NAP – Special Interest Group
‘2x2 OpEx’
“Reducing Opex while extending the life
cycle of your Production Assets”
Nijkerk, September 2013
Table of contents.
Table of contents. .................................................................................................................................... 1
Preface..................................................................................................................................................... 5
Welcome to the SIG ‘2x2 OpEx’ portal! ............................................................................................... 5
Approach ............................................................................................................................................. 5
Results ................................................................................................................................................. 6
Conclusions.......................................................................................................................................... 7
The team.............................................................................................................................................. 7
Part 1 : Continuous Improvements in Production & Performance management. ............................. 10
General introduction. ........................................................................................................................ 10
Focus.............................................................................................................................................. 10
Definitions. .................................................................................................................................... 11
Acknowledgements. ...................................................................................................................... 12
Further reading.............................................................................................................................. 12
List of abbreviations used in this section. .................................................................................... 13
Introduction to Continuous Improvement and Performance management. ................................... 14
Quality management. ........................................................................................................................ 15
Goals .............................................................................................................................................. 15
History ........................................................................................................................................... 16
Models and methods......................................................................................................................... 17
Governing ...................................................................................................................................... 17
Steering.......................................................................................................................................... 18
Implementing ................................................................................................................................ 19
Application and experiences ......................................................................................................... 20
Performance management. .............................................................................................................. 21
Introduction to Performance management .................................................................................. 21
Benefits of performance management. ........................................................................................ 22
Choosing production KPIs.............................................................................................................. 24
Main types of Key Performance Indicators ................................................................................... 25
Performance levels in an organization working with CI in Production ......................................... 26
Continuous improvement processes and industrial automation...................................................... 28
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The essence of industrial automation systems ............................................................................. 28
Energy Management Systems (EMS) ............................................................................................ 29
Process Simulation Systems .......................................................................................................... 30
Advanced Process Control (APC) ................................................................................................... 30
Control Performance Management .............................................................................................. 31
Extensions to PID control .............................................................................................................. 32
Multivariable controller (Model Predictive Control MPC) ............................................................ 32
Effects of reducing cost price of APC tools .................................................................................... 33
Statistical Process Control (SPC) .................................................................................................... 33
Overall Equipment Effectiveness (OEE) ......................................................................................... 36
Condition Based Monitoring ......................................................................................................... 37
Process Analytical Technology (PAT) ............................................................................................. 38
Integrated Asset Lifecycle Management system (Comos) ............................................................ 40
Interaction between plant owner and automation provider ........................................................ 41
Continous improvements in Production: Quick wins. ....................................................................... 42
Introduction ................................................................................................................................... 42
Pareto analysis............................................................................................................................... 42
5S ................................................................................................................................................... 42
Value Stream Mapping .................................................................................................................. 43
Root Cause Analysis ....................................................................................................................... 43
KPI Alignment ................................................................................................................................ 44
Rewarding program ....................................................................................................................... 44
2 business cases. ............................................................................................................................... 45
Business case #1: AkzoNobel......................................................................................................... 45
Business case #2: Royal FrieslandCampina. .................................................................................. 54
Improvement results ..................................................................................................................... 62
The biggest learnings ..................................................................................................................... 62
Comparing the two business cases. .................................................................................................. 63
Part 2 : Asset and Maintenance management. ................................................................................... 66
General introduction. ........................................................................................................................ 66
History. .......................................................................................................................................... 66
Acknowledgements. ...................................................................................................................... 67
Introduction to Asset and Maintenance management. .................................................................... 68
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Maintenance. .................................................................................................................................... 69
Maintenance in the manufacturing chain ..................................................................................... 69
Maintenance during downtime of installations ............................................................................ 70
Maintenance in the design process................................................................................................... 72
Performance analysis model. ............................................................................................................ 72
KPI settings in Asset & Maintenance management. ......................................................................... 73
Performance analysis on Costs of maintenance. .............................................................................. 74
The set up of Maintenance Cost report. ........................................................................................... 75
Definitions of maintenance costs. ..................................................................................................... 76
Maintenance costs and availability – a positive effect. .................................................................... 77
Considerations ................................................................................................................................... 78
Maintenance costs and availaibility – a negative effect. .................................................................. 78
Best practices from Asset and Maintenance management. ............................................................. 79
Best practice: 3D laser scanning in Operations and Maintenance of process installations.............. 80
What is 3D laser scanning? ............................................................................................................ 80
Applying laser scanning in engineering ......................................................................................... 80
3D laser scanning in Operations and Maintenance ...................................................................... 81
Best practice: outsourcing as cost saving. ......................................................................................... 83
Non core assets ............................................................................................................................. 84
Outsourcing ................................................................................................................................... 84
Dividing core and non-core – an arbitrary choice ......................................................................... 85
Example of assessing outsourcing feasibility ................................................................................ 85
PAS55 / ISO 55000: the next step in professionalizing asset management .................................. 87
Best practice on Asset integrity and maintenance management. .................................................... 88
Best practice in Value Engineering. ................................................................................................... 90
Best practice in Asset & Maintenance & Life Cycle Costs. ................................................................ 91
The value of Reliability Based Engineering........................................................................................ 91
Conditions to best Asset & Maintenance & LCC. .............................................................................. 92
The human factor – leadership versus management........................................................................ 94
Part 3 : Turnaround management........................................................................................................ 96
General introduction. ........................................................................................................................ 96
Facts and figures............................................................................................................................ 96
Trends ............................................................................................................................................ 96
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Acknowledgements. ...................................................................................................................... 97
The methodology of turnaround management. ............................................................................... 97
Reasons for a turnaround.................................................................................................................. 98
Modern challenges and chances by performing turnarounds. ......................................................... 99
Business case #1: DuPont. ............................................................................................................... 100
Introduction to DuPont. .............................................................................................................. 100
Turnaround management at DuPont. ......................................................................................... 100
Business case #2: Tata Steel. ........................................................................................................... 102
Introduction to Tata Steel ........................................................................................................... 102
Shut downs at Tata Steel. ............................................................................................................ 103
Trends and issues. ....................................................................................................................... 104
Business case #3: Shell Global Solutions. ........................................................................................ 105
Introduction to Shell .................................................................................................................... 105
Turnaround management at Shell. ............................................................................................. 105
Business case #4: Bilfinger............................................................................................................... 107
Introduction to Bilfinger. ............................................................................................................. 107
Outsourcing Turnaround management....................................................................................... 107
Annexes. .............................................................................................................................................. 110
Annex 1 – business case AkzoNobel: full-scale introduction of Lean-6-Sigma. .............................. 110
Annex 2 – Interview AkzoNobel. ..................................................................................................... 113
Annex 3 – business case Royal FrieslandCampina : running a Continuous Imrovement programme
for the BG Consumer Products Europe. .......................................................................................... 117
Annex 4 – business case DuPont: organizing Turnarounds via site management. ......................... 119
Annex 5 – business case Tata Steel: organizing Turnarounds via site management. ..................... 121
Annex 6 – business case Shell: organizing turnarounds via global management. .......................... 125
Annex 7 – business case Bilfinger. ................................................................................................... 127
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Preface.
Welcome to the SIG ‘2x2 OpEx’ portal!
“The SIG 2x2 OpEx addresses one of the key challenges of the Dutch Process Industry in the
years ahead. Managing an aging asset base in a safe and economic way will be crucial for a
sustainable future. I trust that NAP participants will be inspired and will benefit from the
ideas and best practices generated by this group.”
Robert Claasen, chairman NAP
“Reducing operational expenditures while extending the life cycle of our production facilities,
is key for the competitiveness and continuity of our Dutch Process Industry. I'm very proud
that expert colleagues from across our industry collaborated to address this challenge
together.”
Koen Bogers, chairman Production Assets team, NAP.
In the spring of 2012 the SIG ‘2x2 OpEx’ was formed to conduct a survey to identify ways to
“extract more from our aging assets as much reduced opex through the NAP value chain”. A
more detailed description can be found in the ‘SIG 2x2 OpEx Charter – NAP Production
Assets’ (Feb. 2012). The Process Industry Competence network NAP is pleased to present the
results of this survey.
Approach
As a mindset the ambition was to identify ways to bring down operational costs by a factor 2
while at the same time extending an asset’s life time by a factor 2.
The special interest group focused on:



Interventions on interfaces in the value chain, impacting execution excellence op
operations and maintenance (both effectiveness and efficiency)
Identifying ‘low hanging fruits’, i.e. best practices that can easily be implementend as
a quick win
Identifying best practices (also from outside the process industry)
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

Reviewing the human factor
Providing examples of tools to support implementations
During initial brainstorm workshops ‘low hanging fruit’ and a number of topics were
identified; all these topics were clustered into 6 themes, some of them generic, i.e.
applicable across all themes.
For each theme a ‘twinning’ (group of 2) was formed. In practice however we found that the
number of themes should be brought back to 3 and also that working in groups of 2 persons
slows down the process (if one person is unavailable the other can or will not proceed
either).
Introducing working sessions and expanding the twinning teams (4-5 persons per theme)
helped boosting the process. A number of meetings were held at various SIG-member
locations. The final 3 major themes the SIG has been focusing on are:
1. Continuous improvement processes and performance management
2. Asset and maintenance management
3. Turnaround management
The SIG is well aware that these topics partly overlap and also interact with each other.
Therefore, the findings of the SIG regarding a specific topic should be placed in the broader
context of all 3 themes together.
You are invited to explore our findings, learn from them, apply them in your situation and
share them with your peers.
Pier-Jan Hettema
Chairman of the Special Interest Group ‘2x2 OpEx’
Results
Centered around each theme, this portal provides you with theoretical background and
literature surveys (captured under ‘models and methods’) as well as best practices, business
cases with experiences from the Industry itself and input of the SIG-members themselves,
based on their many years of working experience.
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The SIG has been able to identify both theoretical context for the industry to further
optimize on opex, and has brought together a number of best practices with (indications of)
quantified realized benefits.
Conclusions
Realizing 2x2 OpEx is about running a marathon, not sprinting the 100 m. It is all about longterm vision on optimizing assets and productivity, integrated approach (CI, maintenance,
turnaround mgt etc.) and investing at the right moment. We need Gebreselassi, not Bolt.
Another key success factor is the ability to choose a method and stick to it, from top
management to the work floor.
The SIG trusts that the content brought together in this portal will be inspiring for you to
start identifying ‘2x2 OpEx’ opportunities yourself. We are well aware that ‘2x2 OpEx’ should
not be limited to these 3 themes alone. Therefore, you are kindly invited to share your
experiences, comments, additions and other feedback with the SIG community, in order to
continously improve on the contents of this portal.
The team
The following persons contributed to the results of the SIG 2x2 OpEx (in alphabetical order):
Joep van Aggelen
- AkzoNobel
Karel Asselbergs
- Acordio
Jan Dijk
- Acordio
Dick van Ekelenburg
- DSM
Eduard van Emmerik
- NVDO representative1
Ron van Empel
- Royal HaskoningDHV
Peter Hartman
- Hartman Process Improvement / FrieslandCampina
Pier-Jan Hettema (chair)
- Tebodin
Paul van de Lisdonk
- Aquilex
Bart van der Meulen
- Tata Steel
Gert-Jan Regtuit
- Siemens
Dennis Willemsen
- Siemens
1
NAP requested NVDO to actively participate in this SIG. NVDO is the ‘Nederlandse Vereniging voor
Doelmatig Onderhoud’; see also www.nvdo.nl.
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As members of the NAP ‘Production Assets’ team, Nils Bosma (Shell) and Albert Snippe
(Vattenfall) contributed to the SIG 2x2 OpEx as coaches.
Andy van Dijck, advisor and projectmanager at Pan Narrans, facilitated the realization of this
web-portal.
The SIG team at a presentation session at Tata Steel, IJmuiden
(left to right:) Gert-Jan Regtuit, Eduard van Emmerik, Dick van Ekelenburg, Jan Dijk, Bart van der
Meulen, Karel Asselbergs, Pier-Jan Hettema, Joep van Aggelen and Ron van Empel (not in the picture:
Nils Bosma, Peter Hartman, Paul van de Lisdonk, Albert Snippe and Dennis Willemsen).
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Copyright and disclaimer.
© 2013
All content – text, illustrations, etc. – are copyright of NAP, unless noted otherwise.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in
any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or
be adapted in full or in part, without the prior permission of the publisher, or in so far as
permitted under applicable copyright law.
Although this publication is the result of the best efforts of the publishers and the authors,
neither the publisher nor the authors guarantuee the accuracy or completeness of the
information contained herein. Thus, neither the publisher nor the authors will accept any
responsibility for any damage whatsoever resulting from actions or decisions based on the
information hierin. Users of this publication are strongly advised not to use this information
in isolation, but also relay on theirprofessional expertise and experence and to verify any
information they intend to use.
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Part 1 : Continuous Improvements in Production & Performance
management.
General introduction.
The NAP Special Interest Group ‘2x2 OpEx’ has set itself the following objectives:
“Reduce operating expenditures significantly -by double-digit percentages- and extend the
remaining economic life of aging assets by a factor of 2 through the NAP value chain by
sharing best practices, knowledge, tools et cetera. Develop improved approaches to
operational and maintenance practices”.
In the process industry operating expenditures in manufacturing can be reduced in many
ways. Prominent among these are programmes and methods collectively labelled continuous
improvement (CI): the systematic, continual and incremental improvement of plant
operating efficiency and performance in each and every respect, daily, weekly, monthly.
This stream of the SIG 2x2 OpEx is aimed at providing practical guidance to members of NAP
on the methodologies they may adopt to continuously improve their manufacturing
operations and achieve operational excellence in line with the above ‘2x2’ targets.
Focus.
This study focuses on:
-
existing manufacturing facilities in the process industries, with
-
plants that basically employ state-of-the-art technology and
-
operate internationally in relatively stable product-markets.
Situations are considered in which drastic measures are not directly needed, but where the
life-cycle return on the productive assets can and indeed must be improved incrementally
and continually to stay ahead of the competition. To this end, a vast range of techniques
have been proposed, but in the present discussion emphasizes will be placed on methods
that have been tried and tested in actual practice. In this respect, the programs developed
and introduced successfully by AkzoNobel Industrial Chemicals and Royal FrieslandCampina,
respectively, will be discussed extensively.
Keeping track of progress is a key element in continuous improvement. Hence, special
attention is given to measuring and managing performance by the use of Key Performance
Indicators.
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Definitions.
CI and innovation
Continuous Improvement and innovation differ essentially. The latter entails revolutionary,
breakthrough technology/concepts/materials or totally novel equipment or plant designs
that have never been used before.
Innovation is pioneering and basically technology-driven, whereas continuous improvement
aims at operational excellence in existing installations. Improvement occurs in small steps.
Solving a problem each day, making sure that in the evening the organisation performs a
little better than in the morning. That is not to say that the use of innovative materials of
construction, advanced pumps or smarter process controls and sophisticated software
would not fit into a Continuous Improvement Programme.
Operating expenditures
OPEX (Operating Expenditures) comprise both direct and indirect production costs. The
former include variable costs like raw materials, utilities, consumables and waste removal,
and fixed costs like operating labour, supervision/clerical and maintenance & repairs.
Indirect costs include plant overhead and general expenses. Hence, Continuous
Improvement concerns a vast area of items from leaking steam traps to analysing product
quality, from outsourcing maintenance to sourcing of raw materials.
Remaining Economic Life (REL)
Continuous Improvement in Production (CIP) undoubtedly contributes to achieving the
target of extending economic life in a qualitative sense. But lengthening the economic life is
seldom the prime objective or the starting point of CIP. Better maintenance or more prudent
operation and house keeping will both increase the technical life of plant and equipment.
But technical life does not directly reflect economic life and is normally very much higher
than economic life.
In general, the Remaining Economic Life is influenced by an array of factors like
diseconomies of scale, technological obsolescence, competitive environment, industry cost
curve (i.e. relative product cost split-up among competitors) or product substitution. Some
of these factors can be influenced by the company and others cannot, but most factors are
beyond the scope of continuous improvement programmes.
Achieving the above SIG OpEx target means determining the current REL versus the REL
resulting from putting in place an improvement programme. There are a great many
definitions for the REL, one of the simplest being: "the time after which we save money by
replacing the asset". To calculate this parameter, we enter the world of finance &
accounting: replacement analysis, abandonment value forecasting, equivalent uniform
annual cost of the asset over its life. This is beyond the scope of the present paper. Acordio
has however studied the subject separately and developed a new model (based on
Discounted Cash Flow Analysis) to simply calculate economic life and the effects of OPEX
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reduction.
In the present contribution economic life target has been interpreted as being reflected by
for example halving losses, doubling time intervals between scheduled maintenance stops
and unscheduled failures, halving time for maintenance & repairs.
Acknowledgements.
The following persons contributed on the topic of Continuous improvement and
Performance management for the SIG 2x2 OpEx of NAP:





Karel Asselbergs
Jan Dijk
Eduard van Emmerik
Peter Hartman
Gert-Jan Regtuit
Further reading.
“Beyond Performance Management”, Why, When, and How to Use 40 Tools and Best
Practices for Superior Business Performance, Jeremy Hope, Steve Player, Harvard Business
Review Press (2012)
“Six Sigma + Lean Toolset, Executing Improvement Projects Successfully”, Stephan Lunau
(Ed.), Springer, 1 edition (November 14, 2008)
“The Lean Six Sigma Pocket Toolbook”, Michael L. George et al., McGraw-Hill (2004)
“Economic Life of an Asset: A simple model to calculate Economic Life shows how the impact
of Continuous Improvement on asset life can be readily assessed”, Karel Asselbergs, Jan Dijk,
ACORDIO BV, Chemical Engineering Consultants, The Hague, 7 May 2013.
http://www.procesverbeteren.nl/LEAN/leanmanufacturing.php
http://www.procesverbeteren.nl/SixSigma/SixSigma.php
http://www.procesverbeteren.nl/Lean_Six_Sigma/Lean_Six_Sigma.php
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List of abbreviations used in this section.
APC
Advanced Process Control
CI(P)
Continuous Improvement (in Production)
CSF
Critical Success Factor
BSC
Balanced Score Card
DCS
Distributed Control System
DMAIC (Process)
Define/Measure/Analyse/Improve/Control (see ANIC)
EMS
Energy Management System
ERP
Enterprise Resource Planning
KPI
Key Performance Indicator
L6S
Lean Six Sigma
MES
Manufacturing Execution System
MIS
Manufacturing Information System
MPC
Model Predictive Control
OEE
Overall Equipment Effectiveness
PAT
Process Analytical Technology
PID Controller
Proportional-Integral-Derivative Controller
PLC
Programmable Logic Controller
RACI (Matrix)
Responsible/Accountable/Consulted/Informed (see WCOM)
REL
Relative Economic Life
RFC
Royal FrieslandCampina
SCADA
Supervisory Control And Data Acquisition
SMED
(at RFC)
SPC
Statistical Process Control
SQC
Statistical Quality Control
TPM
Total Productive Maintenance, Total Production Management
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TQM
Total Quality Management
ToC
Theory of Constraints
VSM
Value Stream Mapping
WCOM
World Class Operations Management (at RFC)
Introduction to Continuous Improvement and Performance management.
The European manufacturing industry is facing great challenges nowadays: a decreasing local
demand, wages and energy costs are high and global competition is fierce. In particular in
traditional industries with little potential for innovation and aging assets, management of
operating expenditures (OPEX) is key to the continued survival of a plant. One way to do this
is to adopt a continuous improvement strategy, consistently aiming at best-in-class
performance throughout the organisation over time.
Many companies have introduced a variety of Continuous Improvement (CI) systems more
or less successfully in the past decade. The state of the art has been reviewed to help
members of NAP with the development of their own Continuous Improvement system.
Implementing CIP should not be taken lightly. A number of pre-conditions for success and
lessons learned have been identified:
 Strong and enduring (top) management commitment
 Perseverance: comprehensive results come after years not months.
 Empowerment and buy-in & ownership of personnel at all levels
 Continued availability of resources, both human and financial
 Formal procedures not stifling the organisation in meetings and paperwork
 Training at various levels
 CIP is a powerful tool for Operational Excellence and OPEX reduction
 Payback times of less than one year are frequently achieved in CIP.
Performance Management is of importance in any organisation, but in CIP it is indispensible.
Performance Management has been shown to include:





Selection of a sufficient number of parameters that are really key to the organisations
performance. These Key Performance Indicators (KPIs) should be uniquely defined and
measurement should be relatively simple.
Setting targets for each KPI over time.
Determine what factors and mechanisms influence KPI values.
Recording actual KPIs consistently and comparing actual and target values
Introduce measures to remedy variances
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In most cases performance is to be monitored at different levels: more basic performance indicators
are derived from the main KPIs to form a “KPI tree” involving employees down to the shop floor.
Modern industrial automation systems can make a significant contribution to continuous
improvement processes. An illustrative overview has been given from the perspective of
Siemens. It has for instance been shown how Energy Management Systems, Statistical
Process Control and Process Simulation Systems can efficiently provide input for CIP. Also,
automatically determining the important KPI of Overall Equipment Effectiveness (OEE) online , real time offers great advantages.
Enduring success of CIP on the mid and long term has been shown to depend very much on
short term results. Such quick wins are necessary to bolster acceptance at the beginning of
the CIP program and motivate people to put in the required effort. A range of tried & tested
quick wins has been delineated.
Lastly, taking the perspective of the NAP Network, it is of interest to note that most CIP
systems fail to directly address the issue of improving the organization together with its
client and supplier partners. It is recommended that NAP takes the initiative to fill this gap.
Quality management.
Quality management in an organisation deals with assuring and improving the quality of a
product, production process, service or organisation in a systematic way.
Trade and industry, as well as non-profit organisations are increasingly confronted with ever
more demanding clients and improved products of competitors. Nowadays, our society asks
for more sustainable products and processes, while emerging countries like China or India
are considered as a threat. Next to that, the government demands more and more with
respect to the quality of the supplied goods and services, as well as of the organisation itself.
Therefore organisations are forced to continuously improve the quality and to assure it. Thus
organisations must guide themselves in improving their quality. These reasons make quality
management an essential means to achieve a sustainable organisation.
Goals
The goals of quality management are:
 improving customer satisfaction (internal as well as external clients)
 assuring and continuously improving the quality of products and services
 assuring and continuously improving the general operation of the business
 increasing the effectiveness and efficiency
 decreasing the number of mistakes
 reducing the costs
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
mastering and lowering the risks
There are many ways and approaches to achieve the desired result. The ones to choose
depend on the organisation to be considered. Like other management issues, quality
management has a number of pitfalls. The most elementary are:
 management is focused on norms in stead of on improvement
 insufficient support in the organisation
 insufficient guidance for the process of quality management
 insufficient enduring management commitment
Notes:
1) the management improves the system and stimulates/assures an enduring open
communication and appraisal culture, which is appreciated by everyone.
2) In practice Total Quality Management (TQM) methods were introduced, but many
organisations did not succeed in holding the improvement culture over a long time:
the organisations fell back in the old pattern of accepting that the existing situation is
good enough and that mistakes are normal. After the improvement project, the
situation falls back and an increasing number of mistakes is accepted.
History
The roots of modern continuous improvement programs can be traced back to initiatives
around World War II. The US government set up the “Training Within Industry” service
during the Second World War to enhance industrial output on a national scale. This included
job method training, a program designed to educate supervisors on the importance and
techniques of CI methods. This program was later introduced in Japan by management
experts like Deming, Juran, and Gilbreth, and by the US forces present there after the end of
the Second World War (Robinson, 1990). Eventually, the Japanese developed their own
ideas and quality control evolved into a management tool for ongoing improvement
involving everyone in an organization (Imai, 1986).
While CI initiatives in the past reflected the use of various principles related to work
improvement, today CI is associated with organised and comprehensive methodologies.
These CI programs, in which typically the whole organization is involved, are also more
popularly associated with the introduction of the TQM movement, which also gained
leverage in Japan thanks to Edward Deming in the fifties and later also in America and
Europe.
Over the decades, as the need to continuously improve on a larger scale became an
imperative, a number of CI methodologies were developed based on a basic concept of
quality or process improvement, or both, in order to reduce waste, simplify the production
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line and improve quality. The best known of them are: statistical process control, zero
defects, lean manufacturing, six sigma, the balanced scorecard, and lean six sigma. In the
second half of last century Juran, Deming and Crosby have shown that costs are decreasing
at increasing quality.
Models and methods.
The three main types of processes in organisations are ‘governing’, ‘steering’ and
‘implementing’. These types will be introduced further:
Governing: “directing” the organisation:
The long term ideas are fixed in the mission and vision statements. These declarations are
the starting and leading point for a number of questions. What products are we going to
deliver in the coming 3 to 5 years, to what clients and in what markets? How do we have to
adapt the organisational structure and culture of our organisation?
Steering: “organizing”:
A continuous improvement methodology is chosen to answer the above questions. The
improvement method brings structure in the organisation. The required resources are made
available: training, time and money.
Implementing: “performing”:
The executing of the parts of the improvement program.
A number of well-known models and methods, sorted after the above processes, is
described in the following subsections.
Governing
INK model (2003)
The “ Instituut Nederlandse Kwaliteit (INK)” is the Dutch partner organisation of the EFQM
(European Foundation of Quality Management) Representative Office in Brussels. INK is
mainly known by their management model: the INK-model.
The INK-model (based on the EFQM-model) is a broadly used management model and is
intended to carry out a self assessment. By means of the INK-model, the maturity of the
organisation is being determined and improvement points identified. The model helps
organisations to focus on improvement areas in their management structure.
ISO 9001 (2008)
ISO 9001 is an international standard of a quality management system, describing the
minimum requirements for the way an organisation functions, for working procedures and
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the way of satisfying customer’s expectations. These requirements are set to the following
areas: Plan and Manage Business, Supply Chain, Marketing and Sales, Produce and Maintain,
Manage Risks, Innovate, Audit and Review, Manage Personnel, Correct, Prevent and
Improve, Document Control and Know Mandatory Requirements.
Steering
Balanced Score Card
The business Balanced Score Card (BSC) is a model to define the organisational goals and a
help to steer toward these goals. The key performance indicators (KPIs) or critical success
factors (CSFs) become logical. This allows the BSC to function as a means to direct the
organisation. Performances of organisational sub-units can be monitored.
Six Sigma
Six Sigma (striving for effectiveness) initiatives are based on a pre-planned project charter
that outlines the scale of a project, financial targets, anticipated benefits and milestones. Six
Sigma is based on DMAIC (Define-Measure-Analyze-Improve-Control) that helps in making
precise measurements, identifying exact problems and providing solutions that can be
measured.
Lean manufacturing
Lean Manufacturing (striving for efficiency) focuses around shortening the production cycletime, resulting in an enhancement of the productivity, without losing quality or rising costs.
Lean Six Sigma
Lean Six Sigma is a world-wide proven and applied method, which brings recognizable and
sustainable improvements of business results. The method focuses on those items the
customer really cares for. This approach brings in parallel cost reductions , improvements of
customer satisfaction, and reductions of the cycle-times.
Total Quality Management
Total Quality Management (TQM) is an integrated management philosophy for continuously
improving the quality of products and processes. TQM works on the premise that the quality
of products and processes is the responsibility of everyone who is involved in the creation or
consumption of the products or services offered by an organization. In other words, TQM
requires the involvement of management, workforce, suppliers and customers, in order to
meet or exceed customer expectations.
Considering the practices of TQM as discussed in six empirical studies, Cua, McKone and
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Schroeder (2001) identified the nine common TQM practices as:
1) Cross-functional product design
2) Process management
3) Supplier quality management
4) Customer involvement
5) Information and feedback
6) Committed leadership
7) Strategic planning
8) Cross-functional training
9) Employee involvement
Theory of Constraints
In Theory of Constraints (ToC) improvement of the cycle time has the highest priority. By
exploiting and/or removing constraints in the logistic chain, the efficiency of the production
chain as a whole is improved. ToC is developed by Dr Eliyahu Goldratt.
Thus searching for, exploiting and/or removing the bottleneck in a process is the golden rule
of ToC resulting in a shortening of the cycle time. One hour shortening of the cycle time of
the bottleneck machine means a one hour cycle time gain in the whole production line.
Comparable with Lean, the optimal logistic processes are the drivers. ToC is more internally
focused than Lean: what causes the constraints in the process and how can it be solved.
However, the latest addition of Goldratt was the search for business opportunities (hidden
constraints) by systematically mapping causes, results and opportunities.
Total Productive Maintenance
In the course of the years the attention area of Total Productive Maintenance (TPM) became
broader. Next to maintenance also product loss, productivity improvement and reduction of
the costs of mistakes became attention areas for improvement. TPM has grown to a widely
accepted system of business management in order to realize operational goals for the short
and long term. Therefore the term Total Production Management (TPM) covers the aim of
the method better.
Implementing
Statistical Process Control
Statistical process control (SPC) is a method of quality control which uses statistical methods.
SPC is applied in order to monitor and control a process. Monitoring and controlling the
process ensures that it operates at its full potential. At its full potential, the process can
make as much product conforming to specifications as possible with a minimum (if not an
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elimination) of waste (rework or trash). SPC can be applied to any process where the
"conforming product" (product meeting specifications) output can be measured. Key tools
used in SPC include control charts, a focus on continuous improvement and the design of
experiments.
Kaizen
Kaizen (改善), Japanese for "improvement" or "change for the better" refers to philosophies
or practices that focus on continuous improvement of processes in manufacturing,
engineering and business management. It has been applied in healthcare, psychotherapy,
life-coaching, government, banking and other industries.
When used in the business sense and applied to the workplace, kaizen refers to activities
that continually improve all functions and involves all employees from the CEO to the
assembly line workers. It also applies to processes such as purchasing and logistics that cross
organizational boundaries into the supply chain. By improving standardized activities and
processes, kaizen aims to eliminate waste (see lean manufacturing).
Kaizen was first implemented in several Japanese businesses after the Second World War,
influenced in part by American business and quality management teachers who visited the
country. It has since spread throughout the world and is now being implemented in many
other venues besides just business and productivity.
5S
5S has been developed in Lean Manufacturing to improve the efficiency at the shop floor. It
consists of the following consecutive repeating steps:





S1 Separate (Seiri):
S2 Sort (Seiton):
S3 Shine (Seiso):
S4 Systemize (Seiketsu):
S5 Standardize (Shitsuke):
separate essentials and superfluities
sort in a logical way what rests after Seiri
keep machines and working area clean
repeat step 1 through 3 and act as required
this way of living is the new norm.
Application and experiences
In the process industries L6Sigma and TPM are frequently used with excellent results.
However, generally their usage lasts only a short period of time and the organisations fall
back in their old habits and behaviour. Two business cases, AkzoNobel Industrial Chemicals
and Royal FrieslandCampina, describe how these companies successfully introduced L6S and
TPM, respectively.
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Performance management.
“However beautiful the strategy, you should occasionally look at the results”
Sir Winston Churchill, British politician (1874 - 1965)
Introduction to Performance management
Performance management is a very important management tool and a ´must have´ for every
organization that strives for operational excellence and continuous improvement.
Performance is expressed in Key Performance Indicator (KPI) values. We compare actual
values with target values and measure how successful we are.
KPI values are the ultimate performance indicators. This doesn’t mean that they are the only
or even the most important part of performance management. Vital for performance
management is the translation of the gap between current and targeted values into (sources
of) losses, combined with the contribution of every individual employee in the “closing the
gaps” and “holding the gains” processes. How this is done is explained in the contribution of
FrieslandCampina .
Operational Excellence will never be achieved if it is considered and treated as a
management responsibility solely. We see many examples of good improvement activities
with excellent results that fade away over time and are not sustainable. The reason is that
the organization is not capable to hold the gains. The management is confused and
uncertain: why do we see a more or less flat KPI trend, while at the same time launching
many successful improvement activities? There is a general answer to that question: in all
cases we see a poor performance control system.
High performance production organizations distinguish themselves by a low number of
unplanned stops as expressed by a high Overall Equipment Effectiveness (OEE) number.
There are hardly any short stops, breakdowns or supply failures. The organization is in
control. The high performance organization is capable of keeping losses under control. It
learned that losses can be caused at every operational level, from the shop floor to (top)
management. Therefore every single employee has a role in reducing losses that are above
the target values.
It is also important that performance control is both a top down and bottom up process.
Management selects the KPIs and defines the target values. These KPIs are indeed the keys
to success for the organization. The target values are the goals to achieve in the operational
excellence journey. In general the organization has KPIs in the fields Productivity, Quality,
Costs, Delivery, Safety Health & Environment (SHE) and Environment & Motivation.
The improving organization analyses the losses/variances and executes improvement
activities. In this top down process both the management and the improvement organization
must communicate about the reasons why and the importance of the choices. Only then the
people on the shop floor can understand why it is so important and will be willing to make
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the efforts and support the program.
Holding the gains is mainly a bottom up process. Losses are not found at KPI level but in the
underlying sources of losses. Let’s have another look at the OEE example. No organization
can be in control by only looking at the KPI level. You need to control the underlying sources
of losses. The short stops, breakdowns or supply failures mentioned above are generated on
machine level at the shop floor. So you can only control them at shop floor level. Primary
responsible for this should be the operator or the technician. Every employee has a role in
the performance control process.
Identification of the sources of losses and being in control on shop floor level is of course
applicable in both continuous and batch processes.
Two last remarks on this topic:
1) Make very clear what the responsibility is per person or function. There must be no
misunderstanding about the question who executes a specific task.
2) Make sure there is an ‘escalation’ procedure. This procedure states after what period of time
or degree of seriousness the problem should be escalated to the next management level. In
this way the organization prevents that losses are tackled on lower levels too long.
The goal of performance management is to monitor operational performance and to address
and reduce deviations and variations as soon as possible. Excellent performance
management leads to higher and more stable performance. It is easy to understand that we
need to select those KPIs that are critical to the success of the organization. An overview of
the most important production KPIs can be found further on.
Benefits of performance management.
“Performance control’ is more than just reporting KPIs and comparing actuals with budget or
target values. The real challenge of performance control is expressed in the words: “being in
control”. “Being in control” means having grip on the processes: understanding the
processes, measure the right (key) performance indicators, know how to adjust the
processes to meet the target values, report and stretch targets, make people accountable
etc.
Having a good performance control system and being in control give an organization a
number of benefits:
Achieving more stable and higher KPI values in the daily business:
This main goal is already highlighted before. Every single employee contributes to achieving
and maintaining KPI goals. Quick response to deviations and escalation of serious problems
prevent variation and lack of action. Reducing variation and quick response to deviations
lead to higher and more stable KPI values.
The management shows focus on performing:
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Being consistent in the application of the performance control system has big cultural
effects. The organization members learn that performance is top priority and that deviations
are noticed and discussed. An important precondition is that the loss data, data processing,
analysis and reported data are correct and accepted.
Employees understand the importance of (Key) Performance Indicators:
A Performance Indicator is much more specific than a Key Performance Indicator. A PI is
directly connected to a source of loss, e.g. a routine stop, the average product weight, delay
in a production plan on machine level et cetera. It is important that the employees
understand the significance of the operational achievements for the sustainability of the
organization. They must take responsibility in this for their part, and feel ownership for their
PI’s. Therefore employees are part of the loss reduction process and the performance
control process.
The performance control system supports the empowerment of the employees:
Translating KPIs into clearly related and relevant PI’s makes them understandable for the
employees. The employees will understand their responsibility and how they can contribute.
The KPIs and PI’s give them a clear insight in the effect of their actions on the results. This is
a perfect basis for empowerment of the employees and stimulates their commitment to the
organization.
The performance control system is used to improve:
The organization needs to show in practice that the focus is on problem solving and
improving. The culture must be open, stimulating and constructive towards high
performance. Employees must feel free to report deviations and search for solutions to
prevent recurrences. If you would blame them for the deviations they would never report
again.
A positive attitude towards the performance control system is needed. All people involved,
both management and employees, must see the KPIs, PI’s and the performance control
system, as tools to measure the performance and to hold the gains. If not, they will develop
resistance against them and the goals will not or only partly be realized.
Performance control has a big effect on the operational results and the behavior of all
employees. The first one is demonstrated by higher and more stable KPI levels. The second
one is expressed in a culture of performance-oriented collaboration of people and
departments.
The degree of employee satisfaction will also increase. All organization members participate
in the decision making process. They have more influence in the day to day business and can
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operate more autonomous. It also helps that there is much more clarity. Everybody knows
what he or she is accountable for and what can be expected of the others.
Choosing production KPIs
KPIs and KPI target values are used to express the desired (or required) operational
performances and to monitor the success rate of the improvement process. If the set of KPIs
doesn’t reflect the operational priorities your organization will move in the wrong direction.
Improving in the wrong direction is even worse than not improving at all!
There are a few guidelines for the KPI selection process:
 Start with the mission and vision of the organization. The right KPIs are the ones that
indicate that your mission and vision statement will become reality.
 Balance the different important topics for your organization. Make sure that you
have one or a few KPIs in every subset, as described in the next paragraph.
 Choose the KPIs that cover your main losses. These losses reflect the difference
between the current operational levels and the required ones. Which losses “keep
you awake at night”? These areas must be covered by KPIs.
To be successful a company must identify and operate in line with its so-called qualifiers and
differentiators. Qualifiers are things all companies in a certain branch of industry must be
capable of or must possess to survive on the long-term. For instance, if all major players
each have an OEE in the range of 90-95 per cent, a company will generally not survive if it
consistently has a level of 50 per cent. Qualifiers are so to say entry tickets to the Olympic
Games. Differentiators are competitive advantages companies develop and maintain to beat
the completion, like having superior product quality. In Olympic terms, differentiators get a
company a gold medal.
Evidently, KPIs selected at the strategic level should be fully in line with a company’s
qualifiers and differentiators. In line with the above examples, OEE and product quality
should be KPIs.
The next figure demonstrates the relation between the discussed activities and the three
policy levels.
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Main types of Key Performance Indicators
Indicators are either leading or lagging. Leading indicators are metrics that are task specific.
They respond faster than results metrics and are selected to indicate progress towards long
term objectives. Leading indicators are indicators that measure and track performance
before a problem arises. Leading indicators warn you to take corrective actions before the
process gets out of control. Lagging indicators can be pinpointed as result KPIs. They are the
milestones of the improvement journey. Organizations that meet their (challenging) targets
are considered successful.
A few examples to illustrate the difference between the two types of indicators. By
monitoring the number of unsafe situations, near misses, medical treatments, injuries
without illness leave or restricted work cases a company can manage the process of avoiding
injuries leading to absenteeism. All these indicators are leading indicators. The lagging
indicator is the Lost Time Accidents ratio.
Another example can be found in the quality assurance process. The number of consumer
complaints is a well-known lagging indicator. Quality assurance however goes much further
than just reacting on complaints of consumers. A company needs to manage the quality
assurance process and to monitor the performance. This can be done with a number of
leading indicators such as scrap, first time right ratio and failure costs. The management
could also decide to audit the quality control process. How well is this system executed? This
score indicates the dedication, motivation and discipline of the organization in delivering
quality to customers.
In short, you could say that lagging indicators demonstrate the result were leading indicators
enable the organization to manage their (improvement) processes.
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Performance levels in an organization working with CI in Production
Performance levels in an organization that works with Continuous Improvement in
Production (CIP) can be monitored by a large number of Key Performance Indicators.
The challenge is to find or select a limited amount of performance indicators that are critical
to the successful output of the process. Many organization make the mistake to define too
many or too complicated KPIs.
The table below shows the most important and commonly used KPIs. This overview is
divided in seven subsets: Productivity, Quality, Costs, Delivery, Safety, Environment and
Motivation/Engagement.
SUBSET
KPI
UNIT OF
MEASUREMENT
DEFINITION
Productivity
Site
productivity
Kg/man-hour
Total production volume of finished products in
kg/direct labor manufacturing productive manhours
CU / man-hour
Total production volume in CU (Consumer Units) /
direct labor manufacturing productive man-hours
Consumer
complaints
# complaints
per mln CU
Total number of production-linked complaints of
consumers / total production volume (CU) in the
reporting period
Failure costs
Euro
Sum of all avoidable costs of incidents within the
factory
Waste
%
(Sum input in kg – sum output in kg) / sum input in
kg * 100%
OEE
%
Sum of effective time of the production line(s) /
sum of used time of the production line(s) * 100%.
Costs of
stock
Euro
Value stock end of month of reporting period / #
days of reporting period
Conversion
costs ratio
Euro / Kg
Conversion costs (labour, utilities and
maintenance)/ Total production volume in Kg
during the reporting period
Service level
% OTIF
# orders or products delivered in time and full (no
Mancos) / total # of orders or products
Quality
Costs
Delivery
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Safety
Environ
ment
Personnel
Lost Time
Injuries
Frequency
Rate (LTIFR)
# *106) / THW
The number of Lost Time Injuries plus Fatalities
multiplied by 1.000.000 hours (approximate 500
FTE’s) / all worked hours of employees on the
payroll
Total
Reportable
Rate (TRR)
# *106) / THW
The number of Total Reportable Injuries for the
reporting year multiplied by 1.000.000 hours
(approx. 500 FTE’s) / all worked hours of employees
on the payroll.
Reportable Injuries are: LTI’s (incl. Fatalities) +
restricted Work Cases + Medical Treatment
Electricity
consumption
kWh / ton
The amount of electricity used in a manufacturing
process divided by the product generated in the
period to be measured
Water
consumption
M3 / ton
The amount of water used in a manufacturing
process divided by the product generated in the
period to be measured
Surface
Water
Pollution
Kg COD/ton
Chemical Oxygen Demand of direct discharge of
effluent to surface water (COD) per ton end product
in the period to be measured
Non
Reusable
Waste
Ton/ton
All waste as it leaves the premises in the reporting
period which is not used for resource recovery,
recycling, reclamation, direct re-use or alternative
uses per ton end product
Total Illness
Absence
Rate of own
employees
(TIAR)
%
The number of lost working hours per year due to
all illnesses and injuries, as a percentage of the
scheduled Working Hours of own employees per
year
TPM
involvement
%
Sum of number of hours spent on TPM / contract
hours (=Workable hours; sum of hours paid to own
FTEs)
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Continuous improvement processes and industrial automation.
How are modern industrial automation systems able to make a significant contribution to
continuous improvement processes? This section sets out a number of examples of specific
software tools that can be used to improve quality and reduce losses. It also describes why
the functionalities inherent within modern automation systems can effectively support
continuous improvement processes.
The essence of industrial automation systems
Industrial automation landscapes can be divided into the following four system layers :



Level 4 = Enterprise Resource Planning (ERP) level
Level 3 = Manufacturing Execution/Information System (MES / MIS) level
Level 2 = PLC – Scada / DCS level
Programmable Logic Controller – Supervisory Control And Data Acquisition/Distributed Control System

Level 1 = Field level
See also the figure below. Each system layer fulfils a specific function within the automation
landscape.
The primary task of an industrial automation system is to control, operate and visualize a
production process. In addition, Levels 2 and 3 increasingly offer important options for
collating data on the production process. Sophisticated software tools can be used to
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convert this data into usable information to provide effective support in continuous
improvement processes. As a result of increasing vertical integration, i.e. from Level 4 to
Level 1, and growing local intelligence at field level, greater volumes of more accurate data
are becoming available. Not only can the available information be deployed to improve the
quality of the product and production process, it can also be used to reduce the various
forms of loss. In short, modern industrial systems contribute to continuous improvement
processes by making data on the production process transparent and making it possible to
assess production data more quickly and effectively. Furthermore, they support the actual
process of implementing the improvements as the data is available in real time.
A good example of this is Overall Equipment Effectiveness (OEE). OEE is nothing new in itself,
but by using modern integrated systems, we are able to view various losses more quickly
and as a result determine the OEE. In addition, modern systems offer the tools for displaying
effective dashboards and trends.
Energy Management Systems (EMS)
EMS systems tend to focus on energy losses. Plant owners can use an EMS system to
ascertain how much energy is consumed by individual consumers as well as to show which
process variables are responsible for these energy requirements. By making this data
transparent and showing the various correlations, it is possible to come up with options for
improvement and optimization so that energy losses are reduced.
One of the most important improvement options is the prevention of (expensive) peak load
by combining data on consumption with production planning. This is illustrated in the figure
below. In addition, modern Energy Management Systems offer plant owners the reports
they need for cost allocations, such as energy consumption per production unit, per ton of
product or per batch. In addition, CO2 reports can be created to provide authorities with the
information they require. Finally, EMS systems often provide the necessary functionality for
managing energy optimization initiatives.
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Reducing losses in production also means reducing the use of raw materials and energy. In
this respect, continuous improvement processes directly contribute to sustainability and the
carbon footprint of a production process. Optimizing the total energy management, such as
steam, water, gas and electricity, will have a positive impact on improving the sustainability
of a production facility.
Process Simulation Systems
Process simulation provides us with a means of increasing the quality of production and
reducing outage losses. By mathematically modeling the production process, it is possible to
simulate the dynamic behavior of that process. The effect of an adjustment or change in the
production process can be viewed in simulation mode. Once the change has been evaluated,
it can be applied in practice. This prevents losses from outages as a result of an unplanned
effect. In addition, Process Simulation offers benefits in terms of time when commissioning a
production facility. It also serves as an excellent means of training users.
Advanced Process Control (APC)
APC is a generic term for all available software tools within Process Control Systems that can
help further optimize controllers. APC can be used to tackle many types of loss, including
energy losses and outage losses due to rejects. APC functions can be divided into the
following three groups:
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


