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Reliability Is a Business Strategy

Oct. 8, 2014
Reliability Needs to Be a Boardroom-Level Business Initiative
About the Author: Mike Bacidore
Mike Bacidore is the editor in chief for Plant Services magazine. He is an award-winning columnist, earning a Gold Regional Award and a Silver National Award from the American Society of Business Publication Editors. He may be reached at 630-467-1300 ext. 444 or [email protected] or check out his .As much as 5% of production capacity is lost each year as a result of unplanned shutdowns, said Jim Nyquist, president, Emerson Process Management's PlantWeb Solutions. Nyquist heralded the charge of the process solutions company into economic-based reliability strategies this week at the 2014 Emerson Global Users Exchange in Orlando, Florida.

"Effective reliability programs are essential to maintaining production levels and reducing loss of revenue," he said. "As much as 43% of unplanned downtime is caused by equipment failure. The good news is we know how to solve this. This is physical equipment, and we know the failure modes—we can model, monitor and track the performance. This should not be impacting our industry. But it is because knowing exactly what, when and how to model, monitor and track can be difficult to figure out when you have thousands of pieces of equipment in your plant. If we could solve just this, we'd be able to put a significant portion of that 5% of production capacity back online."

Because of its bottom-line impact, reliability needs to be a boardroom-level business initiative, emphasized Nyquist. "There is a tremendous opportunity to save on maintenance spending and improve operational reliability," he explained. "We see reliability as a strategic business initiative that has major impact on plant safety, plant availability and, ultimately, enterprise profitability."

To illustrate the evolving importance of reliability from tactical maintenance requirement to strategic imperative, Emerson's Jim Nyquist began in Nomex coveralls, hardhat, safety glasses and toolbelt before shedding them in favor of suit and tie.

A safety incident is much more likely to occur when equipment is in transient operations, explained Nyquist. "In a refining or petrochemical facility, over 50% of safety incidents occur during transient conditions, even though they are only in a transient state 10% of the time," he explained. "The second point is the ability to keep facilities running when they need to. Facilities are running longer and harder between planned outages or maintenance turnarounds in order to get the production and productivity they need out of their plant assets. The last factor is profitability. If a piece of equipment fails, it not only causes a disruption to production, but it can also cost 50% more to repair it than to do the proper maintenance before the failure. Additionally, unplanned failure can put pressure on parts inventory and the supply chain. Every 1% gain in availability is worth $8.4 million of additional margin capture per year in a typical 200,000 barrel/day refinery."

Building on 25 years of experience with equipment reliability, in the spring of 2014 Emerson acquired Management Resources Group (MRG), a management consulting firm with almost 30 years of experience in developing strategic approaches. This strategic investment leverages Emerson's "pervasive sensing" and complements existing lifecycle services offerings.

"If a company is not a top-quartile performer, it is losing millions in revenue and spending millions of dollars on unnecessary maintenance costs," said Robert DiStefano, founder of MRG, who is now vice president and general manager, reliability consulting, Emerson. "Every dollar not spent on maintenance goes directly to the bottom line. Our approach helps companies dramatically reduce downtime and enhance safety and compliance, increasing the stature and reputation of a company and ultimately providing better value for shareholders."

A recent Solomon RAM study found companies reach the top-performing quartile when they have less than 3% unplanned downtime and have maintenance costs that are less than 2% of plant replacement value (PRV), explained DiStefano. For example, a $1- billion, top-performing plant spends $12 to $20 million per year on maintenance expense. By contrast, poor performers spend two to four times more per year.

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