pims ® global lubricants & greases supply chain benchmarking on 2010 data performance...
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PIMS® Global Lubricants & Greases Supply Chain Benchmarking on 2010 Data
Performance assessment and improvementCost reduction and optimization
Keith RobertsAnnie HanafinGeorg OppitzElena PeñasPeter SmithJosef Coellen
Introduction to the project and its motivation
Lubricants manufacturers worldwide face many challenges. Economic uncertainty, high material costs, ecological concerns and increasing competitive pressure are forcing them to re-examine all areas of operations. Minimum cost and maximum flexibility are needed to address new market realities.
Historically, there was pressure to increase market share, capacity and complexity:• in regions where demand for many lubricants is falling, due to lengthened vehicle
service intervals and higher oil prices, companies are now having to make tough decisions on plant and product rationalisation.
• in regions where demand for lubricants is rising due to increasing economic development, companies are having to achieve the operational edge necessary to build competitive advantage for market share growth and optimal capacity and complexity management.
Over the last 18 years PIMS® has established its data-driven worldwide benchmarking process and assembled the world’s only current database of lubricants and greases supply chains. Leading companies use PIMS as the foundation for evidence based performance improvement.
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But why benchmark in the first place?
Because benchmarking gives you:
•objective evidence of your true competitive position;
•firm facts to base decisions on, rather than wishful thinking: this helps to avoid wrong competitive moves;
•quantified and prioritised areas of improvement: how much of an improvement is needed and what is the prize? (NB average $500,000 per plant in 2008);
•better information systems: benchmarking makes it worthwhile to measure things because it gives a valid comparison on each metric used;
•a stimulus for change based on clear evidence versus real competitors;
•the reassurance to everybody, where “hard change” is indicated, that the change is really necessary;
•better understanding of the key drivers of performance;
•a basis for analysing alternative future scenarios using real experiences of others who have been there.
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And why PIMS?
Because for more than 18 years we have provided lubes and greases manufacturers with fast, effective and objective benchmarking, becoming trusted advisors, known for thorough data collection and validation, good analysis and useful answers.
Because you can use PIMS deliverables to answer questions like:•what should you do to get your operations to be world class? (process optimization)•what are your advantages / disadvantages versus local competitors?•where and how should you invest? Or divest? (portfolio optimization)•toll-blending, outsourcing, maintenance: yes or not, too much or too little?•how do you master performance and complexity drivers?•are your targets feasible? Is your current strategy supported by objective evidence?Because only PIMS has valid comparative data on over 160 plants in 40 countries, from over 20 of the world’s top oil companies, and a research-based analysis framework to clearly show results to managers at all levels.
Because we assure data confidentiality: feedback never shows (or allows calculation of) data on individual competitors.
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Our data set: 199 lube + 50 grease plants in 2010 PIMS benchmarking
Americas: 51 lube plants17 grease plants
Europe: 67 lube plants20 grease plants
Asia & Oceania: 65 lube plants
10 grease plants
Africa:16 lube plants3 grease plants
34 companies6 continents
Core methodologies: Look-alikes
C
PIMS global databaseFinding plants worldwide that match your profile
Benchmarking your activity based performance against
best practice
Traffic-light code:1.25 Unfavourable position
Neutral position0.8 Favourable position
No immediate message
You Look-alikes
Cost metricNon-cost metric
© 2007 PIMS Associates Ltd
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We compare you against the performance of the best plants that resemble your plant’s profile. Look-alikes are the closest structural peers: based on your current profile (scale, product mix, complexity, labour cost environment and major "givens" for configuration, e.g. % of base oil in via pipe etc.). We match you with your peers in each activity area, and compare you with the best half (e.g. best four out of eight). Details of the matching criteria are shown on the summary page for each activity area. Key messages on productivity and operating performance.
Core methodologies: local low cost peers
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We compare you with the best half of your closest geographical/market peers in each activity area (raw material receipt, blending, packing, laboratory, filling and despatch, warehousing, other production costs and assets, G&A, etc.). What are they doing differently and are they doing better?
Key messages on complexity, product portfolio, payroll costs, structure etc.
Traffic-light code:1.25 Unfavourable position
Neutral position0.8 Favourable position
No immediate message
Cost metricNon-cost metric
You Local low cost
PIMS can amend the default definitions and boundaries of “local” areas to meet clients needs, so long as the number of “local” observations in the database can guarantee 100% confidentiality.
PIMS deliverables
Regional Report (Quartiles & Time Series)
Plant Data
Appendix
HiLevel of detailLow
Executive
Summary
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Results comprise three different level of benchmarking reports:
•The plant data appendix (PDA) is for plant and country managers. It is the place where one plant’s performance is assessed and compared in great detail against its best look-alikes and local low cost peers.•The regional report is for regional managers. It shows all plants in a region (e.g. Europe) benchmarked against each other and regional quartiles. It also tracks the plants and the regional quartiles over time. It is the first report presented to the client as it is used in the data review stage to spot possible mistakes in inputs.•The Executive Summary is the final report, where all the key issues arising from the more detailed reports are highlighted and reviewed from a different perspective. This reports also provides PIMS suggestions and priorities (ranked by financial “prize”).
The input Data Form
The electronic version of the PIMS data form also provides a diagnostic sheet to help clients spot possible macroscopic mistakes and a cost split sheet to explain how the costs are split during the analysis according to the allocation keys provided.