Control Performance Management
Extensions to PID control (Proportional-Integral-Derivative Controller)
Multi-variable controller
Control Performance Management
The general term of “Control Performance Management” covers “Control Performance
Monitoring” and “Optimization of Control Loops”. Empirical studies have shown that many
of the control loops in the process industry do not meet all their requirements and that
there is enormous potential for improvements, especially in the area of energy losses and
speed losses. In many cases, people are not even aware of this potential.
The term “open loops” (see figure above) here means that there is in fact only a means of
control, there is no automatic closed-loop control. By way of analogy, a driver of a vehicle
steps on the gas pedal so that it is depressed exactly half way and looks at how fast he is
going, both uphill and downhill, with the vehicle loaded and unloaded. The driver himself is
the controller if he wants to drive at exactly 50 km/h but can only take action if the impact of
his action is visible on the odometer that records the distance traveled. The quality of cruise
control is much better and more efficient.
Plant operators or instrumentation and automation engineers do not have the opportunity
in the course of their daily activities to permanently monitor the huge numbers of control
loops for which they are responsible. So functionalities are needed to continuously monitor
the performance of all loops in an automated way, with the aim of planning specific
maintenance activities and retuning loops as soon as their performance deteriorates. By
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applying performance monitoring function blocks, it is possible to transparently ascertain
which loops are meeting their performance targets and which are not.
Extensions to PID control
In addition to the standard PID controllers in a Process Control System, APC function blocks
are available to further dynamize the P, I and D actions. It is therefore possible to ensure for
example that specific process values can be regulated to attain their end values more
quickly. This can play a role in reducing the overall volume of energy required, for example.
Extra functions are also available for more effectively monitoring the outputs of the function
blocks for example to control a valve. This enables us to predict when the requisite
maintenance of such instruments should be carried out. For example, it only takes a few
seconds for an effective valve to close, but if this time increases due to wear and tear, this
additional time is detected and recorded by the controller. Because this wear and tear is a
gradual thing, we will see a slowly emerging time variation, making it possible to make
predictions.
Multivariable controller (Model Predictive Control MPC)
A multivariable control situation exists if one unit incorporates various manipulated variables
(variables processed by a controller) as well as controlled (monitored) variables which then
interact with each other. The aim of a process control system is to bring each controlled
variable to an individual setpoint independently from the other controlled variables. This is
time-consuming in practice, because moving a manipulated variable not only affects the
associated controlled variables, it also affects all other controlled variables. A multivariable
controller ensures that a distinction is made between a main controller and sub-controllers.
By limiting the sub-controllers by means of a multivariable controller, it is possible to
prevent errors. This will inevitably reduce losses due to outage.
Typical empirical values of the benefits for APC solutions are:
 Increasing throughput by 1 to 5%
 Increasing yield by 2 to 10%
 Reducing energy consumption by 3 to 10%
 Reducing standard deviation of process variables by 25 to 50% of the previous value.
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Effects of reducing cost price of APC tools
APC tools are currently integrated within Process Control Systems. In addition, it is becoming
increasingly more straightforward – and in turn more cost-effective – to implement APC
tools by applying templates. As a result, in addition to larger and more complex applications,
Advanced Process Control becomes a more attractive option for small to mid-sized
processes. One of the key consequences of this trend is that the condition of an instrument
or installation can be ascertained with increasing accuracy. Based on this information,
predictions can be made with greater precision and reliability with respect to the requisite
maintenance in terms of the availability of the installation.
Statistical Process Control (SPC)
Statistical Process Control (SPC) is a solution deploying statistical techniques for monitoring
and predicting how processes will run, specifically so that action can be taken in good time
and thus prevent any process from going “out of control”. This prevents losses due to
outage. The terms SPC (Statistical Process Control) and SQC (Statistical Quality Control) are
often used interchangeably. Both approaches are based on the same principle, but when
quality data is involved, reference is usually made to SQC. SPC in a modern Process Control
system typically entails the in-line analyses of real-time process and quality data and then
immediate adjustment of the process based on the results of these analyses.
By applying automated statistical techniques based on on-line data, a trend can very quickly
be detected so that the process can be quickly adjusted, if necessary in an automated way,
by taking corrective actions. By adjusting the process in good time, it is possible to prevent a
process from going beyond its limits.
The most familiar statistical rules are the Nelson and Western Electric rules. The figure below
graphically sets out three of the eight different Nelson rules.
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(source: http://en.wikipedia.org/wiki/Nelson_rules)
By analyzing the process and quality data in this way, it is possible to identify patterns and
trends that cannot be detected with the naked eye. SPC only helps when mapping the
trends. Once a trend has been discovered, a root cause then has to be ascertained. By
identifying the root cause and taking corrective actions, a trend can be (automatically)
avoided in the future, thus making a process fully “in control”.
The measured values are set out in a control chart (see figure below). The control chart
shows the general trends and spread of the process and quality data over time. This
information is used to effectively manage the process by ascertaining whether a specific
variation in quality is attributable for a change in the process or for an arbitrary cause. A
control chart comprises a centerline (CL) that usually also corresponds to the average value
or target value, and the upper and lower control limits (UCL and LCL) that are ascertained
based on the previous performance of the process. If the values of the parameter fall within
the two control limits and no unusual trend arises, the process is considered as managed
(under control).
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Note:
It is also possible to apply two sets of control limits, which are then typically referred to as
warning limits and action limits. Warning limits often correspond to a deviation of twice the
standard deviation compared with the average value, and action limits to three times the
standard deviation. By applying these statistical alarms and intervening in the process before
anything is actually produced that does not comply with the specifications, it is possible to
increase the percentage of “First Time Right” production, which also entails cost savings for
a company (less reworking, scrap, non-conformity costs).
In practice, statistical Excel and Minitab applications are used. The advantage of these
applications is the statistical depth reached as well as the fact that these tools work offline
from the process. However, SPC tools are integrated in the Process Control System and work
in-line. In this way it is possible to make adjustments in the Process Control System more
quickly (and automatically) by analyzing the root causes. Thanks to the real-time analyses,
any alarms can also be generated more quickly. In addition to these advantages, the
statistical analyses performed by an integrated SPC tool are context-based. For example, by
comparing the analyses with production planning, it is possible to obtain additional insight
into the value of the statistical analysis.
Looking ahead, it is clear that it will be possible to make adjustments within a Process
Control System with even greater accuracy thanks to the statistical analysis. This will
inevitably lead to the ideal situation in which it will be possible to produce products 100%
First Time Right.
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Overall Equipment Effectiveness (OEE)
OEE tools help provide insight into the effectiveness of the installation and in turn ascertain
potential for improvement so that capacity/output can be further optimized. OEE is the best
known and most often used KPI. By using intelligent field equipment from Levels 1 and 2
such as intelligent Motor Management Systems, and intelligent process instrumentation, we
are able to provide a wealth of information on the use of the installation at Level 3
(Manufacturing Execution/Information System).
OEE reflects the degree of effectiveness to which an installation is used. OEE is calculated as
“the number of good products over a period of time divided by the theoretically possible
number of products over the same period of time”.
To be able to improve OEE, it is important to map the various losses. The 6 loss categories
are set out below:
Routine downtime:
These are pre-planned stoppages for which a standard is formulated.
Logistical losses:
These are problems in feeding and delivery. These losses may arise in the dimensions of
people, equipment and products. In any event, the machine does not produce.
Technical failures:
These are stoppages lasting for over 10 minutes. To clear the stoppage, it is necessary to call
in the services of maintenance personnel.
Minor stoppages:
These are stoppages lasting for less than 10 minutes. Machinists can clear these stoppages
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themselves.
Speed losses:
The machine is not meeting the planned number of units per minute due to causes other
than those set out above (design capacity).
Quality losses:
The units produced do not comply with the specifications.
After deducting all losses, you are left with the effective time, the denominator for the OEE
ratio. Formula for calculating the OEE = Availability X Performance X Quality:
 Availability = Filling time / planned time
 Performance = Net machine time / filling time
 Quality = Effective time / net machine time
Improving OEE is a lucrative business, because a 5% improvement with an OEE of 40%, for
example, is equal to 12% more output with the same resources!
A world-class OEE for discrete industry is based on a 90% degree of availability, a 95% degree
of performance and a 99.5% degree of quality, resulting in an OEE of 85%. For the bulk
process industry, this world-class OEE standard is higher, i.e. 95%. For the pharmaceutical
industry, the standard is considerably lower, at about 65%.
Pros and cons of entering OEE data manually
Initially, manually entering OEE information will increase the operator’s commitment to
finding out more about the effectiveness of the installation. However, over the course of
time, it will become a more repetitive way of working and an automated solution is often
more effective for retaining data integrity and reducing the amount of administrative tasks
in the operator's workload. Such an automated solution offers accurate data with respect to
downtime and reasons for downtime. In this way it is possible to identify trends and carry
out improvements.
Implementing OEE involves more than just installing a software tool. To successfully execute
an OEE project, it is important to select the right parameters/variables and interpret them
correctly. It is therefore important to obtain good advice in this respect.
Condition Based Monitoring
The aim of Total Productive Maintenance (TPM) is to carry out maintenance in such a way
that the availability of the installation remains at a maximum level at minimum cost.
Condition-based monitoring tools, such as intelligent Motor Control Centers, help by
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providing practical information so that the correct maintenance schedule can be set up. For
example, the number of hours in service and time variables that give an indication of wear
and tear. In addition, intelligent field equipment is increasingly designed with internal check
mechanisms that constantly monitor the equipment’s own state of health.
Process Analytical Technology (PAT)
PAT focuses in particular on reducing waste and speed losses.
The pharmaceutical industry is under pressure not just because of the economic climate but
also and above all due to the rising development costs of new medicines coupled with major
success products from the past becoming patent-free – generic producers are entering the
market so margins are getting tighter.
The traditional validation requirements imposed by the FDA (Food & Drug Administration)
on pharmaceutical producers to date have greatly impeded the implementation of modern
production techniques over the last few decades. In practice, this approach meant that a
process could no longer be modified once it had been approved by the FDA. What’s more,
the system was not exactly watertight, given the large number of “recalls” of products over
the last few decades, plus the fact that many batches had to be destroyed after production,
because they did not satisfy the quality requirements for launching products on the market.
For this reason, the FDA has been actively looking for new technologies to achieve more
reliable end product quality, while ensuring this is done in a more cost-effective way. This
led to the publication by the FDA of a PAT guide in September 2004.
PAT (“Process Analytical Technology”) is defined as “one system for designing, analyzing and
checking production processes, based on measuring critical-to-quality attributes of raw
materials, in-process materials and production processes in real time, with the aim of
optimizing the process and ensuring the quality of the end product” (see the figure below).
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By measuring the critical-to-quality attributes in real time using a PAT system, and then
comparing them, it is possible to make predictions about end product quality while the
product is still in production.
PAT is introduced in three stages:
1) Determine the critical-to-quality attributes (CQAs) of the process in question
2) Select the appropriate analytical techniques to measure these CQAs in real time
3) Use a PAT data management tool to collate all data in real time and compare this
data so that predictions can be made about the end product quality
It therefore involves more than just introducing PAT analyzers in the process. The
appropriate IT solution for processing this data in real time and comparing it plays an equally
important role.
By strategically introducing PAT as a technology, it is possible to produce on a Right First
Time basis and with greater efficiency. This real-time quality monitoring reduces or
eliminates not only the need to carry out post-process testing but also production costs,
sometimes to a considerable extent, while lowering the incidence of production losses.
PAT introduces new data sources into the process to obtain a better overview and greater
understanding of the process, while making it possible to manage the process more
effectively.
For example, the drying process of granulate: The end point used to be determined by
measuring the output temperature. This approach seemed to result in a systematic drift
compared with the target value after x batches. By introducing PAT using a Near Infra Red
probe, a nicely concentrated residual moisture content value around the target value was
obtained after drying, batch after batch, resulting in ”Right First time”. This meant no
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unnecessary energy losses and no re-working or scraps.
Integrated Asset Lifecycle Management system (Comos)
Integrated Asset or Plant Lifecycle Management systems optimize the engineering and
maintenance process, thus helping to reduce losses in engineering and maintenance time. By
improving coordination and cooperation during the initial engineering and lifecycle phase,
engineering hours are saved and errors due to inconsistent information are significantly
reduced.
Integrated technical systems based on an object-oriented platform play a key role in
reducing engineering effort, as a specific function only has to be defined once. A further
advantage is the fact that a single definition ensures consistent data integrity and this
definition is immediately available and comprehensible for the entire engineering team.
Integrated engineering environments also ensure that changes and adjustments in the
production process are integrated in a more straightforward way into the as-built
documentation, which in turn keeps losses to a minimum which may arise through errors as
a result of inconsistencies in the production lifecycle. Furthermore, an integrated Asset
Lifecycle Management system provides accurate information on the installation, reflecting
the integrity of the installation, so that effective and efficient preventive, corrective or even
condition-based maintenance can be planned.
In its capacity as a leading market research firm, ARC defined the following
processes/subareas for Asset Lifecycle Management.
(source: ARC, Enterprise Asset Mgt and Field service Mgt. Solutions (2011))
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Interaction between plant owner and automation provider
To make optimum use of the available tools within automation landscapes for supporting
continuous improvement programs, it is crucial to ensure effective interaction between the
plant owner and the technology partner.
It is important for there to be a large degree of openness in discussions about the
bottlenecks and KPIs. This calls for trust on both sides. The teams are then in a position to
initiate an effective proposed improvement for each bottleneck. To further encourage
interaction between the plant owner and technology partner teams, it can be useful to agree
an incentive program. Examples of improvement topics include:








Optimizing energy
Increasing production output
Improving logistical bottlenecks
Enhancing the reliability of old systems
Reducing maintenance costs
Improving availability
Optimizing parts management
Reducing stoppages
A critical success factor for this approach is to ensure the necessary commitment at senior
management level on the side of the plant owner and supplier. In the future, there will
inevitably be closer cooperation along the chain and more frequent sharing of process
expertise, bottlenecks and use of systems and tools. This is partly because technical
expertise among plant owners is dwindling as the population ages, and partly due to the
scarcity of well trained technical students. Furthermore, plant owners increasingly see the
acquisition and retention of technical expertise as a non-core activity and therefore
outsource it.
And finally: Knowledge is power!
If we want to improve, then it is important for the facts to be clear and known, both with
respect to the current situation and the desired situation. Modern industrial automation
systems show (keep a tally of) the plant data and compare it with the desired values, in real
time and transparently.
Modern automation systems show in real time the effects of corrective actions that have
been implemented and adjustments that have been made to ensure improvements. It can
therefore be stated that a modern automation landscape has become an essential factor for
successfully implementing a continuous improvement project.
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Continous improvements in Production: Quick wins.
Introduction
This section describes the importance of first “harvesting low-hanging fruit” for the sustainability of
Continuous Improvement programs.
Building a continuous improvement (CI) organization costs time and money. It is also not an
easy task. It is impossible to consider the implementation of CI as a short term project
capturing limited resources. The opposite is true. It is a step by step change management
program which turns the company into an effective and efficient producer with almost no
avoidable losses. A competitor that is hard to beat.
Almost everybody wants to be that successful, only few achieve this goal. Almost 70% of
planned change programs fail and this percentage is likely also applicable for CI programs.
Companies start enthusiastically with CI. A lot of training and communication is done and the
effort is quite huge. On the other hand, these time-consuming activities leave hardly any
room for real improvements that contribute to the KPIs of the organization. It is mainly this
dis-balance between efforts and results that kills many CI programs at an early stage. In
order to avoid premature stops of CI initiatives, one should balancing efforts and results by
harvesting on ‘low-hanging fruit’, i.e. quick wins.
Although these quick wins are specific for individual companies there are some common
fields were to look.
Pareto analysis
Time is limited and costly. The use of human resources must be managed carefully. We
cannot improve everything at the same time. A tool which is very helpful in prioritizing CI
activities is the Pareto principle. Basis of the Pareto principle is that by doing 20% of the
work, 80% of the advantage of doing the entire job can be generated. Or in other words, a
large majority of losses (80%) are produced by a few sources (20%). The CI organization
needs to find the 20% sources of loss per KPI. By first tackling these sources of loss a major
contribution to the improvement of the KPI value will be generated. Make sure that this
analysis is fact-based. We need to improve on facts, not on assumptions. In practice we will
hardly face a situation where the 20% is caused by more than 5 different sources of loss.
Therefore this method is also known as “the top 5 method”.
5S
5S is a very powerful tool which can be implemented in a reasonably short time. 5S has one
main goal: reducing the searching time of people dramatically. The quick win therefore is
time. But 5S has more positive effects:

It creates a safer working place.
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




It creates more free space.
Anomalies and losses become visible.
It brings ownership to the people of the shop floor.
It makes people proud of the working place.
It motivates.
Value Stream Mapping
What is the use of optimizing something that has no added value? The answer is obvious,
nothing. Surprisingly enough this common sense knowledge often doesn’t prevent
companies from improving process steps that have no or little added value. This common
mistake can be avoided by value stream mapping.
Value stream mapping (VSM) is a visual technique used to identify and strip non value added
steps out of a company's flow of information and materials. The end goal is to make the
process free of wasted efforts. The seven sources of waste are explained in an earlier stage.
VSM starts with the current state of a process. Information is gathered at the shop floor and
the VSM team draws a picture of the current way of working, using standardized symbols.
The process is then analyzed. Next the team comes up with improvement suggestions. All
these improvements together are captured in the future state of the process. Finally this
improved process is implemented.
Root Cause Analysis
The 5X Why tool is probably the most commonly used tool for finding the root cause of a
problem. Implicit it is also a very good change indicator. CI organizations need to make a
change in mindset and acting. They move from thinking and reporting in KPI results to
thinking and acting in loss reduction activities. Those who succeed can be identified by the
high number of successful and completed root cause analysis.
Finding the root cause of a problem, followed by elimination of the source of that loss (the
root cause) is very important for the sustainability of the realized improvement. The
organization moves from firefighting to process control.
A 5X Why analysis always starts with a sharp description of the problem that we can see.
This is called the failure mode. This failure mode is no more and no less than a symptom of
the underlying source of the problem, the root cause.
The 5X Why analysis is performed by a multidisciplinary group of people qualified for this
job. They start with asking themselves “why do we have this problem?”. They repeat the
question till it makes no sense to bring up the next “Why question” anymore. Sometimes
there will probably be more possible answers per question. Complete every line before
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moving to the next possible answer. It is possible to check the results of a 5X Why analysis.
Start with the defined root cause and go back step by step to the problem definition. This by
bringing up the explanation “that’s why” for every answer. In case this “that’s why” is not a
logical conclusion as an outcome of a question the root cause can’t be right.
KPI Alignment
Successful companies always manage to align all the activities in the direction of the
company goals. These goals are clear, and understood by everybody. Every single employee
knows his contribution to the KPIs.
Key word in this process is empowerment. Empowered people are in control. They know
what to do and have the confidence that they are capable of doing it. There is room to
manoeuvre, bring in new ideas and make judgment calls to a certain extent. The boundaries
are also clear. Furthermore empowered people are satisfied with their job which they find
meaningful. The cooperation with colleagues and other departments is considered of added
value and demonstrated in day to day business.
To facilitate this change process the management faces two priorities. The first one is about
the set up a performance control system. The four elements have already been explained earlier.
Briefly:
 KPI tree: Translate the company goals to performance indicators for every operational
level.
 RACI matrix: Assignment of tasks, authority and responsibilities.
 Standardization of every frequent and planned stoppage.
 Monitoring progress and results via standardized short meetings.
The second priority is about performance behavior training and coaching, an absolute
necessity to correct performance problems as they arise within the organization. This is
accomplished by first, identifying the root cause and secondly, implementing a plan of action
to correct the problem. Training deals with knowledge and skills while coaching leads the
employees to higher competence levels and overcomes performance barriers.
Rewarding program
We can learn a lot from teachers and coaches of young people. They reward juveniles for
desired behavior and performance with compliments or small gifts like candies or a medal.
Hardly ever they punish the students or players. They know by heart and experience that
stimulating is much more effective than punishing. The balance for achieving the desired
behavior and performance are at the stimulating side.
Once in the professional environment we seem to lose this knowledge and change our
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approach to the punishing side. We tell people what they have done wrong and make clear
that this kind of mistakes can’t be accepted (anymore). Sometimes this is necessary, but this
should be the exception to the rule. And the rule is to make people clear, in a positive way,
what the management wants and to stimulate both the behavior and the performance that
contributes to the company goals. You know how to do that!
2 business cases.
Business case #1: AkzoNobel.
This theoretical background is an exerpt from a description of an AkzoNobel case, focusing
on the business unit Industrial Chemicals (BU IC). A summary of this business case can be
found in Annex 1; the relating interview that was held with AkzoNobel executives is listed in
Annex 2.
Operational excellence is a key success factor for a producer of commodity chemicals in a
very competitive environment above product leadership and customer intimacy, but there is
always a distribution over the three value disciplines (Tracey, Wiersema, Harvard Business
Review Jan/Feb 1993), as depicted in the figure below:
Operational Excellence
Product Leadership
Customer Intimacy
Operational Excellence will drive “Safe and hassle free delivery at competitive cost” with a
BU wide implemented methodology. It was clearly expressed that a strong top-down drive
was considered necessary, targeting a cultural change in the organization.
A target of a value creation of 1–2 % of the yearly total cost base was agreed by the
participants. A taskforce, existing of senior manufacturing managers, was appointed focusing
on the methodology to be used, and the requirements (design criteria) around the
implementation:


