06/05/2009
Managing Automation
Assets are the heart of any manufacturing company. Production equipment, instrumentation, IT systems, even delivery trucks — without these things, a company has no way to sustain its business. The problem, however, is that assets need attention. If they are not maintained properly, the result is costly downtime.
"Our business is predicated on how good our equipment is, how good our assets are," says Glenn Kormanik, vice president and general manager of Service Heat Treating, a Milwaukee-based company that works with OEMs applying a heat process to their products in order to change the metallurgical structure. "If equipment is not running effectively or optimally, then we are not able to make our revenue targets."
Service Heat Treating, however, is not in the maintenance, repair, and overhaul (MRO) business. As a result, the company, like many manufacturers in the down economy, had to come up with a viable asset management strategy.
While competitive pressures demand new capital investment, today's economic conditions tend to preclude new purchases. Yet, businesses need to run at peak performance levels — from the server room to the production line — in order to ensure that customer demands are met. Meanwhile, baby boomers are retiring, leaving a gap in the number of skilled professionals who understand MRO operations. Collectively, these conditions are placing new emphasis on enterprise asset management (EAM) applications, which monitor the health of corporate equipment.
"Asset management is now the low-hanging fruit," says Sid Snitkin, vice president and general manager for ARC Advisory Group's enterprise advisory services. "In the current economic situation, nobody wants to buy new equipment, so they are trying to extend the life of their [existing] equipment."
This "doing more with less" mentality is sending manufacturers down two very different paths. Some manufacturers, like Service Heat Treating, are outsourcing EAM to a third party in order to remove the internal responsibility that bogs down production engineers with maintenance tasks, especially given a skills shortage. Others, such as Rolls-Royce Defence Aerospace, are turning the EAM model on its head and using these applications — augmented by the Internet and intelligent devices — to turn asset management into a new source of revenue through aftermarket services to their customers.
What this amounts to is that "EAM is not EAM anymore," according to Snitkin.
Years ago, EAM was considered nothing more than a computerized maintenance management system (CMMS), a database holding information about a company's maintenance operations to help with job scheduling, asset management, and inventory control. But CMMS is limited to maintenance management.
Today's organizations need a nimbler, broader approach. To that end, EAM no longer refers to only the physical assets of the organization, be they desktops, mobile devices, or industrial equipment. Now, the definition of corporate assets includes people and an intangible: information.
As a result, EAM is becoming more integrated with other enterprise systems, such as distributed control systems (DCS), product lifecycle management (PLM) software, and even energy management applications. As assets are equipped with sensors that add intelligence, more information flows between the equipment and control systems and even back into the product design process. It is the next wave of collaboration, but it certainly complicates maintenance.
Even the EAM label is changing. ARC Advisory has coined the term, "asset lifecycle management." ALM takes into account that the true cost of equipment must include the environment in which it exists. "I can have a perfectly good physical asset that is useless because of the human involved or the information," Snitkin explains. "If you don't have the [right] information to operate it, you can't maintain it."
With smarter assets and fewer boundaries between who owns what in terms of maintenance, asset management is turning into something that companies need to re-evaluate.
"All assets are becoming more complex because of the convergence with IT," says Mary Bunzel, IBM's industry leader for manufacturing. "It changes the aspects of the assets themselves and calls upon plant and enterprise managers to respond in different ways."
And they are, with some deciding it's best to just get the complex process off their plate and others taking a more entrepreneurial approach and forming aftermarket service businesses for the consumers of their products.
Regardless of the approach, "the current economy and [market] conditions give EAM a chance to shine under the spotlight when traditionally it's been considered a supporting cast member," says John Murphy, EAM director of product market at Infor. "Clearly, companies need to find ways to cut costs, and EAM is [about] that, but also on the revenue side, we're working with a number of customers looking to extend their offerings by providing equipment that is surrounded by value-added services."
