“It’s not raining; it’s pouring”, the rate of change social, workforce, market combined with built up industrial effects, will make 2013/14 exciting!!!!

As we all come to end of 2012, we have time to reflect and look towards 2013, (even bigger things if you are on the Mayan calendar who start their new complete calendar). I find the time over the holidays a time to step back and think, absorb, read, reflect and strategise without the daily routine. As I flew back home, low over the northern coast of New South Wales, Australia I read a number of articles and one from Deloittes on “Tracking the Trends 2012”  which lead with “It’s not raining; it’s pouring” was straight to point and not just for mining, but all industries. Combine this with an improved positive outlook from China and fewer significant potential changes in government next year, 2013 provides the opportunity to build momentum with companies starting the journey to take on solid challengers of unified solutions to achieve “Operational Excellence”. The challenge will be the constraint of bridging the gap between “time and urgency of getting to full production, vs the green light to proceed forward, vs the challenge of the existing install base of “islands of industrial systems”’.

So in the final blog of the year I would like review some of the points raised in this paper, and just expand and enabling further reflection.

The Paper “Tracking the Trends 2012, The top 10 trends mining companies may face in the coming year” by Deloitte (www.deloitte.com/mining). Do not get put off by the word “mining” as 80% of the points raised are relevant across most industries. The article starts with an extremely true statement:

“It’s not raining; it’s pouring.”

“It could be argued that the burning issues facing the industry tend to remain largely unchanged over time. While this may be factually correct, it fails to take into account the extent to which shifting social, economic and political trends affect the mining sector. Looked at in isolation, each challenge may seem familiar. Looked at through a macroeconomic and geopolitical lens, however, it becomes clear that the difficulties afflicting the industry are rapidly reaching an unprecedented level of extremity.”

I do not think enough people realise the extremity of these different factors affecting the ability to achieve “operational effectivness” tending to treat them as individual issues vs interactive. In the industrial sector as it has been traditionally an extremely slow moving, conservative and fragmented operational environment, but not anymore. With globalization, the required speed of decisions, agility to market changes, combine these with age of industrial systems, transitioning workforce and social change. Provides a real opportunity for leading companies to “leap frog” by taking a holistic approach to solving these challengers vs a “piece meal” approach.

1. “The cost of doing business What goes up does not always come down”

“With commodity prices surging to all-time highs, but variable (28% change in price of Iron Ore between Sept and October 2012), accelerated production has become the mantra of most mining companies.”

The result is as onerous as it is predictable: costs are going up across the board.

This applies across all industries, but it is not just the costs going up it is also the volititiy in costs, that change at much more frequent rate, and these costs must be absorbed into the manufacturing costs in order to maintain margin. Energy is an excellent example this going up, and changing, effecting all the costs of materials, and transport costs as well as operating costs. Regulation is another hidden cost that is taxing on manufacturing; from regulations to fit markets, government driven regulation and the growing environmental commitment.

2. “Commodity price chaos  No price stability without greater transparency”

Have commodity prices been reset at a higher level or are we at the top of a bubble that’s about to burst? The answer to that question dictates whether or not current mining projects will be profitable. Unfortunately, indisputable indicators are sorely lacking. Project life times are getting shorter and time to full productin is the key metric, so how do you absorb this dynamic climate? The ability to have approved capex spend, and project designs ready to go at a “minutes notice” with teams executing fast is key. Projects need to sub divided into logical value steps that are achievable and build off each other instead of single huge projects, allowing agility to tune, achieve and adjust through the journey to Operational Excellence. This is as much a culutural change in project running to be journey, as much as an execution.  

3. “The battle to keep profits Government taxes target the mining sector”

“Resource sector profits have long been tempting to governments around the world. This is particularly true at a time when so many nations continue to struggle to repay record levels of debt.”

This statement while centered on mining is true across the world. Governments are looking to change GST, VAT, (sales taxes) or profit taxes in order to access the company profits and compensate for increase costs, and solving their long term debt crisis. This will also continue to increase the complexity in a supply chain that extends across the world, with increased need to be in control of the business, track products, materials and taxes in each to manage the tax costs.

