Manufacturing ROI: Finding the Real Benefit

The big day is close. A team of senior executives from corporate—the people who hold the purse—are about to arrive.

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Your job as a senior manager in the engineering department is to present the capital investment budget for the next year and persuade them to give the company money for the projects. Talk about pressure. Pretty much all of the 1,000 people in your company will know if you succeeded or failed.

This happened to me early in my career. My company was a manufacturer, but not every company in the conglomerate was. So the Senior Vice President and Executive Vice President who flew in more than likely had no more knowledge of what goes on in a plant than your typical Congressperson.

So, I assembled a list of machines that we wanted, details of what they would do, drawings that showed how and where they would be used and financial worksheets that proved (to my engineering mind) the quick payback. It was my turn in the barrel and I stood up to present. I went through the entire speech. The top executive of the visiting team looked at me as a professor might look at a freshman on his first day, and said, “Interesting, but just why should we invest in manufacturing at your company at all?” He was taking me to an entirely different level. And 30 years later, it’s a question that still follows me.

Bottom-line automation

This background reveals why I enjoy my conversations with Peter Martin, who is an Invensys Operations Management (www.invensys.com) vice president and author of “Bottom-Line Automation” published by the International Society of Automation (ISA, www.isa.org). Managers look at manufacturing, and especially automation within manufacturing, and ask where the results are. Engineers give engineering answers with an occasional dollar figure thrown in to supply the token “proof” that they presume managers want.

In his book, Martin writes, “Many manufacturing managers have indicated that their plants are not running any better today than they were three decades ago, before the existence of computer-based automation systems. This is unfortunate and totally unacceptable. Manufacturing managers should be seeing real returns on all of their capital investments, and automation systems should be leading the pack.”

Martin’s book describes “dynamic performance measures,” or methods for showing the real-time financial results of plant performance, rather than just the engineering results. He maintains that engineers must consider the units of measure that are meaningful for managers and financial analysts in the company, and report them in a way that they can believe. In that way, managers can see the real returns on their investments in automation.

Michalle Adkins, a consultant in the Global Industrial Solutions Group of Emerson Process Management (www.emersonprocess.com), an Austin, Texas-based automation supplier, recommends taking a look at predicting the benefits of an automation project even before the contract is let. When taking on a new client, she first works with the client on an assessment of where things stand at the plant currently, and then defines the problems and constraints that negatively affect the plant’s performance. She and the client then proceed to develop a value-stream map—a method of thinking and documentation derived from Lean Manufacturing concepts—to show how the plant works. The next step is to inject proposed changes into the map and see what the entire value stream would look like if the project were implemented. A project expense estimate can be then calculated and compared to projected returns in order to develop the return-on-investment analyses required.

Developing an analysis of the benefits of an automation investment requires considering a larger picture than just the details of the project. If you do look at the broad scope of manufacturing performance in your plant, you’ll probably find success with the managers.

Gary Mintchell, gmintchell@automationworld.com, is Editor in Chief of Automation World.

Invensys Operations Management
www.invensys.com

International Society of Automation, ISA
www.isa.org

Emerson Process Management
www.emersonprocess.com

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