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Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Welcome to todays Webinar: Top Asset Lifecycle Management: Driving Profit.

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Presentation on theme: "Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Welcome to todays Webinar: Top Asset Lifecycle Management: Driving Profit."— Presentation transcript:

1 Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Welcome to todays Webinar: Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Please join us for the following upcoming Aberdeen Group Webinar: August 19, 2010 Achieving Environment, Health and Safety (EH&S) in Todays Plant

2 Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Paul Studebaker, CMRP, Editor in Chief, Plant Services Magazine Joining us today: Daniel Konstantinovsky, Product Marketing Manager, ABB Mehul Shah, Research Analyst, The Aberdeen Group

3 Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Daniel Konstantinovsky Product Marketing Manager ABB

4 May 20, 2010. Dan Konstantinovsky, ABB Reliability Services North America Reliability Excellence Drives Best- in-Class Performance

5 How ABB is organized Power Products Power Systems Discrete Automation and Motion Process Automation $11.2 billion 33,500 employees $6.5 billion 16,000 employees $5.4 billion 18,000 employees $7.8 billion 28,000 employees 2009 revenues (US$; pro-forma figures for automation divisions) Low Voltage Products $4.1 billion 19,000 employees Electricals, automation, controls and instrumentation for power generation and industrial processes Power transmission Distribution solutions Low-voltage products Robots and robot systems ABBs portfolio covers: Services $4.2 billion 12,500 employees (pro-forma) Life cycle services, reliability services & consulting services ABB Confidential and Proprietary Information

6 What is Reliability? Definition In other words, we tie $ directly Availability Performance Rate Quality Rate Overall Equipment Effectiveness =XX Meaningful definition: ABB Confidential and Proprietary Information

7 Why reliability? Operational Excellence is biggest profit contributor Company Profit Operational Excellence Reliability Excellence Operational Excellence is biggest controllable contributor to sustainable profit. Operational Excellence needs a reliable foundation: People Processes Tools Metrics ABB Confidential and Proprietary Information

8 The earning power of a plant under some assumptions: 8 760 50 Max prod/h 77.0% Availability 85.7% 91.0% 438 000 Theoretical prod/year 263 019 Actual prod/year 60.0 % OEE 0.250 Contribution margin/unit 65 755 Contribution margin/year 0.600 Price/unit 0.416 Variable cost/unit 9 469 Direct maintenance costs 15 000 Depreciation 30 000 Other fixed costs 54 469 Fixed costs/year 150 000 Fixed assets 15 781 NOWC 165 781 Capital employed 157 811 Revenues 7.15 % Profitability 0.95 Capital turn over rate 6.81% ROCE 11 286 157 811 Revenues Profit Prices in kUSD Influence of OEE on earning power Planned hours Performance Quality yield

9 OEE increase of 10% gives $9.3M in increased profit 8 760 Planned hours 50 Max prod/h 83.0 % Availability 91.7 % Performance 92.0 % Quality yield 438 000 Theoretical prod/year 306 697 Actual prod/year 70.0 % OEE 0.250 Contribution margin/unit 76 674 Contribution margin/year 0.600 Price/unit 0.350 Variable cost/unit 11 041 Direct maintenance costs 15 000 Depreciation 30 000 Other fixed costs 56 041 Fixed costs/year 150 000 Fixed assets 18 402 NOWC 168 402 Capital employed 184 018 Revenues 11.21 % Profitability 1.09 Capital turn over rate 12.25 % ROCE 20 633 184 018 Revenues Profit Prices in kUSD Higher OEE substantially increases earning power

10 Same earning power can be achieved by a 6.2 % price increase... 8 760 Planned hours 50 Max prod/h 77.0 % Availability 85.7 % Performance 91.0 % Quality yield 438 000 Theoretical prod/year 263 019 Actual prod/year 60.0 % OEE 0.287 Contribution margin/unit 75 486 Contribution margin/year 0.637 Price/unit 0.350 Variable cost/unit 10 053 Direct maintenance costs 15 000 Depreciation 30 000 Other fixed costs 55 053 Fixed costs/year 150 000 Fixed assets 16 754 NOWC 166 754 Capital employed 167 543 Revenues 12.20 % Profitability 1.00 Capital turn over rate 12.25 % ROCE 20 434 167 543 Revenues Profit Prices in kUSD Same earning either requires price increase...