Target driven, coverinng all functional areas
Top-down living of approach
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









Top management commitment
Empowerment/involvement of the whole organization
Cultural change needed, from re-active to pro-active
Approach should allow for local customizations
Use a common language (to be developed)
Clear and consistent communication
Perspective for career development of participants
Performance measurement
Sustainable, long-term way of working instead of a cost-cutting tool
Deliver 1-2% value creation on an annual basis (as % of total cost base)
The task force decided to have a closer look at three proven continuous improvement
methodologies, respectively Lean manufacturing, Six Sigma and the combination Lean Six
Sigma. The QFD-tool (Quality Function Deployment, a Six Sigma tool) was used to look at the
design criteria, and to make sure all requirements were covered.
A detailed comparison was made between Lean and Six Sigma, summarized in the table
below:
Six Sigma
Proven continuous improvement
methodology, working on the basis of
knowledge based decision making
Operates at process level, driving
effectiveness of all business processes.
Starts and ends with the Customer.
Utilizes a standard structured core
improvement process for all projects. Tool
usage is case specific and depends on
project.
Strong program governance structure which
safeguards program and project delivery.
Utilizes fulltime improvement resource that
rotates through a Black belt role on a 2-3
year cycle.
Projects are staffed by a mixture of fulltime
and part time resources supplied by
function/area where project is focused.
Leadership development is a key deliverable
from any deployment
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Lean
Proven continuous improvement
methodology, working on the basis of waste
identification and removal.
Targeted at the complete value stream, with
the central objective of maximizing value by
removing all non value added activity and
waste.(efficiency)
Starts and ends with the Customer. He
defines what is valuable to him, typically
“anything he is willing to pay for”.
Utilizes a core set of principles/rules to
ensure project objectives and deployment is
held true.
Deployment and projects are primarily
owned in the business and staffed by the
business. Centralized mentoring and training
is however normal.
Easily accessible concepts and tools allow a
broad base of participation even from early
in deployment.
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The table below shows identified Strengths and Weaknesses of Lean, respectively Six Sigma
and the combination. From this, one can conclude that the weaknesses of one are in the
main addressed by a strength existing in the other. This combined with their clear synergy in
terms of goals and aims make them ideal partners. So the methodology of Lean Six Sigma
was selected as the preferred one.
Strength
Lean: Easily accessible toolkit for all levels
and produces results quickly
Six Sigma: Extensive toolkit , to address
process based problems (Effectiveness)
Six Sigma: Utilizes fact based statistical
analysis
Six Sigma: Structured governance and
project tracking.
Six Sigma: Very structured core
improvement process, which tools
compliment.
Lean and Six Sigma: Use Standard
Vocabulary
Lean: Toolkit focused on waste
identification and removal (focused on
Efficiency)
Six Sigma: Structured talent development
at all levels, particularly leaders/potential
leaders
Weaknesses
Lean: Does not address process capability or
variation in processes well
Six Sigma: If applied without pragmatism
can drive bureaucracy and benefits/delivery
will suffer in terms of speed
Six Sigma: Toolkit is heavily statistically
biased and can be intimidating
Lean: governance structure, relies heavily
on individuals. No real project tracking and
benefit delivery system (normally)
Lean: Lack of a consistent really structured
improvement process
Six Sigma: Does not address waste
identification and removal well.
As a combination methodology Lean Six Sigma offers a highly structured approach which has
the capability to deliver improvement in both effectiveness of process and efficiency of
operation in a safe, risk managed environment. Lean Six Sigma combines the best of Lean
with the best of Six Sigma and in doing so largely eradicates the weaknesses. It is not just a
tool box with improvement tools that can be used in several occasions but it is more a
philosophy or culture that should be anchored in the backbone of the organization. It takes
time and resources to implement, but if it is made well it will sustain.
Lean Six Sigma (L6S) was implemented from January 2010 in the BU. A L6S organization was
set up to train Black Belts and Green Belts and to guide the introduction and to do the
program management. An Operational Excellence director was appointed.
Lean Six Sigma in AkzoNobel Industrial Chemicals is intended to be part of the Talent Factory
and Management Development. Black Belts were selected from the group of high potentials
in the company, the most talented people, giving them the opportunity to develop in a very
challenging environment. The vacancies left behind by the Black Belt were filled by new
talents. The Black Belts were trained in a six week program in waves of 5-6 people building
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up a group of about 15 Black Belts after 2 years. The Black Belts are 100% dedicated to the
L6S program and return in the organization after 2 - 3 years at a middle management
position to grow further and to strengthen the continuous improvement culture.
The Green Belts are trained during 1 week and combine their daily work with an
improvement project. They are guided by Black Belts. In another chapter more will be
explained about the experiences with the L6S program between 2010 and 2012 and
examples will be given of successful projects.
L6S is has been worldwide proven as a very powerful methodology in numerous companies.
A summary of Lean and Six Sigma is given below.
Lean
Lean is an improvement methodology to deliver optimal performance of the Value Stream to
the Customer by identifying waste (Muda) in the organization, finding ways to remove it and
implementing the necessary changes. Lean starts and ends with the customer, and aims to
understand what is of value to the Customer. To be truly successful Lean must be adopted
by the whole organization. It is more than a manufacturing based methodology. It uses a
broad set of tools, ranging from basic to moderately complex. It operates by understanding
the status quo, understanding the Customer and then closing the gap. As such it is very
much a knowledge based methodology. “No blue eyed children and no sacred cows”. We
listen and understand our customers’ requirements and what’s important to them. We drive
improvement continuously whether the market requires it or not. With Lean we strive to do
More with Less.
Lean employs 5 Principles to drive improvement and if all changes are tested against these
principles for applicability then few major errors will be made:
Value:
Establish value in the eyes of the customer. What does he really need? What are his
expectations which he doesn’t even verbalize? “Something is of VALUE if the customer is
happy and willing to pay for it”
Value Stream:
Understand the complete value stream, by (value stream) mapping everything from raw
material to finished goods in the Customers hands. Identify waste wherever it is. Use Kaizen
methodology to improve.
Flow:
Redesign the current Value Stream to eliminate the waste. Check for alignment to the
Customer Values before making changes.
Pull:
Utilize the value stream only when the customer has a requirement, don’t process when no
requirement but be flexible enough to instantaneously respond to customer demand.
Perfection:
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When one round of improvements has been made, identify your next targets/opportunities
and start again. Don’t wait to be forced to improve, improve pro-actively.
In the context of Lean, “Waste” or “Muda” has been identified as “Anything the Customer
does not want to pay for”. Waste is categorized by 7 types of waste: Correction, Over
production, Material Movement, Motion, Waiting, Inventory, and Processing.
Types of Work or Activity are divided into 3 categories (see figure below):
Value Added is recognized by the customer and is happy to pay for.
Non Value Added is not recognized by the customer and has not any value to him; activity is
not needed and could be stopped immediately, often referred to as pure waste. Note: nonvalue-add = Waste.
Necessary Non Value Added. The customer does not recognize any value to him, but activity
is needed and could not be stopped immediately without undesirable nature results. Further
work required to remove need for activity.
Value
Added
Motion
Non Value
Added
Necessary
Non Value
Added
Non value Added = WASTE
The applicability of Lean is primarily in the area of the performance of the Value Stream. It
seeks to drive optimal performance and efficiency both in the Value Stream and within the
supporting functions. Lean is applicable to every function in every organization. A totally lean
and waste free organization doesn’t exist. The real question is where is waste most
prevalent and can it be removed most effectively? Value Stream mapping sets out to answer
this question and is the real starting point to understanding the opportunity to improve
performance.
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The way Lean is implemented should follow the following set of rules or guidelines:
 A central sensei or master who has exceptional knowledge of Lean trains the
organization in the principles and practices of Lean.
 The Trained organization, initially with assistance from the Sensei will assess itself,
understands its own value streams and defines improvement opportunities.
 The organization will establish its priorities and drive improvement from within its
own ranks; priorities are usually agreed through a central steering group/team.
 Progress is monitored through regular project updates, often on a monthly basis,
updates either come through the steering group or often come through the regular
business reporting cycle.
Six Sigma
Six Sigma is a knowledge based continuous improvement methodology aiming at the
reduction of defects in a process. Six Sigma starts and ends with the customer. A product or
service which is defect free and meets the customers’ expectations can only be
accomplished if


the customers’ expectations are properly understood
if the internal processes of the organization are capable and fit to provide the service or
product to the customer.
The starting point of Six Sigma is knowledge based management. It uses a tool set which is
built around existing statistical tools. What sets Six Sigma apart of other improvement
methodologies is the core process (DMAIC) it uses:


to drive improvement as an integral part of the daily job leading to consistency achievement
of results
the strong project and program management structure
In a traditional organization, the focus of a problem is around the effect. Solutions are
usually driven by intuition, gut feel and guesswork. The outputs or “Y’s” of a process will
often appear on a management dashboard, and will be the measure of success or failure. A
Six Sigma organization works quite differently. The solution to the problem will be driven by
detailed understanding of the factors “X’s” involved in creating the result (Y) and particularly
in understanding the “Critical X’s” which carry the most significance. And last but not least
understand the statistical and mathematical relationship between the “Y’s” and the “X’s”: Y
=f(x)’s. Changes are made based on knowledge; which “X’s” are key versus which are not.
The DMAIC process ultimately delivers the Critical X’s and allows an optimal solution to be
realized. DMAIC is intersected into 5 key phases:
Define:
Understand the business reasons driving the project and understand the Customer’s
requirements. Define the potential benefits and savings.
Measure:
Establish current process performance. Confirm that the measurement system is capable
and that data can be trusted. Create a measurement system to collect data if none currently
exists. Create a formal project definition. Set improvement targets.
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Analyze:
Detail understanding of the potential X’s and start filtering towards critical X’s. Route cause
analysis methodologies employed.
Improve:
Confirm Critical X’s. Create solutions requirements specifications and drive potential
solutions. Select solution, trial and refine. Implement refined solution.
Control:
Validate effects of solution, create process tolerances and document process capability.
Define long-term process control mechanism, and produce out of control plan. Sign off the
benefits case, close project documentation. Celebrate with the team.
Before a project can move from one block to another it must pass a toll gate review, which is
the primary project governance which ensures that the business requirements are met.
Organizations which fail to realize the potential of Six Sigma are often frightened to stop a
project at a tollgate when it has not delivered what it really should have. Failure to be
thorough here will ultimately compromise the end solutions.
The applicability of Six Sigma is in the area of Process Performance. All processes are not
always capable or repeatable, their inputs are not always controlled and their outputs are
often never measured, however they do exist. The challenge a Six Sigma project is that
before it can start it must first create a system to collect data and measure current
performance around the process under review.
Six Sigma is factually a statistical term and refers to the stability and variation of a process. A
Six Sigma process will produce only 3.4 defects for every 1 million repetitions or a first time
yield of 99.99966%. A ‘Six Sigma process’ comes from the notion that if one has six standard
deviations (six sigma) between the process mean and the nearest specification limit there
will be practically no items that fail to meet specifications:
The ’68-95-99.7’rule states that 68% of all measurements fall within the 1-sigma boundary
i.e. 1 standard deviation; 95% falls within 2-sigma bandwidth and 99.7% falls within 3 sigma
bandwidth, as shown in the figure below. Taking this forward, 99.9999998% of all
measurements fall within the 6-sigma bandwidth. As process standard deviation goes up, or
the mean of the process moves away from the center of the tolerance, fewer sigmas will fit
between the mean and the nearest specification limit, increasing the likelihood of items
outside specification.
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The heart of Six Sigma lies is process optimization and variation reduction. Every process
conceptually at least should have limits which define whether the process has delivered on
its prime purpose or not. In process performance terms we talk about Preciseness (spread or
variation in results) and Accuracy (closeness to target value). There are 4 potential
outcomes:
 Not precise, Not Accurate – high spread in combination with not close to the target
value.
 Not Precise, Accurate – high spread but close to the target value.
 Precise, Not Accurate – low spread, not close to the target value.
 Precise, Accurate – low spread and close to the target value.
Six Sigma aims to improve preciseness and accuracy.
The way Six Sigma is implemented sets it apart from all other continuous improvement
methodologies. For instance:
 It takes top class dedicated resources from the organization, invests intensive
training and development in them and then uses them to drive business
improvement as leader of an improvement team.
 It is recognized that change should be driven from all levels of the organization and
training is tailored to facilitate this using the capability of individuals ranging from
Master Black Belts to Black Belts, to Green Belts and in some organizations Yellow
Belts. Green and Yellow belts drive change in combination with fulfilling their daily
job.
 All projects are scoped for financial benefit before they begin and benefits are
tracked through the project life cycle and for a further 3 years after completion.
 Improvement targets are jointly owned by the Six Sigma group and by the Business

Implementation is top down and bottom up. Senior Executives support and live the values of
Six Sigma, demonstrating commitment. Projects are executed by the organization and led by
a dedicated trained resource (Black Belt or Green Belt)
Six Sigma Black Belts are selected from the organization to serve deploying Six Sigma and
leading business change and improvement during 2-3 years. It has two key purposes:
1) It provides a fabulous training ground to develop leadership skills as the black belt is forced
to create and implement change with his team that he must positively influence to achieve
positive results.
2) It spreads the knowledge and capability invested into black belts widely, when Black Belts
return into key roles in the organization and doing the daily job with Six Sigma naturally.
Selecting a Black belt is based on the following criteria: an identified High Potential
employee, who usually has received well above average performance appraisals; he or she
has demonstrated flair for improvement within the sphere of his current responsibilities;
good communication and interpersonal skills; intellectual potential to master statistics etc.
“The correct candidates will always be the ones you can afford to release the least”
Black belt training typically takes 6 weeks in most organizations.
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Lean Six Sigma
Lean Six Sigma follows the Six Sigma implementation approach in terms of roles and
organizational structure. It also utilizes the Six Sigma governance structure with some
modifications to recognize that the scope is wider and includes the overall value stream as
well as process performance.
Lean Six Sigma uses the DMAIC approach (see picture below : DMAIC cycle) and supplements
this with the 5 Steps to Lean used as a set of rules to ensure projects are being driven and
selected in line with Lean expectations.
It is recommended to use and incorporate a Change Acceleration process with DMAIC. The
combination enhances progress and ensures full stakeholder alignment and engagement at
all stages from project identification to implementation and benefit realization, as is
visualized in the picture below.
Six Sigma modules
Change Management tools
DMAIC Lean 6 Sigma
Project management
Team building
Team leading
Create acceptance
Q
A
uality
cceptance
E =QxA
ffect
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This combination of DMAIC process and the Change Acceleration process creates a new
process which contains six stages rather than 5 found in DMAIC.
Business case #2: Royal FrieslandCampina.
Route 2020 is the leading strategy in the company. This long term company wide strategy
deals with WHAT FrieslandCampina wants to achieve in the coming years. To make clear
HOW this will be done there is a need for a more tactical and operational approach. The
Supply Chain organization of FrieslandCampina decided to realize her contribution to the
route 2020 targets with a continuous improvement programme under the name World Class
Operations Management (WCOM).
A summary of this business case can be found in Annex 3.
FrieslandCampina is organised in 4 Business Groups:
From a Supply Chain view a Business Group consists of a number of production locations
(Supply Points). Every Supply Point has a number of production facilities, all with their own
continuous improvement plan. There is a good reason for that. The driving force for
continuous improvement is the local management with their ambitions and goals. The
central part of continuous improvement is the WCOM approach. We share the mission and
the improvement tools. For the rest continuous improvement is a local responsibility.
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We will describe the continuous improvement process for a single Supply Point in the
Business Group Consumer Products Europe.
An overview of the improvement approach is visualized in the next figure:
PLAN: Target settings and improvement planning
The general direction for every single production facility comes from the mission statement
of FrieslandCampina Supply Chain CPE (Consumer Products Europe):
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Mission: To be a reliable, cost conscious producer of dairy products, meeting the market
requirements of our customers.
Goal: To produce our products in safe working conditions, with due care for the
environment, to the agreed quality and service levels, to the then lowest possible costs.
The target setting process starts with the plant mission and vision by the local plant
management team. The target setting and improvement planning process is conducted by
this management team (top down approach) and is divided in 5 steps.
KPI selection
The FrieslandCampina Supply Chain has a set of definitions covering the complete range of
47 KPIs. Using common definitions assures that the calculation of the value of the KPI is the
same in every plant and that benchmarking operational performances is easier to do. 10 out
of this set of 47 are obligatory for every plant since these KPIs are applicable for every single
Supply Point. These 10 KPIs are captured in the table:
The production locations are free to add more relevant KPIs from the KPI set.
Target setting
After the KPI set is completed the plant will express her ambition level via the target levels.
There are a number of criteria for the targets. They must be Specific, Measurable,
Attainable, Relevant and Timely (SMART). The table contains 5 columns. The year To Date
value of the running year acts as reference. What did the plant achieve so far? The target
value for the next year, in this example 2013, is the same value as agreed during the budget
cycle. The plant management also commits herself for the mid long period, in the example
2014 and 2015. The last (but not the least) column is for the indication of the World Class
targets that the plant wants to achieve in the long term. When all avoidable losses are
eliminated, which KPI levels will appear as the results of these improvements?
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Loss analysis
A plant that wants to reach World Class levels, and isn’t there yet, needs to improve to get
there. In most cases there is quite a gap between the current performance and the desired
performance in the next year. So the question is: “how are we going to realize those
improved operational levels?”.
Managing results is not possible. You can measure results but you can’t manage or improve
them directly. Results are the outcomes of improvement activities and that process you can
manage. Improving is synonymous to loss reduction. What we consider as losses is explained
in the previous chapter: “Waste/Muda” – Anything the Customer does not want to pay for –
the Japanese word for waste. So we can improve the results by eliminating or reducing the
losses. In the loss analysis process the sources of losses are identified and they are ranked
according to their improvement potential.
Improvement planning
The activities in this step are often summarized with the term “close the loop”. In short this
means that the sum of the planned improvements is at least equal to the gap between
current and desired operational performances. By planning a bit more improvement results
than strictly needed to close the gap we create some room to move for ourselves.
This step is much more than just an indication. In fact it is a complete team planning for the
next year based on the identified sources of loss. The team targets are also based on SMART
criteria. A weak point in this process is the late involvement of the improvement teams. The
management calculates the potential savings. The improvement teams do not yet exist so
they can’t be involved in the target setting process at this stage, possibly leading to low
commitment.
Calculation financial impact
As stated in the motivation part at the beginning of this paragraph costs savings are very
important for FrieslandCampina. Financial values also enable us to compare the different
KPIs amongst each other. It is nearly impossible to choose between e.g. OEE losses and
productivity losses other than over (potential) € savings.
The potential savings must have enough impact to put continuous improvement high on the
management agenda. Later we can compare the realized savings with the planned savings to
evaluate the savings plan conformance (savings effectiveness).
After this step the planning phase is completed. We know what we need to do to meet our
targets. We are ready to “do the right things”.
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DO: Improving
The improvement plan is executed in this phase. All employees, both management and shop
floor, are contributing. To make sure that every single employee knows exactly what his
contribution is, a formal and strict agreement on roles and responsibilities is crucial for
success. FrieslandCampina uses the RACI matrix to address these questions:
R = Responsible, the executor of the action.
A = Accountable, the person that approves the action, generally the manager of
“Responsible”.
C = Consulted, contributes to the action and gives feedback that is taken into
account.
I = Informed, needs to know but that is all, no dialogue.
Defining the RACI matrix is not a one-off action. Every important improvement activity is
subject to RACI definitions. Only then we avoid that roles and responsibilities are not clear
and it is a boundary condition for good cooperation in the team.
We want the improvements visible on the shop floor and not only in plans on paper.
Furthermore is it of vital importance to involve all employees in the improvement process.
FrieslandCampina uses two tools for this; an initial clean out and 5S.
An initial clean out is mainly used to demonstrate the potential speed and high impact of
continuous improvement, and to motivate the people. The goal is to create a starting point
for improvements. A dirty machine with lots of problems and stops in a messy environment
isn’t exactly an inspiring place to start improvements. We better make sure that we have a
solid foundation for future improvements. We don’t build houses without a sufficient
concrete foundation, either.
Typical initial clean out activities are cleaning, labeling and eliminating small deviations,
restoring equipment and restoring machine parameters.
An initial clean out event is executed in one day maximum, depending on the size of the
object and the number of participants. Off course the shop floor is heavily involved and in
the lead. But other groups like the (top) management, machine builders and other suppliers
are invited to join and help. This is highly motivating the work force. The importance of their
work space is recognized and appreciated.
5S is a well-known technique. The objectives of 5S are not limited to a clean and shiny
working place. Its outcomes also have a big impact on safety, motivation, waste reduction
and even on productivity by reducing searching time. The five steps in short:
1)
2)
3)
4)
Sort: Removing wastes and clearing the work area.
Set in Order: Designating and labeling locations of work tools.
Shine: Cleaning and improving the appearance of the workplace.
Standardize: Documenting the work method, using standard tools, and sharing the best
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practices.
5) Sustain: Maintaining improvement, controlling work methods, and integrating the 5S's into
the culture.
Only after the initial clean out and 5S it is time to build the formal WCOM (World Class
Operations Management) pillar organization. Pillars are characterized as “A team with a
system made up of a set of improvement methods and management systems oriented to
eliminating a set of losses, supporting the production in reaching their targets”. These pillars
are an important part of the WCOM approach. It is fair to say that the execution of the
improvement activities rely on the pillars. The pillars task can be divided in two main
categories:
1) Building an improved way of working.
2) Managing the improvement teams.
The pillar house of the FrieslandCampina Supply Chain is visualized in the next figure:
The pillars are cross-functional teams that are responsible for the improvement of the
working methods and the reduction of the losses. As we can see in the figure pillars are
specialists in certain fields. Focused Improvement is the expert in productivity
improvements, performance control and routine stops reduction. Planned Maintenance is
the specialist dealing with maintenance optimization, breakdown reduction and speed loss
reduction, et cetera.
Becoming World Class is a long journey. To facilitate the pillars in this process
FrieslandCampina uses pillar routes. The routes are a step by step approach enabling the
different pillars to gather knowledge and experience. The different steps are subdivided in
specific result fields, making clear what exactly should be achieved after completion. The
pillars base their action plans on these desired outcomes.
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The Pillars also have an important task in managing the teams. An in-depth loss analysis
results in an improvement planning. The teams that must bring these improvements are
empowered by the pillars with means like e.g. time, (small amounts of) money, training and
improvement routes.
The improvement teams also have specific improvement routes. Like the pillar routes the
aim is to increase speed and results by providing a standard with proven success. The routes
are tailored to the losses, e.g. a single Minute Exchange of Die improvement route for
routine stoppages. All routes have one thing in common. They follow the Plan-Do-Check-Act
and Sustain approach.
After the planning phase we were ready to “do the right things”. Once the improving phase
is completed we are also ready to “do the things right”.
CHECK: holding the gains
A positive trend will only emerge when we add improvements on top of each other. But
what is the use of this when we can’t hold the gains? We will report improvement result
after improvement result but the trend on the KPIs will be flat. It is vitally important to
sustain the improvements. This is a joint responsibility of every single employee.
There are a number of boundary conditions which FrieslandCampina is very keen to meet.
The most important ones are:
1) The main KPIs are monitored, preferably with an automatic system. Example is the real time
and web based OEE monitoring tool.
2) Improvement teams are managed in a proper way so they bring results in time.
3) Cost savings are reported in a standardized manner and strictly followed.
When these boundary conditions are met it is possible to hold the gains in a structured way.
In every factory FrieslandCampina has a Performance Control System in place. This system
contains four main elements:
1) KPI tree. Translating the factory KPIs to PI’s on operational level. It is e.g. impossible to make
an operator solely responsible for the OEE performance level of his machine. He depends on
the planning department for the number of routine stops, the technical department for
preventing or solving breakdowns and other departments like processing and logistics for
supply failures. But the operator is primary responsible for the duration of routine stops, the
number and duration of short stops and the number of off-spec products. That are much
better indicators to monitor and steer the operator performance then “the container” OEE.
2) The RACI matrix for these PI’s.
3) A standard for every routine stop. These stops have a high frequency and are planned in
advance. They should be performed in the same way every time. A standard is an ideal
enabler for this aim. The minimum level is a best practice level. The optimal is, of course, in
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line with the world class standard of this routine stop. These standards come from the
achievements of the (SMED) improvement teams.
4) A meeting structure. In these meetings the operational performances are monitored and
discussed. Meetings are held on shift-, daily-, weekly- and monthly level. If the achievements
are lower than expected, corrective actions are taken. This on the lowest possible level.
Every meeting has a specific standard with an agenda, participants, meeting goals, output
specification and meeting agreements. Duration is minimal and expressed in minutes. The
effectiveness of every meeting is measured. As you can imagine by now, this measurement is
also standardized.
Furthermore there is an escalation procedure in place. What can’t be solved in a shift handover will be addressed in the daily meeting. The remaining issues for the daily meeting are
handed over to the weekly meeting et cetera.
The second large component in holding the gains is auditing. The saying that “you don’t get
what you expect but what you inspect” turns out to be true during the auditing process.
FrieslandCampina conducts audits on three levels:
1) Team audits. Teams are extremely important. They bring the improvements in the important
performance categories (KPIs). The ‘close the loop’ activity in the planning phase is executed
in the do phase by the different teams. Progress and results of the improvement process are
the responsibility of the teams, but the improvement process per team is monitored via
auditing. Results of the audits are reported to the steering committee.
2) Pillar audits. As expressed earlier, the pillars have two main tasks: develop a world class
working method in their own working area and managing the improvement teams. Pillar
audits measure the speed and quality of these two processes.
3) Plant audits. A yearly event in which the complete improvement system is valued.
FrieslandCampina has a standard audit format in which every desired outcome is described
in a 5 point scale. The 6 audit elements are change management, costs and benefits, KPI
results, performance control, pillars and teams. The total audit score is expressed in a
percentage of the ideal score (100%). Plants can achieve four performance levels over time:
bronze (40%), silver (60%), gold (80%) and world class >90%).
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ACT: System evaluation
Also once a year the management team of the plant conducts a system evaluation by means
of a SWOT analysis. The plant audit is an important input document for this analysis.
Opportunities and threats from outside the factory are combined with internal strengths and
weaknesses. The results of the analysis are captured in an action plan. This action plan is
used as input for the planning phase. The PDCA improvement cycle keeps moving to the next
level.
Improvement results
Without any doubts or hesitation FrieslandCampina can say that the continuous
improvement program WCOM turned out to be a good investment. The benefits are both
financial and non-financial. The most important results are:

OEE increase;

Productivity improvement (units per man-hour);
Elimination of sources of product loss and packaging material loss;
Elimination of sources of failure costs;
Becoming more competitive via conversion cost reduction.



The biggest learnings
After conducting several SWOT analyses we concluded that:






WCOM is a very powerful improvement programme.
Commitment from top management is crucial for success.
Knowledge of continuous improvement/WCOM is important, but knowledge of and
capabilities in change management are even more important.
WCOM is very cost-efficient. Payback times of less than 4 months are certainly no exception
to the rule.
There is a strong correlation between holding the gains and the Performance Control system;
the factories that have a good working Performance Control system are the ones that hold
the gains.
Sometimes we lack detailed loss information in certain loss categories. Better knowledge of
(the sources of) losses would unfold even more improvement opportunities.
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Comparing the two business cases.
Two main approaches have been extensively described and discussed. Their key
characteristics are summarized below.
AKZONOBEL INDUSTRIAL CHEMICALS: Lean Six Sigma
 Driven by top management
 Strong management commitment/ownership at all levels from the beginning
 Embedded in Vision & Strategy
 Both process effectiveness and operating efficiency
 Ex-ante cost reduction target of 1-2% p.a. BU-wide
 Tracking (quarterly) of financial benefits (EBIT)
 Tool for change of culture
 Proven methodology
 Revolving full-time, dedicated improvement leaders
 Black Belts play a distinct key role and report to MT
 Opportunity for personal promotion
 Thorough training
 Talent Development and improvement clearly linked (high-potential Black Belts)
 Operational Excellence Director at MT level
 All levels of the organization, top-down and bottom-up
 Improvement integral part of daily work
 Improvement encompasses all activities (it is the way we work, the only way)
FRIESLANDCAMPINA World-class Operations Management (WCOM)
 Embedded in Vision & Strategy
 Local plant (not site) management driving force
 Strategy and WCOM improvement toolkit are shared company-wide, but
implementation is a local plant responsibility.
 Local plant management responsible for target setting and improvement planning
 Broad range of targets in KPI-terms over time; Performance Control Systems
 Focus on loss reduction
 Cost savings ex-post
 Broad involvement of all employees in ‘DO’ stage (only)
 Formal and strict agreement on roles and responsibilities
 Quick wins (on the shop floor)
 Cross-functional teams
 Reliance on specialists (e.g. for planned maintenance)
 Three-level auditing
Both methodologies have their advantages and disadvantages and it would be difficult to tell
which method is to be preferred. That would depend on the type of company: its culture &
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history, its productmarkets, its management style and the industry it is part of. Nonetheless,
some similarities and differences are apparent when evaluating the above lists. Clearly, both
methodologies are tried and tested in practice and both AkzoNobel Industrial Chemicals and
FrieslandCampina embraced Continuous Improvement to spearhead their strategy. In both
cases, no effort was spared to develop and introduce continuous improvement throughout
the organization and, more importantly, keep momentum afterwards to make CI its way of
thinking and acting.
At AkzoNobel, CI is very much organized top-down and BU-wide, with strong topmanagement commitment and involvement. At FrieslandCampina, CI is primarily a local
plant (not site) management responsibility, but local management is bound to implement
corporate strategy and use common corporate CI tools & methods, including for instance the
definition of important KPIs. AkzoNobel sets distinct cost reduction targets for the whole
business unit in advance and controls operating profit (EBIT) on an ongoing quarterly basis.
At FrieslandCampina, cost savings are more the result of an individual plant’s annual CI plan,
discussed with and approved by the next management level.
A key difference is that with AkzoNobel L6S is an integral part of management development:
young, talented staff is freed-up, trained and assigned full-time to lead a CI project for a
number of years. As Black Belt they report directly to a management team member.
Promotion is likely, once the project is successfully completed. The number of employees
that have been involved in CI projects at various levels (of belt colors) increases year after
year, immersing the whole organization in a CI mode of working.
FrieslandCampina organizes its CI activities more in a hands-on manner, close to the shopfloor of a given production plant. Teams play a key role particularly when implementing the
CI plans.
Potential areas for improvement are identified at the individual production plant level at
Friesland Campina, while, at AkzoNobel, this is done at higher levels in the organization
attempting to address areas that are of common interest to a set of (similar) plants.
Benchmarking of the performance of a given set of plants is standard practice at AkzoNobel,
at FrieslandCampina it is practiced in an informal way only. Similarly, there is little crossplant coordination at FrieslandCampina. Another difference with AkzoNobel is that
approaches to Continuous Improvement differ between the various business groups within
FrieslandCampina (some groups having a more centralized approach than others).
The above concise analysis shows that Continuous Improvement can be approached and
organized in completely different ways. It is also seen that a company contemplating the
introduction of Continuous Improvement faces a great many choices. Continuous
Improvement is a powerful tool for bringing organizations to the next level excellence, but
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the effort to select and introduce the appropriate methodology should certainly not be
underestimated.
Lastly, taking the perspective of the NAP Network, it of interest to note that both of the
above systems fail to directly address the issue of improving the organization together with
its client and supplier partners (or more general: its stakeholders). It is recommended that
NAP takes the initiative to fill this gap.
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Part 2 : Asset and Maintenance management.
General introduction.
The stream ‘Asset & Maintenance management’ of the SIG ‘2x2 OpEx’ has chosen to give an
overview of best practices in today’s Asset and Maintenance management, including crucial
success factors determining excellent Asset and Maintenance management.This section also
describes some theoretical background and common practices in this field.
In describing the best practices we started from the premisse that maintaining (process)
installations is an integrated part of the overall business process, including variables like
stakeholders, changing market situations, and the human factor. This is the key to achieving
the goal as defined by the SIG 2x2 OpEx.
The overall goal of the SIG ‘2x2 OpEx’ is to find ways to optimize Life Cycle Costs (LCC,
operational costs), or even lower these costs significantly. Studies have shown that an
optimal Asset management (installations mgt) and Maintenance management can deliver
cost savings from 15 to 30% of LCC. Based on an estimated invested capital of € 1800 billion
(the Netherlands, process industry only), this is a significant financial gain!
Please note that via the Internet a wide range of knowledge can be obtained, through
literature, courses, methods and systems. We leave it up to the reader to search for
additional material.
History.
In the past, NAP has already been investigating on the topic of “2x2”, including Asset and
Maintenance management. A short summary:
2002: NAP SIG 2x2 Project ‘Your choice for projects, twice as cost, effective, twice as fast’
2008: NAP SIG 2x2 ‘Front End Loading Strategy’.
10 years ago the importance of Value Improving Practices and ICT Tooling was already
recognized; e.g. through methods like Collaborative Engineering (life cycle engineering:
taking maintenance into account during the design process) and Predictive Maintenance
(setting up long-term maintenance plans during the design phase of an installation).
Asset and Maintenance management is a co-existence of developed specifications for
technology, processes and concepts, structures and systems, instruments, other assets (like
spare parts), raw materials, budgets and procedures. Especially the human factor – the
employee with specific knowledge and competences – is the main factor contributing to an
excellent Asset and Maintenance management.
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Unfortunately, this is not always recognized, nor appreciated, in the services industry.
Performance management, focusing on KPI setting/measurements and financial
performances, tends to prioritize to tangible results only (i.e. the Anglo-Saxon model); the
contributions of synergy, collaboration and expertise (i.e. the Rhine-lands model) is less
appreciated. This trend has a big impact on culture and on the loyalty of employees, and is
very often underestimated.
Delivering services is all about interaction between people and partly synchronizing
(technical) processes. The A&M organisation to support all this is characterized by the
interaction of functions held together in a formal structure. Understanding and appreciating
the accompanying culture will have a big added value to the peformance of Asset and
Maintenance management.
Acknowledgements.
The following persons contributed on the topic of Asset and Mainenance management for
the SIG 2x2 OpEx of NAP:



Joep van Aggelen (AkzoNobel)
Ron van Empel (Royal HaskoningDHV)
Dennis Willemsen (Siemens)
With additional contributions from:



Eduard van Emmerik (Emmerik consulting, previous: AkzoNobel)
Nils Bosma (Shell)
Ricardo Parrada Curros (AkzoNobel)
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Introduction to Asset and Maintenance management.
Asset management (a financial term) in practice means ‘managing costs as a good
operational management practice and achieving an optimal return on investment and
optimal operational costs needed to manage installations and resources (people, spare
parts) ; . Asset management is also about balancing between Performance, Risks and Costs
of Assets during the entire life cycle. This is congruent with the definitions in PAS55 / ISO
55000.
The replacement value of an installation is key to express quality in ratios and/or (K)PI. This
is also expressed in Total Cost of Ownership (TCO) and/or Life Cycle Costing.
Maintenance management is the total of people, means, budgets, spare parts and
technologies used to ensure that installations meet all functional specifications during their
life cycle. Conditions are determined by legal provisions, the market, the owner and
operator of installations. In real life, these are often the ‘customers’ of the Maintenance
function.
Best practices are determined based on performances! For maintenance this often means
that concepts and views are adjusted once measurements and analyses show opportunities
for improvement. This is often referred to as Maintenance Engineering. These corrections –
made afterwards – often lead to high operational and maintenance costs, and even costs of
loss generated by unreliable technical availability and malfunctions. Loss of quality can also
lead to less overall results.
When striving for Maintenance Excellence, not only the efficiency of maintenance needs to
be considered, but also – and even more so – the effort to prevent (corrective) maintenance
and malfunctions. This aspect of a reliable and sustainable Asset Management holds a
potential to tremendous (operational) improvements. Needless to say this requires a longterm vision on, and willingness to invest in, Asset Management improvements.
Looking back 10 years, why haven’t we advanced beyond the observation that an integral
approach of a project design, including the impact on operations/usage after “technical
ready” can and should improve!? (see also the NAP report SIG 2x2 Project). The output of
the design process influences future costs directly ; from an efficiency point of view these
costs should be minimal, and (safety and security) risks should be better controllable. Why
do we learn and act so little using the knowledge of others? In 10 years time, will we be
asking ourselves these same questions again, of will we raise our standards and will we make
progress?
We conclude – both from theory and in practice – that improvement/savings opportunities
as much as 15-30% of LCC remain, provided we embed our best practices and continue to
innovate!
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Maintenance.
Maintenance in the manufacturing chain
This integral model of the Manufacturing chain depicts the most important functions adding
value in the process from raw materials to finished products.
Every manufacturing process consists of a primary process – the straight line – i.e. the
activities that can be linked directly to the product. The secondary line represents the
supporting functions. These are no core activities and are judged against level of efficiency
and direct added value to the primary process. In general, these functions are shortlisted to
be outsourced when assessing for efficiency improvement steps: the effort needed to
execute these types of processes is not wanted, the specialized skills are often not
(sufficiently) present in the organisation and more importantly, in general it is felt that fixed
costs can be lowered, i.e. efficiency can be improved. The costs of Asset Management are
managed in a more flexible way. Another perception is that labour costs can be lowered.
Quite often it is not recognized that the end responsibility remains at the outsourcing party.
Focusing on the right priorities regarding functions and processes will lead to effective
decision-making.
Important considerations:
•
Any manufacturing process can only be succesfull when it complies with the client’s
wishes
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•
•
Any manufacturing process can only be succesfull for the owner if it generates a positive
return on investment
The basis for any manufacturing process is an integrated chain, i.e.: a sustainable
improvement can only be possible if the total of all functions are considered. This applies
to maintenance processes, too: the efficiency and effectiveness is often determined for
more than 70% by other functions than maintenance itself, e.g. functions like Process
Technology and Design.
Benefits: Model enabling setting right priorities for Strategy of Continuous Improvement.
Applications: useful for managers explaining Change management and creation of goals.
Maintenance during downtime of installations
In the context of Performance Management maintenance costs are often expressed as a KPI:
Maintenance Costs / Replacement Value (MC/RV). Normally this KPI varies between 1.2 and
4.5%, sometimes a bit higher, depending on the situation. In addition, maintenance costs are
part of the fixed operational costs, in the Chemicals/Coatings sector expressed as KPI varying
between 10 and 25%.
From a financial perspective it is only common sense to manage towards minimal MC.
Therefore a lot of time and effort is spent on efficiency of the maintenance process.
However, loss costs can be a multitude of the MC due to malfunctions and inefficiencies of
work processes; this is not always recognized and valued as such. The reliability, and
competitive position of a company can improve substantially if management would aim its
strategy of cost control more towards process improvements, e.g. by deploying Lean
Management and/or TPM.
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= Production quantity
= Actual maintenance costs
= Analysis, communic., start-up
=Production losses
ProProProduction losses
The above figure depicts losses during a malfunction situation. Focusing on maintenance alone
distracts from other disturbing factors and eventually performance. Looking at maintenance as a cost
center is correct, however it represents only a small part in the total of the collaborative operational
process. The integrated approach on KPI level to manage performance is expressed by ‘OEE’,
Operational Equipment Efficiency.
Important considerations:



Management must be willing to acknowledge that an integrated approach can lead
to better results
Management should invest in cross-functional collaboration, TPM and involvement
and attitude
Management should invest in reporting, trending, analysis methodologies, work
process improvements.
Results are visible quicker and contribute to integrated process improvements. Especially the
Technology, Production and Maintenance / Engineering functions will benefit.
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Maintenance in the design process.
The expenditure associated with the maintenance of production equipment often amounts
to several times the investment costs. Maintenance is a “wide-ranging subject” that must be
reviewed during the entire life-cycle of an installation: from initial definition of the
requirements, design, implementation, use, overhaul and modernization to dismantling.
In 2002 The NAP SIG 2x2 Project published the paper 2x2, ‘Your choice for projects, twice as
cost effective, twice as fast’. And in 2008 the publication ‘Front End Loading Strategy’. Both
publication focus on CAPEX and on the importance of making good choices in engineering
processes and plants.
These studies focused around streamlining the design process, thereby achieving cost
savings on the final investments (CAPEX).
Result of the 2x2 project approach. Excellent project results can be realized by benefiting to
the greatest possible extent from the following four components:
1) Using organizational, innovative and strategic methods for translating business
objectives into the project development process can cut schedule and cost between
15-25%.
2) Using innovative methods such as variant design, new process technology, ICT tools
and value improving practices can realize 25-30% in cost and 15-25% schedule
reduction according to an analysis of the best and worst projects worldwide.
3) Stimulating integration between contractual parties (NAPred) through alliances can
cut CAPEX to 20-30% and schedule tot 15-30% which is regarded as state of the art.
4) Use and understanding of the advantage of standard work processes for project
development in the business and in projects, which is a precondition for good
performance.
Performance analysis model.
Each organisation needs its processes evaluated on a regular basis. This also applies to the
Asset and Maintenance organisation. In order to have a thorough evaluation done, an
integral check is mandatory, i.e. not only looking from the financial perspective, but taking
into account all functions and processes that add value to the overall operations. Any
organisation is an interacting collection of agents contributing to the overall result each from
its own (sub)function.
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STRATEGY
Finance & control,
Procurement, IT
QHS &S, HR
KNOWLEDGE
LOGISTICS
EXECUTION
Technology
Process/maint. Eng.
Archive/doc.mgt
Projects/engineering
LT prod. planning
LT maint. Planning
Warehouses / shipping
Packaging / spare parts
Contracts (mgt)
Production
Maintenance
General services
Contractor supervision
Projects (construction)
The performance analysis model as represented in the figure above, shows the core and sub
functions of the Asset & Maintenance organisation. When analyzing processes these
(sub)functions should be taken into account in order to obtain a sound evaluation. We
should distinguish the main objectives of the Asset organisation versus the Maintenance
organisation. The Maintenance management function aims to maximize a safe, efficient and
reliable execution of concepts; the Asset management function focuses on (maximizing) the
effectivity of the invested effort and invested capital. This leads to a transparent, reliable
and safe production installation where costs are managed effectively.
An important observation can be made here. In order to have an optimal execution of Asset
and Maintenance management a range of topics need to have priority, e.g. reliability (of
planning), availability of resources and installations/equipment, (work)process safety and
employee safety, flexibility (to adapt to changing market conditions, competition, etc.). Legal
compliancy is another top priority, which should be embedded in legislation, procedures and
guidelines.
Main benefits to be gained from deploying this model include a clear process analysis, using
KPI and trend analysis, thereby enabling a continuous improvement process. Various (IT)
methods and tools have been developed to support the analysis. The internet offers a wide
range of information on various tools available; also, various knowledge sharing platforms
and networking communities can be found.
KPI settings in Asset & Maintenance management.
Reporting trend reports based on KPI regarding the most important functional areas only has
added value if the value measured falls within historical values / boundaries and the goals as
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set by management. Only then an unbiased analysis, judgement and decision-making can
take place.
KPI are set selectively for high-level management, in line with strategy and goals.
Determining and reporting on Performance indicators deliver the underlying values of the
KPI. These are needed to track development on lowel levels and to be able to adjust where
necessary. Performance indicators are determined selectively to do analysis on engineering
level, including propositions for improvements.
Defining too many PI and KPI is not efficient. Priorities are lost and a lot of administrative
overhead is introduced. Typically, managers who lack a minimum level of expertise in their
area of responsibilities tend to ask too many (K)PI.
(Key) Performance indicators make the current and desired situation visible (‘ist’ and ‘soll’).
Especially ‘what-if’ questions are important, since they define the impact of new decisionmaking.
Finance
Budget / costs
Internal / external
Materials
MC/RV ratio
Downtime costs
Contracts
Customer
Needs / supplies
Complaints
(technical) availability
Service levels
On call system
Emmissions / leakage
Site services
Overtime
Modifications/projects
Image
Response time
Internal processes
Work requests
(non-)scheduled
Types of maintenance
Top-10 analysis
Spare parts
Preventive
maintenance
Efficiency staff
Technical availability
Mean time BF
Employee
Training
Ideas
MTQ process
MTS etc.
Illness rate
Employee survey
Team work
The table above shows a number of (K)PI that can be relevant for Asset and Maintenance
management. The basis for this set op (K)PI is the Balanced Score Card. A correct selection is
crucial to keep the right focus; this selection depends on the situation of the company
(/site/plant…) and its strategic goals. Many examples can be found in literature.
Important note: the value of (K)PI reporting will be gained by following the DMAIC method.
Benefits can be transparancy, communication, development & continuous improvement,
bottom line results improvements. Various IT systems have been developed to support an
efficient (K)PI tracking and reporting.
Performance analysis on Costs of maintenance.
Maintenance costs are internal and external necessary costs to maintain the functionality of
an Asset in line with its design specifications. This includes specifications regarding safety,
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and technical and functional conditions. Financial conditions can have an important impact,
too, e.g. maintenance costs that outweigh the replacement value of an Asset. These
considerations can be made at both plant and installation level.
Asset Management requires a transparent view on maintenance costs in order to safeguard
the ROI of an Asset. In many cases ERP software tools are deployed to support Asset
management processes.
Maintenance costs are divided into fixed and variable costs. Maintenance should be
captured in concepts. Fixed maintenance consists ofpreventive maintenance and an effort
driven by legal compliance (e.g. inspections). All this effort can be defined by, and managed
via, budgets. The variable part, in many cases corrective maintenance and break-down
maintenance, can be influenced and is depending on the technical well-being of the
installation. Budgetting these latter costs needs a thorough understanding, knowledge and
experience of Asset and Maintenance management to be able to control costs within certain
bandwidths. Risk and reliability management are important methods to be deployed.
Maintenance cost control demands a good translation of systems, structures and expertise
of installations into Maintenance concepts. The result is translated into actions, means,
methods and budgets. Annual reviewing and updating is absolutely necessary. Standards are
captured and maintained in the Maintenance Report.
A thorough Asset and Maintenance Cost Reporting requires good definitions and
responsibilities. Continuous attention and continuous improvement programs can realize 1530% reduction of Life Cycle Costs. Asset owners, Maintenance managers and Controllers are
main stakeholders and have maximum impact on the performances in this field.
The set up of Maintenance Cost report.
Maintenance costs should be split up in:


Plant
Site (buildings, offices, roads)
Maintenance costs are reported in € and is the total of:



Internal hours x tariff
Materials used
External costs
Excluded from Maintenance costs are:


Depreciation of maintenance equipment
Costs for product changeover or transaction time (exchange of dies)
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
Downtime costs
Definitions of maintenance costs.
The following cost drivers are all part of Maintenance costs and the total defines
Maintenance Costs:
1) Direct wages for direct maintenance staff (first line maintenance)
2) Slaries for managerial and support maintenance staff
3) Payroll-added costs for maintenance staff (taxes, insurance, legislative contributions)
4) Spares and material for direct use in maintenance
5) Spares purchased for inventory
6) Consumables charged to maintenance
7) Tools and equipment for maintenance purposes
8) Contractor costs
9) Costs for consultancy services in maintenance
10) Administration costs for maintenance
11) Costs for education of maintenance staff
12) Costs for maintenance carried out by production staff
13) Overtime for maintenance staff
14) Costs for transportation, hotels, etc.
15) Costs for documentation, CMMS and planning systems
16) Maintenance of buildings
The following cost drivers are excluded from the defintion, i.e. are not considered to be part
of Maintenance Costs:
1)
2)
3)
4)
5)
Depreciation of maintenance equipment
Cost for product changeover or transaction time (Exchange of dies, e.g.)
Downtime costs
Modifications
Improvements or projects
External cost:


Contractors
Hired people
In general a relation between maintenance costs and the technical availability of an
installation can be identified easily. This interaction can have a positive and a negative
effect. The next sections describe an example of each of these.
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Maintenance costs and availability – a positive effect.
The relation between costs and output are not always reported. In this context ‘costs’ means
the necessary costs to maintain a reliable and safe operating installation; ‘output’ is return
on invested capital (i.e. the installation). However, if impact and risk of any management
decision is to be assessed, this relation between costs and output should be clear.
In practice, decisions, taken by business management based on cost considerations, not only
affect LCC and overall Maintenance costs, but can also have a negative impact on safety and
reliability of installations. In worst-case scenarios a ‘License to Operate’ may be jeopardized
beacause of lack of maintenance and data control. In this respect it is clear that any
managerial decision should be taken based on risk mitigation. A (IT) reporting system and
effective set of KPI should be in place to support this decision-making process.
Improving Plant availability does not necessarily have to be solved via CAPEX. In many cases
an even better result can be achieved by focusing on optimizing work processes.
Unfortunately, this opportunithy is not always identified or recognized. The SIG 2x2 OpEx
aims to make clear what can be done in this area.
Technical Availability & Maintenance Costs
6.0
-2.0
5.0
-4.0
% Availability Improvement
% Reduction Maintenance Costs
0.0
% Plant availability
-6.0
4.0
-8.0
-10.0
3.0
-12.0
2.0
-14.0
% Cost reduction
-16.0
1.0
-18.0
0.0
-20.0
Start
Year 1
2
3
4
5
2
The figure above shows the relation between Maintenance Costs and availability. The effect
of the input needed to take the technical availability of an installation to a next level is made
visible quite clearly. The figure also shows that costs will decrease only after this has been
accomplished; this can be seen as an investment in improving maintenance work processes.
This real-live case was executed without any CAPEX.
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Considerations
Although Maintenance costs represent only a fraction of RV, they can have a huge impact on
output. As an additional benefit, a thorough understanding of this dynamics at highest
management level contributes to reliability and competetive advantage of the entire
company. Lastly, a well-functioning management of installations, availability of effective IT
(ERP) systems and competence of staff are all conditions to succes.
Maintenance costs and availaibility – a negative effect.
A good design using the right equipment and materials leads to minimal operational and
maintenance costs. Related costs, resulting from malfunctions and corrective actions to be
taken will be lower. The theory is correct providing the right budgetary actions are taken. In
practice however, other factors have a big impact, too: besides a good design and business
model, it is of the utmost importance to have a good maintenance concept and risk
management model in place. This is also important from a sustainability perspective: less
costs of losses, less operational costs, improved safety and reliability, etc. The risk
management model should be support by (IT) systems capturing plans, procedures,
inspection regimes, spare parts positions, reports, replacement policies, etc. It goes without
saying that a competent organisation is the basis for all the above.
Too often Technical Services organisations do not meet the demands as described above. As
a consequence, maintenance budgets are not based on good risk management and
concepts, but rather determined by financial considerations. This may have disastreus
consequences for safety and reliability.
The basis for a good risk management is for Technical Services organisations to be able to
have Maintenance budgets and plans based on a fixed (compliance) part and a variable part.
The fixed part takes into account the compliance to government legislation, owner, vendor,
etc.; the variable part should be able to handle unexpected, non-budgeted disruptions. If
these conditions are not met, budgets may be cut in difficult market conditions without a
proper guidance from the responsible management.
The figure below (trend report) shows a case where even customer delivery reliability was at
stake, as was the Licence to Operate.
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This picture shows the effect of short-term policy and lack of vision on Maintenance. Note
that the Maintenance costs doubled (!) because of the backlog in maintenance activities and
the way the site was perceived severely deteriorated.
Best practices from Asset and Maintenance management.
The team Asset & Maintenance management of the SIG 2x2 OpEx has developed 5 cases, or
best practices.
They can be divided into:
 Best practice example on deploying technology: 3D laser scanning
 Best practices regarding the organisation of the maintenance management function:
o Outsourcing maintenance
o Asset integrity & maintenance management
 Best practices related to methods and techniques:
o Value Engineering
o Asset management Excellence
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Best practice: 3D laser scanning in Operations and Maintenance of process
installations.
What is 3D laser scanning?
The 3D-Laser scanning (3DLS) technique is deployed more and more in many areas. This
technique makes it possible to describe existing situation in detail. A scanner is a measuring
instrument, the measurement is done via a laser beam. The scanned environment is
transferred into pixels – small dots representing reflections. The result is a ‘cloud’ of pixels of
tens of millions of pixels, each defined by a 3D (X, Y and Z) reflection value. This 3D ‘pixel
cloud’ serves as a basis for 3D reconstruction, e.g. in a CAD tool.
Applying laser scanning in engineering
The technique of mapping existing environments using 3DLS has developed strongly in the
chemical and petro-chemical industry. In general experiences using this scanning and
measuring technique are positive, bringing a high accuracy, completeness, quick (data)
processing, multi-usability, conversion options, compatible with many 3D engineering SW
tools, and broad applicability during all phases of an installation’s life cycle, from feasability
study to decommissioning / demolition.
Laser scanning techniques have been part of the package of Virtual Design & Construction
(VDC) for a long time. As an example the deployment in the I-room is considered (see picture
below), where the laser scan acts as a visual tool to describe the existing situation and
environment during the design and engineering process.
Laser scanning in Virtual Design & Construction (source: Royal HaskoningDHV)
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Industry example of laser scanning and 3D-CAD modelling
Especially at upgrade, revamp and modification projects of existing installations (brownfield
engineering) 3DLS proves to be a powerfull aid to implement new equipment seamlessly in
the existing environment. 3D models are often converted to 3D-CAD applications, for the
engineer to determine adjustments and connections very precise. Issues with sizing and
usage of space when introducing new components can now be solved during the
engineering phase already.
Research by Spar Point Research2 indicates that in Brown field projects cost reductions of 57% have been realized on the total installation costs, plus up to 10% in time savings. The
latter is especially interesting for continuous processes, where every day of production loss
counts heavily. In these situations the investments needed to perform the 3D scanning are
only a fraction of the savings that can be realized.
3D laser scanning in Operations and Maintenance
3D Laser scanning also proved its value at installations already in use. 3DLS makes enables a
visualisation of the existing situation to be used for:



Legal obligations: updating documentation in Piping & Instrumentation Diagrams
(P&IDs)
Enhance safety: use visualisation of installations with limited access (e.g. closed
confinements, dangerous locations (radio-active, emissions, etc.))
Instructions and work preparations : staff can be instructed / informed about the
work location via visualisations, instead of being at the location physically
2
3D Laser Scanning: Benefits and Paysbacks for Industrial Plant Design, Construction and Operation, Spar
Point Research, 2009
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Royal HaskoningDHV has developed an Asset Support Tool for Maintenance & Operations
support. Originally this tool was developed to support Plant Stops. Besides the normal
‘critical paths’, logistics and integration of projects are main determinators to a successfull
and efficient Plant Stop. In most cases only procss-related interdependencies are considered
when determining the traditional critical paths. Geographic and/or logistic
interdependencies are often not taken into account.
Various tools and other aids are available on the market to support the preparation and
execution teams during this task. The Asset Support Tool is mainly used to support the work
preparation, but can be deployed in many other ways and in other areas, too.
Asset Support Tool as developed by Royal HaskoningDHV
This tool combines 2D and 3D data together; using an interface all this data is presented as
one to the end user. In this way it can visualize maintenance-relevant information using 3D
in an easy to understand and geographically correct way. The tool combines data from
different sources:



3D CAD models
3D laser scan data of the entire installation or entire plant
A maintenance database, e.g. Ultimo or SAP-PM, including all data of stop-related
activities such as stop point number, description of work / task, geographical
location, functional location, logistic dependencies, contractor(s) involved, etc.
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

2D drawings (plot layout)
Avatars: simple 3D objects identified by a unique number, identical to the unique
stop point number in the maintenance database (also including the geographical
location in the plant).
Using a navigation interface, the user can ‘walk through’ his own plant. Avatars are easy to
recognize and contain a link to the maintenance database; they are also linked to (e.g.) an
execution planning. In this way all activities for a plant can be planned more efficient and
any ocurring logistical issues are identified on time.
The progress of the planned stop can be made visible dynamically through simulation.
Additional advantages include :





More efficient planning of activities, e.g. using 4D simulation
Identifying and solving logistical issues quickly and in a structured way
Improved geographical overview
Shorter stop
Less investment costs.
Best practice: outsourcing as cost saving.
In the Process Industry, cost savings are often found in organizing yourself ‘lean and mean’.
Most production organisations have very similar structures. A plant (or site) manager is
responsible for a number of departments or units, usually Operations, Maintenance and
Projects. The plant manager is supported by staff teams like Purchasing, Finance and HRM.
Within these supporting functions all kinds of activities take place which can be ranked in
order of significance of contributing to the primary process of the production plant (which is:
producing at maximum margin). Benefits are determined by the market (sales dept.), costs
are determined by the production assets.
As a rule of thumb manufacturing companies tend to focus primarily on the production
processes and less on the non-core assets. Maintenance and Operations is organised to
make the primary production process as efficient as possible. Supporting assets such as civil
constructions in plants get less attention, unless (of course) ‘License to Operate’ or Safety
may become an issue. Maintenance of core assets is not considered for outsourcing; the
maintenance of non-core assets might be considered to be outsourced.
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Process
Civil structures
Surrounding infra
& buildings
Non-core assets
Non-core assets are considered to be those parts of a company that are not primarily
essential to the business and to create revenu, cash flow and profit. This does not mean that
non-core assets do not represent any value – on the contrary. When creating these assets,
an investment was made because they add value to an undisturbed primary (production)
process. It is the asset owner’s interest to maintain this value.
Outsourcing
“Outsourcing’ has been around for decades and is defined as: the execution of a strategic
decision to redeploy its own personnel, organisation assets and/or invested capital for the
execution of supporting processes to a 3rd (external) party. The organisation that is
outsourcing work will contract an external services provider or vendor to execute the tasks
to be outsourced. Preferably an external provider is chosen whose core competence is in the
area of the work to be outsourced.
Many examples of outsourcing can be found in catering, security, cleaning & facility
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management, maintenance, ICT, car park, payroll / HR services, warehousing & distribution
(raw materials, (semi-)finished goods), marketing, callcenter (complaint handling, after-sales
services), finance and accounting, etc.
As an example from the process industry, DSM has been outsourcing its ICT since 1992,
although this evolves, too. Today, DSM is working on the 3rd generation outsourcing.
Another example is Philips, who has been transferring various company (business) units to
different countries. IT services are mostly outsourced to low-price (low personnel cost)
countries like India. An engineering services company like Royal HaskoningDHV has been
outsourcing in this way, too.
Dividing core and non-core – an arbitrary choice
The process industry finds cost savings primarily by minimizing necessary costs to maintain
non-core assets. The question that rises is, what is a non-core asset and what is a core asset?
The answer is not easy to give.
For example, building / construction and air conditioning are key to a company that depends
on cleanroom conditions; however, for a bulk chemicals plant buildings will be key to be
usable as control room, or office room, i.e. less important for the quality of the product out
of the primary process.
Example of assessing outsourcing feasibility
AkzoNobel uses an interesting method to assess feasibility to outsource (or not). Various site
services can be defined for every production site (see figure below):
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Site Service Portfolio
Engineering
Inspection
Controlling &
Planning
Warehousing
Laboratories
Accounting
ProcessTechnology
Purchasing & Contract Management
Human Recourses
Operations
Environment &
Permitting
PR &
Communication
Maintenance
Management
Q-Systems
Project
Management
Logistics
Health
EMRES
Fire brigade
1st Line
Maintenance
Safety
Security
Maintenance
& Construction
Citizenship
Facility
Management
Plants
Shared Services
Competence Team
Outsourced
These services can be ranked according to the principle of commercial availability and
business impact. Services with a high business impact and low availability will – in general –
be very site- or plant-specific, and will therefore be part of the site’s or plant’s core activities
(see figure below).
Low
Commercial availability
of competences
High
Site Services Portfolio Assessment
Low
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High
86
In 2005 AkzoNobel used this approach to define services feasible for outsourcing.
Conclusion Services Strategy
High
Status 2005
16
18
20
15
19a
Commercial availability of
competences
18a
13
17
19b
8a
14
6
7
11
6a
5
15a
12
5a
4b 4a
9
Low
10
1-3
Low
Business Impact
8
1.
2.
3.
4.
4a.
4b.
5.
5a
6.
6a.
7.
8.
8a.
9.
10.
11.
12.
13.
14.
15.
15a.
16.
17.
18.
18a.
19.
19a.
19b.
20.
Operations
Process Technology
Maintenance Management
Maintenance Engineering
Execution
Strategy
1st line maintenance
Energy specialists
Inspection, General
Inspection, IVG Status
Purchasing, contract mgt.
QHSE - Responsibility
QHSE – Policy & Support
Controlling
HR – recruitment / development
Accounting
Project management (limited)
Communication / citizenship
Lab
Engineering
BEP < 0.25 mln
Maintenance & Construction
Warehousing
Facility management
Infrastructure
Security / fire brigade
Security
EMRES/Fire-Brigade
Logistics General
High
Core Plant
Shared Service
Can be outsourced
Competence Team
Competence Team
with plant presence
Outsourcing
with plant presence
An example of a successfull outsourcing of Infrastructure and Facility management can be
found at DSM’s Chemelot site. Since 2006, ASITO, an external facility services provider, has
been taking care of facility services; Royal HaskoningDHV has been the services provider for
DSM for the maintenance and operations of the on-site infrastructure.
Outsourcing of activities to a 3rd party whose core competence is the maintenance of noncore assets has been proven valuable. Savings have been realized by (among others)
efficiency measures, economy of scale advantages and making specific knowledge and
expertise available. All activities are measured via KPIs, quality levels and service level
agreements. In terms of costs, savings of 10-20% have been realized.
PAS55 / ISO 55000: the next step in professionalizing asset management
Cost savings can only be realized up to a certain level. Asset management is about finding
the balance between performance, risks and costs of assets during the entire life cycle, in
accordance with the PAS55 / ISO 55000 management system.
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ASSET OWNER
The PAS55 system contributes to the
transparancy in the roles of asset owner, asset
Targets
manager and service provider. Deming’s PlanPerformance
Do-Check-Act cycle is encompassed in this
Progress
system, contributing coninuously to improving
Planning
asset performance. This way cost
ASSET
SERVICE
optimalisations can be made ánd at the same
MANAGER
PROVIDER
time managing risks to an acceptable level. Such a system will not contribute to cost savings
in itself ; however, it will help prevent unforeseen costs, and possibly even legal
consequences, related to maintenance activities. Systems like this prove valuable from the
level of corrective maintenance / ‘fighting fires’ up to the level of integrated asset
management and preventive maintenance.
Best practice on Asset integrity and maintenance management.
Among the responsibilities of Installation (asset ) management and Maintenance
management, managing the integrity and safety of any installation are among the most
important ones. Without these, it is impossible to adher to the demands related to License
to Operate. This requires from management the ability to develop a vision, strategies and
concepts and have them deployed and evaluated structurally. If policies are not based on
the above, the consequences can be desastreus.
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The picture above shows the result of a lack of good maintenance, ad-hoc budgeting
activities and – maybe the most important one – underestimating the required knowledge,
expertise and level of involvement of personnel. Day-to-day reality shows that too often the
human factor is neglected under the pressure of performance, efficiency and cost
reductions.
As a typical trend, modern management tends to try and eliminate disturbances by using
(mandatory) procedures and trainings. As a result, personnel is less involved and feels out of
balance: the opposite of what is intended is achieved. Good people management should be
able to improve matters, here.
Today’s society also has a tendency to ask employees to take more responsibility. Based on
the premise that people learn from their mistakes, it is expected that a self-learning, selfimproving culture will develop and, at the end of the day, results will improve.
In practice, however, quite the opposite is happening. Driven by an increase in (safety)
procedures, guidelines and having to report back to higher management, staff tends to
delegate his or her own responsibilities to others. This behaviour has a negative effect on
overall attitude and behaviour. One should always consider that any formal organisation can
only function well if the informal organisation is appreciated and valued!
In this perspective it is worthwhile to note that recently Stichting NAP has taken the initiative
to set up a Code of Conduct. This code should support individual professionals and managers
in showing their commitment and take responsibility regarding process safety and technical
integrity of installations and assets in general.
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Best practice in Value Engineering.
10 years ago, Value Improving practices and ICT tooling were already suggested. Collaborative
engineering already described Life Cycle Engineering and the commitment and involvement of all
stakeholders, including Maintenance, in the engineering process.
Predictive maintenance was also mentioned as a Value Improving Practice : upfront taking
into account the operations & maintenance phase of an installation, and the development of
long-term maintenance models in collaboration with Engineering, including the necessary
monitoring activities.
The NAP publication on Front End Loading strategies (2008) brings a new perspective on the
importance of a good Project Engineering strategy (introducing the FEL matrix). A few years
later newer Project Engineering techniques are reported such as various project
management tools and engineering tools. Here, too, we see the importance of CAPEX
decisions versus a plant’s long-term operations and OPEX (Plant life cycle costs).
Nowadays Value Engineering is common practice in several sectors, e.g. in infrastructure. An
organization like Rijkswaterstaat demands this for her projects. Thinking about the
relationship between functions and costs. RHDHV uses her experiences with System
Engineering to make Value Engineering a success. System Engineering uses a life cycle
approach (life cycle costing), a multi-disciplinary approach and structured information
management. SE also means attention for stakeholders, working top-down and controlling
the interaction between technology and other functions in a project.
It’s very important to put design choices (and costs) in the perspective of the phase of using
objects. As an extra aid an interactive design process is deployed when using Value
Engineering. Advanced techniques for interactive 3D design, risk control and information
management can be deployed. Alternative scenarios can be developed and checked against
usability, in collaboration with advisors from specific areas of expertise.
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These types of design processes are very rare in the (process) industry markets. When
running an industrial project, there is always the risk of design processes being squeezed
into the project’s (tight) time frames. The project’s main interest is in managing risks, and
complying to (time) planning and costs, i.e. short-term interests. The methods as described
in the 2002 NAP publication are hardly used. A lot of profit can be gained here.
This publication gives another view on the design and engineering process and the relation
with OPEX: The view of the reliability engineer.
Best practice in Asset & Maintenance & Life Cycle Costs.
When developing ‘projects’ the consequences of choices for an optimal (LCC) management,
costs and output, need to be evaluated sufficiently. If not, the additional costs (direct and
indirect) can have a negative impact on the operational management of installations and
facilities. Functional integrity, delivery reliability to customers, and compliance to safety
standards can even be compromised.
The value of Reliability Based Engineering.
In maintenance there is a significant difference between maintenance engineering and
reliability engineering. This difference can also be characterized as re-active versus proactive.
In some cases the consequences of choices regarding an optimal (LCC) management, costs
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and output are insufficiently considered, during the setup of projects. The recurring costs
(both direct and indirect) may have a large impact on the operational maintenance of
buildings and installations. The reliability of installations and functionality can be
compromised. As a result, delivery reliability to customers and safety may need for extra
attention.
Giving insufficient attention to the above will lead to reactive (unplanned) maintenance, the
need for extra warehouses, unreliable installations, redundancy and increasing labour costs.
To prevent dissatisfied customers quite often a lot of effort is requested from the second-tolast step in the SCM chain.
Maintenance engineering is often deployed reactively to establish structural improvements.
Pro-active Reliability Engineering pevents this!
The development of Maintenance concepts is one of the primary responsibilities of a
Maintenance Engineer. However, in general the ME spends the majority of his time on
improvements afterwards.
Asset management focuses on the prevention of, and the preventive actions regarding
potential malfunctions. In other words, when striving for Maintenance Excellence the goal
should be to have zero disruptions, thereby meeting the standards of safety, availability and
reliability.
The function of the Reliability Engineer aims to optimize a (new) installation’s performance
upfront, in terms of sustainability, reliability and safety. One of the goals of this function is to
avoid maintenance, in the context of Asset management. Performances can be improved by
10-30%.
Both functions aim to lower operational costs and comply to SIG 2x2.
Conditions to best Asset & Maintenance & LCC.
Based on day-to-day practice, a number of conditions can be identified leading to Best Asset
and Maintenance management and strive for A&M Excellence. This listing is a summary of
best practices at various companies :

Organize functions: knowledge, planning & scheduling, execution

Develop vision, strategies and concepts for Asset & Maintenance mgt.