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Country Plant
Company Year of data Volume unit Distance unit Currency
Plant raw material receipt (including bulk finished product)Into plant: Base oil Bulk additives Packed additives Bulk fin. product Total
Volume inbound (1=pipe/2=ship/3=barge/4=rail/5=road)
Input cost* *Row optional Volume out Mode in Mode out
No. storage tanksBy mode: Volume moved No. movements Line items/mvmt. Av. days stock No. specs. Days lead time No. stockouts Av. distance Transport cost
Pipe
Bulk ship
Bulk barge
Bulk rail
Bulk road
Packed
Packs & pack materials
Including pre- and re-blends:
Volume blended Total <11M3 (3000 gal) Manual Semi-auto Automatic Available Setup+maintce Blending
In-line
Load cell
Tank blends
Total blended By order: Toll % To order % For stock % Finished product tank stocks:
Volume as % of capacity Bulk Total 100% Days stock
Own VI improver pre-blends as % of VII usage Packed Total 100% No. storage tanks
Excluding pre- and re-blends: Motor oil Gear oil Marine Hydraulic Ind./other simple Ind./oth. complex Blended non-lubes Total
Volume lubricant produced
No. grades
No. grades = 80% of prodn.
No. new formulations this year
No. finished product runs
Av. no. components
Typical cycle time (hours)
Lubricant packing Large packs (IBCs, drums, kegs, pails) Small packs (up to 10 litres, 2.5 gallons)
No. lines Person-hours Available Setup+maintce Filling No. lines Person-hours Available Setup+maintce Filling
Manual
Semi-auto
Automatic
By pack type: IBCs Drums Kegs Pails 3 to 10 litre 1 or 2 litre <1 litre Total
Volume packed (in house)
Volume packed (outsourced)
No. runs
No. SKUs
No. pack footprints
Grease production and packing Volume unit
Equipment: Available Setup+maintce Production Cooling
Continuous line
Autoclaves + contactors
Preparation vessels
Finishing kettles
Mills + homogenizers
Finished grease tank stocks: Packing: Volume packed No. lines Person-hours Line-hours No. runs No. pack footpr. No. SKUs
Days stock Small packs
No. storage tanks >10 kg. packsThickener type: Al complex Ca soap Ca complex Li soap Li complex Other soap Polyurea Clay All other
Volume grease made
No. production runs
No. grades
No. colours
Av. no. components
Av. hours/batch
Notes
©2009 PIMS Europe Ltd.15 Basinghall Street London EC2V 5BR +44 20 7776 2800 (fax 2828) Email: [email protected] Version 1.4
PIMS Lube/Grease Plant Benchmarking Page 1
Large packs
Base oil handling points between refinery and LOBP:
Number of runs Number of units Overall line-hours
Large pack overall line-hours Small pack overall line-hoursSmall packs
Overall line-hours
No. lines (units)Total person-
hours No. batches No. flushings
% batches special greases
Lubricant blending
PIMS Lube/Grease Plant Benchmarking Page 2 Country Plant
No. active quality certifications
1 = yes (or equiv.); 0.5 = part
Material receipt In-process contr Product release Post production % corrections % reject ISO 14000?
Lubes TS 16949?
Greases OSHA 18001?7
Out by: Volume lubes Volume greases Volume other No. filling positions No. movements Automation (0=no, 0.5=management, 1=operation)
Bulk barge Capacity utilization % No. bulk orders
Bulk rail % orders despatched OTIF % cust. collect
Bulk road Line items /mvt. % exports
Area unit (m2 or ft2)Packed: No. SKUs Av. days stock Volume out Volume in Packed inbound product Packed warehouse:
Lubes Automation (0=no, 0.5=management, 1=operation)
Greases % product refilled/relabelled No. orders
Other No. movements out No. movements in % orders OTIF % cust. collect
Total Total Line items /mvt. % exports
Warehouse capacity: Shelf Block inside Block outside % volume out: 1-product pallets Split pallets Containers Free loaded
Area of storage For customer
No. pallet places Other
Losses in plant + warehouseLubes: Value lost Volume Greases: Value lost Volume Empty packs: %
Stock count losses Stock count losses % value lost
Recovered downgrades Recovered downgrades Cost per 100 drums
Slops Slops Cost per 100 1 litre (quart) packs
General data on energy, systems, maintenance planning, health, environment, safety etc.Energy use: Units Volume Cost Control systems: 1 = yes; 0.5 = part HES: Volume Number
Steam Automated production scheduling Spills
Gas Adapt to weekly sales forecast Other environmental incidents
Electricity Activity based costing Lost-time accidents
Fuel oil Mandated Other planned Reactive First-aid injuries
total 100%
Operations Maintenance Operations Maintenance Standard Overtime Operations Maintenance Outsourced
Bulk raw materials in
Pack raw materials in
Lubricants blending
Lubricants large packs
Lubricants small packs
Greases prodn & packing
Laboratory
Bulk filling
Warehouse
General & administrative
Total
. . of which Management Energy (as above) + utilities
Direct employees Rents, tax, permits
Contractors and temps Transport Operations
Security + safety Maintenance
Office Outsourced
Accounting Other
Personnel Leased fixed assets:
Data processing
Procurement
Production planning Lube plant
Engineering Grease plant
HES/security/legal Warehouse
General Total
Total Plant opex = E125+F125+I125+J125+K125+I138+K138 (excludes freight in, losses, allocated cost)
Notes
©2009 PIMS Europe Ltd. +44 20 7776 2800 (fax 2828) [email protected] Person-hours to fill this form Version 1.4
Net book value
Pack cost data
3-year average capex / yearGross book value
Maintenance % that is
Allocated cost from HQ
Total no. tests per year
% of tests (row sum =100%) by process stage % of batches:
% of non-people cash cost that is HQ-determined price
Total no. different types of test equipment
Non-people cash costPerson-hoursSplit of people and costs by area:
Split of G&A in-plant activity vs services shared
from HQ:
Cost in plant Gen & admin row 124
cells E+I+K
No. people People cost
Overall plant breakdown of costs, people, assets
Laboratory (lubes and greases production related)
Plant warehousing and loading / unloading (packed products)
Bulk filling and despatch (including base oil and other bulk)
Owned fixed assets and depreciation:
Annual depreciation
Days/year plant
operated
Other (specify
type)
Calc. gross book value Annual lease cost
Potential additional benchmarks for 2010
Order to despatch time in days (agile production), split between bulk, large packs, small packs, greases, etc.. Need to split produced to order versus delivered from stock. Suggest capturing the minimum, average of lowest 80%, average of top 20%, and on time in full despatch performance (on a line item basis?).
