Emerson Process Experts

Engineers being the problem solvers that they are, typically enjoy a project in full execution mode. Problems must be quickly confronted and solved to keep everything moving forward. As we've mentioned in earlier posts, the part they typically like least is the upfront justification to get the projects approved in the first place.

Emerson's Pete Sharpe, a principal consultant in the Advanced Automation Services organization, shared his thoughts on automation investment justification with the readers of Automation World magazine. The article, Strengthen Company, Minimize Risk, pointed to areas of opportunity for project justification.

Pete's guidance is to look at the economic buckets your efforts in automation can influence, which boils down to increasing profits and minimizing risk. Simply put:

To increase profits, "you must either increase revenues or lower costs," he emphasizes. Revenue is a bucket on the positive side of the formula that is affected by things like throughput, yields, recoveries or product price. That means "you have to shift production toward the more valuable products, or increase yield, reduce off-spec, product losses and downgrades of product," Sharpe states. Cost-lowering considerations could involve maintenance, labor, energy, utilities or raw materials, among other areas.

Pete cites an example of looking at quality. Poor quality can lead to customer rejection, off spec and rework. Providing better quality than is specified in the contract is called "quality giveaway". It likely means additional costs are being incurred without receiving additional price for this quality. This is particularly relevant to commodity markets such as gasoline and diesel. Other potential sources of justification are in intangible costs like safety and environmental compliance.

Minimizing risk is about reducing the probability that something bad will occur in the plant's operation. These projects focus on improving reliability, safety, environmental liability, and dealing with abnormal situations. Risk can be evaluated based on the frequency and severity of historical incidents. Then appropriate application of technology and programs designed to mitigate the highest risk areas by applying such things as predictive maintenance, operator training systems or abnormal situation prevention technologies.

The key is to look for how your project will affect the throughput, production costs and total production value on an on-going basis. Ultimately, the expected financial return of the project will determine whether the project goes forward or not. The article sums this up:

...the ultimate metric for justifying investments is ROI. He notes that it includes the time value of money, and calculation of returns based on expected future cash flows from the investment.

In most companies, the management team evaluates potential projects based on the expected return and the risk associated with the investment. The projects with the highest rate of return and lowest perceived risk are those that will likely be funded. In almost all cases, the project return must exceed the manufacturer's cost of capital, which varies depending on company. Pete notes that there are exceptions where a low return, discretionary project is approved. This could be a "stay-in-business" investment decision, which ultimately is about reducing overall business risk.

Tags: project justification | quality giveaway | safety compliance | environmental compliance |

January 2, 2008 in Education, in Modernization, in Project Services | Comments (0)

There may be reasons why you need to consider something beyond your automation system that has been running in your plant for years and years. It might be the need to more tightly control energy usage to reduce energy costs. It might be to improve quality and consistency to stay ahead of your competitors. It might even be that you are losing peoples' expertise to retirement to maintain this automation system.

The vernacular for this process varies—modernization, migration, or upgrade—but planning is an essential component. I caught up with Laurie Ben, who directs a team of modernization consultants in Emerson's Process Systems and Solutions business. They have expertise in Emerson systems and systems from other automation suppliers. They also have methods and tools to design a migration solution.

This migration process can range from a simple connection between systems all the way to a "rip and replace" project, depending on the business drivers prompting the change. Some plants have existing pneumatic and panel-mount controls. Downtime and reliability concerns often provide the justification required to transition these to the current digital communications-based systems.

These digital technologies provide ways to do hot cutovers to keep the process running while the automation is migrated from pneumatic to digital. An example of how this works is a Fisher Foundation fieldbus-based DVC6000f digital valve controller. Its pressure control functionality connects to a DeltaV system while also sending a pressure signal to the existing actuator or pneumatic positioner. Once these pressures are balanced within the system, control is transferred to the digital valve controller. During this phase, AMS Device Manager helps finalize the cutover by helping the team to communicate locally with the valve to monitor exactly what is happening during the process of mounting, adjusting, stroking, and calibrating the valve.

