Manufacturing profitability is no longer primarily a management problem. Rather, it's a control problem. With the costs of energy and raw materials varying by the hour or minute, how can executives possibly make effective decisions based on feedback from monthly financial statements?
What's needed instead is the application of feedback control methodologies that link business goals with plant performance in real-time, translating the plant floor's temperatures and pressures into real-time measures of production value in dollars and cents.
Interviews with hundred of executives over the past decade confirm their discomfort with steering their businesses through what has increasingly become a rearview mirror, according to Peter Martin, Invensys fellow and vice president of business value solutions. "They all say, 'We believe our plants are in control, but our profitability is not,'" Martin says.
At Invensys, they've grouped the methodologies and algorithms needed to resolve this impasse under the banner Real-Time Performance Management (RTPM). Martin, together with Invensys colleagues Russ Barr, Stuart Parker and Ramon Hernandez presented the case for RTPM this week at the 2013 Invensys Foxboro & Triconex Global Client Conference in San Antonio, Texas. They also discussed how organizations can go about implementing this methodology in their plants, and how Invensys consulting services can help bridge the gap between the realms of real-time control and transactional accounting. "Today they use two different languages, many worlds apart," said Parker.
Russ Barr summarized some of the key challenges facing today's manufacturing executives as the need to drive more value from manufacturing assets, the need to provide better linkage between business and plant environments, the need to better understand what activities add value in manufacturing operations, and the need to provide better overall visibility into real-time business performance. In short, "How can we understand what's happening in the plant from a business perspective?"
"Fortunately, controlling plant profitability is actually easier than controlling a distillation column," Martin said, "but you have to be able to see it. Information has to be provided in the timeframe of the decision. The information doesn't have to be complex, but if the timing is wrong, it's useless."
Stuart Parker described RTPM as a series of hierarchical cascade control loops, in which a lower level measurement and control action is used to satisfy a particular strategy one step up in the hierarchy. Each of these upper level strategies, in turn, provides the measurement for a companion action and higher level strategy. At each intervening level there are appropriate key performance indicators (KPIs) and dashboards so that the affect of decisions on value production can be easily understood in economic terms. "It's how you tie the measures together to drive overall strategy: control loops to operators, operators to section supervision, section supervision to section management," Parker said.
Simply providing operators with visibility into the economic impact of their decisions can deliver outsized returns, Parker noted. He went on to describe a Sasol implementation in which a KPI decomposition methodology and dashboard allowed the company to save 6% in feedstock costs and 4% in electricity. "When operators understand cause and effect, when they understand the impact of their actions, they can materially affect the plant's economic performance."