Revving the Engine
Rolls-Royce Defense Aerospace is one company that is taking the value-added services approach to EAM. The jet engine manufacturer serves primarily the United Kingdom's Ministry of Defence. It has always delivered engines, but left it up to customers to plan for maintenance and parts. In the past, Rolls-Royce advised customers about lead times for ordering spares so that they could plan to get parts in a timely manner.
About five years ago, the company realized it needed to reconfigure its business model to also offer customers maintenance and support services. With this arrangement, the Ministry of Defence gets the benefit of not having to worry about maintenance repair and overhaul of the engines while Rolls-Royce gets a new revenue stream.
"Rolls-Royce offers mission care or total care contracts, where, rather than just supply spares, we support them operationally in terms of engines and spare modules," says Richard Houghton, Rolls-Royce Defence's spares support and capability development manager. "The shift has been to go to the customer and take the responsibility for doing all of that away from them, at a price."
Houghton didn't elaborate on the price, but, in the case of the MoD, the key incentive had to be reduced costs to the customer. The service has the potential to become a nice new stream of revenue, but only if Rolls-Royce can manage the inventory appropriately. For that, the aerospace company has enlisted the help of service management vendor Servigistics, licensing its event-based forecasting and spare location application.
The Servigistics Parts Planning software works with the EAM application on the back end, which, in Rolls-Royce's case, is IBM's Maximo, used to track bill of materials (BOM) and other information about the engines. Servigistics, fed with key data such as scrap rates, repair rates, and scheduled engine inductions, plans replenishments, procurements, and repairs required to support the engine recovery process. This is done at the most cost-effective level relative to the performance level set in the application by the business. The software can be applied to multiple locations in the planning model, which in the case of some Rolls-Royce service contracts includes customer maintenance and operational locations.
"Ultimately the end game goal is to reduce inventory," says Mike Landry, Servigistics' founder and CTO. "Rolls-Royce can then make competitive bids to the military with maintenance that is less expensive and more reliable."
Landry says he's had similar talks with European automotive companies, which in this economy are selling fewer cars, which means fewer spare parts. Those companies are facing the fact that cash-strapped consumers are running their cars longer before bringing them in for service. "There is more pressure [for automakers] to make as much money on parts as they can, but they don't want to jack up prices and erode customer loyalty," Landry says. "There's a lot at stake on this side of the business."
In an effort to show manufacturers the value of an aftermarket service model, the company has organized a "jump-start" program whereby a Servigistics team comes to the manufacturer's site for an intense six- to eight-week pricing strategy session. In one example, Servigistics entered more than 200,000 parts into its system, including pricing policies. The software exercised all pricing options and came up with a strategy that would result in a $24 million per year cost and warranty expense saving, Landry says.
Right now, savings is the best measure of how an asset management service strategy is working. For example, Houghton does not have hard numbers to show what Rolls-Royce's new service contracts are contributing to top-line growth, but he does know that the Servigistics software is saving the company money in other ways. "One of the ways we can add value to Rolls-Royce is by mitigating excess inventory," Houghton says. "That's cash tied up on the shelf. The tighter control we can apply to inventory, the better."
Outsourcing EAM Tighter control of assets is what EAM, in whatever form, comes down to. That's what Service Heat Treatment was trying to do when it hired
Advanced Technology Services Inc. to manage all of the maintenance on its heat treating line.
ATS, spun out from Caterpillar in 1985, offers industrial outsourcing. Much like an IT outsourcing company will take over management of corporate networks and applications, ATS knows the ins and outs of the factory floor. The company has built multi-vendor expertise, servicing everything from PLCs, drives, CNC controls, and conveyor belts to networks and servers that maintain the information and connections to factory machines. It does this by maintaining its own database of industrial equipment, which is used as an online resource for its 2,200 service technicians operating throughout the United States, the United Kingdom, and China.
Manufacturers in discrete and even some process industries have turned to ATS to take over maintenance duties in order to remove any distractions related to the unglamorous job of keeping equipment up and running.