Laurie mentioned that operator consoles typically have the shortest life span of all the automation system components. It is often the first consideration for migration to a modern automation system. Newer operator workstations keep the look and feel of the operator graphics and faceplates and connect to the existing automation system. Over time, I/O and controller hardware and software can be migrated. The business drivers help dictate the pace of migration.

For instance, if energy cost reduction is the business driver, it may make sense to modernize the controller and I/O to get embedded advanced control capabilities. Units like lime kilns, fired heaters, boilers, etc. can be run more efficiently as a unit with model predicted control than as a collection of interdependent loops.

It really begins with your business drivers and developing a plan to move forward to modernize your automation. The hardest path is to justify it based on obsolescence since the calculation of ROI based on problem avoidance. The best path is to find cost reduction or efficiency-improving opportunities. These numbers are the basis for your financial justification calculations.

Tags: energy costs | system migration | system modernization | system upgrade |

November 16, 2007 in Modernization, in Project Services | Comments (0)

I know from my early days as a systems engineer, that power and grounding can sometimes cause vexing, intermittent issues. It's like chasing ghosts, which is an apropos analogy with Halloween occurring yesterday here in the Western world.

I caught up recently with Dan Jacobsmeyer, a specialist for Emerson's FlexConnect solutions. These solutions connect pre-engineered cables to the existing automation system termination panels and marshall the field signals to DeltaV I/O.

Dan shared a recent story where a process manufacturer was having some grounding issues with 1-5V analog I/O cards. Ground loop currents were causing a voltage offset, increasing the error on what the I/O card was reporting to the control system, versus its actual measured value. A solution discussed was to convert the I/O over to 4-20mA.

Dan pointed out that replacing the 1-5V cards with 4-20mA cards is a way to solve the immediate voltage offset problem. However, not fixing the ground issue may result in future problems that may be very difficult to diagnose.

Dan recommended the following course of action based upon DeltaV site preparation documentation.

A proper earth ground is critical. It safely conducts stray electrical current to earth for personal safety and good electrical noise control. Building steel must be part of a good earth ground system to obtain an equal-voltage-potential ground between the steel and the automation system ground networks.

Automation system faults are often the result of poor or faulty grounds. IEEE Standard 1100-1992, Recommended Practice for Power and Grounding Sensitive Electronic Equipment describes industry-accepted methods.

Isolation transformers should be used for power transfer from plant A/C service to the individual automation systems. A single point ground eliminates ground loops and provides excellent isolation between the automation systems and other plant systems.

Dan sums up his recommendations to use the isolation transformer between the A/C power source and automation system and have each system with a dedicated connection to a true-earth plant ground grid. Make sure no other systems share this connection point.

Paying close attention to these recommendations and not masking over them will save a lot of time chasing ghosts and delivery more reliable and accurate system operation.

Tags: power | grounding | voltage offset | ground loop | earth ground | isolation transformer | true earth |

November 1, 2007 in Modernization, in Power & Grounding | Comments (2)

John Dolenc, a principal consulting engineer in Emerson's advanced applied technology organization whom you may recall from earlier posts, presented Estimating Benefits from Process Automation at the Emerson Exchange.

John began by discussing what types of activities are performed during a process automation modernization feasibility study. Project justification is one of the most difficult steps to complete.

Start with looking at the plant as a financial asset. Perform a financial balance across a process unit in the same manner as performing a material and energy balance. Capital enters a process unit in the raw materials, net utilities, operating expenses, and maintenance expenses. Value is added within the process unit. Capital flows out in primary and secondary products as well as the waste streams. After identifying the financial streams, identify areas that need improvement and determine whether better process automation can help.

Capital projects are justified by either increasing the revenue of the plant or by reducing the costs to manufacture the products. Revenue may be increased through increasing production capacity (if additional product can be sold), and increasing the yield of more profitable products while reducing lower grade product and waste streams. Look for capacity increases through being able to run closer to constraints by reduced process variability. Can you reduce unproductive time such as grade changeovers, off-spec blending and downtime for cleaning through better process control? Can you reduce cycle time for batch processes by better control of reaction conditions and eliminating wait time for operator actions?

