REACHING THE TOP QUARTILE HOW AUTOMATION POWERS DIGITAL TRANSFORMATION 1 INTRODUCTORY HOW CAN MANUFACTURERS ACHIEVE THE FIVE COMPETENCIES OF DIGITALLY OPPORTUNITY ABOUNDS TO BOOST OPERATIONS, ROI FROM IIOT: PUTTING TECHNOLOGY LETTER TOP QUARTILE PERFORMANCE? TRANSFORMED COMPANIES BUT IT WON’T BE FOUND IN THE SAME OLD PLACES TO WORK FOR YOUR OPERATIONS INTRODUCTION BUSINESS JUSTIFICATION Dear Reader, Manufacturers today are working in a pivotal time. The challenges arising from rapid technological innovation and a dynamic business environment grow larger every day. To succeed, it seems sometimes we must find a way to balance seemingly opposing challenges: How do we embrace innovation and new technology while leveraging our existing investments? EXECUTION How do we evolve our businesses to be adaptable while METHODOLOGY maintaining tried-and-true practices? How do we help our organizations cope with rapid technology changes and evolve our personnel to the jobs of the future? The challenges, at times, can seem overwhelming, but overcoming them is crucial for companies to reach and maintain operational and project performance in the Top Quartile, or top 25 percent, of peer companies. Over decades of experience helping customers face and overcome these challenges, Emerson has identified the building blocks to navigate the digital transformation successfully. It all begins with business justification—why should your business invest in the technology, and what goals will it help you achieve? Then comes identifying the execution methodology—the predictable, scalable plan and actions needed to implement TECHNOLOGY digital technologies—and the right technology platform to bring the vision to life. PLATFORM And finally, to ensure success, companies must prepare their people and inspire behaviors needed to develop the workforce of the future. Together, these elements, explored more deeply in this ebook, can help companies navigate the digital transformation and realize Top Quartile performance. Emerson PEOPLE AND will continue to work tirelessly in pursuit of tools, technologies and practices that BEHAVIORS help our industry partners and customers succeed. I hope those outlined throughout this ebook are helpful and lead you and your company to the next level of success. Sincerely, Mike Train Chairman, Emerson Automation Solutions 2 INTRODUCTORY HOW CAN MANUFACTURERS ACHIEVE THE FIVE COMPETENCIES OF DIGITALLY OPPORTUNITY ABOUNDS TO BOOST OPERATIONS, ROI FROM IIOT: PUTTING TECHNOLOGY LETTER TOP QUARTILE PERFORMANCE? TRANSFORMED COMPANIES BUT IT WON’T BE FOUND IN THE SAME OLD PLACES TO WORK FOR YOUR OPERATIONS It’s time to LOOK AT PROJECTS DIFFERENTLY Looking for a way to avoid unforeseen and unrecoverable risks, budget overruns, schedule slippage, and unreliable partners? With Emerson’s global project services team providing guidance, you will reduce cost and schedule risk throughout the project. PROJECT SCHEDULE RISK ndustrial organizations today are under A proven approach to achieving these performance HOW CAN tremendous pressure to not only stay goals is to move strategic engineering decisions I competitive, but also deliver greater value into the earliest project stages. Historically, from their investments to shareholders. For some companies tend to make critical decisions MANUFACTURERS$135 many companies, the challenge to complete in the later stages of a project, when there is million % capital projects on time and on budget as well as the least flexibility to implement the changes, ACHIEVE TOP QUARTILEINEFFECTIVE56 achieve Top Quartile operational performance%— ultimately resulting in schedule% disruption AT RISK communicationperformance in the top 25 percent of peers—often and increased cost. Successful project teams, appears difficult, if not unattainable. however, engage an industry expert during the projects over65 $1B 35 PERFORMANCE? Too often,around industrial the firms world overlook the planning stagesprojects of project under$500M design and execution. transformative power and game-changing It’s important to work with partners that not For every $1 billion spend on a capital project, performance of new executionFAIL methodologies and only have a track record FAILof global consistency of $135 million is at risk. 56% of that ($75 million) technologies.A When project automation is considered technologies— to have faileddelivery, if the schedule but also followslips or a theproven project methodology is at risk due to ineffective communication. sometimes viewedoverspends as commodities by more or than necessary 25%, the executionfocused on time completing is 50% longer, projects or onthere time are and –2013 Pulse of the Profession, Project Management Institute but non-strategic—aresevere and continuingtreated as partoperational of a problemswithin budget. into the second year of the project. broader business–Speed Kills,performance Klaver, Ali. 2012 strategy, Project Manager the Magazine 40 percent of projects in the oil and gas industry result can be a tremendous improvement in are subject to budget and schedule overruns. value achieved. –Capital Project Execution in the Oil and Gas Industry. Companies can attain Top Quartile performance M. McKenna, H. Wilczynski, D. VanderSchee. 