4. “Labour pains  Bridging the precarious talent gap”

“Behind all the tonnes of articles, statistics and reports written about the talent and skills shortages facing the mining industry lies one stark fact: there simply are not enough people to power projected mining company growth.”

All through this year I talked about the workforce transition challenge, as the year progressed the reality set in that this is not a transition it is a total workflorce reset. There are fewer skilled people in the engineering and industrial space, they are less inclined to go to remote locations, and people are rotating jobs significantly. In Another article on Operational Practices in 2020 (which I will expand on in January) they predict 42% of the workforce will be made up Gen Y, and the average time in a role, job will be 2.4 years. This requires a different thinking in Operational System Design to absorb this type of change, and maintain continous production. As I interviewed many people in the latter part of the year, realization of this workforce challenge is starting to sink in, it will make the next 5 years an interesting time!

5. “Capital project quandaries  Project risk rises as the supply/demand gap widens”

“As countries around the world continue their push towards massive industrialization and infrastructure renewal, the number of capital projects across the globe is mounting. At the same time, declining assets across the sector and lower ore grades mandate investment in new development and exploration projects, particularly in light of the escalating safety risks associated with aging mines.”

This is not just mining all industries are seeing this in some form, consider food and beverage where they add new plants, or more than often acquire existing plants with existing aging systems, and practices then require for the alignment. The requirement for increased capital investments to gain alignment, but then the enormous costs of sustaining or evolving these aging assets and systems to be effective in the modern world. Both are putting a strain of project investment and financing and also project execution in a timely fashion due to a shortage of engineering, skilled personal.

6. “The big get bigger Risk multiplies as companies diversify”

In order to stay competitive and in control, larger companies are getting bigger through acquisition to increase the vertical supply chain control and reduce risk, or increase responsitivity. With global expansion, new cultures, establish processes need to melded together and aligned. This expansion is key to stay in the market but in turn increases the risk to companies, and the leading companies are looking for ways, processes and technologies that will smooth out, reduce the risk in merging these new companies into the bigger picture. This can only be done through the roll out of standards and the concept of “federation” vs “rip and replace”. This allows plant cultures and system to be sustained, but the plants/companies to be “plugged” into the bigger value chain, and aligned.  

7. “Volatility is the new stability Planning for the unforeseeable”

“While risk planning requires executives to peer into the future, it traditionally does not demand that they plan for highly-unlikely occurrences. Unfortunately, the stepped-up incidence of implausible events is turning conventional scenario planning on its head. From the widespread effects of the global financial crisis and worldwide political instability to the tsunami in Japan and flooding in Australia, Brazil and South Africa, mining companies find themselves facing the unexpected on a frighteningly regular basis.

Although these so-called “black swan events” are by definition, rare, high-impact and hard to predict, they are finding their way onto corporate agendas, fuelled in part by boards of directors that fear ambush by issues that never appeared on their radar screens. Preparing for these unanticipated surprises – whether they are harbingers of risk or opportunity – may require more of a creative licence than mining companies are accustomed to exercising.

On some level, the process must begin by considering the organization’s vulnerability to extremely unlikely, but potentially catastrophic, incidents – those considered worst-case scenarios. The aim is to challenge existing business assumptions by asking questions that consider myriad sources, from geopolitical movements to volatile weather patterns.”

Continuity Risk Planning is becoming a big common concept in companies as they plan forward, this involves now bringing in these external events, and effect on personal safety, environment etc.

8. “Legislative Olympics Countries compete to become the world’s toughest regulators”

In recent years, however, nations around the world have been loading their regulatory firearms, targeting areas such as bribery, safety, environmental, carbon, financial correctness, etc.

These regulations are coming from governments in the form of new laws, good example the new Carbon Tax in Australia, which will immediately affect the bottom line. Drive from customers and community, example is environmental where companies are starting to be judged based on the moral conduct towards the longevity of the planet. Also, food safety is playing a role in buying habits, this especially seen in China after their scares, so brand integrity is at risk relative to food safety, personal safety and operational safety. All of these bring a new level of risk to board and executive members of companies, as well as the bottom line cost. So naturally in the operational systems capability relative to reducing risk, and the cost is becoming natural a natural train of thought.