Give priority to HR: Competences, expertise and attitude, engagement

Give priority to info/ data management at all layers needs for reporting
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
Set up Performance management: select right KPI and PI

Manage Top X topics for priority setting and lean management

Install TPM and Lean methods for selecting Added value and OpEx

Develop culture of Continuous Improvement ‘driving’ sustainable results

Develop excellent Communication/ Reporting, for evaluation & follow up

Important: safeguard balance in finance, process, innovation & customer

Never forget all results are the output of people, your colleagues!
Focus on (Maintenance) Excellence
Ex: model used to define priorities
Note:
Framed are the issues to start
with mentioned for the
SMB program
Maintenance Excellence
Equipment
RAM Standardization
Life
Contract
Cycle Management
Analysis
P x I x PI = O
K= I x E.S.A.
Engineered Reliability
RCM
Craft Maintenance/ External
Flexibility Operations Benchmarking OPM
Integration
/BSC
Condition
Monitoring
Asset
Strategies/
Concepts/ RBI
Failure
Analysis
Craft Skills
Enhancement
Equipment History
MANAGING
SYSTEM
Planning
& Scheduling
CMMS/Metrics
Work Execution
Review
Materials
Management
Planned
Maintenance
Preventive
Maintenance
Organizational Excellence
Pro active
Maintenance
Predictive
Maintenance
Maintenance
types of Work
Asset
Management
This picture depicts various building blocks for Operational and Maintenance excellence,
starting from the base (planned maintenance) to Asset management as a strategic
framework. Within the context of these building blocks reliability centered mainentenance
(RCM) has an important position.
The figure below shows the RCM approach, making cost and performance drivers visible.
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This facilitates improvement management to focus on the most relevant topics.
Plant performance killers
MC/CRV %
Maintenance “cost drivers”
AVG MC/RV%
Dryer
General
LESS LOSSES:
LOWER COST
Cooler
Filter
3%
AVG MC/CRV %
IND F
IND ALG
Pump
NEUTRAL LINE
MENGW
Compressor
4,5%
“downtime (hrs x cost) killers”
The human factor – leadership versus management.
At the end of the day, it is (individual) people who make a difference. For Asset and
Maintenance excellence this is applicable too, the same as for any other functional or
professional area. This alone already justifies why special attention should be given to
people and the way they collaborate, learn and improve. It takes excellent management to
optimize work processes in terms of effectiveness and efficiency (striving for perfection); it
takes leadership to take a leap forward as an organization to a completely next level of
maturity (striving for excellence).
Leadership and management are two different capabilities. The ideal organisation, and
team, will have leaders and managers in an effective and efficient mix at work. Some of the
features of leaders and managers, i.e. the differences between the two, are depicted in the
table below.
Leaders
Vision, innovation, flexible
Entrepeneurship
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Managers
Control, less flexibility
Procedures, striving to ‘best-in-class’
94
Effectiveness, unique
Mission, strategy & goals
Delegation, development
Continuous improvement
Conceptual management
Few KPI and trends
Encouraging empowerment
Responsible care
Creation develop ownership
Clear course
Efficiency, compete
Manage on targets, figures
Supervision on agreements
Project management
Micro management
Many KPI, passive styles
Desire to be in the lead
Eleminating risks
Demolishes ownership
Bureaucracy controlled
Typically, time effectiveness of people in your organization can be depicted as in the graph
below:
The key learning from this graph is:
When investing in people management, i.e. striving for (people) excellence, it will be your
staff themselves who will start minimizing the ‘time theft’ gap! People will be more involved,
better equiped, have a better understanding on what to do in which circumstance, etc. if the
organization they work for continuously invests in people skills and collaboration across
organizational borders.
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Part 3 : Turnaround management.
General introduction.
The first and simple question to ask ourselves when looking at turnaround management in the
process industry is: “Why do we have turn-arounds?”. Reasons vary:






Legislation (e.g. stoomwezen)
Large maintenance: replacements, repairs
Pitstop maintenance: inspections, cleaning
Plant upgrades
Unplanned (circumstantial) maintenance
Economic reasons: no demand
For turn-around in the (chemical) process industry, the 2x2 OpEx goals translate as follows:
Cutting the operational costs by half: Make the installation fit for purpose and execute plant
upgrades via CAPEX investments.
Extend the life time by a factor 2: decide on, and deploy, an optimal interval planning.
Facts and figures
Some facts and figures in order to put the importance of turnaround (management) into perspective:




In Europe € 3 billion is spent on turn-arounds annually
Indirect costs outnumber the direct Turn-around costs
2/3rd of contractors has been replaced over the last 5 years
18% uses an outsourced planning
Trends
Many trends can be identified relating to developments in Turn-around management:









Responsibilites
Interval planning
Outsourcing
Planning – scheduling
CAPEX
Organization
Communication
Scope definition
Knowledge management (improvement process)
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Acknowledgements.
The following persons contributed on the topic of Turn-around for the SIG 2x2 OpEx of NAP:




Paul van de Lisdonk (Aquilex)
Bart van der Meulen (Tata Steel)
Pier-Jan Hettema (Tebodin)
Albert Snippe (Vattenfall)
The methodology of turnaround management.
Turnaround, also known as maintenance shutdown or outage, is a repetitive planed
interruption of plant operations in order to perform general inspection, reparation and
improvement. To reduce the costs due to the loss of production, turnarounds are always
performed as detailed planned projects with a very tight schedule. Therefore a turnaround
can be divided into different phases:
Phase 1: Preliminary planning
Detailed planning and a well-organized schedule are the basis for the success of a shutdown.
Therefore most of the time is invested in these phases. Depending on the size of the plant
and the complexity of the included processes, a shutdown can easily take more than a year
time of planning. In the first Phase the scope, the operations and the periphery are planned
on the basis of the specific requirements of the plant. The result of this phase should be
documents, ready to be tendered and a general schedule containing the basic frame
conditions and considering all regulations and recommended practices.
Phase 2: Planning of shutdown execution
Based on the general planning in Phase 1 and the generated documents, the scheduling and
resource planning can take place. Therefore the elaboration of operation charts and
workflows is the primary goal. The result of this phase should be the complete plan of the
turnover including…
Phase 3: Decommissioning of plant
As the name “shutdown” already indicates, the decommissioning of the plant is inevitable in
order to deliver a good and consistent turnaround. In this phase all processes that are in
contact to equipment that has to be examined are stopped and the process lines that
contain dangerous substances have to be scavenged.
Phase 4: Execution of Operations
After the decommissioning, the plant is prepared for all actions planned in Phase 1 and 2.
Therefore all actions have to be carried out as described in the plans, workflows and
schedules. Transparent information channels and regular meetings of the responsible
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personnel shall guarantee early detection of delays and bottlenecks resulting in a strict
adherence to the overall schedule.
Phase 5: Recommissioning
Following the fulfillment off all shutdown activities given in the plans and schedules, the
plant has to be reassembled in order to restart the processes which have been stopped
during the turnover. It is crucial to the safety of the plant and its personnel alike the success
of the shutdown, that all work that has been done to this point was carried out completely,
accurate and under consideration of all given guidelines. If all of these requirements have
been fulfilled, the plant should be recommissioned without major problems and afterwards
be working well. It has to be taken into account that especially plants with complex and time
consuming processes will not reach full capacity in a short period of time. This has to be
considered during the scheduling and planning of the shutdown.
Phase 6: Review
After completion of a turnaround, it is fundamental for the success of future shutdowns to
have an extensive review on the factors of success and failure that occurred during this
project and to document potential processes to eliminate failures and strengthen success.
Only a documented review will offer the possibility of continuous improvement and
prevention off repetitive failure.
Reasons for a turnaround.
Though the procedures done in a shutdown are in most cases very similar and just differ in
the details, the reasons for a shutdown can be quite different. The most common turnaround is the inspection shutdown, having the aim of investigate condition of the plant and
taking actions to bring it into a condition that fulfills all internal and external regulations. If
the plant is expected to be brought back into immaculate condition, the turnaround is called
an overhaul shutdown, in which all equipment not fitting the conditions is exchanged.
Occasionally, a turnaround is not just aiming for the removal of degradation due to the aging
of the plant but also for the improvement of the containing processes. These improvement
shutdowns are very often combined with overhaul shutdowns.
The types of turnarounds mentioned above all belong to the group of planned shutdowns.
Though these types of turnarounds in most cases are preferable due to the possibility of the
definition of the scope and the estimation of the costs, there is always the possibility of an
emergency shutdown. Such an unplanned shutdown is necessary when a high risk is
determined in the plant so that the safety of the personnel, plant or surrounding cannot be
guaranteed.
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Modern challenges and chances by performing turnarounds.
Nowadays turnarounds at industrial companies receive more and more attention and are
ranked higher on priority lists. One of the reasons for this development is the increasing
amount of laws and regulations forcing companies to reassess their turnaround
management to ensure the safety and sustainability of their equipment but also the
awareness of increasing investment costs for new plants that can be reduced by keeping the
old plant in a good condition and adjusting them to the changing parameters that might
have occurred during its lifetime.
One of the main advantages of regular turnarounds is the possibility to plan and schedule
the shutdown upfront. This ensures very short downtimes and high reliability by preventing
unplanned emergency shutdowns. Though the loss of capital might be little higher while
performing turnarounds, the costs are easy to estimate and therefore the risks of unplanned
loss of production can be massively reduced.
In light of the above description of Turnaround developments 4 best practices are
described : DuPont, Tata Steel, Shell Global Services and Bilfinger. These companies are
faced with turnarounds regularly and are handling them effectively, from different points-ofview.
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Business case #1: DuPont.
Introduction to DuPont.
Du Pont de Nemours (Nederland) B.V. is part of the global E. I. Du Pont de Nemours and
Company, a science-based products and services company. Founded in 1802, DuPont puts
science to work by creating sustainable solutions essential to a better, safer, healthier life for
people everywhere.
Operating in more than 70 countries, DuPont offers a wide range of innovative products and
services for markets including agriculture and food; building and construction;
communications; and transportation.
The DuPont sites in the Netherlands are situated in Dordrecht, Breda and Landgraaf. DuPont
Netherlands employs approximately 950 people.
Dordrecht is one of the largest production sites of DuPont in Europe and it is the company’s
eldest site in the Netherlands. The site is home to nine manufacturing plants where the
synthetic resins Delrin® and Surlyn® are made, the refrigerants Isceon® and Suva® and the
fluoroproducts Teflon® and Viton®. The Teodur Powder Coatings sales organisation and the
DuPont Crop Protection marketing organisation are located in Dordrecht as well.
The sales organisation of Standox® automotive refinishing paints is located in Breda. The
Landgraaf site manufactures filaments for the toothbrush industry.
All production sites of DuPont in the Netherlands are certified according to ISO-9001 and ISO
14001.
A summary of this business case can be found in Annex 4.
Turnaround management at DuPont.
DuPont Dordrecht is planning and performing their shutdown independently from shutdown
activities in the nearby areas such as the Botlek. They are not taking into account the
shutdown planning and possible (non-)availability of contractors due to Botlek and
Europoort schedules. The site consists of two Strategic Business Units (SBU). All Inspection
planning and scheduling is being done by the same site team, performing the shutdowns on
both SBU´s not simultaneously.
This section describes the best practices that enables DuPont to successfully perform
turnarounds.
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Scheduling
DuPont is using Oracles EPPM solution Primavera as the central tool for scheduling
shutdowns. Therefor all procedures planned for the turnaround are scheduled in one
Primavera schedule, allowing a detailed summary on all tasks to be dealt with. To ensure
that no tasks are being overlooked, the software offers a variety of filters, to provide the
user with the overview he or she needs.
DuPont is using the following freezing dates:


Capital freezing date is one year before the turnaround starts
Maintenance/Production freezing date is five months before the turnaround starts
All add-ons to the shutdown need to be approved by the site Turnaround Steering Team.
DuPont defines the following fixed Milestones for each turnaround:



End of wrench time (hands-on)
End of commissioning
Ramp up time (sustain date)
The Scope is always scheduled without contingency by the units in order to plan the pure
work. Contingency is put in by the site scheduler afterwards.
Capital
An important issue during a recent turnaround organisation schedule was the fact that the
approval for capital expenditure was too late. As a result, the purchasing of equipment was
delayed and equipment was not ready for the turnaround period. This has to be taken into
account in future turnarounds.
Intervals
There is a limit in the complexity DuPont wants to handle during a turnaround period. This is
the main reason for not extending the turnaround intervals. DuPont’s philosophy is to do
smaller intervals with less complexity rather than bigger intervals with big complexity and
risk.
Continuous Improvement Process (CIP)
Over the last turnaround periods DuPont spent a lot of time in analysing the root causes of
the turnaround issues by RCA methodology. More than 200 recommendations were
identified and monitored and as to date, only 7 recommendations are open.
The turnaround organisation is a corporate competence with an assigned Corporate
Turnaround Manager. At three stages in the Turnaround cycle corporate 2 nd party audits are
held to audit the process:
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


audit focus of the turnaround organisation
audit focus of the turnaround schedule
audit focus of the complete turnaround preparation and execution (all)
The audit consists of 93 questions that will lead to a score from 0-100%. The score is used for
internal benchmarking and reporting.
Organisation and Communication
Responsibilities in the Turnaround organisation are designated to business level. The site
Turnaround Team starts with issuing a Business Objective Letter. If there is a change in the
objective, a revision of the letter is issued and is communicated on all levels
On site, different expert teams are performing the assigned tasks




Steering Team
Core Team per business unit
HSE-Team
Scheduling Team
Scope
At DuPont, the scope of the turnaround is defined by:



Maintenance: 60% of the data is coming out of SAP (PM)
Technical/Engineering
Production
Inspection reports of equipment are all set up, maintained and stored in SAP completely.
Depending on the scope, items are skipped out. So inspections are always starting from a
complete inspection scope.
Business case #2: Tata Steel.
Introduction to Tata Steel
Tata steel IJmuiden is a top steel producer in Europe, with high quality products and a
complete product range of steel products and related services. The steel products from
IJmuiden are mainly processed in construction, in lifting & excavating machines, in consumer
goods such as white goods (refrigerators and stoves) and in the automotive and packaging
industries. The site has excellent logistics based on its location and the deep-sea port,
railway, road and inland waterways; it holds an excellent export position and home market
with high-value markets. Health and safety is Tata Steel’s number one priority.
In IJmuiden, Tata Steel runs a fully integrated production process, ranging from iron and
steel making, to rolling and coating, with a tradition of innovation and continuous
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improvement. The site’s production capacity is 7.5 million tons of steel. Approximately 9.300
employees, including 250 researchers are employed in IJmuiden.
A summary of this business case can be found in Annex 5.
Shut downs at Tata Steel.
Tata Steel in IJmuiden is organised in 10 Works and 3 Service Units. In total there are around
60 facilities. These facilities differ very much in size and shut down regime: from pit stops of
4 hours each week to large scale shutdowns of 3 months after more than 10 years
continuously in operation. To manage these various types of stops a classification system is
in place to apply different sets of working procedures for different types of shut downs, to
be able to manage the shutdown properly.
The execution of shut downs is the responsibility of the Works, including scoping and
scheduling.The Central Engineering department has set up standards for shut down
management to improve the execution. Apart from setting shut down standards, this
department is also responsible for quality reviews during the preparation phase and overall
site scheduling.
Although standard procedures as scope freeze and schedule freeze are well known parts of
shut down management, these procedures have to be tailored to different types of shut
downs. At this moment Tata has decided to use a simple approach in which scope freeze and
planning freeze dates are set by the following rules:
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Level of complexity is set by
two rules:
• length of stop:
–
–
–
< 24 hours
24 – 96 hours
> 96 hours
OR
• simultaneousness with
other stops:
–
–
–
0
1
>1
Outcome:
–
–
–
Low
Medium
High
The level of complexity defines the
timing and organisation of the shut
down:
Complexity
• Low
• Medium
• High
Scope Planning
freese freese
(weeks)(weeks)
4
1
7
2
10
2
For mayor Blast Furnace shut down
(1/10 years, 3 month duration) a
separate organisation is set up.
As shown in the figure, two variables are considered: the duration of the stop and the
simultaneousness with other stops. For example, if the steel plant has a regular maintenance
stop, the blast furnace has a stop as well due to the fact that hot iron production is coupled
to the steel making process. In this example the shut down complexity is higher, having more
contractors on site and more complicated logistics to be managed. As depicted in the figure,
a higher level of complexity will ask for more preparation time and therefore, scope freeze
and planning freeze dates are set earlier.
The use of standardized codes of status of work order preparation, like order ready for
scheduling of ready for execution, enables the monitoring of preparation progress compared
to the different scope and planning freeze dates. All this information is available in our
Maintenance ERP system. This increased transparency has improved the quality of
preparation significantly.
Trends and issues.
One of the major trends is increasing shut down intervals. There are several facilities
working with intervals between 4 to 10 weeks. Increasing the interval will result in more
uptime and less logistic disturbances. A decrease of experience of shut down management is
not to be expected because of the relative short intervals.
Another important trend is the increase of foreign personnel. Cultural differences, language
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barriers and communication issues are likely to increase the risk on health and safety issues.
A third significant trend is to uniformly apply methods (standards), to professionalize shut
down management. Part of these methods is more focused on risks / risk management (e.g.
quality review, scoping).
CAPEX projects in plant shutdowns introduce high risks since shutdown- and project
management are not synchronized.
High peak loads for contractor personnel introduce the challenge to ensure quality and low
costs (HoTT). Lastly, due to the extreme long interval period of 14 years for the Blast
Furnaces, it proves difficult to maintain the specific turnaround knowledge and have it
available on-time.
Business case #3: Shell Global Solutions.
Introduction to Shell
Shell Global Solutions (SGS) helps improve its customers' business performance by providing
leading-edge energy consulting and innovative technology. SGS is committed to responsible
energy, innovative technology solutions and environmentally friendly approaches. The
technologies provided by SGS have been developed in response to the challenges that
emerge when operating complex process plants in demanding operating environments.
SGS has its origins in the research and technical service organization that supported the
Shell's activities worldwide. Originally, their mandate was to work with the Shell businesses
in the development of “wellhead-to-wheels” technology. However, it was recognized that
their leading-edge technologies, intellectual property and operational expertise could be a
significant value creation opportunity for other leading players in the industry.
By drawing on its experience, SGS provides business and operational support including
project-execution services from design and engineering through ommissioning and start-up,
experience transfer, master planning and training.
A summary of this business case can be found in Annex 6.
Turnaround management at Shell.
Shell has their biggest refinery at Pernis in Rotterdam, producing around 400.000
barrels/day and a chemical plant in Moerdijk. The Turnaround policy is based on deploying
dedicated Turnaround teams with the assistance of very experienced turnaround
consultants that support shutdowns performed worldwide.
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The collected best practices of the Shell Global Solutions B.V. are listed below.
Scope
The central aim is always to stay responsible for the scoping, to minimize possible risks. In
fact, every workorder in a turnaround can be carried out by external contractors, except for
the scoping. The scoping personnel has to be highly experienced coordinating turnarounds,
otherwise you will be losing control.
Shell is planning their turnaround strategy from a risk based point of view. Depending on size
and nature of the plant considered for a turnaround, the strategy can be chosen, as long as
the primary goal is reached to make the installation fit for purpose for the next running
interval, guaranteeing optimal operation and a high reliability of a plant.
Organisation and Communication
Agreements between refineries about turnaround intervals and shutdown times are not
permitted by European law. Using long term contracts with the main contractors which are
not bound by this law, this kind of information can be shared informally. The second
advantage of long term contracts is the improvement of the Turnaround Teams working
together, which is crucial for the success of a project.
Continuous Improvement Process (CIP)
The assignment of a worldwide competence team, i.e. SGS, with in-depth knowledge
supports the Continuous Improvement Process. In addition, long term contracts support the
continuous improvement and gain of knowledge on the plants themselves.
Intervals
The intervals for a shutdown are very depending on size and complexity of assets. From a
HSE (Health, Safety and Environment) point of view it is preferred to have less people on
site, therefore shorter intervals with a clearly laid out scope are often better than long
intervals with a big scope and more contractors on site.
Capital
Total Cost of Ownership mostly comes out of Capex resources. The lifetime costs are not
always taken into account totally.
Scheduling
Shell prefers the springtime for big turnarounds because it offers the best weather
conditions.
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Business case #4: Bilfinger.
Introduction to Bilfinger.
Bilfinger Industrial Services supports its customers with the (turnaround) expertise it has
acquired over many years, which it makes available to them within an international network.
When it comes to turnarounds, Bilfinger Industrial Services is a competent partner to the
industry. Its expertise in maintenance as well as construction and project business
represents the foundations for professional handling of challenging turnarounds. Numerous
references for successfully implemented turnaround projects bear testimony to this.
Planned maintenance activities, such as major repairs and turnaround projects, have a
substantial impact on the operating result of a technical facility. Against the backdrop of
mounting competitive pressure, professional turnaround management is therefore
becoming an increasingly critical success factor for manufacturing companies in all industry
segments.
The integration of revamp projects into a turnaround represents a particularly challenging
task relating to project planning and handling. By intertwining the turnaround business with
the maintenance and project organization within Bilfinger Industrial Services, the company is
ideally prepared for this assignment. Thanks to its wide portfolio, Bilfinger Industrial Services
is in a position to realize both partial services and turnarounds as unit or general contractors.
Budgets and adherence to time schedules are key focal points of each turnaround. At the
same time, high safety and quality standards must be ensured. This is possible by deploying
a consistent and solution-oriented project management system comprising planning,
coordination and execution on the one hand as well as analyses and sustainable
documentation on the other.
For Bilfinger Industrial Services, this is the model of the future. Not only does it have
extensive experience and know-how, but also an organization that is geared towards
implementing newly discovered findings in the context of methodological skills and
standardized processes, without neglecting the required flexibility.
A summary of this business case can be found in Annex 7.
Outsourcing Turnaround management.
Bilfinger is a partner for companies who don’t have a big enough organisation or don’t have
a corporate competence organisation to handle a big 4-5 year turnaround organisation and
schedule.
In this business case a big refinery in the Europoort area of Rotterdam is one of the clients of
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Bilfinger.
The refinery has a 5 year turnaround schedule and Bilfinger organises the turnaround
management this year (2013) for the 2nd time. The Bilfinger organisation is at peak level,
during the Turnaround execution phase at a level of 120 FTE’s. During the planning phase
the organisation starts at approx. 50 FTE’s.
The refinery uses also Bilfinger as one Turnaround partner, so all subcontractors are
contracted by Bilfinger purchase department. Although there is one Turnaround partner, the
scope of the turnaround is managed by the Client.
The Bilfinger Turnaround organisation is depicted in the figure below:
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There are two phases for Bilfinger, a Planning phase and Execution phase. The planning
phase is characterized by the following activities:





