Establishing Asset Management Metrics to Drive Business Improvements An Industry White Paper Dan Roessler, Industry Marketing, Aspen Technology, Inc.
About AspenTech AspenTech is a leading supplier of software that optimizes process manufacturing for energy, chemicals, pharmaceuticals, engineering and construction, and other industries that manufacture and produce products from a chemical process. With integrated aspenone solutions, process manufacturers can implement best practices for optimizing their engineering, manufacturing, and supply chain operations. As a result, AspenTech customers are better able to increase capacity, improve margins, reduce costs, and become more energy efficient. To see how the world s leading process manufacturers rely on AspenTech to achieve their operational excellence goals, visit www.aspentech.com.
Introduction Today, manufacturers use globally distributed enterprise assets to meet corresponding geographically diverse market demands. These assets are commonly in different lifecycle stages and operated with varying degrees of effectiveness. Successful companies manage these assets in a systematic way that optimizes utilization and maximizes overall profitability. There are a number of business drivers motivating the investment in asset utilization optimization. Measuring key performance variables provides the foundation to identify issues, develop solutions, and implement improvements. These metrics help companies establish a performance baseline benchmark to which ongoing operational performance can be compared. When these metrics are expanded across the enterprise to facilitate cross-site benchmarking, they also enable companies to holistically manage assets through key activities like best-practice sharing and improved production scheduling to drive overall asset utilization improvements. Take for example a polymer company with two manufacturing sites that make multiple product grades on similar production lines. Site A is known to have a more effective catalyst delivery system for fractional melt index products than Site B, but the impact has not been measured. The company implements reactor utilization calculations in the Enterprise Wide Information Management System at both sites. If the reactor asset utilization calculations indicate that Site A has 90% reactor utilization and Site B has 80% reactor utilization when making fractional melt index products, the company can use that information to make better strategic decisions such as: Optimizing the fractional melt index product portfolio scheduling to take advantage of the higher reactor utilization numbers of Site A Evaluating a quantifiable ROI and considering a potential project to re-design the catalyst delivery system of Site B to drive higher utilization An obstacle for many companies in efforts to establish effective asset management programs is reaching a consensus on how to measure asset utilization. A subsequent challenge is determining how to distribute the key metric information to the right resources to drive improvements. When good asset utilization metrics are established, distributed to the right resources, and utilized effectively, companies enhance the efficiency of their assets and ultimately increase overall profitability. Defining Asset Utilization Metrics Determining which asset utilization measurements will add value to a company is an essential step in creating meaningful metrics. Several factors must be considered: Who will use the data? Which assets are critical to the overall production output, quality, and uptime? Are accurate measurements available or can they be calculated from obtainable information? Would a given measurement be applicable across multiple sites? The definition of asset utilization varies greatly depending on the level of the organization discussing the term and the granularity of assets being evaluated. A high-level, financial term like total asset turnover references a company s total sales divided by its total assets. Variability factors that can affect total asset turnover ratios include accounts receivables, inventory levels, and fixed asset utilization to name a few. This is the measurement that many CEOs and CFOs might use to track organizational effectiveness. However, at the plant level this metric has limited meaning within the context of daily operations. 1
Within the manufacturing environment, asset utilization can refer to the fixed asset turnover ratio that evaluates how efficiently the company uses its fixed assets, like plant equipment, to generate sales. 1 A primary goal of manufacturing asset utilization efforts is to optimize the availability of production equipment, enabling higher potential production with the same capital investment. This in effect increases income without increasing fixed costs. There are numerous ways to optimize equipment availability such as reducing unplanned shutdowns, improving maintenance efficiencies, and better managing production schedules. One of the more common and effective metrics at the manufacturing level today is Overall Equipment Effectiveness (OEE). The OEE measurement is the result of multiplying equipment availability, equipment productivity, and equipment quality. Representative calculations of each of these factors are below: Equipment Availability = Run Time Available Time Equipment Productivity = Actual (Measured) Output Output Capacity Equipment Quality = Good Output Total Output Note that there remains some subjectivity in the definition of these factors such as good output or available time, but as long as the definition basis is known, then the results of these numbers provide meaningful data. In addition to defining the measurements, companies must consider exactly which assets within their organization are going to be included in the asset utilization calculations. Companies have human assets, intellectual property, process equipment, IT equipment, and process and business data. All of these can be an important part of the asset utilization equation. Manufacturers must also determine to what granularity they will perform asset utilization calculations. Are asset utilization calculations going to be done around key process areas or around individual pieces of equipment? For example, if the process has two reactors in parallel, will they use a combined utilization factor or individual utilization factors? Maybe they would be better off calculating an overall number for an entire production line? These are the types of decisions that must be made based on what makes the most sense within the business context of the individual company. Companies that implement asset management programs and develop numerous measurements without carefully considering the details of the metrics can sometimes generate ineffectual information that dilutes or negates the true value of asset management and asset utilization efforts. 2