The final thoughts in the article sum up the change in the attitude and thinking in the industrial space and how companies are thinking. It is this thinking on a more holistic collaboration with real time coupling and alignment which delivers the most promise for the industry combined with the most risk and challenge.

“From competition to collaboration industrywide-wide issues require an industry-wide response.

It is becoming increasingly incumbent upon mining executives to broaden their purview by fostering improved collaboration – across their own organizations, among industry players and with communities and governments around the world. From an internal perspective, it may help to begin by adopting enterprise-wide processes capable of creating a cohesive culture among disparate international locations. These types of processes can run the gamut – from global labour practices, worker safety programs and supply chains through integrated financial reporting, business intelligence systems and regulatory compliance practices. No matter the adopted solution, the end goal is the same: to ensure consistent practices and communication across the entire global enterprise.”

I wish you all a happy holidays and all the best for the New Year, and I hope this blog through last year has prompted thoughts and thinking, and this article some provoking thoughts.

In the up coming year we have a lot of investment and innovations happening across the industry, and I will continue to explore the directions people are taking on the journey to Operational Excellence.

Dynamic Simulation needs to become a Natural Feature of the Industrial Operational Landscape

To empower operational teams, workforce, each role must understand the context of the future, as well as current state and history. In the traditional industrial solutions, the worker is provided with tools for understanding history and NOW. This is the same as driving a car by only looking at the dashboard of the car, and rear vision mirror. Can you drive the car without looking out 100 meters or longer into the future the answer is NO, you would miss judging the next corner?

So why do we think we can run plants in this same manner?

The leading companies are defining the operational experience of empowering the different roles in the plant operations with the ability to “understand the future”. This will then empower the user with:

·         Understanding of the NOW situation

·         Understand the History

·         An expectation of the future based on NOW situation

·         Access to Experience

The concept or words used to describe this capability is “What If” capability. The ability to have at the finger tips of the worker the ability to ask “what if” question and the system will provide the best estimate based upon the current state of the process/ plant, and history. This provides maybe a “times 10” in time look forward so that it provides another reference point for the worker to base their decision on.

An example of how the general day to day market has come to accept using simulation models as day to day is in the weather. I do a lot of ocean sailing; today a natural tool I use on the boat is weather simulation. On my Ipad,  I have two applications, which connect to a cloud application that will allow me to select a location, and run a number of weather simulation models, based upon the current condition. There are a few models with different characteristics that I use to 2 to 3 models and compare feedback, combine this with reading the weather maps, and do a “gut validation”. It is this future, plus my experience from the weather map reading plus applying local conditions such as mountains that allows me to gather enough information to make decisions on what to do. This effects safety, comfort etc, there were examples of friends on other boats that just listened to general weather broadcast especially in remote places, and they made decisions based on this, but these forecasts were over 1000s of miles and extremely general, and open for interpretation as they were line item. In the same situation,  I ran the models; play off scenarios “what if” based upon local navigation, mountains, and my boat. On at least 3 occasions,  these friends left and where caught with young families in life threatening situations. This is decidedly different to when I was a teenager sailing the Australian coast, where we only had the weather maps, and a number of peoples opinions, we got caught a couple of times in particularly severe weather especially 5 hours out. Today I am able to use the models to look 7 days into the future for a trend, and greater accuracy at 12 and 24 hours. Today these models are a natural part of my navigation tools, having on board capability to download the results of the model, and then tools to ask questions based upon routes I want to go, easy to interpret graphic experiences to see results. (As seen below the weather is overlayed on the charts and uses colors to show intensity, I can work through time forward 5 days by hour).

It is easy to receive model results even at sea by sending an email of current locations, areas I am interested by a text email and the results come back in a data file that I load into my local system with my boat parameters, navigation charts, and I can now easily see graphically the results layered on the navigation charts and ask questions, because of this simplicity to use I now use this many times a day to make and validate decisions.

So why, not on the plant? No matter the role, it could be maintenance, performance engineer, safety, operations, where decisions are having to be made, and experience varies, the ability to get these reference points is key.