Another method of increasing plant profitability is by working with the marketing and sales force to understand what your customers' value about your product. Can price be slightly increased if the product consistently meets specification and delivery schedules and emergency production is provided when needed?

Reducing costs are a big area of value creation. Some areas to look for cost reduction opportunities include increasing feedstock yield, reducing energy consumption, better use of direct and indirect labor, and limiting off-spec material, abnormal events, demurrage and maintenance.

These are the opportunities for automation project financial justification. So what are some benefit estimation methods you can employ? John mentioned the best operator method, data reduction method, and percent limit violation as three methods of estimation. The best operator method considers historically identifying key performance indicators at their optimum point. What are the "best operators" doing to make this happen? The key is to look for how to automate these best practices. Your project justification is the difference between operating at the "best operator" condition versus the historical average condition.

John went through an example of looking at batch cycle times, throwing out outliers caused by extenuating circumstances, and digging into the process automation that can be done to move from the average cycle time to the best cycle time.

He discussed the other methods, data reduction method and limit violation methods. With the latter, conceptually the results of the automation project are to reduce overall variability. This means you can run closer to your process or specification limit. This means operating set points can be set closer to these limits, thus reducing costs such as product giveaways and excess energy usage. The presentation includes some of the statistical methods to build your financial justification. John offered a rule of thumb that you would reduce standard deviation by at least 50% by improving overall control performance.

John summarized his presentation with these key points:

• Justification is difficult, but necessary to receive approval for automation projects
• Historical data collection is vital
• Build a base case
• Some "prediction" of results is necessary

Tags: estimation methods | feasibility study | capital project | best operator method | data reduction method | percent limit violation | control performance |

September 25, 2007 in Education, in Emerson Exchange, in Modernization | Comments (0)

As reported in the DeltaV News RSS feed recently, Automation World magazine's C. Kenna Amos wrote an article, Getting Projects Approved. I know from my days as a systems engineer, that financially justifying a capital project was not nearly as fun as executing the project. Most engineers enjoy the action of seeing their work come to life more than convincing others to approve the capital to get the project going. They also are not typically versed in the language of financial analysis.

The article captures the wisdom of Emerson's Doug White, a vice president of advanced automation services. Doug and his team often assist process manufacturers in ways to help quantify return on investment for automation and advanced automation projects.

In the article, Doug notes:

The project has to be very attractive to be funded, because it will compete with others. The project has to show a clear and compelling return on investment.

Easy enough, but the trick is how to do this. Doug recommends that engineers work with the financial group to understand their selection criteria for capital projects. Basics for most projects include cash outflow analysis and when the return on investment begins. This is the basis for the payback calculations. Also, the capital proposal should include key non-quantifiable benefits often found in health, safety, and environmental (HSE) considerations.

The closer you can tie your proposal to key organizational initiatives, the more the proposal will be noticed more than others will. When it comes to presenting your proposal:

Begin by first defining the problem, then telling them why your project is important and giving reasons why it needs to be done, he emphasizes. Then—and only then—go into financials, beginning with the most likely scenario.

Doug has captured much of his experience in a whitepaper, Calculating ROI for Automation Projects. It comprehensively goes through the components of return on invested capital and how to calculate each component. Give this whitepaper a thorough review and you will be better prepared to have that conversation with the financial group.

For those of you going to the Emerson Exchange next week in Dallas, make sure to catch Doug's short course, How To Find The Economics For Process Automation Investments that will be held Tuesday at 2:15pm and repeated Wednesday at 8am. Here's the abstract for this presentation:

This session presents realistic approaches to automation project economic analysis and justification. The viewpoint is that of the business financial analyst. Specific areas where automation affects the business results are identified and quantified.

Tags: capital projects | automation modernization | ROI analysis | project justification | project payback |

September 4, 2007 in Education, in Emerson Exchange, in Modernization | Comments (0)

The ever-increasing global demand for energy requires tremendous daily global movements of crude and refined products. Offsite operations play a vital role in the hydrocarbon supply chain. These offsite operations provide the receiving, shipping and storage facilities for handling bulk liquid or gas products. These sites typically include tank farms, blenders and terminals for handling truck, rail, and marine transport.