It's becoming a popular trend, ATS says. Recently, the company sponsored a survey, conducted by Nielsen Research, of 100 U.S. manufacturing executives in which two-thirds of the respondents said they would outsource maintenance as a hedge against a down economy. Many of the respondents indicated the decision is at least partly related to baby boomers' retirement, which will result in a 40% decline in skilled technicians on factory floors in the next few years.
Service Heat Treatment decided to outsource production maintenance because the organization didn't have the resources to build its own maintenance staff. ATS was able to solve that problem immediately.
"It was like overnight we got a maintenance department that was getting the job done," Kormanik says. "It takes all of the pressure [off] on what is happening today to our equipment, and instead we are able to focus on looking for new business and working on quality."
Service Heat Treatment understands that its people are important assets, too, and the company needed operators on the line, not doubling as maintenance personnel. ATS keeps a maintenance manager and five technicians on site at the Service Heat Treatment factory in Milwaukee. This team reacts to any anomalies on the lines and conducts preventive maintenance procedures and parts tracking, which have proven to be major money savers.
"At least half a dozen times we bought a part that cost $5,000 because we didn't know any better," Kormanik says. "ATS helped us source parts for less and, in some cases, repaired the part." The real ROI, however, comes from equipment uptime, which has gone from 65% to about 90%. "That's progress," he says.
Similarly, Ron Mahan, plant engineer at Centria, a maker of roofing systems used in commercial and industrial buildings, has experienced a 15% increase in factory floor uptime since he hired Rockwell Automation to remotely monitor the company's equipment. And, because downtime can cost $2,000 to $4,000 per hour, he believes the company is saving a substantial amount of money by outsourcing maintenance.
"We estimate we are saving about $200,000 per year," Mahan says.
Rockwell's remote support business, called InSite Services, monitors the paint line at Centria's coil coating facility in Ambridge, PA. The company decided to outsource maintenance four years ago, Mahan says, because it was too big a drain on resources to have its own engineers trained on the equipment. Now, the facility has no service engineers on site; rather, Rockwell monitors the factory floor from its own operations center.
Rockwell's operations center is staffed with experienced technicians remotely monitoring customers' worldwide manufacturing sites 24x7 through a secure high-speed connection. The service goes beyond simply monitoring a Logix controller. Rather, using its open Integrated Architecture technology as the foundation, Rockwell can monitor and troubleshoot a drive or database service just as easily as a controller, according to Steve Carlson, Rockwell's global product manager.
"The IT outsourcing and knowledge processing outsourcing trend that created a huge IT services industry has hit the manufacturing space like a tornado, especially in this current economic environment" Carlson says. "We can monitor, manage, maintain, and enhance an automation infrastructure at a single site or multiple sites around the world for significantly less than a [manufacturer] can do it for itself. It is a huge savings in productivity."
Currently, Rockwell has more than 100 InSite service contracts in place covering 200 individual locations around the world. "And it is just accelerating," Carlson says.
Part of the value-add is that the service is transparent to the user. "In four years up and running I've never had a [Rockwell] service engineer here once, as they can fix everything remotely," Mahan says.
Other automation vendors offer similar solutions — especially vendors catering to process industries, where downtime is not only costly, but also can be dangerous.
Emerson Process Management, for example, has been in the asset management business for 20 years, covering mechanical, electrical, instrumentation, valves, and process assets, including furnaces, heat exchangers, and boilers. The company has an asset management software package, called the AMS suite, but many of its customers outsource some of the diagnostic and advanced asset management capabilities directly back to Emerson, which, like Rockwell, can manage, troubleshoot, and fix assets remotely.
"These companies are challenged to reduce MRO by 10% to 15%, so the big question on the minds of customers is: How can we reduce the costs without significantly changing and/or increasing the risk in terms of safety, availability, and the performance of the plant?" says Stuart Harris, Emerson Process Management's general manager of plant asset management.
The bottom line is that now, more than ever, manufacturers are realizing that assets — equipment, information, and people — are the lifeblood of the operation.
" think companies are becoming more sensitive to the value of getting more out of their assets," ARC's Snitkin says.