This must use high fidelity simulation models to predict the future, but the capability of adding this to a solution must be small. Traditionally simulation systems have been offline, and large after thoughts, especially outside of the oil and gas industry. “Why cannot we just add this future capability similar to adding alarm or historic capability to a device supervisory control?”. The answer should be yes. This will require smaller foot print simulation, dynamic and libraries of simulation models for different devices/ processes etc. Again in the oil and gas world this has been done for years, and companies such as Exxon and others have built libraries of optimization, and simulation capability. All industries require this no matter the complexity, but to achieve reality it must be easy (a natural act) and rich this library of simulation models must be rich, and easy to apply, plus domain experts must be able to develop these models easily, these could be device / process vendors, domain experts, and companies. With the models naturally able to be applied to the automation/ operational platform as just another function.

Yes, dynamic simulation is one of fastest growing aspects of Industrial Operational Systems, as we design systems we must assume that this capability should be included.

Big Data Requires a Big, New Architecture

“The potential of “big data,” the massive explosion of sources of information from sensors, smart devices, and all other devices connected to the Internet, is probably under-appreciated in terms of its eventual business impact. However, to take maximum advantage of big data, IT is going to have to press the re-start button on its architecture for acquiring and understanding information. IT will need to construct a new way of capturing, organizing and analyzing data, because big data stands no chance of being useful if people attempt to process it using the traditional mechanisms of business intelligence, such as a data warehouses and traditional data-analysis techniques.” Dan Woods; Forbes

So does this apply to Industrial Area, I was heading through Terminal 5 in Heathrow this week, and articles banners around Big Data were all around me, and yes it is the latest “train” for people to board, but is it real in the Industrial Space? As I boarded a train, sat doing a mind thinking moment looking at the industrial operations/ automation landscape I realized why there is confusion is that in the industrial space,  we talk about Enterprise Historians, and one person said to me that is big data! I do not think so, it is just one aspect of the growing industrial information dilemma facing all us over the next 5 years.

When I look at the predictions of Big Data by Industry from Gartner:

The column for “Manufacturing and Natural Resources” which has every row in “Hot” or greater and points to “Volume of data”, “Velocity of data” and especially “Underutilized Dark Data” as Very Hot. This is should not be a surprise to anyone with the historians out there with 10000s of tags soaking up the data at second intervals. In the last 7 years,  Invensys Wonderware has installed 128 million I/O in historian points. Another point not brought out here is the need to make the data “trust worthy” and auditable so business decisions can depend upon it, much of the industrial data is just captured today, not validated against the current state of the process etc.

Now lets understand the “Jobs People want to do today” has there been a change? Yes there has been around the responsibility scope increase. This is both in making decisions and more business impactive decisions, as well as the increase in breadth e.g. Area that a person has to manage.

Initially this seems okay, but  now consider  the devices in the field today, and the amount of data coming from a device that traditionally would have 2 to 3 points, can have 400 points. Is this exaggeration, lets look at an example of a pump.

In the old days,  a pump would have:

• Speed
• Pressure

 Today:

• Speed
• Temperature
• Pressure on incoming and outgoing
• Vibration
• Energy calculations (many variables)
• Number of starts
• Volume
• On goes the list

The reason is that today devices are much smarter this to improve performance, efficiency, maintenance lifetime, and energy consumption management as well as predicting the operational reliability of  the pump. Compared with the old requirement of turning it on and making sure it is pumping to make sure it does not run dry.

Now take one device and put it in a plant context where it is one of 1000s, we have effectively increased the volume of data by 100000s and it will not stop growing. So the ability to capture this data as close to local data source, validating the data, but accessing the data, understanding events, patterns, and relationships across devices, plants, and device types etc required for this ever increasing drive to lower the OPEX costs, through increased efficiency and lower maintenance lower energy consumption  etc.  Again review this data historised for  a pump, the data falls under multiple categories:

·         Operational

·         Energy

·         Maintenance

·         Efficiency

Different roles within the “day to day” running of the industrial operations will analysis the data in different ways, to draw different conclusions. Examples are some people will want to look across multiple pumps and compare efficiency, energy etc vs the Operator who is just look at the current status and availability.

