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Focusing on reductions in total cost of ownership

Focusing on reductions in total cost of ownership

With purchase cost versus running cost an ongoing debate, we talk to Rockwell Automation business manager Mark Daniels, who argues that a focus on total cost of ownership could benefit end users, machine builders and systems integrators alike.


It is often said that the holders of the capital expenditure budget and the keepers of the maintenance budget tend not to talk as much as they should. The gulf between the two has certainly narrowed, but they could still move closer together. If they did, while procurement costs might edge a little higher, operational costs could be significantly reduced, impacting dramatically on total cost of ownership (TCO) of plant and equipment.

We have seen a sea change in the in-built capabilities of automation systems in terms of actionable information, combined with increases in costs for parameters like energy. The time is right for every company to look at its challenges, risks and pain points, and evaluate the very real impact on total cost of ownership. But perhaps most importantly, the onus for driving change lies not in any one corner, but is spread equally between end users, systems integrators, machine builders and equipment vendors alike.

Mark Daniels, business manager for automation at Rockwell Automation, uses the example of the electric motor to illustrate the point: "A standard induction motor can consume its own cost in energy every year. So the purchase cost of that motor is almost irrelevant; in TCO terms, what's important is how many years you run that motor. End users should be demanding energy efficient motors, OEMs should be pushing them, and vendors should be doing their utmost to highlight the benefits. There's a collective responsibility, and we all have something to gain."

There are clear benefits for end users in focusing on TCO; reduced running costs, greater OEE, reduced downtime, lower maintenance costs, increased productivity, etc. But there are just as many benefits for OEMs, who can make reduced TCO potential one of their key competitive advantages.

Automation equipment has a key role to play, and importantly much of the technology that can provide the diagnostics and actionable information that will enable costs to be driven down are built-in at no added cost. But still there is an educational job to be done, as Daniels explains: "If we go back to the rise of fieldbus, the small extra investment in networked technology could repay itself many times over through improved diagnostics that would massively reduce operational costs. It should have been a simple matter for anyone to look at the business cost of an hour's downtime, and immediately make the case for a procurement cost that was perhaps 10% higher, but in so many instances this didn't happen.

"Today it should be even easier. Whenever you invest in new automation technology, nine times out of ten all the tools you need to start reducing TCO are already in there. Predictive diagnostics that could reduce maintenance costs is a good example, but there is a wealth of other actionable information that could be exploited across the enterprise just waiting to be used - and yet so rarely is. As a bare minimum, it amazes me that more companies aren't asking to be supplied with OEE data and energy usage data from their automation systems. The extra cost of setting up the equipment to provide that data is minimal when compared to the cost of, say, an hour's downtime or a month's over-spend on energy."

Automation vendors like Rockwell Automation have made it as easy as possible for users to exploit the information and functions that will drive reductions in TCO, for example by providing pre-defined function blocks and face-plates. The trick is in how that technology is deployed. "It's very easy, for example, to set up alarms on a SCADA screen," says Daniels. "So the temptation might be to set up as many alarms as possible. But when one alarm triggers a cascade of others, your SCADA screen ends up simply as a sea of flashing red lights. A more effective system might show just the important causes, not all the consequences of the original alarm, giving the user to room to address the underlying problem."

To get the most out of the technology, it of course has to be deployed as it was designed to be deployed. That will give end users the functions they need to realise reductions in TCO. But just as important is the overall approach to deployment, which Daniels describes as a drive towards commonality. This is not simply standardisation on a single automation platform - although this undoubtedly helps - but rather standardisation on the way problems are solved and lines are installed. "When end users look at the likes of OEE, spares, the cost of troubleshooting, the cost of support across a whole production line, ease of upgrades - all the factors that impact on TCO - it is clear that when there is commonality of approach across the whole production line, these costs can be massively reduced," he explains. "Of course this can be difficult: an end user might be working with ten different OEMs in ten different countries on a single production line, but the benefits are enormous. And it's made easier by, for example, standardisation on Ethernet for networks, standardisation of function blocks, portability of code, etc. It is an approach that is prevalent in the automotive industry, and becoming more common in the water industry, but it could benefit every sector."

We can see, then, that much of the ability to realise reductions in TCO depends on having an automation infrastructure that will enable it. On complete new lines at green field sites, this is easy, but reduced TCO can be achieved by starting small and scaling up over time. The key is to invest in the right automation systems and to understand what the return on that investment will be. Even in the most cash-strapped businesses, there are risks and pain points involved in maintaining aging automation systems. When you balance the risk of sticking with older technology against the potential opportunities to optimise areas such as TCO by investing in new technology, then it can be easy to make the case for advanced automation. "And once you've got actionable information," comments Daniels, "you've already got past the pain point - you've already got much of what you need to begin reducing TCO."

Returning to his earlier point about the electric motor, Daniels concludes: "The technology that will help drive reductions in TCO is something that benefits everyone in the supply chain, and that everyone can use to build competitive advantage into their business. TCO is an issue that shouldn't need a champion at every company, but it certainly couldn't hurt and there is definitely a collective responsibility. After all, the costs of variables such as energy or an hour's downtime only ever go one way."
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