11 … or by reduction of maintenance costs by >95 % ! 8 760 Planned hours 100 Max prod/h 77.0 % Availability 85.7 % Performance 91.0 % Quality yield 438 000 Theoretical prod/year 263 019 Actual prod/year 60.0 % OEE 0.250 Contribution margin/unit 65 755 Contribution margin/year 0.600 Price/unit 0.350 Variable cost/unit 442 Direct maintenance costs 15 000 Depreciation 30 000 Other fixed costs 45 442 Fixed costs/year 150 000 Fixed assets 15 781 NOWC 165 781 Capital employed 157 811 Revenues 12.87 % Profitability 0.95 Capital turn over rate 12.25 % ROCE 20 313 157 811 Revenues Profit Prices in kUSD...or reduction in maintenance costs of 95%!

12 Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Mehul Shah Research Analyst The Aberdeen Group

13 © AberdeenGroup 2009 Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment May 20 th, 2010 Mehul Shah Research Analyst

14 © AberdeenGroup 2009 14 Agenda Introduction Research Methodology Survey Demographics Making the Best-in-Class P.A.C.E. (Pressures, Actions, Capabilities, Enablers) Recommendation Questions

15 © AberdeenGroup 2009 15 Aberdeen Manufacturing Research At a Glance 2,500+ MFG Executives Surveyed in 2008 In-depth Manufacturing Research Calendar Over 15,000 Report Downloads Yearly Over 60,000 Newsletter Subscribers Library of Research Topics – Over 200 published documents

16 © AberdeenGroup 2009 16 A Few of Our (More Than 25) Advisors President Global Supply Chain, Schwann Food Company Vice President, Conagra Vice President, General Dynamics Vice President Global Supply Chain, Celgene Corporation Vice President Continuous Improvement, La-Z-Boy Vice President Supply Chain, Becton Dickson The Research Advisory Council provides the Strategic Service Management Practice with ongoing guidance around research direction and topic selection on topics that address the most pressing issues facing Service Executives globally. Comprised of CSOs and other senior service executives across multiple industry sectors, the council serves as an invaluable resource for end-user market validation. Director Strategic Initiatives, Pfizer Vice President, Ditch Witch

17 © AberdeenGroup 2009 17 5,000+ Executives surveyed 10,000 + data points collected per study 12 Benchmark Reports planned for 2010 Library of 15,000 benchmark survey responses and 200,000 data points Our Research Methodology

18 © AberdeenGroup 2009 18 Aberdeens Methodology End-User Investigation: PACE Framework P A C E P ressures: External and internal forces that impact an organizations market position, competitiveness, or business operations. A ctions: The strategic approaches that an organization takes in response to industry pressures. C apabilities: The business competencies (organization, process, etc…) required to execute corporate strategy. E nablers: The key technology solutions required to support the organizations business practices.

19 © AberdeenGroup 2009 19 Aberdeen Maturity Class Framework Selected Performance Criteria (KPI) Asset Downtime OEE Maintenance Cost Reductions Total Respondents: - Top 20% - Middle 50% - Bottom 30% Respondents are scored individually across KPI Best-in-Class Industry Average Laggard Maintenance Budget Change

20 © AberdeenGroup 2009 20 Aberdeen Maturity Class Framework What are Best-in-Class companies doing differently? What pitfalls are they avoiding? Why are they achieving greater success? What technologies and services are enabling them to succeed? Asset Downtime OEE Maintenance Cost Reductions

21 © AberdeenGroup 2009 21 ~ 145 Qualified Survey Respondents Size: 31% Small (Rev. < $50 million) 33% Mid-size (Rev. $50 million ~ $500 million) 36% Large (Rev. > $500 million) Headquarters: 60% North America 26% EMEA 13% Asia-PAC

22 © AberdeenGroup 2009 22 Seniority Represented 2% 7% 10% 11% 41% 6% 23% CxO Vice President Senior Management Director Manager Staff Other

23 © AberdeenGroup 2009 23 Decisions for Asset Lifecycle Management 32% 36% 41% 47% 52% 60% 64% 65% 81% 0%25%50%75%100% Environment and energy management Safety - Employee and Asset Asset decommissioning Asset commissioning Training and certification Asset repair / refurbish / overhaul Spare parts management New asset procurement Asset reliability and maintenance Survey Question: Please describe which of the following decisions you influence?

