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Building a Business Case for an Enterprise-Wide MES Rollout. Session: OXCX222 Presented by Trevor Cusworth VP, Business Value Consulting November 9, 2011. Invensys Enterprise Control Offerings. Corporate Systems. Industry Solutions Services: Consulting, Project Execution, Learning,
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Building a Business Case for an Enterprise-Wide MES Rollout Session: OXCX222 Presented by Trevor Cusworth VP, Business Value Consulting November 9, 2011 Invensys proprietary & confidential
Invensys Enterprise Control Offerings Corporate Systems Industry Solutions Services: Consulting, Project Execution, Learning, Operational Improvement, Maintenance & Support Partner Ecosystem Corporate Software Applications Invensys and Third Party Manufacturing / Production Operations Automation Invensys and Third Party Enterprise Control System IT Platform Integration and Collaboration Platform
Where The Offerings We Will Discuss Fit Within TheInFusion Enterprise Control System Execution Integration & Collaboration Platform Enterprise Asset Management Mobile Workforce Management Manufacturing Execution Systems Batch Performance Software Applications Enterprise Manufacturing Intelligence Asset Performance Performance Measurement and Reporting Enterprise Integration Visualization Quality Optimization Workflow Advanced Process Control Simulation / Optimization Design Operator Training Third-Party Offerings Open Device Integration Web Portal Control Automation Software Applications DCS PAC SCADA HMI Application Toolkit Safety Turbomachinery Control Safety Instrumented Systems General Purpose Safety Historian Measurement & Instrumentation Recorders Instrumentation Controllers
Pillars of Operational Excellence and Focus of This Discussion Operational Excellence Level 3 (Multi-plant/Multi-site) Environment And Safety People Level 2 (Plant Floor/Area) Asset Level 1 (Resource/Asset) Control
Business Value Creation Process Empower Real-Time Business Empowerment Measure Real-Time Business Measurements Improve Real-Time Business Improvement Manufacturing Resource Base
Introduction • Most manufacturers justify MES investments on tactical and easily measurable operational cost reduction metrics e.g. lead times, data accuracy, reporting etc. • Typical payback from these benefits is an average of 12 months • However, there are much larger benefits when MES is used to drive continuous improvement • Calculating the benefits from MES-enabled continuous improvement is straightforward • It is then possible to develop an effective and profitable enterprise-wide MES rollout strategy
Benefits from MES Increase Volume and/or Margins at Same Cost Increase Market Share and/or Pursue New Markets Reduced Operating Costs 10X • Platform for Continuous Improvement • Supports Collaboration • Provides supply chain visibility Average Payback 12 Months on 1X Benefits Value of Benefits 3X • Faster New Product Introductions • Shortened Time to Market for Innovation • Customer Audits Requirements – Traceability and Genealogy 1X • Lower WIP and Finished Goods Inventory • Reduced Waste/Scrap • Reduced Rework • Reduced Maintenance Costs • Reduced Indirect Labor Costs • Shortened Cycle Times • Improved Quality/Reduced Variability • Reduced Cost of Regulatory Compliance 3 to 12 mos. 12 to 36 mos. 3 years + Source: AMR Research Report: MES Provides Long-Term Revenue and Market Benefits Beyond Easy-to-Quantify Operational Cost Savings
Measuring Performance Against True Potential • Over time, personnel in manufacturing businesses build up a perception of what their assets are capable of delivering • This historical performance become the standards (or budgets) by which these assets are operated and measured and are usually never challenged. • If it was possible to break through these perceived constraints, there are millions of dollars of “hidden” opportunity for profit improvement • A large amount of opportunity is invisible to the current reporting systems • True Potential is defined as maximum speed, zero downtime, zero waste and optimal crew size
True Potential is Often Hidden by Current Measurement Systems
True Potential is Often Hidden by Current Measurement Systems Process Standard or Budget
True Potential is Often Hidden by Current Measurement Systems Process Standard or Budget
Example – Traditional Data Collection Efforts Can Hide The True Opportunity …After an assessment of total plant opportunities, the downtime issues were found to be of minimal value Client was focused on addressing downtime to Improve performance… Results of Plant Assessments: • Identified that the top issues were hidden by current reporting tools • Reset the priority and focus of plant management • Focusing on the “real” top issues will drive rapid performance improvement
What Affects these Cost Variables? • Manufacturing profitability can be impacted by process efficiency & yield • Need to understand all losses: Yield Losses Efficiency Losses • Downtime (planned/unplanned) • Time spent making waste • Throughput/speed reductions • Inefficient use of labor • Product Giveaway • Visible And Hidden Losses • Product Downgrades Need to understand the demand for the products – whether they are sales or production constrained
What controls manufacturing costs? What Controls Manufacturing Costs? Variable Cost of Manufacturing $/Unit Raw Material $/Unit Energy & Utilities $/Unit Labor $/Unit Raw Materials / Unit Units / Labor Hour Labor $/Hour Raw Material $/Unit Units / Line Hour Crew Size Which of these variables can be optimized to improve profitability?
