An economic case for reliability
19 April 2012
Ron Stallworth, global business manager, Asset Management at Honeywell Process Solutions, believes that a facility can now only be considered to be ‘world-class’ if they can create competitive advantage, for example, through the use of reliability and asset management programmes.
The ‘world class’ label was, traditionally, given to facilities based solely on size. More recently, however, the label has evolved to represent performance-based benchmarks around beating the competition to market or having the most efficient product lines.
Unfortunately as they mature many of these leading industry performers are gradually losing their world-class status due to their inability to adapt quickly to market changes.
Creating a competitive advantage is now key to success. One area of opportunity that many companies are using to gain this competitive advantage is the implementation of reliability and asset management programs and strategies. Programs such as Operator Driven Reliability (ODR)* and Reliability Centered Maintenance (RCM)** can significantly reduce the cost of operations and maintenance while enabling companies to bridge the gap between maintenance and operations.
Another important area that needs to be considered is the impact of incidents on plant operations, performance and industry status. According to studies produced by the Abnormal Situation Management Consortium – a research and development group founded in 1994 by Honeywell, to address customer concerns about the high cost of plant incidents – incidents and downtime in the US refining and petrochemical industries cost $10 billion annually in lost profits, with a $20 billion impact to the economy. Based on these figures, financial losses from a single incident could easily mask any technology or performance-related gains. This only goes to highlight the fact that, truly world class performing companies cannot afford to ignore any aspect of operation and maintenance – this includes human factors.
Focus on reliability
Today’s global markets mean that it is less likely for a single company to be able to influence upstream or downstream market prices. It can, however, influence its individual operations through cost reduction, improved efficiencies and other internal factors that increase safety and profitability. Reliability initiatives enable improvements to be made within the boundaries of the plant; where it has the most influence.
Focusing on improving reliability can provide dramatic results. In the refining industry, for example, where more companies are taking this approach, results can include:
• 5-10% improvement in availability
• 10-20% decrease in maintenance costs
• 25-35% increase in equipment uptime.
These benefits extend beyond monetary value by reducing the probability of safety incidents and environmental excursions, which can be debilitating. A key element to consider is that almost any reliability improvement, regardless of the scope, will result in incremental benefits in both safety and profitability.
Justifying investment in reliability
The value of physical assets in process facilities can range from hundreds of thousands of euros to well into the billions for large, asset-intensive businesses. These facilities incur expenses on a regular basis such as depreciation, taxes, staffing, feedstock, utilities, insurance premiums, and maintenance. As a result, value creation for the owners is largely determined by factors that productivity and margin. Additionally, factors such as safety incidents, downtime, poor Overall Equipment Effectiveness (OEE) and poor efficiency all inhibit the ability to maximise value.
Many other factors can also influence a facility’s ability to maximise value. Every customer and perhaps even every site has their own indices or definitions of ‘maximising value’. Regardless of the terminology, the concepts are similar. One view is by improving the percent utilisation and the percent efficiency to improve profitability. In this method, the capacity at which a facility can produce a product is equal to the maximum possible throughput multiplied by the utilisation and the efficiency.
A number of efficiency gains in workflows and processes can be realised by implementing reliability programs and strategies. Employing programs such as Operator Driven Reliability (ODR) or Reliability Centered Maintenance (RCM) enable better collaboration between operations and maintenance departments to speed up the decision-making process. These programs identify problems earlier on the P-F curve and reduce the impact of secondary damage.
Process efficiencies can also show significant improvement by utilising reliability product and solutions for field instrument calibration, control loop tuning, alarm management and other tools that help users identify and manage problems earlier. More advanced products and solutions provide some level of guidance to help end-users resolve problem areas once they’ve been identified.
Utilisation can be problematic in both turndown and peak demand conditions. However, profit potential is impacted the most when market demand is high and there is a shortage of supply. In these cases, utilisation is a key element in maximising profitability. For a growing economy like India, a 1% or 2% improvement in uptime can represent huge profit increases. Vibration, corrosion and other health monitoring equipment can now be installed for a fraction of the cost using wireless networks; making reliability efforts more affordable in emerging regions.
Best-in-class companies will take a holistic approach to reliability by including people, processes, IT and equipment. From a maintenance perspective, reliability is a key driver of maintenance costs. Equipment reliability is impacted by design, maintenance practices and operation. Companies that implement reliability strategies across the enterprise are more likely to achieve world-class status.
According to benchmark studies by Solomon Associates and Matrikon (2008, Enterprise Asset Management), Best-in-Class companies have roughly 3% equipment downtime whereas laggards have 34% equipment downtime. In most industries, a 1% increase in uptime represents millions of euros in profit opportunity; therefore, depending on the current state, industrial plants that are not best in class can easily increase profitability by implementing reliability initiatives.
*ODR is any system that involves equipment operators in improving reliability by having them identify potential equipment problems and failures early.
**RCM is maintenance approach which prioritises some machines over others in a bid to increase reliability and optimise resources. It has also been characterised as a process that establishes safe minimum levels of maintenance.
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