is the driver to many of the listed profitability improvements. As a matter of fact, a quality based improvement may affect the financial performance in multiple areas. However one must determine what financial values are affected by improved quality.
Interviews with operations management and supervision, historical documentation review, identifying the longer-term business drivers for the process unit or facility, and financial performance review all need to be done. While the order that above tasks are completed does not absolutely matter, doing them in a certain order may prove more efficient.
First, understanding the long-range business driver provides insight into whether increasing capacity or focusing on cost reductions are more important. Second, determine where less than desired or inconsistent financial performance is occurring. Finally, by knowing the business drivers and the poorly performing financial metrics, the process operations that affect performance can be specifically discussed with operations.
When looking at financial costs sheets what should be looked at? First of all, the data must be normalized usually to a common production output so that the numbers can be compared. It is important the analyzed data is taken during normal operations. Timeframes that include start-ups, switchovers or shutdowns need to be removed. (Unless you specifically looking at improvements in those activities) Also any timeframes that include slowdowns or shutdowns due to maintenance activities need to be removed. (Again knowing the amount of time the process equipment is not available and how it affects the process unit financials may be important for plant availability improvement projects.)
Once the data has been cleaned-up one needs to compare the results per a timeframe, which is typically per month. Look for data such as production volume per product code for a specific timeframe, typically per month. Examine other metrics on a per unit volume produced basis such as energy or utility costs, reaction chemicals and other processing chemicals consumed. Also maintenance costs and direct labor per unit volume. Work with the operations personnel to determine what in the process affects a particular performance cost or KPI. Together, brainstorm reasons why there is variability and determine how much can be attributed to process control (automation).
As you can see, the better the data the more detailed you can get in your examination. Especially if you can associate the costs to what is going on in the process unit.
From Jim: You can connect and interact with other control system modernization and migration experts in the Improve & Modernize group in the Emerson Exchange 365 community