Tank farms and terminals are found at various stages along the production process from oil & gas collection terminals to refinery terminals and depots, to primary depots where refined products are loaded and transported to your local gas station.

I caught up with Patrick Truesdale, a senior consultant, in Emerson's advanced automation services team. Patrick will be co-presenting with Emerson's Gerrie Benjert at the upcoming Emerson Exchange. Their topic is developing a business case for tank farm and terminal automation.

The biggest business challenge Patrick finds from his work with offsite operators is the lack of spare capacity throughout the global distribution system. Capacity utilization is at a maximum and assets in many of the established markets like North America and Western Europe are aging. This increases the chances for unplanned shutdowns. These facilities often lack flexibility to deal with changes in market demand.

Other challenges include increasing safety and environmental requirements and increasing compliance reporting. In addition, new regulatory mandates for ultra low sulphur fuels, biofuels and other additives increase the number of products to manage through the distribution chain.

Overcoming these challenges is the basis for the business case that Patrick helps offsite operators build. If the case for improvement justifies capital investment, an important step will be reviewing the key components in an offsite automation system. These components include automatic tank gauging and inventory management, goods movement automation and control, blend control and optimization, and terminal management systems.

The more these components are integrated, the better the efficiency of the offsite operations can be. Automated data collection, correlation, and reporting help streamline the regulatory reporting challenge and provide a better data to make process improvements. In addition, custody transfer of the liquids and gas can be more accurately measured, accounted, and billed.

In his presentation, Patrick and Gerrie will discuss some of the quantified benefits that some offsite operations have been able to achieve. It is important to establish a continuous improvement loop to collect data before and after these offsite automation system components are added or modernized. This is so the data can be analyzed and used to generate additional projects to further integrate and streamline operations, based upon quantified results.

Tags: offsites | terminal management | tank gauging | inventory management | blend control | tank farm | terminal automation | refinery |

August 13, 2007 in Modernization, in Offsites, in Project Services | Comments (0)

Charlie Masi, over at Control Engineering magazine's Ask Charlie blog, had an interesting post recently. Entitled, When is a piece of equipment or system obsolete?, he writes:

After spending several hundreds of thousands, or just as often millions, of dollars building up infrastructure based on earlier-technology equipment, dumping it as "old and yukky" just because something "new and improved" has come out is fiscally irresponsible. Not only would you have to write off the old equipment (which the accounting department would rather depreciate over another two or three years—or more) and lay out the cost of the "new and improved" stuff, everyone in the plant would have to drop what they're doing (hopefully, productive work) to take training classes on the "new and improved" stuff (which is definitely unproductive).

It's interesting because it ties in with a draft of a paper that Emerson's John Dolenc is writing about planning automation upgrades. You may recall John, an advanced automation services consultant, from an earlier post. One of his key points is that economic justifications based on obsolescence are a difficult route to take, unless the obsolete equipment is causing unplanned downtime. One problem is that it's hard to quantify the improvement. Another is that the new equipment may be replaced "in-kind" where no benefit is received from its improved technologies—it simply mimics what the old equipment did.

He stresses a path which begins with the business objectives like increasing production capacity, reducing manufacturing costs, or increasing process flexibility to more quickly respond to customer demand. From these business objectives, an audit of the process unit should be done to identify areas for financial improvement.

This audit feeds a conceptual engineering study to develop the process automation modernization plan. John has developed these studies working with members from operations, maintenance, plant engineering and management, even sales and marketing to better understand the flexibility the plant's customers require.

This study provides the business case whether to pursue the capital investment for modernization or to maintain the status quo. It may also identify quick opportunities for improvement with the existing equipment.

The draft also describes his methodology for moving forward with the modernization plan, which I'll save for a future post.

Tags: obsolescence | project justification | modernization | automation investment |

April 12, 2007 in Modernization | Comments (0)