The Best of Both Worlds: How Chemical Companies Can Optimize Value Across Corporate and Plant IT

As part of our ongoing commitment in helping organizations achieve high performance, Accenture regularly conducts substantive research to shed light on key challenges our clients are facing and provide thoughtful guidance in addressing those challenges. Accenture has recently conducted such a study on IT for chemical plants. Accenture conducted in-depth interviews on the topic with representatives (CIOs, COOs, vice presidents of engineering, vice presidents of operational excellence and manufacturing IT leaders) of global chemical companies. An extensive set of data was collected and analyzed, forming the basis for the point of view that is presented in this publication. On behalf of Accenture, I’d like to thank those leaders who gave their valuable time to participate in our study. I hope you find the results informative and useful as you consider how best to establish the IT platform that enables high performance in your network of chemical plants. Regards,

David Abood Managing Director Global Chemicals Industry Group

2

3

Plant performance and IT Global chemical companies face a variety of challenges, from relatively weak economic growth and increasing margin pressure to a growing need for customization and specialization, the rising importance of sustainability, and a loss of knowledge as waves of older workers reach retirement age. As varied as these challenges are, they all influence the performance of operations in chemical companies’ manufacturing plants. At the same time, there is a significant barrier that limits that performance. Recent Accenture benchmarking research on IT-OT convergence found that although manufacturing leaders agree that the availability of effective IT tools is essential to reach higher levels of plant performance, such tools are often not available.

4

The research explored the use of IT in manufacturing plants in several industries, including chemicals. It found that most chemical plants do not yet have the type of IT platform that can enable improved performance, and that they are often not using the tools they do have to full advantage. The problem is partly the technology itself, with a need for more integration and more sophisticated tools. But it also stems from governance, and the way that chemical companies oversee and manage IT in their plants. The result, too often, is that IT provides only a fragmented view of operations that makes it difficult to drive and monitor performance and improvement programs— and that can ultimately have a negative impact on production.

The research not only highlights some of these issues, but it also points to areas where new approaches to plant-focused IT are likely to bring results—and where companies can focus their efforts to move forward on the journey to becoming highperformance businesses.

Plant-focused IT: Room for improvement To realize the full benefits of today’s technology in manufacturing, it is increasingly important to have integrated systems that link operations across the plant floor, and link the plant and the central corporate perspective. Such integrated systems are needed for efficient, flexible plant operations. But they are also needed to enable the aggregation of data for benchmarking and optimized capacity balancing across plants, and for gaining detailed insights into storage capacity, inventory levels and production capacity. And they are key to the sharing of best practices and standard operating procedures, and to driving companywide operational excellence, six sigma and continuousimprovement programs. When plant IT systems fall short of that integrated ideal, problems ensue—and that is often the case in the chemical industry. The research found that in most chemical plants Microsoft Excel® spreadsheets are the primary tool used to collect and share production information. In many cases, these spreadsheets have evolved over years to become very sophisticated, often including graphical Gantt charts and interfaces to databases of production information. The functionality that they provide may fit very well with the individual plant’s information

needs. But this approach can lead to problems. Too often, the effective use of the spreadsheet tool depends on one individual— the person that built it. In addition, these tools are typically error-prone, which means plant decisions are being based on inaccurate data. From a companywide perspective, these locally built tools usually do not provide the consistent, quality data needed to benchmark production performance across sites. Nor do they lend themselves to the information -sharing that is required for the implementation of efficient, enterprise-wide standard operating procedures. The research found that chemical companies are intensive users of data historians, which are essentially repositories of production data. However, they usually implement and maintain these historians locally, and users tend to draw on only a small percentage of their potential functionality due to a lack of awareness of what such a system can offer. To make better use of historians, chemical companies can draw on the experience from other industries—notably oil & gas—that do make effective use of these tools. That is, they can take a more centralized, corporatelevel approach, with centers of excellence that maintain corporate data historians that aggregate data collected from local

historians into a corporate system that supports continuous improvement. A number of interviewees said that their plants are using commercial off-the-shelf Manufacturing Execution System (MES) solutions. But here again, these solutions tend to be tailored and implemented on a site-by-site basis, rather than through a single MES template across sites. Addressing this is no longer a daunting technology issue—packaged MES systems are now mature enough to support such a templatebased approach. One of the companies in the research had used a commercial MES to develop and roll out a template across 30 plants. The real barrier to standardized MES usage is not the maturity of technology but the lack of an organization to support such an approach.