Organization structure in global/regional/national offices of multi-plant companies. In particular, how many people are involved in planning and deciding what to produce where for which customer and ensuring the necessary resources and materials are in place?
What key performance indicators are used by the oil companies and their transport companies in distribution to customers? From the transport companies, how do lubricants compare to other products? (Suggested focus on 12 countries or so: USA, Canada, Mexico, Brazil, Germany, France, Italy, UK, Spain, Poland, Turkey, China).
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Plant summary - total volumes & no. grades by product type Company X Region 1 2008
To
tal v
olu
me
to
ns
No
. o
f g
rad
es
Region 1 av
Company X av
0
50
100
150
200
250
300
0
50000
100000
150000
200000
250000
300000
350000
Motor oil
Grease
Non-lubes
Industrial/other complex
Industrial/other simple
Hydraulic oil
Marine oil
Gear oil
Volume No. grades
Plant summary - total volumes & no. grades by product type Company X Region 1 2008
To
tal v
olu
me
to
ns
No
. o
f g
rad
es
Region 1 av
Company X av
0
50
100
150
200
250
300
0
50000
100000
150000
200000
250000
300000
350000
Motor oil
Grease
Non-lubes
Industrial/other complex
Industrial/other simple
Hydraulic oil
Marine oil
Gear oil
Volume No. grades
Regional report: bar chart examplesVolume and grades are plotted in bar charts, plant by plant and against region and company averages. The split between different lubricants, non-lubes and grease together with the grades/volume ratio give an immediate feeling of plants structure,, complexity, mission and regional competitive position.
Volume and stock keeping units are plotted in bar charts, plant by plant and against region and company averages. The split between different pack volumes together with the SKU/volume ratio give an immediate feeling of the warehouse tasks, complexity and competitive position within the region.
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Plant summary - total packed product volumes & SKUs by pack type Company X Region 1 2008
Company X avg
Region 1 avg
To
tal v
olu
me
to
ns
No
. o
f S
KU
s
Volume No. SKUs
0
100
200
300
400
500
600
700
800
0
20000
40000
60000
80000
100000
120000
IBCs
Grease large
< 1 litre
1-2 litres
3-10 litres
Pails
Kegs
Drums
Grease small
Plant summary - total packed product volumes & SKUs by pack type Company X Region 1 2008
Company X avg
Region 1 avg
To
tal v
olu
me
to
ns
No
. o
f S
KU
s
Volume No. SKUs
0
100
200
300
400
500
600
700
800
0
20000
40000
60000
80000
100000
120000
IBCs
Grease large
< 1 litre
1-2 litres
3-10 litres
Pails
Kegs
Drums
Grease small
EXAMPLE
The regional report also shows time series of costs, complexity and productivity
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Company X Region 1 2008 Company X Region 1 2002-8
[13] Page 4.2
Bulk raw material receipt time series: complexity & cost
Bulk in complexity index
Bulk raw material receipt cash cost ($ / ton)
Outliers compressed to 1.7 x Q3 for readability.
© 2009 PIMS Associates Ltd
0
2
4
6
8
10
12
14
16
18
Cash cost People cost
0%
10%
20%
30%
40%
50%
60%
70%
80%2002 2004 2006 2008
Company X Region 1 2008 Company X Region 1 2002-8
10% 50% 90% 10% 50% 90% 10% 50% 90%75%
10% 50% 90% 10% 50% 90% 10% 50% 90%
[15] Page 4.4
Bulk receipt complexity index cumulative impacts over timePlant 1 Plant 2 Plant 3
Line items / movement
Bulk road %
Specs / 000 tons
Bulk vol-wtd av lead time days
Plant 4
Line items / movement
Bulk road %
Specs / 000 tons
Line items / movement
Bulk road %
Specs / 000 tons
Bulk vol-wtd av lead time days
Bulk vol-wtd av lead time days
Pl 24.8
75% 1.7
15%
0.31
8.5
1.3
9%
0.35
9.2
© 2009 PIMS Associates Ltd
1.2
20%
0.34
5.2
1.1
17%
0.36
7.1
1.0
6%
0.35
1.7
1.0
10%
0.49
1.9
1.0
100%
2.54
10.0
1.0
100%
2.55
10.0
2002200420062008
Company X Region 1 2008
Cost Cost People cost People Runs GradesTon People cost Person Run Grade Ton
$ $000 /1000 x1000Region 1 Q3 34.73 2.42 99 4.42 20.9 6.47Region 1 Q2 20.17 2.03 84 2.64 16.7 1.98
Region 1 wt.av. 20.22 2.09 85 3.43 16.6 1.99Region 1 Q1 15.39 1.68 69 1.73 10.9 1.31
Company X wt. av. 18.87 2.16 90 3.44 21.8 1.29Plant 1 19.07 1.92 83 4.42 33.2 0.74Plant 2 21.65 4.00 97 3.13 10.7 1.53Plant 3 12.50 1.66 105 1.70 21.0 1.98Plant 4 37.38 1.36 100 3.68 8.9Plant 5 50.01 1.20 133 1.30 24.1 10.10
000tons Blendingblended complexity
Region 1 Q3 141 66%Region 1 Q2 68 52%
Region 1 wt.av. 94 45%Region 1 Q1 28 37%
Company X wt. av. 119 56%Plant 1 319 61%Plant 2 150 51%Plant 3 115 49%Plant 4 3 33%Plant 5 7 100%
[20] Page 6.1Blending complexity index
Lubricants blending cash cost ($ / ton)
Lubricants blending costs and drivers
Region 1 Q1
Region 1 Q2
Region 1 Q3
Plant 2
Plant 3
Plant 1
Plant 5
Plant 4
Company X av
0
10
20
30
40
50
60
0% 20% 40% 60% 80% 100%
A = B x C x D x E x F
© 2009 PIMS Associates Ltd
Area of circle
proportional to volume
Regional report: table-bubble chart examples
PIMS shows your cost and performance position relative to your competitors in the agreed region boundaries.
