1、The Value of Automation:The Best Investment an Industrial Company Can MakeThe Value of Automation:The Best Investment an Industrial Company Can Makeby Peter G. Martin, Ph.D.NoticeThe information presented in this publication is for the general education of the reader. Because nei-ther the author nor
2、 the publisher has any control over the use of the information by the reader, both theauthor and the publisher disclaim any and all liability of any kind arising out of such use. The reader isexpected to exercise sound professional judgment in using any of the information presented in a particularap
3、plication.Additionally, neither the author nor the publisher has investigated or considered the effect of any pat-ents on the ability of the reader to use any of the information in a particular application. The reader isresponsible for reviewing any possible patents that may affect any particular us
4、e of the information pre-sented.Any references to commercial products in the work are cited as examples only. Neither the author northe publisher endorses any referenced commercial product. Any trademarks or tradenames referencedbelong to the respective owner of the mark or name. Neither the author
5、nor the publisher makes any rep-resentation regarding the availability of any referenced commercial product at any time. The manufac-turers instructions on use of any commercial product must be followed at all times, even if in conflict withthe information in this publication.Copyright 2015 Internat
6、ional Society of Automation (ISA)All rights reserved. Printed in the United States of America. 10 9 8 7 6 5 4 3 2ISBN 978-0-87664-092-0No part of this work may be reproduced, stored in a retrieval system, or transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording or o
7、therwise, without the prior written permissionof the publisher.ISA67 Alexander DriveP.O. Box 12277Research Triangle Park, NC 27709Library of Congress Cataloging-in-Publication Data in process.DedicationThis book is dedicated to my wonderful wife, Liz.viiAcknowledgmentI would like to thank many peopl
8、e who have helped and encouraged me with respect to the value of automation over the past 35 years. In particular, I would like to call out in no particular order Buss Barr, Melanie Russell, Bob Cook, Rob Novotny, Dave Baxter, Paul Barletta, Dave Snyder, Steve Furbacher, Bob Baird, Gary Loop, Don Ba
9、rtusiak, Jack Garrity, Frank McAllister, Joe Wilhelm, Trish Davenport, Mike Kletti, John Krause, John Snodgrass, Susan Colwell, Pat Gouhin, Carol Schafer, Kevin Fitzgerald, Dick McAllister, Sudipta Bhattacharya, Chris Lyden, Mark Davidson, Trevor Cusworth, Collin Ward, Stuart Parker, Rashesh Mody, L
10、arry Colwell, Don Clark, Greg Hale, John Mitch-ell, Walt Boyes, John Eva, Mike Caliel, Nathalie Marcotte, Michael Tracey, Maxie Wil-liams, Cory Welch, Larry Schavey, Gary Freburger, Martin Ward, Kurt Haag, Rick Kornblum, Greg Shinskey, Carroll Ryeskamp, Alex Jonson, Stan DeVries, Pankaj Mody, Joe Co
11、wen, Lew Gordon, Alan Morrow, Bob Medower, Jim Sommers, Bob Cox, Vernon Trevathan, Dave Adler, Serena Williams, Tim Sowell, Thomas Vollmann, Jorge De La Rivera, Ramon Hernandez, Maurice Wilkens, Hannes Mittermeier, Joe Fillion, Diego Areces, Calum Semple, Jeffery Goodman, Terry Marsh, Larry OBrien,
12、Cynthia Esher, John Nero, Maurice Egan, Dave Woll, Dick Hill, Andy Chatha, John Wason, Mike Le Plastrier, Ulf Henriksson, Tom Toronto, B.R. Mehta, and so many others.I would especially like to thank Carol Vallett for her support and editing of the manuscript. And, last but certainly not least, I wou
13、ld like to thank my wife, Liz, for all of her support and my family: Derek, Jen, Erin, David, Karly and Lexi. ixAbout the AuthorPeter Martin, vice president of business value consulting at Schneider Electric, joined The Foxboro Company in the late 1970s and spent most of his career working at Fox-bo
14、ro, Siebe, Invensys and Schneider Electric in project engineering and management, training, marketing, con-sulting and strategic planning. He also worked for Intech Controls Corporation and Automation Research Corpora-tion. He has authored or coauthored five books and has been a contributing author
