Competitive Benchmarking and Paper Recycling Industry Analysis
CHEMICAL INDUSTRY BENCHMARKING
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Transcript of CHEMICAL INDUSTRY BENCHMARKING
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CHEMICAL CHEMICAL INDUSTRYINDUSTRY
BENCHMARKINGBENCHMARKING
George S. Birchfield
December 6, 2001
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BENCHMARKINGBENCHMARKING
“The Search for Industry Best Practicesthat Lead to Superior Performance”
“Establishing Competitive Standards for Valid Measurement of Performance”
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KPIshelp pinpoint problems & opportunities,
guide decisions, and measure the results
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Focus KPIs on Value
Revenue Growth……………Capacity Utilization, Output Growth
Feedstock & Yields…………Yields vs. State of the Art
Operating Cost Reduction…...Energy Efficiency, Reliability
Capital Efficiency……………ROCE, RORV, Days of Supply
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Align & Balance KPIs
Internal vs. External
Planning vs. Doing
People vs. Organization
Control vs. Flexibility
Production vs. Sales
Plan vs. Actual
Efficiency vs. Efficiency
APC Index vs. Feed/Product Switches
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Hard to Measure“Better”
VariabilityUnder-control vs. Over-control
RisksTrends vs. Fads
Total Cost of OwnershipTrade-Offs
Rate of Performance ImprovementBusiness Relativity
Constraints to ImprovementTrue Potential
Value
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“Better” means Improved:• Data
• Information
• Accuracy
• Consistency
• Completeness
• Content
• Timeliness
• Speed
• Quality
• Knowledge
• Forecasting
• Modeling
• Optimization
• Analysis
• Control
• Monitoring
• Communications
• Collaboration
Decision-MakingProfitability
SustainabilityGrowth
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No PerfectPerformanceBenchmark
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Multiple benchmarksadd
perspective & insight
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Productivity Metrics
Inputs• Investment• Raw materials• Energy• People• Chemicals/Catalysts• Knowledge• Innovation• Risk-Taking
Outputs• Products• Quality• Revenue• Value added• Profits• Emissions• New knowledge• Lessons learned
Productivity = OutputInputs
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Typical Competitiveness ProfileP
erfo
rman
ce M
etric
Per
form
ance
Met
ric
Questionable long-term viabilityQuestionable long-term viabilityApproaching end of life cycleApproaching end of life cycleMajor new investment riskyMajor new investment risky
Many favorable factorsMany favorable factorsMay not be sustainableMay not be sustainable
Incentives to debottleneckIncentives to debottleneck
1Q1Q 2Q2Q 3Q3Q 4Q4Q
MedianMedian
Small improvementSmall improvementgives greatest changegives greatest changein competitive positionin competitive position
11(68.3%)(68.3%)
22(95.5%)(95.5%)
33(99.7%)(99.7%)
Bet
ter
Bet
ter
Wor
seW
orse
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Sustainability is what counts in performance
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““SUSTAINABILITY”SUSTAINABILITY”
• Repeatable performance over several years
• No abnormal, non-reoccurring events
• Competitive performance in related areas
• No borrowing from tomorrow
• Not damaging the environment
• Knowledge of causal factors
• Supported by durable values & doable goals
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Knowing how much performance varies is
interesting.
Knowing why is important.