Is there room for improvement? If so, where do you have the highest potential to reduce costs?
EXAMPLE
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Regional report: quartiles-table examples
Key performance indicators are shown against ad-hoc regional percentiles while traffic light colour coding is employed to highlight clear performance gaps againstregional competitors. A number of tables like the one in the example are reported in the RDA to cover all activity areas and cost centres.
EXAMPLE
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Equipment and utilization by area versus region Company X Region 1 2008
Bulk raw material receipt
Lubes small
packingLubes large
packingGrease
prod-uctionGrease packing Bulk filling Warehouse
Lab (lube plant)
Lab (grease plant)
Storage tanks
In-line blenders Load cells
Tank blend units Lines Lines
Finishing lines + Lines
Filling positions Pallet places Types of test Types of test
Region 1 75%ile 57.0 0.0 4.0 12.6 4.0 7.8 11.5 12.5 4.8 10135 41.0 25.5Region 1 50%ile 35.0 0.0 1.0 4.5 2.0 5.0 8.0 9.0 2.0 4914 24.0 22.0Region 1 25%ile 28.0 0.0 0.0 1.3 0.0 2.3 4.5 5.8 1.0 1414 16.0 13.0
Plant 2 57 1 4 1 2 10 5 16000 32 Plant 3 58 0 27 6 5 9 17 13937 51 Plant 1 0 4 13 9 10 11 13900 60 Plant 5 0 0 6 1 5 3 5 1 2400 45 33Plant 4 0 1 1 0 0 6 7 1 3860 47
Company X av 57.5 0.2 7.2 5.4 3.4 6.8 4.5 6.0 7.0 10019 47.0 40.0
In-line blenders Load cells
Tank blend units
Autoclaves + contactors
Preparation vessels
Finishing kettles
Mills + homogenizer Overall
Region 1 75%ile 3310 2836 1904 3128 2046 2660 1754 1486 622 4827 2508 50%Region 1 50%ile 2266 1837 1296 1770 1796 2394 814 1060 465 3648 917 34%Region 1 25%ile 1272 936 611 1060 1306 1782 146 904 297 2478 780 12%
Plant 2 3515 2457 1819 1879 40%Plant 3 840 289 912 1531 12%Plant 1 324 2046 58%Plant 5 1296 2787 691 247 1060 428 524 Plant 4 219 815 2720 2502 1133 748 1938 1762 6%
Company X wt. avg 3515 1023 794 818 1661 1896 2502 1109 748 1758 1246 31%
[80] Page 18
Lub large packing
hours / line / year
Bulk filling capacity
utilization
Grease packing
hours / line / year
Grease production hours / line / year
Equipment (number of units) Lubes blending
Utilization (excluding setup
and maintenance)Lubes blending hours / line / year
Lub small packing
hours / line / year
© 2009 PIMS Associates Ltd
The plant data appendix (PDA)
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Within the PDA each plant is benchmarked individually against the best look-alikes and local low cost peers and the report is specifically designed to:
•highlight any possible performance gap at plant level in areas like raw material receipt, lubricants blending and packing, grease production and packing, bulk filling and despatch, plant warehouse, losses, G&A, overall heads, assets, maintenance and utilities costs. •show ad-hoc time series to analyze and highlight volume, costs and productivity changes for those plants who regularly participate in the PIMS benchmarking project. •illustrate and explain the clients what are the complexity drivers in each activity area and their computed weight and impact on the relative complexity index. •explain the cost split between the lubes, greases, warehouse and non-lubes related activities by area•decompose, with the help of waterfall-graphs and specific support tables, the overall costs into both financial and non-financial metrics, which are promptly benchmarked against look-alikes and local low cost peers at each level of PIMS decomposition. •use a traffic light colour coding to highlight the competitive position against peers.
Finally, a summary list of issues (performance gaps) flagged by the whole report is shown, highlighting the PIMS top six priorities based on those areas with the greatest financial “prize”.