15、on three others. He has writ-ten dozens of published articles and papers on industrial control and automation. He has multiple patents related to real-time business measurement of industrial businesses. He is an ISA Fellow and received the ISA Life Achievement Award. He is a member of the Process Au
16、tomation Hall of Fame. He was recognized as a Hero of U. S. Manufacturing by Fortune and as one of the Fifty Most Influential Influencers in Control by InTech magazine. He has a BA and MS in Mathematics, an MA in Administration and Management, a Master of Bibli-cal Studies, a Ph.D. in Industrial Eng
17、ineering and a Ph.D. in Biblical Studies. xiContentsAbout the Author ixChapter 1 Expected Value from Automation 1Chapter 2 What Is Value across Industrial Organizations? 15Project Engineering, 20Plant Engineering, 21Process Operators, 22Plant Maintenance, 23Management, 24Summary, 25Chapter 3 Automat
18、ion and the Capital Budget Process 27General Capital Projects, 29Automation Projects, 32Modern Accounting Systems, 36Automation Supplier Perspective, 38Conclusion, 42Chapter 4 Under-Delivering on the Promise of Automation 43Replacement Automation, 44Inability to Utilize Dormant Capability in Install
19、ed Automation Assets, 49Lack of Measures of Automation Performance, 52Market Slowdowns, 54Chapter 5 Measuring the Value of Automation 57Cost Accounting and Automation Benefits, 58Project Team Performance Measurements, 62Key Performance Indicators, 63Dynamic Performance Measures, 69Benefits of Compre
20、hensive Real-Time Performance Measurement Systems, 78xii The Value of Automation Peter G. Martin, Ph.D.Chapter 6 Changing Key Processes 81Project Engineering, 82Replacement Automation, 86Continuous Improvement Programs, 90Chapter 7 Continuous Value Improvement through Control 97Automation or Control
21、?, 97Value in Control, 101Talent Is the Key, 102Controlling Efficiency and More, 104Safety Control, 108Environmental Control, 110Asset Control, 110Quality Control, 113Profitability Control, 114Chapter 8 Value Improvement through Optimization and Constraint Management 123Optimization Concepts, 123Opt
22、imization Concerns and Limitations, 132Performance Measures and Constraint Analysis, 134Chapter 9 Driving Operational Excellence 137Operational Excellence, 137Human Performance Excellence, 142Control Performance Excellence, 146Asset Performance Excellence, 150Safety however, since future events are
23、probabilistic, it is often difficult for financial management to accept future failure event prevention as a valid economic value of automation. Therefore, the improvements in the three vectors of the model (throughput, energy consumption and material consumption) have become the pri-mary basis of t
24、he business value of improvements due to automation. Most automation projects are economically justified up front during the capital budget process using expected return on investment (ROI), as many companies estab-lish an ROI threshold to qualify capital expenditures. Any proposed expenditure under
25、 the threshold is automatically rejected while those above the limit compete for avail-able capital. Anyone applying for capital must justify their projects by projecting a return on investment (ROI) above the threshold. Automation projects typically battle for funding with other capital project req
26、uests, such as installing storm windows on the office building in Minnesota. Unfortu-nately, experience has demonstrated that few industrial companies review and assess the true value their automation solutions delivered after the projects are complete and the solutions have been implemented; thus,
27、the credibility of the projected ROI on future capital funding requests for automation projects is often questioned by manage-ment and finance.ROI typically serves as the common way of looking at automation system value; therefore, it is important to understand how the ROI is determined in most indu
28、strial operations. Since automation capital projects are competing with other projects for the available capital budget, the group within the organization that is requesting a capital expenditure is required to project the estimated ROI for the project and provide justifi-cation for this projection.
