July 2019

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Digital: The pathway to digitalization value delivery

It seems that all software initiatives in the energy and chemical industries are now tagged with the name “digitalization.”

Micklem, D., KBC, a Yokogawa Company

It seems that all software initiatives in the energy and chemical industries are now tagged with the name “digitalization.” A few years ago, similar initiatives were called Six Sigma or lean manufacturing projects. All are focused on operational excellence, but digitalization has risen to the top of the C-suite agenda due to the rapid penetration of new technologies that are disrupting the way consumers are buying and using everyday products and services.

Music and movies are provided as services that learn about your preferences and those of your peers; they used to be sold as a hardware product that you bought and owned. Increasingly, products of all kinds are bought from unknown vendors in far-off locations through trusted online marketplaces and delivered to your doorstep—you no longer must find and visit a local vendor and hope they have stock on hand. Newspapers are failing as we consume news and entertainment in real-time through our phones, and often for free. Our cars are mobile information centers with the intelligence to save us from our own bad driving habits, and we can control our homes and maintain their security remotely. The process industries saw this and feared they would be left behind.

In the consumer world, entrepreneurship caused the digital revolution and consumers benefited from improved efficiency and convenience, greater social connectivity and personal security, and even elevated status. Minor improvements in a consumer’s experience have massively and forever changed their suppliers’ business models—newcomers have entered from nowhere and some household names that failed to respond are gone forever (e.g., Blockbuster, Sears, Toys-R-Us). Some of our children are growing up knowing nothing different.

Digitalization is the energy and chemical industries’ response. Here, the potential gains are much more valuable: greater profitability, improved asset performance and better competitiveness; but we can also expect much more drastic consequences. Hundreds of millions of dollars are at stake, and those who embrace digitalization will prosper while those who do not respond will indeed be left behind, either consumed by those who do or fatally destroyed in the marketplace.

Digitalization is more than just another Six Sigma or lean manufacturing project; it is an imperative that is not going away. Digitalization is the scalable application of digital technologies, and the alignment of organizational capabilities that we believe an energy or chemical process operation should have and master with digital information at the core to achieve excellence. All the emphasized words matter.

FIG. 1. Sticking to the digitalization roadmap.
FIG. 1. Sticking to the digitalization roadmap.

Applied correctly, digitalization allows a process plant operator to not just manage day-to-day performance of a plant safely and reliably, but to also anticipate and respond to swings in market dynamics. Plant personnel become implementors and supervisors of strategy, rather than number-crunchers or tacticians. Digitalization ensures that the plant will operate at its true optimum, squeezing the gap between potential and realized margin. Better and faster decisions will be made, outmaneuvering competition.

For many beginning their digitalization journey, strong pressure exists to deliver something big using one of the latest buzzwords, such as the Industrial Internet of Things (IIoT), Industry 4.0, the cloud, the edge, big data and analytics. Proponents of this input-oriented approach risk applying technology for the sake of technology, without realizing its true value. Here, the focus is on outcomes, exploring how digitalization can deliver and sustain true value to the energy and chemical industries.

All digitalization initiatives lie somewhere on the journey shown in FIG. 1. For any initiative to be successful, no matter where it lies on the journey, the earlier steps must have been taken already. For example, most analytics projects (“situational awareness” ambition) fail due to poor data quality (lack of “readiness”), and most advanced controls (“operational execution” ambition) are turned off (a sure sign of failure) because their strategy or constraints are not up to date (poor “situational awareness”) so that the operator can perform better.

Readiness

It has been estimated by Frost & Sullivan that process industries utilize less than 5% of the data that is collected—95% of the data is either siloed (used selectively), dark (unused data) or lacks consistency in use. Problems of poor quality and assigning context to data have also been identified.

To be ready for digitalization, the impediments to data utilization must be addressed, including:

  • Data readiness
  • Infrastructure readiness
  • Consumption readiness
  • People readiness.

Situational awareness

To improve a plant’s operation, it is important to understand its potential for improvement so that the right actions can be taken. Situational awareness is, therefore, a crucial step:

  • Knowing how the plant is and has been performing (hindsight)
  • Understanding where it can improve vs. its constraints and optimum capability (insight)
  • Predicting responses to changes (foresight)
  • Assessing the success and value of such changes (oversight).

