By Gregory Hale
Whether it is maintenance, operations or engineering on the plant floor, there is a business angle missing for most manufacturers that would help add true value to the bottom line.
Yes, the technical aspects are all accounted for, but how about real business metrics that can help solidify the end goal, which is to make, and grow, a profit.
“Whenever an engineer or operator or maintenance worker makes a decision, it either creates wealth or destroys wealth,” said Peter Martin, Ph.D, vice president, business value solutions, for the Software and Industrial Automation division of Invensys said during his talk Tuesday at Invensys Software Conference and Tech Support Symposium in Dallas, TX. “We have an island mentality, we specialize so much, we can’t talk to each other. We have a huge level of talent and we don’t use it.
That island mentality exists and part of the problem is everyone needs to bridge the gap and be able to work together. Technology is there, but that can also cause the schism.
“We can’t use technology as an excuse,” Martin said. “The islands of technology exist because we created it. Maintenance and operators have no incentive to work together.”
Often times the maintenance folks work toward maximizing availability, while operators maximize utilization. That means the goals sometimes clash and that can lead to different results.
Martin said life in the plant was much different in the 70s through the 90s where all everyone worried about was just keeping the plant running. From the 90s to the early 2000s, it was about optimizing the plant. From 2010 on it is all about optimizing the business.
“If you can’t prove you created value,” Martin said, “you haven’t created value.” That means manufacturers have to get down to the basics and understand what they are there for. They are making a product, so the company and make a profit. That also means they have to learn to measure business values and metrics in real time.
After all, Martin said, “if you can’t measure something, you can’t control it.” That saying usually applies to process control, but it also works for the business environment.
“We used to work in an environment where costs were stable,” Martin said. “The speed of business has changed from being highly stable to real time.”
One case in point, Martin said, was the cost of electricity. That cost used to be stable and was not highly variable. Now, however, the cost can change as quickly as every 5 minutes, he said.
There are four drivers hitting manufacturers they need to address:
• Market dynamics
• Aging industrial environment
• Increasing regulatory pressures
While manufacturers have the process aspect down where they know production has various costs associated with it like energy and materials to make the product.
But from the business perspective there are dynamic performance measures that flow down into strategic indicators that can lead to key performance indicators for manufacturing or real time accounting measures on the business side.
The catch is no one views the accounting measures on a daily or weekly basis. With variables such as electricity changing on a daily basis, how can a manufacturer get all the costs under control? The answer is to find a way to measure them on a daily basis.
The CFO is dealing with financial measurement but also needs to look at real time performance measures and then activity based management which can give him or her a good indication of how the business is operating on a daily basis.
Understanding how the manufacturing enterprise is running on a daily basis from a production standpoint and a business standpoint is not a pipe dream, it can be a reality.
“We have to break those islands down,” Martin said. “We need the right measures to drive improvement.”