Displaying and Distributing Metrics When the decisions have been made about what asset utilization calculations are appropriate, the focus shifts to how to best implement asset utilization calculations and in what format to display and distribute them. This is a critical step that must be well planned if asset utilization calculations are to help drive improvements. Metrics can be implemented in a variety of ways within the control layer or at the information management layer. The control layer is effective for communication at the operations/technician level but has substantial limitations, primarily due to access restrictions for communicating with other key stakeholders within the organization. For many companies, a more practical solution is to leverage the information management layer to implement and distribute these metrics because of broad data accessibility and a strong set of data collection, analysis, and visualization tools. The manner in which data is presented to users is also a critical aspect of ensuring that the information is effectively utilized. There are a number of display options for asset utilization metrics such as: Key Performance Indicators (KPIs) Reports Statistical Process Control Charts Event Notifications KPIs are probably the most common way to display asset utilization metrics. Within most information management solutions, the KPIs are easy to develop with out-of-the box calculation, trending, and target display capability using realtime data from the central data historian. The KPIs are then available to users of the information management systems, which generally results in the information being broadly accessible across the enterprise without additional configuration. One example of using the information management layer to deliver key equipment metrics is outlined below and illustrates that successful KPI implementation can be used to drive better asset utilization: A major chlor-alkali producer recognized that degradation of key process equipment at the plant results in increased energy costs, decreased production rates, and plant downtime. The existing voltage monitoring system for the electrolyzer unit was not effective because data was only accessible through a single terminal in the control room, long-term history retrieval was a slow, manual process, and data was handled in large spreadsheets. These system restrictions resulted in limited performance monitoring. The plant efficiency improvement team requested a dedicated set of KPI tools based around the historian infrastructure to help deliver improved plant performance and reduce production costs. The plant implemented Aspen InfoPlus.21 as the data collection and storage system for the large volume of records required. The KPI information is visualized graphically with Aspen Process Explorer and Aspen IP.21 Process Browser. Aspen Event.21 monitors periods of significant plant change and generates e-mails to notify appropriate equipment owners of significant events. The implementation of these KPIs has improved equipment performance monitoring capabilities, allowing targeted component replacement and resulting in maximized plant output. Process understanding has also been improved with the additional data availability in a graphical visualization format, and the KPIs are recognized as the foundation for future plant improvement efforts. 3
Many companies prefer to view asset utilization data in reports. These reports can be automatically generated at regular intervals and can summarize data and trends at a higher level as opposed to providing more granular detail. The reports can be distributed via e-mails, posted to common locations, or made available on company networks so that the user does not have to log in or access other software systems. Many executives prefer this type of approach because it delivers data that they can view easily and quickly within the tools that they already access daily. Another approach is to leverage Statistical Process Control tools. These solutions provide capabilities for SPC monitoring, analysis, and alarming of operating data. Treating asset utilization as a key control parameter can help to quickly identify real-time issues and proactively address the issues to manage asset effectiveness. The results can generally be viewed in a variety of ways such as histograms, Pareto charts, SPC charts, and tabular displays. Event notifications can also be an effective mechanism for asset utilization metrics. This generally involves monitoring and detecting predefined events and conditions. This is an exception reporting approach, which means that the granular data is examined when the user is notified that there is an issue. For example, the event notification may be triggered when the reactor utilization calculation drops below 90%. When this event occurs, the appropriate resource can then utilize the information management system and associated event data to determine root cause issues and work to correct the issue. Some of these approaches are more popular than others for a variety of reasons. Each company must evaluate their particular needs to determine: How the data will be used How easy it will be to configure and maintain asset utilization calculations, displays and reports How widespread and easy it will be to access the metric information Based on these considerations, companies can choose the approach that maximizes the value of the metric information to their organization. 4
Utilizing the Information Establishing asset utilization metrics is an important part of effective asset management programs. However, while establishing metrics with the right visibility is important, companies must take action to ensure that they have a process in place for turning the asset utilization data into dollars. One of the reasons that the information management layer is effective in asset utilization improvement efforts is the comprehensive performance analysis tools that are a part of solutions such as aspenone Production Management and Execution. The flexibility of these tools equips users with the capability to adjust the data presentation to meet specific user needs. When utilization metrics indicate issues, organizations must be able to quickly identify root causes and put action plans in place to address the issues. Asset utilization metrics help to identify where efficiency issues exist and aid in drilling down to the root cause. Companies must be able to quickly assess what is contributing to asset utilization inefficiencies. Common factors can be: Equipment capacity limitations and bottlenecks Poor operating practices Ineffective control schemes Inefficient production scheduling Instrumentation issues Process upsets and equipment fouling When companies have a well-planned and effectively managed approach to asset management established asset utilization metrics, display and distribution of asset utilization metrics to the right resources in user-friendly formats, and utilization of available analysis tools to quickly identify root causes and take corrective actions to resolve issues they can improve asset efficiencies and realize profitability improvements. References 1. http://bizfinance.about.com/od/financialratios/f/fixed_asset_turnover.htm 5
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