Business Objectives for Pilot Plants: Benchmarking Study Results 2004 AIChE Meeting, Austin TX

1. Business Objectives for Pilot Plants:Benchmarking Study Results2004 AIChE Meeting, Austin TX • Bob Duggal • Afton Chemical David Edwards Zeton Inc. Daniel Pintar UOP LLC Joseph Powell Shell Chemical LP

2. Demographicsof Respondents

3. Type # Speciality Chemical 16 Commodity Chemical 4 Pharmaceutical 7 Oil & Gas 4 Sub-Industry Within the CPI

4. Annual Sales

5. Employees

6. Business Objectives for Pilot Plants

7. What are the top reasons why you pilot new and improved processes?

8. What are the top reasons why you pilot new and improved processes? – By Segment

9. Pilot Plants are used.. • Across all segments of the CPI to • Mitigate risks of implementing new products and processes • Produce market development samples of new products • Develop process design data for new facilities, • Demonstrate process hardware for licensing new technology • Study processes for a range of goals, from basic research, process optimization to problem solving

10. How do you decide what processes to pilot?

11. How do you decide what processes to pilot? – By Segment

12. Deciding to Pilot • CPI uses a mix of methods to determine when to pilot a process • Pilot all processes, Risk Assessment, Judgment, Stage-Gate, etc. • Pharma more likely to pilot all processes • Other segments depend more on risk assessment and judgment to decide when to pilot a new process

13. What business metrics do you use in deciding what processes to pilot

14. What business metrics do you use in deciding what processes to pilot– By Segment

15. Business Metrics in Piloting Decision • Commodity chemicals, Oil & Gas most likely to use formalized financial analysis • Driven by size of capital investment • Decision factors in Specialty Chemicals & Pharma are mixed

16. What functional groups are involved in deciding whether a process will be piloted

17. What functional groups are involved in deciding whether a process will be piloted – By Segment

18. Who Decides? • R&D and Process development predominant in decision in most sectors • Less that others in Pharma • Marketing influence significant in Commodity and Specialty Chemicals

19. What percentage of new processes are piloted?

20. What percentage of new processes are piloted? – By Segment

21. What fraction of process improvements are piloted?

22. What fraction of process improvements are piloted?– By Segment

23. Frequency of Piloting • Most pilot >75% of new process and <50% of process improvements • Pharma more likely to pilot new processes and improvements

24. Who pays for pilot plant capital and operating costs within your organization?

25. By Sub-Industry: Who pays for pilot plant capital and operating costs within your organization?

26. How are support services (such as analytical test costs, engineering services, maintenance costs) billed back to the pilot plant or business?

27. How are support services (such as analytical test costs, engineering services, maintenance costs) billed back to the pilot plant or business? – By Segment

28. Who Pays ? • Overall, split between business area & central research budget • More funding from business area in Specialty and Commodity chemicals • Pharma, Oil & Gas supported predominantly by corporate funding

29. In Conclusion… • Norms/best practices identified • How do these compare to organizations • In your market segment • In others

30. Presentation of Results www.pd-aiche.com/area12b

31. Topics for “Post Paper” Discussion:(What other issues associated with “Business Objectives for Pilot Plants” are of significance to your organization, and would be of interest to you in future benchmarking studies?) • Benchmarking data for total allocated cost of running a pilot unit per week • Benchmarking data for percentage of time pilot units are being modified/run/unsued • The magnitude and type of scale-up risks varies depending upon the process (e.g. fixed vs fluid bed reactor) and the degree of scale-up (from 1cc to 100 cc unit or from 1000 cc unit to commercial scale). A database containing scale up histories for various types of unit operations and scale up magnitudes would be extremely useful in assessing risks. • How do you formalize the economic aspects of deciding which processes to pilot? • Costing samples for customers. Should sample price cover cost of piloting, make profit margin, or accept a loss and sale based on long-term commercial price for product. • Operation of commercial processes in Pilot Plant • Justification of Pilot Plant during slow periods (no new product development). How much cost should a business be willing to accept just to have a pilot plant asset available and how long of a downtime period is reasonable before asset should be shut down and written off. • Knowledge Management of pilot plant data • Time to market metrics. • How to quantify the business benefit of pilot plant capital investment and on-going operating costs.

32. Other Comments: What other issues associated with “Business Objectives for Pilot Plants” are of significance to your organization, and would be of interest to you in future benchmarking studies? • How are pilot plant costs billed to the business? By project? Allocation? • Pilot testing of a new process equipment rather than development of new process per se • Scheduling, Manpower • How is pilot plant time charged? Per time used? Or costs absorbed in some main R&D budget? Particularly interested in charges for feasibility studies, not directly linked to deliveries for marketing/clinical trials • In our organization, production quality and rate objectives are defined and monitored through the pilot plant function. • Applications of automation technologies to process improvement. • FDA Compliance • Due to cost cutting and frequent change in business/market opportunity, we take higher risks, pilot less. • Cost of operation of pilot plants. Could be total cost/year, cost per pilot plant day, cost per staff • Typical capital spent on pilot plants • Amount of pilot plant construction that is handled with internal vs contracted labor • What charges are included in the charge out rate vs. what is allocated? • Objectives, 1)New process keeps quality of final product, 2)Timing for supplying sample, Interest, Actual working day of pilot plant • Showcasing Pilot Plant capabilities to customers to demonstrate that NSC should be THE supplier for them. • General and ongoing data, studies, etc.