Local area (lube+wh): Region 1 Volume unit (lube+wh): Ton Distance unit: Km Currency: $ 2008 Data
16078 14335 11650 Unfavourable position You
Neutral position YouFavourable position You
No immediate message YouWeight 75% 25%
13277 11846 9858
89.2 77.8 67.5 98.1 97.5 92.6 4533 4257 3609 2474 4384
Bulk raw material receipt 6.5 2.2 3.4 118.5 118.5* 92.9 242 186 309 571 387 5 7-9
Pack raw material receipt 2.5 2.3 1.6 103.6 103.6* 79.9 139 90 55 70 214 7- 8,10
Blending 8.3 9.8 10.2 105.2 105.2* 83.3 573 851 868 0 0 11-14
Small packs 8.3 7.3 5.3 84.0 84.0* 78.2 852 313 159 621 975 4 15-17
Large packs 10.3 13.8 10.1 86.0 86.0* 86.7 453 304 291 0 168 15,18-19
Grease prodn. & packing 0.0 0.0 0.0 na na* na 0 0 0 0 0 20-23
Laboratory 9.1 3.8 4.6 89.4 89.4* 101.7 299 374 265 402 382 6 24-25
Bulk filling 5.8 8.1 6.8 111.9 111.9* 87.0 170 345 172 0 54 26-27
Plant warehouse 20.6 20.8 11.8 98.2 98.2* 71.8 1387 972 356 389 2204 2 28-29
Gen. & admin. 18.0 9.7 13.8 99.8 99.8* 128.2 418 823 1134 421 0 31-33
Weight 75% 25%
Overall plant 2802 2489 1792 Overall plant depreciation + lease costs 722 1304 35
Lube plant 1498 1907 1550 0 0
Grease plant 0 0 474 0 0
Warehouse 0 0 0 0 0
Non-lubes 1304 582 0 722 1304
Losses: lubes 3608 888 950 Losses: lubes 2719 2657 1 30
Losses: greases 0 0 165 Losses: greases 0 0 30
Allocated HQ costs 0 1710 995 Allocated HQ costs 0 0 33
Inbound freight: bulk na 5516 7176 Inbound freight: bulk 0 0 10
Inbound freight: packed na 1983 3158 Inbound freight: packed 0 0 10
Small packs (est.) 921 1996 2087 Small packs (est.) 0 0Overall money difference 10
Drums (est.) 4192 3113 3385 Drums (est.) 1079 806Overall money difference 3 10
6994 9152
Page 5
See pages:
Cost metricNon-cost metric
Top six areas
Look-alikes
Local low cost
Money difference $000
Comparison plants rescaled to volumes of this plant (for lubes, non-lubes, greases and warehouse)
Non-operating costs $000
People cost $000 / head*Number of people
Depreciation + lease costs $000
+x
* look-alike people cost per head reset equal to
you in each area
Money difference $000
Floorspace area unit: M2
Non people cash costs $000
Ton
Cash costs $000
(grease): Region 1
Total plant operation + maintenance
Money difference $000
(grease):
Total production cost $000
© 2009 PIMS Associates Ltd
PDA: priority areas against look-alikes and local low cost peers
Cost and non-cost metrics are here benchmarked against look-alikes and local low cost peers, by activity area, taking into account the typical decomposition from total cost production to operating cash cost, non operating cash costs and depreciation plus lease costs. The PIMS top 6 areas are also highlighted by the greatest potential return computed from actual performance gaps .
EXAMPLE
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B C D E F G H I J K
Plant raw material receipt (including bulk finished product)Into plant: Base oil Bulk additives Packed additives Bulk fin. product Total
Volume inbound 134'218 7'795 2'454 2'089 146'556 (1=pipe/2=ship/3=barge/4=rail/5=road) 6
Input cost* na na na *Row optional Volume out Mode in Mode out 7
No. storage tanks 26 32 0 na na 8
By mode: Volume moved No. movements Line items/mvmt. Av. days stock No. specs. Days lead time No. stockouts Av. distance Transport cost 9
Pipe 129'878 751 1.00 1.0 17 1 0 1 na 10
Bulk ship 0 0 na na 0 na 0 na na 11
Bulk barge 0 0 na na 0 na 0 na na 12
Bulk rail 0 0 na na 0 na 0 na na 13
Bulk road 14'224 768 1.00 28.9 53 10 34 917 3'393.44 14
Packed 2'454 426 1.00 60.0 130 15 4 699 945.73 15
Packs & pack materials 622 1.00 83.3 430 7 240 279 na 16
Operations Maintenance Operations Maintenance Standard Overtime Operations Maintenance Outsourced
Bulk raw materials in 4.50 2.00 562.211 208.173 11'213 558 237.014 4.697 0.000 115
Pack raw materials in 2.50 0.00 258.945 0.000 4'313 310 129.219 4.697 4.881 116
Value Std. value Weight Impact Value Std. value Weight Impact
Line items / movement 1.00 -0.56 0.32 -0.18 Overall plant % small packs 13% -0.77 0.11 -0.08
Bulk road % 10% -0.66 0.16 -0.11 Line items / movement 1.00 -1.35 0.07 -0.09
Specs / 000 tons 0.49 0.04 0.40 0.02 Specs / 000 equiv. tons 10.71 0.55 0.47 0.26
Bulk vol-wtd av lead time days 1.89 -1.07 0.12 -0.13 Pack vol-wtd av lead time days 7.38 -0.30 0.35 -0.10
Sum of impacts -0.40 Sum of impacts -0.02
x scaling factor 0.35 + add to 50% = complexity index = 36% x scaling factor 0.34 + add to 50% = complexity index = 49%
Lubes Greases Non-lubes Lubes Greases Non-lubes
Volume output 115'305 0 30'247 Volume output 115'305 0 0
Cost split 79% 0% 21% Cost split 100% 0% 0%
Volume packed raw materials in 2'454
Volume lubes + greases packed 49'813 = volume empty packs in (approximately)
Sum = equivalent volume in 52'267 Page 7
Company X Plant 3 2008
Complexity drivers: packed + packs receipt
Raw material receipt data summary
Complexity drivers: bulk raw material receiptFactor
Base oil handling points between refinery and LOBP:
Split of people and costs by area:
No. people People cost Person-hours Non-people cash cost
Cost split for bulk raw material receipt Cost split for packed + packs receipt
Factor
Calculation of equivalent volume (packed + packs receipt)
(for bulk handling look-alikes see Bulk Filling Page 26) (for pack handling look-alikes see Warehouse Page 28)
© 2009 PIMS Associates Ltd
PDA: data summaries with complexity drivers and cost split explained
PIMS defines complexity as those factors that are intrinsic to the plant’s mission: controllable in the medium term, but fixed in the short term. The scale is 50% = average, over 60% = high, below 40% = low.As complexity is the driver of manning levels and productivity, it is also the key driver of costs in medium to high labour cost countries.