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Causes of Performance Differences• Organizational Effectiveness• Market Price Incentives• Technical Design • Economies-of-Scale• Capacity Utilization• Optimization/Flexibility• Predictive/Preventative Actions• Automation • Resource Sharing• Customer Relationships• Decision Making & Accountability
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ASPEN IT ENABLES SUCCESS FACTORSASPEN IT ENABLES SUCCESS FACTORS
• Organizational Effectiveness…Business Processes, Best Practices
• Market Incentives………….…Strategic Planning, Supply/Demand Optimization
• Technical Design……………..Collaborative Engineering, Process Innovation
• Economies-of-Scale…………..Strategic Planning, Supply/Demand Optimization
• Capacity Utilization………..…Plant Optimization, Production Control
• Optimization………………….Supply/Demand Optimization, Feedstock Selection
• Predictive Actions…………….Production Control, Plant Maintenance
• Automation……………………Production Control, E-Sales
• Resource Sharing……………...Collaborative Replenishment & Demand Planning
• Customer Relationships……….Order Management & Commitment, E-Sales
• Decision Making………………Production Management, Order Management & Commitment
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““SMART” METRICSSMART” METRICS
“Best Demonstrated”
“Best Sustainable”
“State-of-the-Art”
“True Potential”
“Economic Optimum”
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TO UNDERSTAND A PERFORMANCE AREA
KNOW THE:
• GLOBAL PERFORMANCE RANGE
• SMART METRICS
• CAUSAL SUCCESS FACTORS
• TRADE-OFFS
• LESSONS LEARNED
• IT ENABLERS
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CAPACITY UTILIZATION• METRICS – (1) Production versus rated capacity
(2) production versus maximum sustainable production
• PERFORMANCE RANGE – 40%• TRADE-OFFS – higher utilization improves
most performance metrics • LESSONS LEARNED – corporate optimization
reduces utilization of poorest swing plants • IT ENABLERS – Supply/Demand Optimization,
Plant Optimization, Production Control
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PLANT RELIABILITY
• METRICS – (1)Production loss due to downtimes, slowdowns, turnarounds and flaring (2) off-spec production
• PERFORMANCE RANGE – 800%
• TRADE-OFFS – synergy with capacity utilization & maintenance
• LESSONS LEARNED – correlation with APC
• IT ENABLERS – Production Control
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MAINTENANCE• METRICS – (1) cost versus replacement value,
(2) cost versus standards (3) reliability losses + maintenance cost
• PERFORMANCE RANGE – 400%• TRADE-OFFS – energy efficiency requires
higher maintenance, better reliability reduces total maintenance but not all components
• LESSONS LEARNED – study equipment families-fixed, rotating, instrument, electrical
• IT ENABLERS – Production Management, Plant Maintenance
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ENERGY
• METRICS – (1) energy consumption per unit of product production (2) energy consumption versus processing standards
• PERFORMANCE RANGE – 300%
• TRADE-OFFS – higher prices generate greater efficiency, personnel lower at high efficiency
• LESSONS LEARNED – importance of heat recovery and cogeneration
• IT ENABLERS – Collaborative Engineering, Production Control
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PERSONNEL
• METRICS – (1) equivalent personnel per unit of production (2) equivalent personnel versus processing standards or equipment count
• PERFORMANCE RANGE – 800%
• TRADE-OFFS – inverse relationship with wage levels, economy-of-scale, companies with efficient personnel also efficiency in other areas
• LESSONS LEARNED – importance of process operator post positions
• IT ENABLERS – Production Control
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PRODUCT YIELDS
• METRICS – (1) yields versus state-of-the-art (2) yields versus standards (3) total equivalent yield at indexed prices
• PERFORMANCE RANGE – 30%
• TRADE-OFFS – lower yields may allow more throughput
• LESSONS LEARNED – model needed for feedstock quality and operating conditions adjustments
• IT ENABLERS – Process Simulation Models
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TOTAL OPERATING COSTS
• METRICS – (1) total and cash cost divided by high value co-products (2) cost divided by prime product with other production as by-products
• PERFORMANCE RANGE – 400%
• TRADE-OFFS – higher cost may be offset by value added or lower investment
• LESSONS LEARNED – cost breakdowns by line items required for meaningful analysis
• IT ENABLERS – Production Management
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INVENTORY• METRICS – (1) total inventory in days of production
(2) inventory turnover rates (3) inventory cost versus production cost
• PERFORMANCE RANGE –400%
• TRADE-OFFS – higher inventory may allow longer product runs and greater protection against stock run out
• IT ENABLERS – Collaborative Forecasting & Replenishment, Inventory
Management
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PROFITABILITY
• METRICS – (1) net margin versus replacement investment (2) net margin versus actual capital employed (3) calculated profitability at standard prices
• PERFORMANCE RANGE – 400%
• TRADE-OFFS – strategic growth objectives may entail lower short term profitability
• LESSONS LEARNED – large single-train plants, at high capacity, and right feedstocks do well
• IT ENABLERS – Strategic Planning
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ACTUAL VERSUS PLAN• METRICS – (1) percent deviation (2) economic value
of deviations (3) statistical variability
• TRADE-OFFS – plans may range from “easy” to “reasonable” to “hard stretch”, or to just “wishful thinking”
• LESSONS LEARNED – know where plan stands relative to “true potential”
• IT ENABLERS- Supply/Demand Optimization, Plant Optimization
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The biggest room in the world ?