2006 Booz Allen Hamilton survey from 2006 of in a variety of ways: % 20 companies (super-majors, independents and EPC firms) PROJECT CERTAINTY 20 cost savings Traditional approaches to % project engineering/execution 30 can introduce project risk, extra % budget & schedule anticipated valuecost and extended startup time. By 39 focusing on automation early in the process, schedule DISAPPEARS Good front end OVERRUNS companies can reduce this capital project risk, REDUCTION Up to 30 percent of anticipated value planning leads to as eliminating cost and time overruns to save 20 much Goodas 20% front-end cost savings disappearsto during30 percent the onturnover/ their investment. According planning leads to commissioning and ramp-up phases of and 39% schedule reduction % to industry benchmarking data, Top Quartile as much as 20% new asset lifecycles. for total project design and –Deloitte. Effectiveperformers Operational Readinesshave 54 of percentLarge Mining lower Capital costs and construction.cost savings and 40 Projects - Avoiding49 valuepercent leakage shorterin the transition schedules from project thanexecution fourth –Construction39% Industry schedule Institute: Adding Value Through into operations. Article, 2012. Front End Planning. CII Special Publication 268-3 quartile performers. Top Quartile performers reduction for total Construction Industry in capital projects not only achieve schedule project design and Institute: Adding Value Through Front-End Planning. and cost goals, but also derive faster ROI, construction. CII Special Publication 268-3 PERSONNEL which improves shareholder value. TO 3 It takes an average of six to seven years to develop new employees into autonomous petrotechnical INTRODUCTORY HOW CAN MANUFACTURERS ACHIEVE THE FIVE COMPETENCIES OF DIGITALLY OPPORTUNITY ABOUNDS TO BOOST OPERATIONS, ROI FROM IIOT: PUTTING TECHNOLOGY LETTER TOP QUARTILE PERFORMANCE? TRANSFORMED COMPANIES BUT IT WON’T BE FOUND IN THE SAMEprofessionals OLD PLACES who can makeTO WORK non-standard, FOR YOUR OPERATIONS original technical decisions. 6 –2010 SBC Oil & Gas HR Benchmark, Schlumberger Business Consulting Energy YEARS Institute, March 2011 % expected to 7 50 RETIRE 50% of experienced and managerial personnel in national and international oil Bring the most complex projects to gas processing companies are expected to retire in the coming decade. SUCCESSFUL IMPLEMENTATION –Society of Petroleum Engineers, “The Great Crew Change: A www.emersonprocess.com/integratedprojects/ Challenge for Oil Company Profitability”, April 16, 2011. EMERSON. CONSIDER IT SOLVED. OPERATIONAL CERTAINTY Achieving safe, reliable operations is critical to a company’s success. Unplanned downtime—the loss of production availability—is one of the biggest AS MUCH AS causes of reduced profitability, not to mention safety and compliance risk. These unplanned 37% outages result in excessive maintenance, repair OF ENERGY BROUGHT and equipment replacement. This is just part of INTO INDUSTRIAL a performance issue that leads to more than $1 PLANTS IS WASTED trillion in operational losses across the globe. ANNUALLY Having top operational performance can make a huge impact on a company’s bottom line. In fact, according to industry benchmarks, bottom-quartile companies spend nearly four times as much on maintenance costs as Top Quartile performers that often leverage the power of predictive intelligence built into Department of Energy study, as much as 37 new technologies. percent of energy brought into industrial plants PEOPLE PRODUCTIVITY In the pulp and paper industry, for example, Companies that can all but eliminate these is wasted annually, and 15 percent or more of Standard maintenance practices companies that have implemented preven - costly unplanned outages set the benchmark for generated steam is lost. Among contributing are labor-intensive and inefficient. tive and predictive maintenance informed operational performance. Emerson’s methodology factors, inadequate monitoring of furnaces Through better training of personnel by advanced automation technologies have for its Operational Certainty approach can and gas-fired heaters can cause excessive fuel and modern automation technologies, increased process efficiency by 20 to 30 percent help customers pinpoint the causes