Collaborative Asset Lifecycle Management and PAM

Collaborative Asset Lifecycle Management and PAM Wil Chin Research Director ARC Advisory Group wchin@arcweb.com 1 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Millions of Plant Assets Installed Base (units) Process Field Devices: >40M Discrete Sensors: >500M Valves: >30M Other Plant Assets: >550M The Sheer Volume of Plant Assets Presents a Huge Opportunity! 2 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Today s Extended Workload Increasing Installed Base + = 500 to 2000 Loops per Technician Manpower Reduction 3 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n Plant Assets Can Not be Managed by Traditional Methods

Reductions in Asset Investments Reflect A More Challenging Future Chemicals (1997 = 100) Metals (1997 = 100) 140 120 120 100 98 100 80 104 89 80 60 68 60 40 20 0 1997 1998 1999 2000 2001 2002 40 20 0 1997 1998 1999 2000 2001 2002 CapEx/Revenue Oil & Gas (1997 = 100) Revenue CapEx/Revenue Revenue Pulp & Paper (1997 = 100) 160 140 120 130 140 120 144 100 80 84 100 80 60 60 64 40 40 20 20 0 1997 1998 1999 2000 2001 2002 0 1997 1998 1999 2000 2001 2002 CapEx/Revenue Revenue CapEx/Revenue Revenue Doing More with Less is the Challenge for All Companies! 4 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Initial Costs Represent Only 20% of Total Costs of Ownership Percent of Total Equipment Costs 100% 80% 60% 40% 20% 0% Initial Costs Initial Costs Maintenance & Maintenance & Operation Costs Total Equipment Life-cycle Operation & Maintenance is Costly 5 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Asset Management Has Some Real Challenges Today Global, More Competitive Markets Constant Pricing Pressure Need to Improve ROA of all Facilities The Old Squeeze Play Expanding Regulatory Requirements Increased Concern with Security 6 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n Need to spend more on things that don t improve financial performance Survival Requires New Ways to Manage Your Assets!

ARC s Collaborative Asset Lifecycle Model (CALM) COMMISSION Asset Management OEM PLAN/SOURCE PLAN/SOUR EPC CE OPER Maint MAINTAIN Engr 7 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n IMPROVE

PAM s Role in Collaborative Asset Lifecycle Management (CALM) CALM PAM Audit Replace Redeploy Dispose Improve Extend Life Plan Source Commission 6 10 9 8 4 7 6 5 4 2 3 2 1 0 0 1 2 3 4 5 6 7 8 9 10-1 -2-2 -3-4 -5-6 -4-7 -8-9 -6-10 Operate/Maintain Retire 8 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n PAM Supports the Longest Stage of an Asset s Lifecycle Operate/Maintain

What is PAM? Enabling use of optimal maintenance practices based upon real time information to avoid unplanned failures Using exception alerts to help management focus on the most critical challenges Increasing performance of plant assets through advance notification of performance drifts & Developing Hazardous Situations PAM is becoming one of the fastest growing segments of process automation 9 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n PAM Solutions Monitor, Analyze, and Help Optimize the Performance of Plant Assets!

PAM s Original Focus-Predictive Maintenance Predictive Asset Management reduces maintenance costs 1/2 of all planned maintenance is unnecessary Over 80% of maintenance becomes triggered based on equipment conditions as opposed to time 10x Cost of Maintenance 5x 1x Predictive Preventive Corrective Traditional Maintenance Too Costly 10 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

ARC End User Survey Validates Importance of Focusing on Plant Asset Performance 37% are focused on improving performance and reducing operating costs 26% are trying to extend life of existing assets Less than 18% are identifying underperforming & unnecessary assets Still - Over 75% rate the importance of an effective PAM strategy - Very to Extremely Important Nearly 70% State that Plant Asset Management has Increased in Importance! 11 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

PAM Supports All Pillars of Plant Asset Performance PERFORMANCE Safety & Security Production Maintenance PAM 12 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n Plant Equipment & Control Systems PAM is More than Just Better Maintenance!