24 © AberdeenGroup 2009 24 Industries Represented

25 © AberdeenGroup 2009 25 Maturity of ALM Programs

26 © AberdeenGroup 2009 26 Top Pressures driving companies to focus resources on asset management 7% 8% 20% 21% 24% 43% 71% 0%25%50%75%100% Respond to attrition in workforce Minimize health and safety related incidents Adhere to corporate sustainability Initiatives Regulatory Compliance Respond to aging infrastructure Need to delay CAPEX in the current economic environment Maximize Return on Assets All Respondents

27 © AberdeenGroup 2009 27 Defining Best-In-Class Performance Definition of Maturity ClassMean Class Performance Best-in-Class: Top 20% of aggregate performance scorers 2% Asset Downtime 92% OEE (Overall Equipment Efficiency) -14% Maintenance Cost Change -8% Maintenance Budget Change Industry Average: Middle 50% of aggregate performance scorers 5% Asset Downtime 84% OEE (Overall Equipment Efficiency) -3% Maintenance Cost Change -1% Maintenance Budget Change Laggard: Bottom 30% of aggregate performance scorers 17% Asset Downtime 68% OEE (Overall Equipment Efficiency) 4% Maintenance Cost Change 4% Maintenance Budget Change

28 © AberdeenGroup 2009 28 Strategic Actions 24% 27% 35% 45% 0%25%50% Equip operations and maintenance employees with real-time visibility into asset condition Establish a risk based approach to be predictive towards asset management strategies Synchronize asset performance with corporate performance objectives Establish collaboration across functional departments Improve visibility into complete asset lifecycle to improve decision making All Respondents

29 © AberdeenGroup 2009 29 Competitive Framework – Process Capabilities Best-in-ClassAverageLaggards Process Asset management decisions are based on a risk based approach 44%34%32% Dynamically updated asset management processes across the enterprise as new best practices are developed. 38%34%20% Process established to understand the criticality of asset to determine the most effective maintenance approach 56%44%24% Source: Aberdeen Group, June 2009

30 © AberdeenGroup 2009 30 Competitive Framework – Organization Management Capabilities Best-in-ClassAverageLaggards Organization Executive ownership and sponsorship for asset management strategies across the enterprise 60%53%29% Established cross-functional team to foster collaboration across production, maintenance, finance, engineering and corporate groups 44%26%14% Established Centers of Excellence for capturing and promoting best practices for asset management across the enterprise 53%26%20% Social networking tools used to drive collaboration among current as well as past employees 25%17%0% Source: Aberdeen Group, June 2009

31 © AberdeenGroup 2009 31 Competitive Framework – Knowledge Management Capabilities Best-in-ClassAverageLaggards Knowledge Management Centralized knowledge warehouse to store asset data from different plants 44%32%19% On-demand asset lifecycle information easily accessible by employees 40%32%15% Failure data is used to perform root cause analysis to understand the impact and the probability of equipment failures 44%36%30% Source: Aberdeen Group, June 2009

32 © AberdeenGroup 2009 32 Asset Information 33% 47% 51% 61% 64% 73% 91% 0%25%50%75%100% Asset Lifecycle Expectation Asset Utilization Equipment Vendors Asset Condition / Status Asset value Spare Parts Inventory Maintenance Schedule Asset Location All Respondents

33 © AberdeenGroup 2009 33 Competitive Framework – Performance Management Capabilities Best-in-ClassAverageLaggards Performance Management Asset Performance metrics are linked to financial metrics 38%34%33% Asset Performance can be compared across plants 38%34%33% Source: Aberdeen Group, June 2009

34 © AberdeenGroup 2009 34 Key Performance Indictors (KPI) 34% 32% 31% 25% 66% 38% 44% 81% 0%50%100% ROA Profitability Cost of Downtime Revenue Growth Total Maintenance Cost 37% 46% 59% 49% 50% 56% 63% 0%50%100% LTA MTBR Asset Reliability MTBF OthersBest-in-Class

35 © AberdeenGroup 2009 35 Energy and Carbon Management Best-in-ClassAverageLaggards Sustainability Energy management integrated with the overall asset management strategy 33%14% Maintenance schedules and alerts are based on asset condition and energy efficiency 33%22%10% Carbon emission levels are regularly collected and monitored 53%34%29%

36 © AberdeenGroup 2009 36 Criteria for Purchasing New Asset / Equipment 94% 75% 63% 50% 38% 25% 19% 22% 27% 34% 58% 63% 78% 0% 20% 40% 60% 80% 100% Asset reliability Cost of asset maintenance Asset functionality Availability of spare parts Energy requirement New product Introduction (NPI) Learning curve Percentage of Respondents Best-in-ClassOthers

37 © AberdeenGroup 2009 37 Competitive Framework – Technology Capabilities Enterprise Asset Management Source: Aberdeen Group, June 2009 n= 114 EAM Adoption EAM Integrated with ERP

38 © AberdeenGroup 2009 38 Technology Enablers n= 114 Source: Aberdeen Group, June 2009

39 © AberdeenGroup 2009 39 Recommendation: Laggard to Average Establish executive focus for asset management. Break down departmental silos and establish cross-functional teams to enable collaboration. Focus on understanding the criticality of assets based on past and current asset data.