THE ROOM
FOR IMPROVEMENT
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IT Opens New Sources of Value
• Internet: e-business, e-collaboration, e-commerce • Unify & synchronize plant & ERP domains• Unified total enterprise planning & optimization• Real-time total supply chain management
For Investment Decisions:Know the value
Know the total cost of ownershipKnow the KPIs
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MANY POSSIBLE TRADEOFFS
• Personnel levels by salaries & benefits rates• Energy prices by energy efficiency• Feedstock quality by feedstock prices• Turnaround intervals by turnaround costs• Throughput for yields• Severity for selectivity• Catalysts cost for longer life or yields• Investment for labor• Pass through of lower or higher costs to customers
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The name of the game:
OPTIMIZATIONof feedstocks, throughputs, yields,
operating costs, inventory, distribution,
and spot transactions
within the context of a long range
BUSINESS STRATEGY
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OPTIMIZATION ISSUES• Not just maximizing production of
high value products• But how much low netback products
to utilize spare capacity• Influence of added supply or
inventory in market on marginal revenues versus selling price
• Location of optimization decisions
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The current emphasis:SUPPLY CHAINMANAGEMENT
better IT B2B
unification & integration optimization
customer relationshipsglobal competition
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Business Strategy Products Quality Markets Competitiveness Pricing Profitability Market Share Growth Investments Divestitures Alliances Customers
Planning & Scheduling Fulfillment• Sales • Billings • Credit • Collection
Product Distribution• Wholesale • Industrial & Commercial• Reseller and Jobber • Retail
Optimization
Outbound Logistics to Primary Terminals• Pipeline • Tanker • Barges• Rail • Truck
Operating Plan Forecast Plan Buy Make Ship Store Exchange Distribute Sell Deliver Invoice Collect Service Collaborate Customer Satisfaction
Supply Chain Management-Chemicals
Feedstock ProcurementSelection and Strategy
Inbound Gathering, Terminalingand Transportation
Plant Process Operations
Product Certification & Shipping
Marketing Position & Strategy
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SUPPLY CHAIN COMPETITIVENESS COMPONENTS
Raw MaterialsCapacity UtilizationHydrocarbon Losses
Product YieldsProduct Quality Waivers
Product Quality Give-AwayEnergy Consumption
ReliabilityMaintenance
Personnel LevelsSalary, Wages & Benefits
Contractor UtilizationChemicals & Catalysts
Insurance & Taxes
Demurrage Inventory Carrying Costs
Exchanges & SwapsProcessing Agreements
Bulk Transportation CostsTerminalling Costs
Trucking CostsEnvironmental ComplianceProduct Run-out Penalties
Late DeliveriesInventory Turnovers
Total ProfitabilityDecision-Making Time
Actual vs. Plans
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THE VALUE OF INFORMATION TECHNOLOGY
highly depends on the use for
DECISION MAKING
Performance Improvement
Better Decision-Making Processes
Better Decisions
Better Use of Information
Better Information
Functionality to Transform Data Into Better Information
Computerization of Data for Timely, Accurate, Easy Access
Raw Data
MASTER PLAN WORKFLOW MODEL
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INFORMATION (IT)INFORMATION (IT)OF THE FUTUREOF THE FUTURE
• MADE-TO-ORDER
• UNIFIED & INTEGRATED
• DEEP KNOWLEDGE ENHANCED
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“ALIGNMENT”The Big IT Management Issue
• Alignment to corporate goals
• Alignment to KPI’s & performance metrics
• Alignment to performance causal success factors
• Alignment to client organizational structure
• Alignment of products into solution suites
• Alignment of business processes & best practices
• Alignment by unification and integration
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THANK YOU!
BIRCHFIELD CONSULTING, LLC