How are you going to keep your automation department whole and obtain needed funding?
Budgeting is seldom a task that automation managers seek, but it is central to the fiscal administration of the plant. Understanding the budget cycle and budgeting issues is an important business skill for automation managers and engineers. It will help you justify the expenses in your department, including your staffing needs.
Expense budgeting is performed by every plant, and indeed, by almost every organization. Normally, it is completed annually, near the start of the new fiscal year, with monthly reviews of actual expenses versus budgeted.
Frequently, automation is viewed as simply one more cost center in the plant, rather than as a key contributor to maximizing plant profitability. Automation departments are often guilty of fostering this view by being internally focused, rather than attentive to plant business issues. While automation professionals may be more interested in the new technologies available, management is more concerned with the plant profitability.
There are several critical issues of interest to automation managers as they approach expense budgeting. First, is the need to demonstrate that extra expenses for staffing will result in tangible expense reductions in other categories. Instead of focusing just on automation costs, the key is to look at overall expenses for the plant and find ways that automation can reduce these expenses.
For example, raw materials are usually the primary cost components for the plant, and energy usage is the second largest expense. Exploring ways to use automation to increase yields or reduce energy consumption turns an expense into a profit. Document how new staff members will ensure that these savings occur.
Health, Safety, and Environmental (HS&E) issues are at the top of every plant manager’s agenda. Keep track of potential HS&E incidents that were avoided through the use of automation, put a dollar value on the savings and make sure management is aware of them. If there are incidents, check to see if improved automation systems can prevent them from reoccurring. Be aggressive about proposing solutions. Modern automation components and the associated software analysis modules provide significantly improved intelligence about potential incidents.
Reducing maintenance costs is another budgeting opportunity. As new automation equipment is purchased and replacements installed, it is essential to consider their full life-cycle costs, and not simply the initial purchase price. Many studies have shown that more than two-thirds of automation equipment and software life-cycle costs occur after installation. Modern, “smart” instruments, combined with digital plant networks, can substantially reduce these ongoing maintenance costs. Higher reliability and 20 percent to 40 percent reductions in routine maintenance costs can be obtained with predictive maintenance technologies.
Specialized equipment and sophisticated software are obvious prime candidates for outsourcing—which is a popular topic with management today. It is hard to maintain skill sets to repair equipment or modify software that only requires attention once or twice a year. If you are asked by your plant manager to consider outsourcing some or all of your department functions, it is important that you approach the request unemotionally, hard though that may be, and respond with recommendations that are based on sound financial analysis.
Budget the money, schedule the time and insist that your department members, including you, take some training classes each year. The best long-term job security is maintaining your and your staff’s skill levels and expertise.
Budgeting is a necessary chore. It may not be as exciting as evaluating new technology, but it can be significantly more important to the long-term health of your department. Just remember, when making your budget, it’s necessary to replace the technologist’s cap with a business manager’s hat.
Douglas C. White, PhD, Chemical Engineering, [email protected], is vice president, Advanced Process Control Services, for the Process Solutions Division of Emerson Process Management.