Please note: The PIMS complexity index is volume corrected: high volume plants often have “lower” PIMS complexity, but also lower cost/ton.
EXAMPLE
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Cost Cost People cost People Runs SKUsTon People cost Person Run SKU Ton$ $000 /1000 x1000
Region 1 Q3 48.2 1.51 96 2.7 11 32.5
Region 1 Q2 34.3 1.35 86 2.1 9 17.6
Region 1 wt.av. 35.1 1.30 83 2.1 10 15.3
Region 1 Q1 28.6 1.18 71 1.3 7 9.2
Plant 3 30.9 1.51 86 2.2 9 12.7Plant 3 look-alikes 34.5 1.26 86 3.3 9 11.0Region 1 low cost 27.0 1.33 87 1.4 11 15.3
ComplexityRegion 1 Q3 73% 47.4
Region 1 Q2 55% 28.6
Region 1 wt.av. 49% 35.1
Region 1 Q1 42% 14.2
Plant 3 48% 43.2Plant 3 look-alikes 47% 38.5Region 1 low cost 54% 43.2
Page 16Large packs complexity index
Larg
e pa
ck p
acki
ng c
ost
$ /
tota
l ton
pac
ked
Company X Plant 3 2008Lubricants large pack filling cost drivers
Tons 000
© 2009 PIMS Associates Ltd
Plant 3Region 1 Q1
Region 1 Q2
Region 1 Q3
Plant 3 look-alikes
Region 1 low cost
0
10
20
30
40
50
60
0% 20% 40% 60% 80%
A = B x C x D x E x F
Area of circle proportional to
volume
PDA: your performance against look-alikes and local low cost peers
PIMS shows your cost and performance position relative to your closest competitors (in your local area) and to structurally similar “look-alikes”
Is there room for improvement? If so, where do you have the highest potential to reduce costs?
To answer these questions, PIMS provides you with detailed analysis across plant activity areas…
EXAMPLE
18
Value Std. value Weight Impact
Warehouse SKUs / 000 tons 21.60 0.32 0.37 0.12
% containers 11% -0.05 0.06 0.00
Warehouse orders / 000 tons 551.11 0.67 0.25 0.16
% imported vol / vol despatched 20% 0.94 0.06 0.06
% direct to customer 68% -0.19 0.14 -0.03
% customer collections 0% -0.80 0.07 -0.05
Line items / movement 17.0 0.54 0.06 0.03
Sum of impacts 0.29
x scaling factor 0.35 + add to 50% = complexity index = 60%
Factor 3%-ile Plant 3 L-Alikes 97%-ile
Packed equiv tons in 6'918 52'267 42'147 138'541
Tons despatched 7'077 57'317 49'086 147'091
Country labour cost 0.42 26.29 28.26 37.20
Warehousing complexity index 9% 60% 71% 86%
Pack in complexity index 14% 49% 60% 93%
Pack receipt greases split % 0% 0% 1% 88%
% exports 0% 2% 3% 81%
Warehouse general & admin
Pack raw material receipt
Page 28
War
ehou
se c
ash
cost
$ /
ton
Used for comparisons of:
Matching criteria for pack handling look-alikes
Factor
Plant warehouse
Warehousing complexity index
No cost split
(100% to warehouse)
Complexity drivers: plant warehouse
© 2009 PIMS Associates Ltd
Plant 3
Region 1 Q1
Region 1 Q2
Region 1 Q3Plant 3 look-alikes
Region 1 low cost
0
10
20
30
40
50
60
70
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Area of circle proportional to
volume
PDA: quality of look-alike matching explained
EXAMPLE
19
PIMS finds plant areas from the database, that are structurally similar to you (look-alikes). Matching criteria are clearly stated and the quality of the match is also displayed. Transparency despite confidentiality is the goal.
Lubricants blending vs. look-alikes & local low cost plants Company X Plant 3 2008Local area: Region 1 Volume unit: Ton Currency: $ 2008 Data
Traffic-light code:Sum 12.50 16.33 14.86 7.53 8.96 7.33 4.97 7.38 7.53 Unfavourable position You
Operations 10.10 13.00 11.85 6.63 8.19 6.44 3.47 4.81 5.41 Neutral position YouMaintenance 2.45 3.33 2.96 0.90 0.77 0.90 1.54 2.57 2.07 Favourable position YouOutsourced -0.05 0.00 0.05 -0.05 0.00 0.05 No immediate message You
Weight 75% 25%
Sum 0.072 0.085 0.088 Av 105.2 105.2* 83.3 0.131 0.148 0.145 57.4 60.5 50.6 1834 1741 1646Operations 0.063 0.078 0.078 105.4 105.4* 82.3 Standard 1725 1678 1616
Maintenance 0.009 0.007 0.010 104.1 104.1* 91.3 Overtime 109 62 30
Sum 8.3 8.5 12.8 115.3 99.3 145.8 Sum Sum 100% 100% 100% 35 24.5 27.8Operations 7.3 7.7 11.4 34.6 32.3 52.1 Motor oil Motor oil 30% 32% 36% 17 16.4 25.5
Maintenance 1.0 0.7 1.4 4.4 7.0 8.5 Gear oil Gear oil 4% 7% 6% 8 13.8 13.56.6 1.8 27.0 Marine oil Marine oil 6% 2% 19% 4 6.0 4.4
14.1 22.6 16.1 Hydraulic oil Hydraulic oil 12% 23% 11% 4 6.0 4.411.0 5.0 10.9 Industrial / other simple Ind/oth simple 10% 5% 8% 13 15.6 13.34.5 5.2 12.7 Industrial / other complex Ind/oth complex 4% 5% 9% 8 2.8 10.5
40.2 25.5 18.5 Non-lubes Non-lubes 35% 26% 13% 2 5.8 4.9
1.7 1.9 2.5 Sum 4858 4544 5122 Av 24 22 28 Average 21.0 15.1 19.6 2.00 3.04 1.79 5.6 4.6 5.1Motor oil 1872 1396 1909 18 23 27 Motor oil 25.0 17.4 28.5 2.17 2.49 1.28 6.0 4.9 5.8
