A date almost one year ago—Oct. 30, 2017—marked a significant shift in the companies that dominate the world economy. For the first time, ExxonMobil was not in the top 5 for the list of companies with the highest market capitalization. Instead, the list was dominated by software-centric companies: Amazon Web Services, Google, Apple, Microsoft and Facebook. Today, ExxonMobil has slipped to No. 13.
For Amish Sabharwal, executive vice president of the Americas for AVEVA, it’s a clear sign that the business world is changing. It’s a fast-moving ride that industrial companies now need to get on board. “The digital transformation shift is happening faster than we know it,” he said, urging attendees of the AVEVA World Conference North America in Dallas this week get started with digitalization plans. “We have to be on the forefront of this digital transformation journey.”
Sabharwal was speaking specifically of EPC 4.0, a new perspective AVEVA has on how engineering, procurement and construction should operate moving forward—and what digital transformation means for capital project execution.
Although technology is an enabler for digital transformation, Sabharwal noted, industrial companies need to pay particular attention to changing business processes. Companies like Netflix and Uber completely changed not only the business model for the movie and taxi businesses, but their business processes as well. “Fundamentally, we can’t use the same business processes that we did before,” he said.
According to a 2017 study from McKinsey, 98 percent of mega-projects incur cost overruns or delays. The average cost increase is 80 percent of the original value, and the average slippage is 20 months from the original schedule.
Those are big numbers. A lot of it comes down to data and the ownership of that data, according to Sabharwal. Three major data sources come together to create what is known as a digital twin—a virtual representation of a physical asset—comprising that asset’s real-time data, engineering data and maintenance data. The engineering data is a combination of 1D, 2D and 3D information—everything from datasheets to piping and instrumentation diagrams (P&IDs) to laser scans.
The problem that occurs typically today is that even though it’s a data-centric engineering process, it’s a document-centric handover process. Owner/operators are still receiving engineering data through static documents, like PDFs and Excel files. Owners need to start dictating how they get their data from an EPC, and they need to take a more data-centric approach, Sabharwal argued. Doing so could yield a 10 percent savings on any given project.
AVEVA’s idea of EPC 4.0 actually brings the industry back toward the days of drafting tables, where everyone was gathered around the same workspace and could see the changes that were made to any project. Computer-aided design (CAD) brought the promise of 3D to the workspace, but it created problems with disparate systems around the world, Sabharwal said. Global execution introduced pressure to lower man-hours through offshore engineering. “But, the efficiency went down and the cost of the project went up,” Sabharwal said. “It didn’t work.”
Getting a digital asset, however, is almost like going back to the drafting table, Sabharwal said, arguing that it puts everybody back in a common work environment. Whether owner, EPC or supplier, they can all operate in the cloud to execute a project. “The cloud is the drafting table of today,” he said.
To put this into perspective, Sabharwal introduced what happens when a chemical engineer makes a seemingly simple change to a single temperature value in the process. Suddenly, pipe stress needs to be reassessed, the pipe becomes safety-critical, P&IDs need to be updated and reissued, a different instrument arrangement is needed, equipment datasheets need to be updated, and on and on. That propagates further into procurement, which has meanwhile sent the wrong piping/equipment specs to the suppliers and has to reorder, wasting materials. And there’s no end to the rework needed in the field.
Although today’s world sees different hierarchical structures for the work being done in each department, the reality is that the work breakdown structures are relational, Sabharwal said. “We need to relate them to each other. You cannot do that unless you’re digital,” he added. “You cannot do that if you’re in a document-based world.”
Fifty percent of a work project is just managing change, Sabharwal said, and making a digital transformation enables you to master that change. “In our world of AVEVA, you can change all you want,” he said. “We know relationally every effect down the process.”
He likens the situation to Google, which can share information with 300 million people because they’re all seeing the same information. “We have to get there, ladies and gentlemen, or we’re never going to improve this EPC process.”
In this scenario, lists and datasheets are all aligned with 3D models and schematics, ensuring quality deliverables. You can avoid procurement errors and delays, as well as rework in construction. This can have a significant impact on a project’s total installed cost (TIC), which could see savings of 10 percent, Sabharwal said. On a $1 billion project, a $10 million investment in AVEVA software could provide a TIC savings of $100 million.
These cost savings are realized by mitigating capital investment risks at the process design stage, cutting engineering man-hours by 30 percent in plant design, reducing material costs in procurement by 11 percent, reducing field labors costs in fabrication construction by 10 percent, and using simulation learning to improve enterprise safety in the commissioning and startup phase.
Industrial companies today are too often making fundamental decisions on capital expenditures without having enough information. “We’re making decisions without really understanding what we’re actually building. It’s one of the reasons why these projects are over budget and over schedule,” he said. “We’re trying to bring that information upstream.”
As an example of the importance of digital data, Sabharwal pointed to Husky Energy in Calgary, Canada. They have taken project execution down from 48 months (or more) to 24 months. That’s particularly significant for a company that produces hundreds of thousands of barrels of oil a day.
“They have certainty. They own their own data. They can change it on a dime, flip it, and completely automate their process,” Sabharwal said. Too many oil companies let the EPCs own their data, relying on them to redesign a new platform every time it’s built. “No wonder it takes so long to build the next one.”
But the EPCs are changing as well, seeing the value in a digital transformation. “They’ve also experienced a downturn in their industry,” Sabharwal said. “They’re embracing the concept of digitalization to help improve the service they offer their owners.”