Will the traditional industrial tools be good enough?  I do not think so as all data is not in one form, one data source, take the above time series historian data, combine this alarming, events, and operational data. The introduction of new architectures, “Information Models” and analysis tools which will enable a view across large amounts of data, put this data in the context (this does not mean a data warehouse) and analysis tools quickly bring out trends/ relationships between data from different sources over large areas. All with the simple objective of enable more “real time decisions support”. An example of this is in the latest Wonderware Information Server 2012 R2 (released this month) with a new operational analysis capability. Seen below this capability is out of the box across, MES, Batch, Time series historian data and alarms data sources, providing an immediate view into a trend with a “halo” to show the shift, or batch or phase of operations the process was in, and associated alarm data, all at the operators finger tips.

This is the first step as Invensys will be expanding this capability through the next few years across the Enterprise Control Solution. I will expand on this Big Data in Industry and Decision Support concepts over the next couple of weeks.     

It is the End of the Year, what is on people minds this year vs. Last year?

Sitting a coffee table in Convent Garden in London, the chilling winter wind blowing through me, but the dazzling lights of Christmas and the holiday season dance about me. I have the opportunity to absorb the discussions of the last week discussing with teams from around the world what is driving operational thought leaders in mining, transport, and infra-structure. Now I look up at dazzling lights my mind shifts to the thought of;”is there a difference in operational priorities this year vs. last year and the answer is YES!!!”

The economic outlook is “soft” and nervous; certainly infra-structure projects from governments are under increased scrutiny. Last year there was some optimism as things were turning, today for many they walking carefully, we are seeing commodity prices causing pull back in major/ mega projects. Also, we are another year into this final run on the experience of “Baby Boomer” and Early Gen X (born 1960 to 1970) moving on, and that experience going out the door.

Reflecting on the key themes underlying discussions in Operations Strategy as we end 2012:

·         How to increase the effectiveness of roles, so they are able to make more decisions. This is leading to active discussions around “decision support systems” more than reports, but an experience that will enable a holistic view on information in context and actions to be taken in a timely manner.

·       Opex cost tightening, that strategies are around reducing operations costs, through increased efficiency, the discussion is not on people reduction, but is around “energy” reduction. This is causing discussions on energy around how to align plant, equipment usage to low energy rate periods and bring this into the plant operational planning.

·         The Aging worker discussion has shifted or started to shift to how deal with people in roles for short periods causing limited experience. There is recognition that this is not just an age issue, but the nature of operational business and HR that people are moving locations, roles at an increased frequency compared with 5 to 10 years. Note that this has only started to be recognized but with recognition.  

·         Having people more aligned into effective work. This is an intriguing one, but there is a lot of discussion on what workers are doing in their 8 hours and how much of it is effective. This aligns with the shift towards focusing on “planned work” vs. “ad hoc, unplanned” work. This immediately provides benefit in safety levels, and efficiency.

·         The discussion of how to execute solutions of the complexity required, unifying many sites and systems, how to build and sustain standards, how to execute in a timely fashion at minimal risk when shareholders are constraining capital budgets. Yet everyone realizes the programs must go on, so a healthy discussion around how execute, modularization of the program into “bite size chunks” using multiple engineering teams. This discussion will grow in momentum in 2013.

·         With the drive down on Opex and Capex, there is an increasing review of the custom, unsustainable solutions running in the operations, especially MES, which traditionally had a significant customization. Companies are investigating programs to shift the cost or growing and sustaining the systems away, either by new solutions based upon off the shelf products, or outsourcing the sustaining of the system.

There are many other side conversations around information in the context, the unifying of data, potential to use “Big Data” concepts (see blog coming up in the coming weeks). There is  realization in the holistic view across the Enterprise Landscape, and the changing Operational Worker, I believe there will be a resetting of role definitions across the plants, as the “day in the life “ of Operational Worker (no matter the role) is changing significantly with the freedom mobility brings.

I am sure I have missed some points, but the key is the “outlook” is different, and the leading companies are considering different factors on when, what and how they will evolve their operational systems in order to achieve Operation Effectiveness.

All good food for thought over these upcoming holiday period.