Gear oil 580 565 621 8 12 14 Gear oil 32.2 13.0 17.5 4.14 6.24 4.19 5.0 4.6 4.8Marine oil 204 127 330 32 14 82 Marine oil 20.4 10.3 22.6 1.52 6.90 0.54 8.0 4.3 5.4
Hydraulic oil 881 1030 775 16 22 21 Hydraulic oil 23.8 17.6 20.6 2.63 2.58 2.34 4.0 4.8 4.7Industrial / other simple 704 486 638 16 10 17 Ind/oth simple 10.7 9.1 12.0 6.01 10.73 4.84 5.0 4.3 3.6
Industrial / other complex 558 343 501 8 15 25 Ind/oth complex 25.4 14.5 14.6 4.86 4.54 2.70 8.0 7.9 6.6Non-lubes 59 597 349 682 43 53 Non-lubes 19.7 19.8 18.3 0.07 1.19 1.03 2.0 2.7 2.2
6358 4565 5559 20 22 28 Sum 100% 100% 100% 100% 41% 41%In-line 0 26 15 na 11 70 In-line 0% 0% 1%
Load cells 5450 1491 3161 13 24 23 Load cells 59% 36% 47%Tanks 908 3048 2383 56 21 34 Tanks 41% 63% 52%
Page 13
Comparison plants are not rescaled to volumes of this
plant, so headcounts are not the same as on Page 6
43.9%
Blend runs per grade No. grades per 000 tons
% of tons blended
Avg. no. components
No. runs by equipment xBlending complexity
index
50.8%
People / 000 runs Tons / run
Sum including non-lubes, pre-blends, re-
blends
x No. finished product runs
Tons / run
Cost metricNon-cost metric
x People costs $ 000 per person
% of tons produced
Hours worked per person per year
Look-alikes
Local low cost
/
Non-people cost
x People costs $ per person hour
No. grades = 80% of production
Other complexity factors
x
affects selection of look-alikes
49.3%
VI improver producn as % of VII usage
Total costBlending cost $ / ton produced
= +
* look-alike people cost/person reset equal to you
People cost
Blending person hours / ton
Blending people / 000 ton
Tons produced 000sNumber of people
(blending)
© 2009 PIMS Associates Ltd
PDA: support tables
Not all metrics analyzed and computed can be decomposed and included in a single waterfall-graph given the activity area.To support the study of performance gaps, waterfalls are followed by in-depth tables that show the benchmarks for both cost and non-cost metrics that are key performance indicators for a given activity.
EXAMPLE
20
Co
st p
er
ton
Co
mp
lexi
ty
Sca
le
Act
ivity
He
ad
cou
nt
Pa
y ra
tes
Oth
er
cash
co
st
Ass
et
eff
icie
ncy
PIM
S t
op
six
Bulk raw material receipt7 0 14 4 0 4 119 2 - 1
Pack raw material receipt8 0 5 2 0 2 10 4 3 - 4
Blending12 0 115 2 1 2 10 5 5 0
Small packing2 3 2 1 7 3 3 5 8 4 12 8 18
Large packing3 1 0 4 3 19 3 8 6 10 2 9
Grease prodn. & packingn a n a n a n a n a n a n a n a
Laboratory1112 0 115 15 0 8 9 2 9 9
Bulk filling8 1 10 0 0 1 112 2 0
Plant warehouse5 9 1 5 7 0 4 9 8 2 4 17 3
General & admin. in plant2 2 15 1 5 3 13 18 10 0 4 18
3 Depreciation + leasesLosses3 6 0 8
0 Allocated costs0 Inbound freight
Overall plant 101 1 1 1 1 1 1 1
3
High cost / ton: Bulk road. Pack raw mat.. Long distance: Bulk road. Empties. Empty drum cost.
Other issues: Transport costs.
Small orders. High pay rates. Low capacity utilization. Low % on time in full. Many filling positions. High outsourced cost.
Accounting. Personnel. Data processing. Procurement. Production planning. Engineering. HES / security / legal. General.
High headcount. High pay rates. High non-people cost. Stockouts. High overtime.
2
4
1 Lube waste slops: high volume and cost / ton disposed. Many reject blends.
5
High fixed assets. Low capex / depreciation.
High % out in containers. High pay rates. High non-people cost. Slow turnover of pallet places. Many days of stock. High maintenance. Over automation. Low % on time in full. High overtime. High outsourced cost. Many small orders. Little help from HQ. High headcount. Procurement. Production planning. Engineering. High overtime. High outsourced cost.
6 Few tests / head. Low active person-hours. High overtime. High maintenance.
Many tiny packs. Little outsourcing. High headcount. High non-people cost. Few line-hours. High maintenance. Slow filling rate. High outsourced cost.
Many grades. Many blends / grade. VII pre-blends. High pay rates. Few line-hours. Low capacity utilization. Few holding tanks. High finished tank stock. High overtime.
High headcount. High pay rates. High maintenance. Stockouts.
Little outsourcing. High non-people cost. High outsourced cost.
Issues flagged by Data Appendix (Note: not in order of priority. Order is complexity factors first, then activity, headcount, pay rates, other cash
cost, asset efficiency, maintenance, automation, cycle time, configuration, other factors.)
