Operations Innovation & Transformation – Value Chain Management, Part 2 of 5

by Stan Devries, Senior Director Solutions Architecture, Invensys|Schneider Electric

The 4 quadrants described in the article “OperationsInnovation & Transformation – the 4 Types Part 1 of 5" positions the upper left quadrant as a strategy for using a “value chain” of physical assets in a new way:

In this quadrant, a group of similar industrial operations (2 or more) adapt their performance objectives, business processes and accompanying hiring and information strategies to optimize the “value chain.”  The move is to unifying the industrial enterprise over multiple sites (in groups or as a whole), with a more holistic view in terms of operating strategy and performance management.

This innovation can be limited by the dynamic and range flexibility of some of the operations, but several corporations have achieved success with this.  One example is seasonal competitiveness, where the “chain” collaborates to achieve maximum throughput during the high demand season and maximum efficiency during the low demand season (efficiency and throughput interact differently across different groups of industries).  Another example is short-term business continuity, where the “chain” collaborates to exploit a supply or demand opportunity, or they collaborate to minimize the business impact of a supply chain problem, such as a major customer unplanned outage.  They all adapt their operations to meet a shared performance objective, such as yield or efficiency.

A key method used to sustain this strategy is operations-level feed-forward and feedback, with workflow for collaboration.  This does not violate or compete with established business processes for planning, scheduling or other elements of supply chain management – in fact these strategies and business processes must work closely together.

This is a significant step beyond scorecards, dashboards or rigid workflows.  The following 2 examples show how real-time performance measures (different from traditional KPI’s) and proactive procedural automation sustain this differentiation:

·         A “value chain” of related industrial operations (one of the operations provides fuel and raw material to another) have some dynamic and range flexibility to “pace” together.  When a downstream site must slow down, the upstream site adapts its throughput of the entire site or the affected products during the duration of the slowdown.  As soon as the slowdown has ended, both sites resume their scheduled throughput and yield targets.

• Coordinators (different industries have different names for this function) use workflows to negotiate short-term upcoming changes in demand and the operating shift and the coordinators use the same visual demand, using a “tram line” display.  Information to the right of the center dashed line is forecast and planned. The benefits include significant reductions in energy (excess energy is required to restore the high pressures and temperatures) and reductions in rework or waste.  Conventional equipment protection strategies aren’t adaptive and they are designed to handle the most extreme conditions, which is focused on safe interruption of operations.  Value-chain management focuses on safe continuity – both are valuable and necessary.

•          A “value chain” of related industrial operations (one of the operations provides fuel and raw material to another) have some dynamic and range flexibility to optimize the processing and use of fuels and raw materials in the downstream operations, such as the following example in petrochemicals and specialty chemicals.

Proactive procedural automation, using real-time performance measures and best practices, helps the value chain to sustain high reliability and minimize cost – even achieve world-scale performance.  It is used to present the decision makers (including operators) the business and operational alternatives and their consequences, in a simple form, such as the efficiency/yield/cost without changes and the corresponding performance if one of the alternatives is implemented in time to avert an unplanned outage or a significant shortfall in performance.  This does not require exotic technology, but it requires the implementation of trustworthy, on-line performance calculations and humanworkflows.