5

Figure 1: The average maturity of plant IT services is significantly lower in chemical companies, compared to other industries. Average maturity of plant IT services per industry on a scale of 0 (low level of maturity) to 5 (high level of maturity) Average

3.12

Energy

4.73

Products

3.15

Steel/Mining

3.63

Utilities

4.16

Chemicals

2.41 0.00

1.00

2.00

3.00

4.00

5.00

Source: Accenture 2014 benchmarking research

Overall, the maturity of IT services for applications in chemical plants is significantly lower than that seen in other industries (see Figure 1). Locally built spreadsheets are typically without documentation of any kind. Some plants are using MES that were configured and implemented by local system integrators, and some have outsourced MES support to local companies because they do not have the necessary in-house skills, and often do not want to add such skilled workers to the payroll. It is important to note that this approach has significant risks and limitations, because these local arrangements often fail to include the robust service level agreements needed for effective support. The low maturity of IT services in chemical plants is also characterized by a lack of clear insight into the cost of IT. The maintenance costs related to specific systems are often hidden in broad maintenance budgets that provide little detail about which applications are related to which support hours incurred. (Of course, this is not the case when maintenance is

6

outsourced, because plants simply receive a bill from the third party for the hours spent on maintaining the application in question.) Chemical plants’ lower IT maturity is also reflected in their approach to security. Process control systems, in particular, are usually in need of improved security. They are typically maintained by local employees who are focused on production operations, with limited skills in cybersecurity—or often, even little awareness of cybersecurity threats or the basics of security. It is not unusual to find notes listing usernames and log-in codes stuck onto control systems; control rooms that can easily be entered by anybody who has access to the site; server rooms that are not locked, and so on. The central IT team typically does have deeper cybersecurity skills, but that group and the plant group usually have little contact. Chemical companies can address the issue with enterprise security standards, a program that pays special attention to security in the process-control domain, and companywide knowledge bases that can provide security information to operational teams

The central-local disconnect Most of the companies in our research use one of two models for overseeing plant IT. They either rely on the CIO and the central IT team, or on the local site managers who are supported by their local engineering and automation teams, and sometimes, the local IT team. Both approaches have their advantages and disadvantages. Our research found that in companies where CIOs are accountable for IT in plants, the results tend to be mediocre. Although the maturity of IT services in these cases is higher than average, there appears to be little focus on the development and implementation of solutions that fit with the specific needs of the chemical plants. There is often a strong “ERP-unless” policy in place, and standardization for costeffectiveness gets high priority. Thus, local IT requirements often fall outside the CIO team’s attention, and plants are left in do-it-yourself mode for operational technology—leading to the proliferation of locally built and maintained systems. Some CIOs told our researchers that their central IT teams are hardly ever contacted by site managers, so they are not aware of plant requirements or support gaps. Meanwhile, several plant and site managers made it clear that, based on their experience, the central IT team is not able to support their needs effectively. These local managers said that central IT is not always responsive to the changing needs of plants. Here, there is a disconnect in workstyles, perspectives, objectives and performance metrics. While plants are often trying to change IT quickly to meet shifting production and customer requirements, the central IT team tends

to embrace a structured approach, with technology changes coming in formal release dates. From the plant perspective, the result is a long wait, perhaps for months, for something that they need right away. Often, the central IT team does not have a grasp of day-to-day life in the plant, which can lead to communication disconnects that manufacturing employees find frustrating. In one example cited by interviewees, two plant operators called central IT support about an issue they were having with the application that controlled the chemical process. The support person asked a typical IT question—“how many users are affected?” The answer—two— meant that it was a lower-priority issue, even though having those two users online was key to keeping the plant running. We see a different set of problems where local site managers, rather than the CIO, are in charge of plant IT. There is some logic to using this approach, of course. Site managers are ultimately accountable for everything that happens on their sites, including safety and security, and IT could be seen as part of that. However, even though site managers have responsibility for IT in the plant, they also have responsibility for many other things. They may not have the time or skills needed to manage IT, and they often rely heavily on individuals in the plant to do so—individuals who may also lack deep IT skills. In companies using this approach, our research found fairly low levels of maturity in IT services; relatively low usage of commercial, off-the-shelf solutions (which means more custom and locally built applications); low maturity around

applications security; and relatively high IT costs. Beyond the individual plant, there tends to be no effective reuse of IT-related effort, and no sound basis to build and maintain a knowledge base for use across plants. Clearly, both approaches—the strictly centralized and the strictly localized—have their drawbacks. The findings suggest that the recommended approach would be to draw on the perspectives of both worlds, and balance local knowledge with central IT’s rigorous approach to technology. In our research, a small number of companies in the full, cross-industry sample did use that kind of approach. In these cases, accountability for IT in the plants was assigned to a vice president of engineering overseeing a central team of automation and engineering professionals. The VP and this team essentially act as a link between plants and central IT. The companies using this model actually had the highest maturity levels of IT services in their plants and the highest levels of user satisfaction, and were most likely to be heavy users of commercial off-the-shelf solutions across their plant networks. There were not enough of these companies to allow for a solid statistical conclusion about this approach, but the finding certainly suggests that chemical companies should consider it.