Traffic light signals by area: note these are versus look-alikes and local low-cost peers (not par)
PDA: performance gaps and PIMS top 6 priorities
EXAMPLE
21
PIMS provides you with areas for improvement by activity area. These include benchmarks on:•Payroll cost per head•Maintenance costs and other overhead costs•Complexity•Stock levels
The executive summary
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The Executive Summary is the final report, where all the key issues arising from the more detailed reports are highlighted and reviewed from a different perspective. This reports also provides PIMS suggestions and priorities based on the financial prize.This report is specifically designed to show:•all the key messages resulting from the analysis, evaluating the key performance gaps region by region, plant by plant, activity by activity, etc...•the objectives and the scope of the project with relevant details on how key indices and metrics are computed. •the up-to-date list of participants with a regional split of the plants included in the exercise. •the trends in lubricants supply chains gathered by PIMS consultants after talking with several hundred people around the world during the project lifetime.•important research findings from the up-to-date database (like actual versus “par” lubes production and warehouse cash costs, plant cash cost against plant complexity index etc...)•the overall lube plant and warehouse cost efficiency indices (actual vs. Par) with their relative global regional and local percentiles.
Finally, a range of follow-up options is also presented on how you can fully benefit from PIMS value-added services tailored to the lubricants and greases supply chain (membership, performance analysis workshops, Lubes IT benchmarking, Lubes Technology benchmarking, etc...)
Executive Summary: portfolio highlights and possible improvement areas
EXAMPLE
In the Executive Summary you will find a list of priorities (ordered by potential financial return) at corporate level, useful for portfolio planning and strategy, where the traffic light colour-coding highlights the competitive position of each plant in all areas of activity.
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Executive Summary: research findings
Real Data
Real Data
Once the entries in the database have passed the quality check on PIMS side, a number of research activities on the database will be performed by PIMS consultants to provide participants further insights on quantitative trends and correlations typically between costs and drivers of costs and/or PIMS performance indexes; when possible, also on time series data.
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Executive Summary: cost efficiency indexes
EXAMPLE
New since 2009, PIMS introduced cost efficiency indexes for both lubricants plant and warehouse. These indexes go beyond the consolidated PIMS complexity indexes developed in the PDA, defined and benchmarked separately for each activity area. Keeping in mind that the best lubricants plant is not the one with lowest cost, but the one with the best ability to manage complexity; just being “best quartile” on cost by eliminating all complexity (and all the margin) will not do. PIMS “cost efficiency index” provides a way of determining whether a plant is performing well, given the job it has to do and the location it has.
25
Project timeline (for those who join in the main cycle)
26
How will we work with you?
27
PIMS consultants work with you through a 5-stage process, and they will have a face-to-face meeting with you at least 3 times (kick-off, data review, final results, see previous slide). From 2009 PIMS streamlined and improved communication and interactions with clients personnel through the Lubes Customer Portal, specifically developed to ensure data quality, provide consistent 24/7 training and better support, guarantee more transparency, enhance services customization. PIMS consultants will interact with key plant personnel, and validate the data with your planners and financial accountants to develop a comprehensive profile of your plant operations, comprising over 100 key metrics. PIMS then models your plant against regional and local competitors and against matching plants globally. We identify which areas of the plant are performing strongly, and which need improvement. We spell out relative pay rates, productivity levels, complexity, maintenance load, cycle times and quality performance in each area, versus appropriate peers. PIMS correct for key differences outside your control, such as scale, complexity, location, inbound logistics, and product mix. Comparisons are "apples to apples". We give you key insights into improving your production operations. Together, we pinpoint priority areas and help you to develop action plans for performance improvement.
Lubricants benchmarking
Lubes Customer Portal: ensuring data consistency
What does the portal do?
• uses current IT solutions to improve communication not just between PIMS consultants and clients, but also at client level internally thanks to both the up-to-date sections “Project Agenda” and “My organization’s Tasks”, where both PIMS and clients communicate information on tasks and deadlines plus the relative status.
• enhances coordination among travelling PIMS consultants as well as transparency and uniformity in response to clients questions.
• gives participants the opportunity to display concerns and suggest improvements through PIMS moderated and anonymous discussion boards, in real time, when ideas are generated and issues found, ensuring that they will not get forgot or misunderstood in the development of PIMS analysis and documentation.
• allows participants to use multimedia tutorials specifically designed to make PIMS reports and documentation more understandable and usable
• supports the ®PIMS Lubes Membership, making available online articles, presentations and results based on PIMS research on the Lubes and Greases extensive and unique database(s)
EXAMPLE
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Participants feedback
Customer satisfaction: 95% rate us “good” or “very good”.
• “PIMS helps to bring about change by providing a common language between operating units, showing priority areas of focus, setting targets and surfacing ideas for improvement. PIMS facilitates an excellent benchmarking process and builds cost consciousness.” Gustavo Aldaya, Shell
• “After a relatively painless input the benefits in benchmarking against the (global & local) best in class are huge!” Andrew Hartwig, Engen
• “PIMS is the lighthouse that guides our way.” Jose Tirado, Lubrisur
• “PIMS benchmarking has been very helpful in making us improve over the years. PIMS has been very helpful in letting us know where we are and where we want to be.” Jose Vaz Serra, Galp
• “For the first time we have a clear picture of where our competitive position is on costs. This will lead to actions to improve our position.” Karel Dedek, Orlen Oil
The PIMS main benchmarking circle is updated every two years; each cycle is bigger than before and over 90% of participants renew.
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Main contacts
Keith Roberts Project Director [email protected]
Annie Hanafin Project Manager [email protected]
Georg Oppitz Consultant [email protected]
Peter Smith Senior Consultant [email protected]
Elena Peñas Consultant [email protected]
Pims Associates Ltd.15 Basinghall StreetLondon EC2V 5BR EnglandTel: +44 20 7776 2800www.malikpims.comPIMS Associates Ltd. Is a company of Malik Management St. Gallen, Switzerland.
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