Tools associated with hindsight and insight are largely visual in nature (e.g., dashboards, BI tools and spreadsheets) and gain significant value when they align with goals, targets and constraints. Therefore, to provide decision-makers with valid information to present in dashboards, for example, the right tools must be applied to each situation being analyzed.

Analytics are necessary for foresight and oversight and are also considered beneficial for hindsight and insight. We are strong believers in the use of first principles-based analytics tools in conjunction with emerging correlation-based analytics (also known as statistical or stochastic analytics) for situational awareness: a so-called “ensemble approach.” First-principles tools bring rigor due to their built-in understanding of physics, chemistry and dynamics, but at the cost of complexity and relatively high computation time. Correlation-based analytics suffer from lower fidelity without any guarantee of feasibility, but with the advantage of simplicity and speed of solution.

Decision-making

In the same way that we recommend an ensemble approach to situational awareness, we also believe that decision-making should be grounded on first principles in conjunction with correlation-based tools, as necessary.

Decision-making is about looking for answers. In an operating plant seeking to improve performance, there are three main qualities of answer that can be sought:

  1. Forecasting—“What next?”
  2. Prediction—“What if?”
  3. Optimization—“What’s best?”

In the energy and chemical industries, many complex decisions must be made due to the vast number of variables that can be controlled and the large quantity of disturbances and constraints. Correlation-based decision tools are useful when accuracy is not as important as feasibility, and when the answer lies within an already-experienced operating window. However, sloppiness in accuracy comes at a cost: the actual optimum solution is likely worth a lot more than a simply feasible solution. Rigorous models will always find the best answer. Always.

Operational execution

Being ready, situationally aware and making the right decisions guarantees success only with efficient and effective operational execution. Digitalization compresses time horizons, which means not only doing the same thing faster but also becoming liberated to do completely new things.

The more encompassing the decision, the longer it takes to make and the more economically and organizationally impactful it is, and for a longer time. A wise business decision may reap rewards for years, whereas a poor business decision may have long-term, costly consequences.

Automation, by its inherent nature, makes decisions very quickly based on recent limited data; the scope is typically much more contained, and the automation actions can be suspended or terminated quickly. The timelier and more informed the decision process becomes, the better chance that the decision will be good, the quicker it will be to execute and the easier it will be to course-correct.

Digitalization accelerates information flow, increases the power of analytics and automates much of the execution, which greatly condenses the decision/execution time horizons, allowing strategic business decisions to be made in real time, and the results to be visible and available almost immediately.

The tools of operational execution (advice-based open-loop actions, closed-loop control, procedural automation and closed-loop optimization) begin with best practices. Replicating poor or average business processes in a digital environment does not ensure delivery of superior results. The focus should be on acquiring best practices to execute the organization’s work, and thereafter on finding the digital means to institutionalize automation of as much of each of these processes as possible.

Value sustainment

Digitalization is typically not a one-time hit, where the benefits are achieved and stay forever. Unless proactive steps are taken, benefits will almost always decline over time, and the opportunity to capture incremental benefits will diminish. This happens for many reasons, and the economic basis for solution changes include:

  • The goals change
  • The plant performance changes
  • Business priorities change
  • Focus by people changes
  • Technology changes.

Our approach to sustainment of digitalization value entails going above and beyond compliance with how new digital applications are implemented, to one where a clear sense of ownership exists by the organization, especially front-line operators, through recognition of the added value of the applications. Achieving this entails goal monitoring and economic stewardship, knowledge management, management of change, and a value vs. cost mindset around technology and capability refresh.

Digitalization: don’t get left behind

Digitalization creates and sustains competitive advantages and is one of the key strategies a plant can adopt in pursuit of operational excellence.

Digitalization leaders embrace it as a holistic business issue and are already making huge strides forward in productivity, efficiency, flexibility and agility. Those who are not realizing the value of digitalization risk being left behind. Failure to adapt and transform means that the magnitude of value being lost will continue to increase—the digitally wise will consume the laggards in the market. HP

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