29、 Most savvy groups within organizations quickly learn what the capital investment threshold is and make sure that the ROI they project for the project is higher than the threshold. They then typically list a number of features and functions of the new solution that will get them that ROI. The proble
30、m is that after the project is exe-cuted, few organizations go back to determine what the delivered ROI was. This miss-Chapter 1 Expected Value from Automation 5ing step has led management and finance people to question whether or not they are really realizing the returns they expected. Over a numbe
31、r of these projects, in which fairly significant capital was invested with no discernible returns, the returns on any automation investments are heavily scrutinized and the credibility of actually realizing the returns is questioned by both management and finance. As a result, the available capital
32、is often directed into other areas than automation system improvements.It is also important to point out that there are two different value propositions for automation systems, based on whether the project is for a new plant or plant expansion (greenfield project) or is for an upgrade to an existing
33、 plant (brownfield project). To a great extent the primary value of the automation solution for greenfield projects is the value of getting the plant running in as short a time as possible. The automation system is often on the projects critical path and getting the plant running on schedule is the
34、entire focus. For brownfield opportunities, on the other hand, the value proposition should be based on improving the operating level of the plant from that prior to the implementation of the automation solution. In either case, the classic way to measure the business value of automation has been by
35、 return on investment. Figure 1-3 provides a geometric perspective of classic ROI. ROI can be expressed in a number of ways, such as a percentage of the investment recovered in the first year or the time it takes to recover 100% of the investment value. In this case, the basis for the ROI calculatio
36、n is the economic benefit provided by the capital project divided by the cost over time. Regardless of how it is expressed, the basic components of the eco-nomic value provided by the solution and the costs of the solution over time serve as the basis for the calculation. Obviously, both the cost an
37、d benefit must be measured to determine the ROI. Automation technologies offer a number of effective approaches to efficiency improvement. Since a number of these approaches to improvement have been avail-able for many years, they are often overlooked when assessing the value of automa-tion. My year
38、s of experience in performance consulting in industrial operations have revealed that often the most valuable solutions available are the most mundane, yet they are relegated to the back burner because they are no longer new technology. Industrial operations continually change and it is a good idea
39、to go back to the basic measurement and control solutions implemented years ago to ensure that they are still providing the value they had been providing in the past. The following is a brief discus-6 The Value of Automation Peter G. Martin, Ph.D.Figure 1-3A Greenfield Mindset in a Brownfield WorldT
40、he primary value propositions for greenfield projects and brownfield projects are fundamentally different. Automation systems are typically on the critical path of greenfield projects. Therefore, the primary value proposition for the automation system is getting the system installed and running, so
41、that the plant gets up and running on schedule. For brownfield projects, the plant is typically already operating, so the primary objective for the automation system is to make the plant run better than it had previously. (This is not to say that on-time project completion is not important it is, bu
42、t with improving plant performance being of primary importance in this instance.)During the 1970s and 1980s, the major portion of automation spending was on greenfield projects. There was a considerable amount of spending on new plants and on major plant expansions. During this time, the greenfield
43、mentality took hold across industry and the primary perspective on automation value became ease-of-configuration and ease-of-use, in order to support getting the project Simple Return on Investment$PriceLifecycle BenefitLifecycle CostTimeReturnOnInvestmentChapter 1 Expected Value from Automation 7si
44、on on the key functionality of automation systems that have traditionally driven effi-ciency improvements in industrial operations. The earliest automation technologies were primarily focused on providing effective measurement and control. Much of the value of industrial automation systems is gained
45、 through measurement and control functions delivered on the systems. Part of the reason that these solutions are often not commonly considered when new automa-tion projects are planned is that most basic automation projects involve replacing an aging automation system with newer technology. The spec
46、ification for the new system at the measurement and control level is often based on a function-by-function replace-ment of the previous system; as a result, the new system typically offers little incremen-tal value at the measurement and control level. Replacing aging technology with newer A Greenfi
47、eld Mindset in a Brownfield Worldcontinuedup and running on time and on budget. Many of the innovations over this period were focused on this value perspective and the business focus of the automation suppliers was aligned with this greenfield perspective.Since 1990, the major percentage of spending
48、 on automation has been on brownfield projects. Most brownfield projects are considerably smaller than greenfield projects, so automation suppliers have continued to work hard to secure larger greenfield projects. As a result, the primary value proposition in the industrial automation market has con
49、tinued, to a large extent, to be from a greenfield perspective. Industrial management has an expectation of improved performance through automation, while the primary buying model has been based on ease-of-use. This is driving a misalignment of expectations between management and engineering. Management expects measurably improved results from automation projects not merely ease-of-use and on-time project delivery.A basic shift in value proposition is required to meet the current primary business focus across industry, which is: brownfield projects to improv