Traditional Measurement Systems can Hide Opportunity • Cost Accounting System • Only looks at costs, not profits • Compares current costs to a standard (or budget), not True Potential • Cannot easily drilldown into variances to understand reasons • Benchmarking • Benchmark may not be running at its True Potential? • Difficult to get business buy-in to benchmark results • Manage by Intuition • Work on what you believe are the right opportunities or what other people tell you
Bottleneck Identification • In order to assess the True Potential of a manufacturing process we need to find the speed bottlenecks • Speed bottleneck can vary by product running on the line • Build a speed profile of the line • Measure actual speeds • Determine maximum speeds Speed Bottleneck
Valuing the Opportunity - Efficiency • Efficiency Improvement • Use the speed bottlenecks with historical data to determine the actual performance versus True Potential
Valuing the Opportunity - Yield • Yield Improvement • Compare theoretical yield versus actual yield to determine material loss versus True Potential
Business Scenarios Valuing Lost Time - Business Scenarios • Sales Constrained • If a process is Sales Constrained, we can make more units than we can sell • Improving efficiency will enable us to make the current volume in fewer hours • Production Constrained • If a process is Production Constrained, we can sell more units than we can make • Improving efficiency will enable us to use the time which is currently lost (due to downtime, slow running and waste) to make more units for sale • Note: It is common to find processes for which some Product Variants are Sales Constrained and some Product Variants are Production Constrained (e.g. Domestic products are Sales Constrained but Export products are Production Constrained)
Developing a Successful MES Rollout Strategy • Many considerations besides opportunity size need to be considered in developing a roll-out strategy for MES • Many companies start with pilot(s) to become familiar with the technology and it’s capabilities before committing to a corporate-wide rollout • Change management is a huge factor in rolling out this technology • Need to include all stakeholders early in the process • Need to consider the impact of how this new system will impact each of the functions in the business • Who needs to see this information • How will it be presented to them • How will they use it to drive improvements
Questions that Need to Addressed • Key principles: • Need to capture data in order to baseline, ID top issues and measure effectiveness • Create a rollout plan which accelerates the deliver of benefits so that each step starts to pay for the next step • Cash flow goes from negative to neutral to positive as quickly as possible
Considerations for Developing a Successful MES Rollout Strategy • Opportunity Size • Key business issues • Delivery of quick wins and early delivery of financial benefits • Ease of implementation (technical) • Ease of change management (people and process) • Business risk (e.g. need to avoid disruption to critical projects) • Other business constraints (e.g. resource availability) • Financial model – budget available/timing/project cash flow
Business Value Creation Process Visibility is Essential to Profitability Empower Real-Time Business Empowerment Measure Real-Time Business Measurements Improve Real-Time Business Improvement Manufacturing Resource Base
Drive Improvement with Plant Data Dynamic Date Throughput Energy Cost Yield Material Cost Waste Speed True Potential Semi Dynamic Data Capacities Production Value Material Costs Opportunity Calculations Static/Setup Data Products Process Configuration Crew Sizes BOM
Setup a Continuous Improvement Cycle Install Performance Measures Data Collection True Potential Analysis Opportunity Review Taking Action • Implement • Monitor Results • Analyze Data vs. True Potential • Total Opportunity • Top Opportunities • Short term • Daily • Weekly • Identify Systemic Problems • Production Data • RT Cost Data • RT Profit Data Continuous Profitability Improvement Profitability Time
Summary • Justifying MES purely on tactical and operating cost issues severely underestimates the benefits from MES • Need a methodology that allows the calculation of the larger benefits available from MES • Need to measure the business against its True Potential • Need to consider the demand for the products to calculate the value of efficiency and yield improvement • It’s easy to get started – and the required data is usually readily available
How to Get Started • Choose your most efficient plant/line • If opportunity can be found here, then it is likely there will be opportunity across all plants/lines • Perform a Business Value Assessment • Analyze the bottlenecks by product type/family • Use one year of historical data to understand the total opportunity • Calculate opportunity against next year’s production plan • Build a business case for an MES pilot or corporate rollout