7

The payoff of effective plant IT An increased focus on specialty chemicals. The specialties segment is growing faster than the commodities segment. Specialties plants often need to produce chemicals in smaller batches, which requires more changeovers. An integrated, balanced approach to IT can help companies optimize production and inventory, across a network of facilities, to match customer needs. This can help schedulers manage changing production while making sure that storage capacity is available for these varying products and assets are being used optimally.

Sustainability.

An integrated, balanced approach to overseeing plant IT can help ensure that decision makers across the organization have the right information needed to improve plant and company performance— on a network-wide basis. A more effective approach to IT can help chemical companies address a variety of plantrelated challenges, including:

Cost reduction and efficiency. There is always pressure to control cost in chemical plants. Integrated IT enables companies to coordinate cost-reduction efforts and operational-excellence programs from a central perspective. Harmonizing data across manufacturing sites can be a challenge, but doing so can enable more effective comparisons and the identification of recommended practices. That in turn, enables the establishment of efficient standard operating procedures across plants. 8

Product innovation and customization. For many in the industry, it is increasingly important to customize products for specific customer needs—and in general, product and service innovation is becoming more and more critical. An integrated approach to plant and central IT can help R&D, sales and manufacturing communicate more effectively, and share knowledge on specific customer requirements and product and production processes. This heightened communication can help speed up the new productdevelopment process, from initial idea to production and delivery. An integrated approach can also help sales and manufacturing work together more closely to share customer product requirements and production-status information.

The market is looking for more information on the sustainability characteristics of products. At the same time, chemical companies are finding that reduced energy usage is a key to reducing costs. Integrated IT can help on both fronts by providing more detailed insight in the production history of chemical products, the amount of energy and water consumed, and related waste and byproducts. In short, it can enable more effective measurement, monitoring and reporting at manufacturing plants.

The changing workforce. There is growing need for talent in chemical plants—a challenge complicated by an aging workforce and the retirement of many individuals who have production knowledge, as well as the scarcity of incoming operations or science, technology, engineering, math (STEM)-skilled personnel. Integrated IT can open the door to increased automation of production processes, and for remote access to plants’ information and control systems—helping chemical companies make the most of their employees who have key skills.

Getting organized

Each company is different, and each will need to find its own way to balance central and local control over plant IT. The key is take a step back, develop an overall corporate /plant IT strategy, and formally address the topic of who should be accountable for which components— based on an understanding of the strengths that central IT and local manufacturing personnel both bring to the table. The right organizational structure will enable companies to tap into the best of both these worlds, and to take a collaborative approach to managing plant IT for high performance.

F

C

How responsibilities are divided: Locally, federated, centrally

L

F

C

Manufacturing Council Manufacturing strategy Manufacturing

Benchmarking Best practices Harmonization Information requirements

F

Continuous Improvement

C

Engineering

Automation Production process Control system Safety systems Suppliers

C

needs

L

Chemical companies should consider defining accountabilities and responsibilities for central and local employees—those who work in IT, manufacturing, engineering and continuous improvement teams—to enable structured, daily collaboration between all these key stakeholders (see Figure 2). Within each of these teams, various responsibilities can be handled locally, centrally or in a federated model that shares responsibility across both groups. An overall governance structure should spell out how these teams work together. The idea, ultimately, is to build collaboration into the organization.

L

F

Doing so will require change. Companies will need to look at the increased integration of systems—across each plant and between plants and the central ERP.

Figure 2: Chemical companies need to establish an organization that facilitates ongoing collaboration between stakeholders.

L

In our research, interviewees made it clear that they recognize the shortcomings associated with their current approach to managing IT in their plants. Indeed, all manufacturing operations leaders involved were in favor of having a more centrally driven approach, instead of having every plant build and maintain its own solutions. And according to our research, high performers have an established governance structure that enables convergence of IT and OT.

IT Team Infrastructure Enterprise Architecture Cybersecurity Harmonization Suppliers L

F

C

Source: Accenture

9

About the research This report draws on the chemicals-related findings from an Accenture study conducted in 2013-2014 that looked at operational technology across industries. The respondents from the chemical industry included 21 individuals (CIOs, COOs, vice presidents of engineering, vice presidents of operational excellence and manufacturing IT leaders) representing 13 global chemical companies. Figure 3: Research participants, by industry. Number of participants per industry (Total: 49) 25 20 15

21

12 10

10 5 0

10

Chemicals Products

Metals/ Mining

3

3

Utilities

Energy

11

Contact us David Abood Global Chemicals Industry Lead [email protected] Bianca Scholten Research Lead [email protected]

About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 289,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.

If you have a QR reader installed on your smartphone, simply scan this code to be taken directly to the Accenture Chemicals page: www.accenture.com/chemicals

Copyright © 2014 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative. This document may make descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.