Scope by Client, scope is frozen appox. 6 months before turnaround.
Data collection
Site checks
Scope to work packages
Scheduling
Bilfinger’s responsibilities include, but are not limited to:





QOHSE
Cost (unit rates)
Extra work (approval by Client)
Delivering a pool of FTE’s for flex force
Managing RACI
Primavera is used as SW tool for planning and scheduling of the workpackages. As a general
trend, complexity is the main driver for outsourcing turnaround management.
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Annexes.
Annex 1 – business case AkzoNobel: full-scale introduction of Lean-6-Sigma.
AkzoNobel has its activities equally spread over 3 business areas:
1) Decorative Coatings
2) Performance Coatings
3) Specialty Chemicals
AkzoNobel generates a turnover of 16 Billion Euro (2011) and employs approximately 55000
people worldwide.
Industrial Chemicals is one of the business units in the business area Specialty Chemicals
with a turnover of 1.2 Billion Euro, and approx. 1700 employees. Industrial Chemicals is
acting in the markets of salt, chlorine, caustic soda, chloro methanes en mono-chloro-acetic
acid (MCA). It has leading positions in Europa and is leading globally in MCA.
MCA facility at Delfzijl, Netherlands
Situation/Tasks:
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


In the past various CIP programs were executed with results limited to only parts of
the organisation and with restricted sustainability; most were executed on
production locations
Today’s strategy includes 3 pillars: operational excellence, sustainability and
profitable growth
Target: create added value of 1-2% of the annual cost base
Activities:




Kickoff 2009: Operational Excellence masterclass
Starting January 2010 Lean Six Sigma was implemented in the Business Unit
As part of Talent Factory and MD programs Black Belts were selected from a group of
high potentials; the vacancies were filled with new talents
The L6S program was to be deployed across the entire BU and was to facilitate a
continuous flow of improvement projects for multiple years
Results:




L6S projects have been running for 4 years and continue to be executed
Continuous in- and outflow of Black Belts, with a steady number of approx. 15
dedicated Black Belts, running 1,5-2 projects each
The program benefits (based on EBIT) for the 3rd, 4th and 5th year were planned to
be 2x, respectively 4x and 8x the costs
2013 will be the 4th year and the planned return on investment will be made easily
(>> 1 M€)
Examples of results:







The Chlor-Alkali business had ca. 300 tank wagons contracted; a considerable
amount was not utilized. With L6S the utilization grade was improved significantly.
In Ibbenbüren the use of cooling water of about 3000 cubic meter per hour reduced
with 20%.
In Frankfurt and Rotterdam the chemical waste quantities were reduced with 40%
compared to 2010.
The delta between the forecasted and actual electricity consumption was reduced to
below 2% in the chlorine production in Rotterdam.
In the salt plants in Delfzijl, Hengelo en Mariager(Dk) a saving could be realized of
more than 2 Million €/year.
In several chemical plants of IC a capacity improvement was achieved of more than
10% by consistent measuring, the use of statistical analysis methods and
consequently making the right modifications in process monitoring and operation.
In China, Taixing, the 5S-method was applied successfully. Tidiness and
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

housekeeping improved significantly. The operators have got now more time
available for inspection, operation and maintenance of packing machines, resulting in
a higher output.
By using the L6S methodology the organization gained more understanding of the
root causes of illness absence. Based on the results numerous improvements are and
will be realized.
Procurement: In a number of categories in Site, Operational, Consumables and
Services a L6S team set up and negotiated new frame contracts with suppliers
leading to a reduction of 10-15% of the purchasing price.
Acknowledgements:


Ref. internal memorandum of AkzoNobel Industrial Chemicals (J. Inberg 2009)
Edited and summarized by E. v. Emmerik.
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Annex 2 – Interview AkzoNobel.
Interview with Francois Ramond, BU Director Operational Excellence and Nelly Nijssen, Lean
6 Sigma program office manager about working with Lean Six Sigma (L6S) at AkzoNobel
Industrial Chemicals.
AkzoNobel has its activities equally spread over 3 business areas: Decorative Coatings,
Performance Coatings and Specialty Chemicals. (Turnover 2011: 16 Billion Euro, ca 55000
employees). Industrial Chemicals is one of the business units in the business area Specialty
Chemicals with a turnover of 1.2 Billion Euro. (ca. 1700 employees). Industrial Chemicals is
acting in the markets of salt, chlorine, caustic soda, chloro methanes en mono-chloro-acetic
acid (MCA). It has leading positions in Europa and is leading globally in MCA.
What are the critical success factors to sustain L6S successfully?
FR: Ownership is the magic word. The entire organization should support it. In particular
management should show real commitment by giving the right priority to improvement
projects, freeing up resources and being prepared to organizational changes. L6S leads to a
culture change and a new way of working, which eventually makes the organization change.
Just a clean L6S implementation as methodology can be done and leads to improvement, but
then there is no differentiation with other continuous improvement methods. In Industrial
Chemicals it is more than just introducing a new technique. It is about making everybody
aware that L6S is a different and better way of working.
We do not achieve this by a top down approach only, as we applied in the first years. Not
enough ownership was created. It must also come bottom up from the shop floor. That can
only be accomplished when all employees are involved and there is commitment of all
management levels.
In this respect we have still to do more. L6S is too much seen in the organization as a
program that comes on top of other programs. There is a risk that the organization
perceives it as an extra pressure and feels forced by higher management to do more show
projects, while it is already busy with the ongoing business and running programs like the
Corporate Training Program, Eco Efficiency Program, etc. In that situation the green belt
training program for lower and middle management will be insufficiently executed because
there is not enough time left and the purpose to do improvement projects by L6S comes
under pressure.
Yet, Lean six sigma is what we want because then and only then the solutions will be
accepted and carried by the entire organization and real problems will be solved in a
sustainable way. Instead of spending extra time on reduction of non-conformities and
rework it will become easier, time will be saved and productivity will be improved. Long term
it saves time which can be used to make more improvements. So L6S becomes ‘the way of
working’ in our business unit and do we use one language regardless where we are in the
world.
The big challenge in 2013 is embedding L6S in all layers of the organization and making L6S
the only way how we improve things and solve problems. An absolute pre-condition is full
management commitment of higher management. They must continuously advocate that
there is only one way to improve: the Lean Six Sigma way.
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How successful is L6S after the program was launched about 4 years ago and how is
success measured?
FR: After completion of each L6S project the EBIT (Earnings Before Interest & Tax) is
calculated and validated. It can be an extra earning or a saving either in fixed costs or
variable costs. Of all L6S projects the EBIT per quarter is reported and verified by business
controllers. It always concerns real earnings or savings. If a capital investment is necessary it
will be fully included in the EBIT calculation. In all cases it concerns only small capital
investments.
In L6S we always focus on the feasibility of savings or positive financial effects. The potential
outcome is compared with the ‘as is’ situation. The result is the ‘gap’ that should be closed.
And that’s what we are doing: not accepting the ‘as is’ situation and continuously looking
for opportunities to close the ‘gaps’.
After 3 years we reached a constant level of 15 dedicated Black Belts. Yearly there is an
inflow and outflow of about 5 black belts. They complete 1,5-2 projects per BB, resulting in a
total of 20-30 projects annually. The offset of the returns against the investment in the L6S
project (the cost of consultants, organization, program management, freeing up resources
becoming black belts etc.) was negative in the first year. But in the second year we had to
reach breakeven. The target for the third, respectively the fourth and fifth year was to
deliver a return of twice , respectively four and eight times the costs. 2013 will be the fourth
year and we are going to reach the target easily. And we are not talking about small money,
but about millions of Euros. Large companies like Coca Cola, GE, Celanese, Sony, Siemens,
IBM, Boeing, Dow Chemical, Merck…etc. discovered this already in the past and now also
AkzoNobel, adopted L6S as the continuous improvement vehicle. More business units
started working with L6S.
What happened with the Black Belts flowing out? Were they satisfied with the next career
step ?
NN/FR: The entire first wave Black Belts accepted a new job in AkzoNobel at a higher level
than the job they left before being nominated as a black belt e.g. sBU Controller, Operational
Excellence Manager, Technology Manager and Key Account Manager. One of the serious
goals of the L6S program is that Industrial Chemicals selects TOP talents from inside and
outside the BU in order to let them grow as a Black Belt and after achieving good results let
them flow to a higher position. L6S acts as a talent factory. Also during the economic
recession, society is in now, we continue the program. And when the economy is back on
track we have got the right people on those spots where we need skilled leaders. These
leaders enhance a culture in which we do not accept an average result, but endeavor
continually the best performance. And that’s what we mean with ‘closing the gap’ says
Francois.
In contrast with other organizations the Black Belts are fully dedicated to L6S during 2-3
years abandoning their present job. They will not return afterwards to their old jobs. New
people have been recruited in those jobs in the meantime. The candidates have to go
through a heavy selection procedure. The group of Black Belts acts as an extra resource and
is considered as an investment in the organization.
The management development part enhances the interest of potential candidates to join the
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L6S program as Black Belt. So Lean Six Sigma contributes fundamentally to the talent
development program of Industrial Chemicals. The continuous improvement process that
companywide has been implemented and anchored, yields in big quality improvements and
savings e.g. in operational equipment efficiency, raw material and energy efficiency, quality,
maximum proven hourly capacity, lifetime of equipment, project duration, logistics, the
procurement process, OWC, etc. We expect a lot of our Black Belts. They are the talents,
who will and must grow into higher management jobs in the near future.
How show members of the BU management team commitment to L6S?
FR: The Black Belts report directly to a member of the management team. The Black Belts
keep weekly contacts with their bosses and meet face to face regularly. The Black Belt is
frequently invited to report progress of his/her project in one of the 4 sub-Business-Units
Management Teams. In the AkzoNobel Industrial Chemicals News Letter frequently successstories about L6S projects can be read. Business Unit MT-members act often as steering
committee chairman of larger L6S projects.
What could be improved?
NN: There are still many things to improve. More can be done involving more employees in
all layers of the organization in the use of L6S. The Belt trainings will be included in the yearly
personal targets, agreed between employee and his manager. A better structure will be set
up at the sites to promote the identification of L6S projects and to enable the sites to set up
and manage the lean six sigma process. Targets will be agreed with respect to the number of
employees to be trained.
FR: We develop fast; On top of Green Belt and Black Belt training also Yellow Belt and Brown
Belt training are performed in 2013. Yellow Belt is a one day L6S awareness training focusing
on identification of improvement opportunities: ‘Gap’ identification. Brown Belt is an expert
training at the sites of two weeks lead by Black Belts. The important continuous
improvement techniques and the DMAIC approach is learned, and applied directly in existing
improvement projects. The Brown Belts are deployed also in the training of Green Belts and
Yellow Belts. It leads to a balanced approach of the improvement culture: top down and
bottom up. The goal is: more than 10% of the employees trained in 2013 and more than 50%
in 2015.
Assuming one completed project per year per trained employee results in 170 projects in
2013, and 850 projects in 2015 spread over all parts of the business unit en over all locations
(12 locations worldwide). We expect that in 2013 the point of no return will be passed and
L6S will be sustainably embedded in our organization. From watching passively what
happens by the majority of the people it will change in “can we join and when?” From that
point the system keeps going on by its own strength and has enough momentum to sustain,
supported by its facilitators and the management of the business unit. And those who still
do not want to participate? They do not longer feel at home in our business unit and will
make other choices in their careers. All in all, a big challenge for the management team of IC
and the people of IC.
Some examples of successful L6S projects in IC:
 The Chlor-Alkali business had ca. 300 tank wagons contracted. A considerable
amount was not utilized. With L6S the utilization grade was improved significantly.
 In Ibbenbüren the use of cooling water of about 3000 cubic meter per hour reduced
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






with 20%.
In Frankfurt and Rotterdam the chemical waste quantities were reduced with 40%
compared to 2010.
The delta between the forecasted and actual electricity consumption was reduced to
below 2% in the chlorine production in Rotterdam.
In the salt plants in Delfzijl, Hengelo en Mariager(Dk) a saving could be realized of
more than 2 Million €/year.
In several chemical plants of IC a capacity improvement was achieved of more than
10% by consistent measuring, the use of statistical analysis methods and
consequently making the right modifications in process monitoring and operation.
In China, Taixing, the 5S-method was applied successfully. Tidiness and
housekeeping improved significantly. The operators have got now more time
available for inspection, operation and maintenance of packing machines, resulting in
a higher output.
By using the L6S methodology the organization gained more understanding of the
root causes of illness absence. Based on the results numerous improvements are and
will be realized.
Procurement: In a number of categories in Site, Operational, Consumables and
Services a L6S team set up and negotiated new frame contracts with suppliers
leading to a reduction of 10-15% of the purchasing price.
(E. J. van Emmerik, Delden, 2013)
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Annex 3 – business case Royal FrieslandCampina : running a Continuous
Imrovement programme for the BG Consumer Products Europe.
Royal FrieslandCampina is a dairy company of global proportions. The company expects to
pass the revenue milestone of 10 billion euro in 2012. FrieslandCampina has a double-edged
ambition: on the one hand to bring the essential nutrients of natural dairy to people
worldwide, and on the other hand to be the most attractive dairy company for the
Cooperative’s member dairy farmers. To achieve these ambitions FrieslandCampina has
formulated the “route 2020” strategy for the period 2010-2020.
The key words in the strategy are growth and value creation: growth of the Company and
ensuring all the milk produced by de Cooperative’s member dairy farmers reaches its
maximum value. To this end FrieslandCampina is striving to achieve the following targets in
2020:




An increased share of specialties and branded products in the total sales volume;
Further growth of operating profit;
A substantially higher performance payment and a higher distribution of member
bonds for the member dairy farmers;
Climate-neutral growth throughout the chain from cow to consumer.
Situation/Tasks:

Based on the company’s strategy of growth and value creation, the supply chain
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
organization decided to contribute via a continuous improvement programme
The World-Class Operations Management (WCOM) program interlinks and supports
the individual CIP programs of each of the 4 business groups at FrieslandCampina
Activities:


Focus around the Business Group Consumer Products Europe
Based on Plan-Do-Check-Act (PDCA) loop with CIP activities (see slide 4)
Results:





Increase in Operational Equipment Efficiency (OEE)
Improved productivity (units per man-hour)
Elimination of sources of product loss and packaging materials loss
Elimination of sources of failure costs
Increased competitiveness via conversion cost reduction
PDCA loop and related activities:
Acknowledgements: Peter Hartman, FrieslandCampina.
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Annex 4 – business case DuPont: organizing Turnarounds via site
management.
DuPont site at Dordrecht, Netherlands
Situation/Tasks:



The DuPont site in Dordrecht, NL, hosts 2 SBU’s: Delrin and Fluoroproducts
Brands manufactured at Dordrecht: Delrin, Telfon, Viton, Surlyn
The site has a Site Turnaround manager and a Turnaround planner / scheduler
Activities:



Next to a global TAR management, a site-specific TAR management team is in place:
o Steering team
o Core team per SBU
o HSE
o Schedule team
Intervals are related to the complexity of TAR
Scope:
o Technical/engineering (CAPEX)
o Maintenance (60% from SAP)
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o operations
Results:

Improvement process:
o RCA is used to identify root causes
o Corporate competence (development)
o Corporate audits (3 phases)
Aspects regarding scheduling :



Freezing dates
Using Primavera SW tool (one big schedule)
Milestones:
o Capital
o Maintenance / operations
o End of wrench
o End of commissioning
o Ramp up time
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Annex 5 – business case Tata Steel: organizing Turnarounds via site
management.
Tata Steel facility at IJmuiden, Netherlands
Situation/Tasks:



Top steel producer in Europe: 9,300 fte personnel, including 250 research staff
Capacity: 7.5 million ton steel / year; fully integrated production process
Products: hot-rolled, cold-rolled and coated steel
Activities:


Different types of shutdowns:
o Duration varies: 3 hours – 3 months
o Intervals vary: 1 week – 10 year
o Man hours vary
o CAPEX vs maintenance: 0-100%
o Linked and non-linked shutdowns
The site is organized in 10 Works and 3 Service units
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
60 facilities in total
Results:






Focus on stops less than a week
Vast majority of stops is 1 day / low-complexity
Shut-down management, scoping and scheduling are done by Works
Shut-down management on site level for:
o Standard setting
o Quality review
o Site scheduling
Trend is to increase intervals
Shutdown mgt does bring some issues
Production process overview:
Raw materials - Pig iron - Steelmaking - Casting - Rolling - Coating
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Complexity level is part of management system:
Level of complexity is set by two
rules:
length of stop:
The level of complexity defines the
timing and organisation of the shut
down:
< 24 hours
24 – 96 hours
> 96 hours
Complexity
OR
simultaneousness with other stops:
0
1
>1
•
•
•
Low
Medium
High
Scope
Planning
freese
freese
(weeks)
4
7
10
(weeks)
1
2
2
For mayor Blast Furnace shut down
(1/10 years, 3 month duration) a
separate organisation is set up.
Outcome:
Low
Medium
High
Types of stops:
Duration (# shutdowns/year)
Level of complexity (# sd/year)
260,0
387,0
50,0
49,0
26,0
5,0
dag
week
0,2
twee 3 maanden
weken
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Medium
High
123
Issues with shutdown management include:






Integrated management of shutdowns is a challenge (production-maintenancequality)
Due to the number of stops and people involved, shutdown management skills are an
issue
Risks for operations and risks for a shutdown are intertwined
CAPEX projects in plant shutdown are high risk since shutdown- and projectmanagement are not synchronized
High peak loads for contractor personnel are challenge to ensure quality and low
costs (HoTT)
Difficult to keep knowledge of shutdowns of Blast Furnaces, due to long interval (10
years)
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Annex 6 – business case Shell: organizing turnarounds via global
management.
Shell refinery site at Rotterdam-Pernis, Netherlands
Situation/Tasks:




Shell deploys its ‘Shell Global Solutions’ internal consultancy for turn-around
management
Globalized standardized approaches to TAR
In some cases TAR management is outsourced
Working with 3rd parties on long-lasting contract basis
Activities:



Improvement process: worldwide competence team
Long-term contracts to keep knowledge within Shell
Note: spring time is the preferred season, because of heavy weather (winds) in the
autumn
Results:


TAR intervals are determined depending on size and complexity
HSE improves, by having less people onsite
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



Shorter intervals are sometimes better than long intervals with big scope
Shell is responsible for the scope
Risk-based
Fit-for-purpose for next interval
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Annex 7 – business case Bilfinger.
‘Europoort’ industrial area – Rotterdam,Netherlands
Situation/Tasks:



4-5 year turnaround
No internal TAR organization, no corporate competence
One partner: the organization moves from 50 to 120 fte; TAR and Construction
manager from partner
Activities:




QA/AC, HSE, progress monitoring, Extra work
Unit-supervisors
Working with sub-contractors
Planning & scheduling with Primavera:
o Planning phase
o Execution phase
Results:

Contractor responsibility:
o QHSE
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

o cost
o extra work
o resources
RACI chart
Scope: client is responsible for scope definition
General trends :


More complex turnarounds?  outsource the management of TAR
Focus on planning
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