how does industrial nordic service science services ... · pdf filenordic service science...

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ABB

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Nordic Service Science Summit 28.2.2007

How does Industrial Services Improve

Customer’sCompetitiveness?

Ilkka TykkyläinenABB Oy Service

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Contents

ABBHow Maintenance Can Improve Competitiveness

Productivity challenges

OEE as a measure for production effectivenessMaintenance and productivityReferences

Pulp & Paper Industry – New Zealand

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-Introduction

of ABBABB – An Industry LeaderProducts, Systems & Services

Serving the full range of process industries

Oil & Gas

Pulp & Paper

Chemicals & Pharma

Marine

Turbocharging

Process Industries Products

Performance Services

Metals

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-ABB

Service ABB Global - Local Service

ABB Service Competencies Globally Projected with Local Resources:

Global revenues of $3,9 BUSD (2006)ABB develops advanced tools, training and methods for Maintenance ExcellenceOver 20,000 direct service employees worldwideStrong local organizations in more than 40 countries

Local service organizations provide speed in responding to problems, language and cultural alignmentThey are backed up by a global service infrastructure of product and solutions experts, advanced software tools, and a global communications infrastructureTogether we can deliver specific expertise anywhere and anytime it is needed

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Performance Services Portfolio

Customer’s Maintenance

Strategy

Outsourced MaintenanceOutsourced Maintenance

Self MaintainSelf Maintain

ABBService

Technology know-how + Service know-how + Energy efficiency

= Performance Based Solution !

Technology know-how + Service know-how + Energy efficiency

= Performance Based Solution !

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Need to Improve Return on Revenues (%)

Source: 2005 Fortune Top 500

What is needed to improve Your Industry

bottom-line?

ProductivityChallenge

Mining, Crude-Oil Production 29.9Pharmaceuticals 15.7Diversified Financials 12.4Publishing, Printing 11.8Household and Personal Products 11.1Insurance: P & C (stock) 9.0Food Consumer Products 8.4Electronics, Electrical Equipment 8.2Computers, Office Equipment 7.5Health Care: Insurance & Managed Care 7.1Industrial & Farm Equipment 6.6Petroleum Refining 6.1Utilities: Gas & Electric 6.0Chemicals 5.8Metals 5.6Beverages 5.3Aerospace and Defense 4.9Telecommunications 4.2General Merchandisers 4.1Specialty Retailers 4.0Semiconductors & Other Electronic Components 3.9Energy 3.0Food Production 2.8Health Care: Pharmacy and Other Services 2.8Wholesalers: Food and Grocery 2.1Food & Drug Stores 1.6Wholesalers: Electronics and Office Equipment 1.3Motor Vehicles & Parts 1.1

Most Profitable Industries: 2005 profits as % of Revenues

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Customer Demand Going Forward

Source: ARC Advisory Group

8 T h o u g h t L e a d e r s f o r M a n u f a c t u r i n g & S u p p l y C h a i n

Copyright ARC Advisory Group

The Way we look at delivering Value Must Change

1990s 2000s

Val

ue

Cost and Efficiency Focus

Incremental value leveling off

Operational Excellence is the Next Wave

Manufacturing and Supply Chain Optimization

Next wave of Improvement driven by Operational Excellence

Courtesy of DuPont - used with Permission


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Companies Shifting Focus on Value Creation

ValueCreation

Operating Margin

Capital Efficiency

Credibility/Consistency

Growth

ValueCreation

Operating Margin

Capital Efficiency

Growth

Focus 1990s:Superior growth through acquisitionsOperating profit propped up by non-operational itemsVery high debt leverage to drive ROEExtreme decentralization as corporate architecture

Focus 2005-2009:Drive operating margin, ProfitabilityMaintain organic growth momentum, UtilizationImprove capital efficiency via operating excellence and maintenance, OEE Focus corporate architecture on execution, Strategy and Consistency


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Why do an Alliance?To focus on core and outsource non-core activities


Is Maintenance recognized as your core competence?

To move away from capex and toward opexHave you identified your OEE improvement potential and possible gain?

To ensure continuous improvement in this specific areaDo you know your position against world-class maintenance?

5%17%

78%

One core withleadership

Multiple coreswith leadership

Other

Sustained value creators

focus on their core business

Source: Bain & Company

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Contents





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Evaluation of Potential Production Losses

The losses are not easily The losses are not easily visible, despite their size visible, despite their size

• Costs• Breakdowns• Unavailable Equipment

• Direct and indirect losses due to technical shutdowns • Speed or flow rate reduction• Product changes• Off-spec production• Waste of Electric Energy • Waste of Fuels• Waste of Utilities• Expenses with waste treatment• Fines paid to Environmental Agencies• Fines paid to customers• Expenses due to product delivery delays• Losses of personnel working time and overtime• Waste of materials, spare parts, chemicals, catalysts

OEE

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Introduction to OEETo meet business objectives and remain competitive, companiesstrive to optimize plant productivity

Companies invest in manufacturing planning and control systems.

