Column: Find Your Hidden Plant

Aug. 1, 2003
Imagine saving your company $6 million in capital equipment investments. Jean Van Damme did, and survived to tell his tale at the recent ARC Strategy Forum.

The ARC Advisory Group ( hosted the two-day conference, which focused on Real-time Performance Management, in Boston at the end of June.

Van Damme is the plant manager and managing director of CNH’s Antwerp, Belgium, manufacturing plant. CNH, which is the result of the 1999 merger of CIH and New Holland, is the number one global manufacturer of farm tractors, combines and balers. At the time of the merger, directives were set to reduce costs by $500 million to $600 million in three to four years. The company closed several plants, standardized on common platforms to reduce R&D expenses and focused on core business and production activities. Van Damme’s 1,000-employee plant in Belgium was selected to launch several new CNH products that would support these initiatives.

Rather than undertaking a significant plant expansion, CNH had to find ways to make the existing facility produce more. This is what Van Damme refers to as finding the hidden plant. He explains, “In every plant, there is a ‘hidden plant.’ Making this hidden plant productive has a major impact on performance.”

The hidden plant in a manufacturing facility is the capacity lost due to unused or underutilized assets. Van Damme found his hidden plant with a three-pronged attack that involved labor negotiations for seven-day production, service level agreements for equipment and maintenance contracts, and an asset utilization program that maximized overall equipment effectiveness.

Ultimately, CNH selected an asset utilization tool from ABB called OptimizeIT that uses real-time production data to increase equipment efficiencies and uptime. Don Aiken, president of the ABB Automation Technologies Division USA, addressed asset management in his comments at the ARC Forum. “Up to 40 percent of a plant’s capacity can be lost due to efficiency problems, even with a planning and control system.” Why? Because planning systems often lack real-time information. The hidden plant goes unnoticed.

Linking real-time data to the production business plan uncovers the hidden plant. In the case of CNH, real-time monitoring and analysis data fed the production engine to improve uptime and minimize downtime. Net result: Required new equipment investments were reduced from 17 to 12 machining centers.

Industry conferences, such as the recent ARC Forum, provide a platform for the exchange of ideas among industry leaders, including suppliers, users, analysts and media. Sometimes, these ideas get lost in a quagmire of terms and semantics. In the space of two days, attendees were treated to at least 48 multi-letter acronyms and dozens of complex multi-axis diagrams.

It doesn’t need to be that complicated. One presenter made the comment that real-time performance management (RPM) can be accomplished with a simple spreadsheet. The steps are straightforward: measure data on a real-time basis, review that data in an analysis tool, such as a spreadsheet, and take action to implement the improvement strategy. That sounds like a traditional control loop to me.

Where RPM, or the acronym du jour, moves to the next level is in driving the real-time control loop model up into the enterprise. It requires the exchange of real-time manufacturing data, owned by the automation systems, with financial data, owned by the accounting systems. Things get more complex when real time has to merge with transactional time.

There are numerous tools available to guide you through this process, from the simple spreadsheet through the complex modeling of key performance indicators using activity-based accounting and advanced control techniques.

Major manufacturing companies, such as ChevronTexaco, CNH, DuPont, Fonterra, U.S. Steel and Whirlpool, have found their hidden plants by achieving real-time performance management goals. Have you started looking for yours?