PAM Supports Production & Safety PAM supports production by Keeping production assets performing at maximum throughput Reducing Quality Problems caused by unplanned disruptions and off-spec response Help operators make better decisions PAM supports safety & security by Detecting hazardous conditions before they become a real problem Providing information for safety & security audits PAM Keeps Plants Running to Design Specs! 13 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

The Evolution of PAM (from measurement point of view) Instruments Automation Systems Measurement, Alarms, Tuning, etc. Operations Domain Measurement, Alarms, Tuning, etc. PAM Domain Asset R-T Behavior, Condition, Predictions, etc. 70s CMMS 80s WO, Calibration, Source, Spares Material, etc. 90s EAM WO, Calibration, Source, Spares Material, etc. Today Maintenance Domain Future 14 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

PAM Offer Solutions Beyond Maintenance to Operations % Improvement Beyond Maintenance Equipment Productivity Workforce Efficiency Equipment Life Product Defects Production Downtime Inventory Costs Unplanned Breakdowns -60-40 -20 0 20 40 Source: ARC Advisory Group 15 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

PAM Capabilities EAM/ CMMS Integration PAS Integration Calibration & Compliance Mgmt PAM Predictive Condition Monitoring Safety and Security Actionable Alerts Remote Monitoring & Lifecycle Services Asset/Performance & Optimization 16 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Assets Managed by PAM Machinery & Production Assets Automation Assets Motors, Rotating, Reciprocating Equipment PAM Field Devices Process & Mechanical Equipment Analyzers Electrical Equipment Wiring Control Valves 17 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Machinery & Production Assets Automation Assets Motors, Rotating, Reciprocating Equipment PAM Field Devices Process & Mechanical Equipment Analyzers Electrical Equipment Wiring Control Valves 18 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

The Evolution of PAM Value ipam Analog Reactive Maintenance Smart Proactive Maintenance HHC Configuration Protection CM PAM Predictive Maintenance Predictive CM EAM Integration Automation Assets Niche Asset Solutions Predictive Performance Intelligent Knowledge Management Optimization- ROA Enables OpX Integrated & Internet Enabled Automation and Production Assets 1970 1990 2000 2005 PAM Becoming a Core Competency of the Enterprise 19 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

ipam From Client/Server Data Workstations Devices Centric Niche Solution Critical Equipment Asset Monitoring Reactive Smart Tethered Internal Health Maintenance To Web Hosted Portals Knowledge Management Mobile Solutions Total Enterprise Centric Broad Solution All Mfg Plant Assets Asset Optimization Predictive Self-Validating Wireless + Tethered Outsource + Internal Safety/Security + Health Performance- ROA 20 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

The Future of PAM Needs Interoperability Detect Distribute Deliver Integrating Information from Plant Systems, People, and Field Devices Around the Globe in Real Time! 21 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Integration vs. Interoperability Integration provides a tool-set (API s, etc) that can be used to connect Labs to Manufacturing and Enterprise systems Business Interoperability delivers Labs, Manufacturing and Enterprise systems that are designed to work together upon installation! 22 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Better Ways of Sharing Information and Processes Out-of-the-box While reducing risk, improving quality and increasing flexibility Cost Interoperable Scope Integrated Open Closed 80 s 90 s - 2000 s 2004 New Concepts for Information and Process Sharing That Have Not Been Invented Yet 23 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Conclusion PAM should be a focus of every organization and should be considered in every strategic business plan to reduce cost and increase efficiency of the total enterprise From To 24 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Recommendations for Manufacturers Adopt a Strategic Perspective towards Plant Assets and manage them appropriately Invest in an integrated asset performance infrastructure that will enable PAM Investigate PAM solutions and adopt one that supports your company s core objectives 25 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n PAM Can Have a Significant Impact on Your Return on Assets (ROA)!

Recommendations for Suppliers Recognize the full breadth of impact of PAM Solutions Include PAM as a key component in your Future Automation Product Suite! Support tight integration of PAM with PAS and Enterprise Systems Extend Support and Training to Include PAM principles Customers Need PAM and will support those suppliers who recognize this in their products 26 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Key Take Aways Asset Management is a critical issue for manufacturers. Leading organizations practice continuous improvement and constantly search for new opportunities. There are numerous developments that offer significant benefits and merit close evaluation. Realized value will depend upon selecting developments that actually fill gaps in existing practices. 27 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Thanks for your attention... Wil Chin Research Director ARC Advisory Group 28 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n