Manufacturing ExecutionSystems (MES)

Enterprise Resource Planning(ERP)

Supply Chain Execution (SCE)

Anyhow, it is estimated that manyplants can still waste up to 50% of production capacity

OEE

Overall Equipment Effectiveness - OEE

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ValuableOperating Time

Net Operating Time

Gross Operating Time

ABB Deliverables: Overall Equipment Effectiveness -OEE

Theoretical Production Time

Planned Production Time PlannedDown Time

UnplannedDownTime

SpeedLosses

QualityLosses

Equipment Failure

Reduced Speed

Defects in Process

Setup & Adjustment

Idling & Minor Stops

Startup Losses

Quality (Q)

Availability(A)

Performance(P)

OEE

PlanningFactor

(Pf)

Availability(A)

Performance(P)

Quality(Q)

Valuable Operating TimePlanned Production Time

OEE% = X X =

Total Productivity = OEE%

Planning factor(Pf)

XValueable Operating Time

Theoretical Production Time=

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Availability

Performance

Quality

A

P

Q

x

x

Maintenance Operation

= OEE

<<< >>>

<<< >>>

OEE-improvements require:

Best Payers at the Plant

Partnerships & Network

Advanced Technology

Management Attention

Common OEE Targets

Shop-floor partnershipOEE

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Return on Return on InvestmentInvestment

MaximizeAssets UseMaximize

Assets Use

• Life Cycle Extension -> Replacement Postponment• Reliability Improvement

PerformanceImprovementPerformanceImprovement

• Minimize shutdowns• Maximize production rate• Minimize product losses

and reprocessing

High Performance Maintenance

Maintenance Influence on Productivity

CostsOptimization

CostsOptimization

• Personnel cost • Materials cost• External Services cost

Maintenance and

Productivity

Reason to Improve Maintenance!Reason to Improve Maintenance!Reason to Improve Maintenance!

“Sustaining a competent, in-house maintenance capability will require increased level of training and larger, more expensive parts inventories… The costs for those steps are large and ever-lingering threats…” – ARC Insights –2006.

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Maintenance and

Productivity Alliance Models are Developing

ServiceProvider

PerformancePartnership

Transactional

Cost KPIs BusinessOutcomes

Measurement

Dur

atio

n

3-10Years

1-12Months

1-3Years

Commodity Value RiskSharing

Bus

ines

s Im

pact

Value Proposition

None

Tactical

Strategic

Scaleable levels of sophistication to meet client demands

“Performance guarantees represents a different challenge and are one of the preferred methods for all.” – ARC Insights – 2006.

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Behaviors are Model DependentMaintenance

andProductivity

PerformancePartnership

Co-Sourcing

Collaborative

RelationshipGovernance

ServiceProvider

Users

Resources

Proactive

FrameAgreement

Purchasing

Sales

Transactional

Users

Resources

Purchasing

Sales

Reactive

Relationships must evolve with model“The whole outsourcing process is “heavily driven by change managementand really implementing new business processes around maintenance””. –Chemical Processing – 2006.

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Maintenance – Global World-class ProcessComprehensive benchmark maintenance assessmentMaintenance plans to enhance the business strategiesRelevant maintenance and production Key Performance Indicators(KPIs)

Competent leadership and resourcesContinuous competence developmentSelected maintenance tools and approaches such as OEE and Reliability Centered MaintenanceImprove production effectiveness by utilizing world-class maintenance know-how

Maintenance and

Productivity

Partnership Fulfillment

Maintenance Operations

Reliability Maintenance

Plant Performance Improvement

Leadership Leadership Strategy

HSE Quality

Finance and Cost

Supply Chain InformationPeopleManagement

HSE Quality

HSE Quality

Finance and Cost

Finance and Cost

Supply ChainSupply Chain InformationInformationPeopleManagement

PeopleManagement

Results

ClientValue

ABBValue

People Value

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ABB - Contractual Commitment

We also commit to total maintenance cost optimization!

Maintenance and

Productivity

OEE %83,5%

OEE baseline

Bonus 35% of gained benefit

Bonus(Eur)

Contribution margin: e.g. 72 Eur/unit (2005)

The actual figure of the contribution

margin will be used83,5%

Benefit Sharing

35 %

65 %

ABB share Client share

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References

Total Current Performance Service Contracts 150+ Total Current Performance Service Contracts 150+

Examples of Full Service® References

ABB Industry (6)ABB Motors & ABB DrivesAlcan Amcor (2)Api RaffineriaAracruz CeluloseBandag (2)BlueScope SteelBobingen Industry Park

Invista, Teijin, Trevira, J. Manville

Botany Industry ParkOrica, Qenos, Huntsman

Braskem (2)Camacari Industry Park

Ford (1)Tier One’s (14)

Canexus - NexenCarter Holt Harvey (2)

Codelco (6)CognisCompania MegaCooper TiresCorensoDMSDowDraka CablesFosfertilGruppo CordenonsGeorgia Pacific

Harjavalta Industry Park

OMG Hariavalta Nickel

Boliden Harjavalta

Pori Energia, etc

Hydro Aluminium

Icolub - Shell

International Paper

Kunda Nordic Cement

Manganese Metal Co.

Monckton Coke & Chemical Co

Mondo Minerals (2)

Nokia (2+1)

Orica

Outokumpu Pori Tube

Otokumpo Stainless

Outokumpu Stainless Tubular Products

Petroflex

Puhos Board

Solvay (2)

Stora Enso Finland (5)

Stora Enso Netherlands

Stora Enso Packaging Latvia

Voisey Bay Nickel Co.

Situation on July, 2006

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Full Service Success Story – CHH Kinleith

The achievements and development of the company

OEE increased by 9%Production (t) increased by ~10%Maintenance cost reduced ~20%Maintenance hours reduced from 700.000 to 400.000Engagement Level of employees increased substantiallyShut (one fiber line) duration reduced from 12 to 10 daysAbsentee level halvedHealth & Safety certificate ISO 18001

ABB signed a Full Service partnership agreement with a pulp & paper company in New Zealand in January 2003.

References

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