40 © AberdeenGroup 2009 40 Recommendation: Average to Best-in-Class Improve visibility into complete asset lifecycle. Consider energy requirements while making asset buying decisions. Invest in an Enterprise Asset Management (EAM) system.

41 © AberdeenGroup 2009 41 Recommendation: Best-in-Class Synchronize asset performance to corporate performance. Enable real-time visibility into asset conditions by investing in wireless solutions. Establish Integration between EAM and ERP systems.

42 © AberdeenGroup 2009 Thank You Contact Information Phone: 617.854.5212 Mehul.Shah@Aberdeen.com

43 Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Daniel Konstantinovsky Product Marketing Manager ABB

44 Enterprise Asset Management Services Reliability Consulting ABB Full Service ® ABB Confidential and Proprietary Information ABB uses reliability as a lever to increase OEE and drive best-in-class performance. ABB Reliability Services portfolio:

45 Enterprise Asset Management Services Enterprise Asset Management (EAM) Services EAM Hosting EAM Implementation Database Development Maximo Services SAP Services PM30 ® PM30Plus ® MaximoPlus ® & Other EAM Services help instill a reliable foundation and enable customers to get the most out of CMMS/EAM investments. ABB Confidential and Proprietary Information

46 EAM Implementation results in Centocor, a division of Johnson & Johnson Challenge: Develop a validated, integrated and paperless Computerized Maintenance Management System using SAP Solution: SAP EAM Services Customer quote: The results of this partnership are world-class business processes and a complete systems solution that will deliver equipment reliability and cost savings to the business for years to come. But these are not the only signs of success. The partnership with ABB has left us with a workforce that now has the system and reliability engineering knowledge to take our program to the next level on our journey toward world-class reliability. Felix Velez, Director of Maintenance Operations Results: SAP-related savings that have paid for the $3.2 million investment in less than two years ABB Confidential and Proprietary Information

47 EmpowermentReliability Scorecard Asset Management Prevention Education/Training Design for Reliability RAM Modeling OEE Reliability Consulting provides a path to success Performance Mgmt. Multi-skilling Operator Driven Reliability Teamwork Roles & Responsibilities Org. Structure Vision & Mission People Mgmt. of Change Contractor Mgmt. T/A or S/D Mgmt. Materials Mgmt. Standardization Failure Investigation Mtce. Work Mgmt. Process Reliability Centered Mtce. Risk Based Inspection Life Cycle Costing CMMS/Data Mgmt. PdM/Cond. Monitoring Basic PM Critical Equipment Ranking Tools/Methods Customer Training Hrs/Emp. Learning & Growth PM Compliance Internal Business Process Mtce $ as % RAV Financial Measurement Total Plant Reliability ® Best Practice Working Partially Working Not Working/Absent Reliability Consulting benchmarks customers to identify strengths, recognize improvement opportunities and deliver actionable roadmap ABB Confidential and Proprietary Information

48 Major cost reduction at NA Southeast Chemical Plant Forming a partnership with ABB, we have achieved improved production performance and lower maintenance costs. Our results are a continuing and sustainable process that will pay lasting dividends. Maintenance Manager, Southeast Chemical Plant ABB Confidential and Proprietary Information

49 ABB Full Service ® ABB Full Service ® is a long-term maintenance collaboration in the form of a performance-based win/win partnership between ABB and the customer. ABB assumes full responsibility of design, execution and management of client maintenance, including full responsibility of: All maintenance personnel All maintenance related activities All maintenance equipment & facilities Management of maintenance subcontractors Management of spare parts and inventory ABB Confidential and Proprietary Information

50 ABB Full Service ® increases productivity and reduces costs at Compañía Mega S.A. Year-over-year reduction in total maintenance costs by 1.6-2.0% Increase of 12.6% for OEE in just the first year of the agreement Maintained 99.6% availability ABB Confidential and Proprietary Information

51 Interested in learning more? Call: 877-234-6756 Email: reliability.services@us.abb.com Visit: www.abb.com ABB Confidential and Proprietary Information As a token of appreciation for attending this webcast, ABB will send you the latest issue of ABB Review, the esteemed global technical journal produced by ABB Research and Development. This issue features developments in the fields of maintenance and reliability. Contact us today to get your copy.

52 © ABB Group June 1, 2014 | Slide 52

53 Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Questions for our Panel? Webinar Sponsored by: Daniel Konstantinovsky, Product Marketing Manager, ABB Mehul Shah, Research Analyst, The Aberdeen Group

54 Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Thank you for attending todays Webinar! Look for an email from us with a link to download the entire Presentation from todays event. Please join us for the following upcoming Aberdeen Group Webinar: August 19, 2010 Achieving Environment, Health and Safety (EH&S) in Todays Plant


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