Chemical and pharmaceutical project study

CHEMICAL AND PHARMACEUTICAL

PROJECT STUDY

VALUE ORIENTED MAINTENANCE AND ASSET MANAGEMENT

Highlights

• Importanceofmaintenance

• ValueorientedMaintenanceasthebasisanddriverforsustainablesuccess

• Evaluationofmaintenanceandassetmanagement performancebymanagers andoperationalstaffin67 chemicalandpharmaceutical companiesonsite

• Benchmarkwithidealsituationandindustry-specificvalue creationareas • Keysuccessfactorsand resultsinthechemicalandpharmaceuticalindustry

Excursus: Overall Equipment Effectiveness (O.E.E.)

Content

2

Page3 Preface

Page4-15 Chemicalandpharmaceuticalprojectstudy

Page4 ExecutiveSummary

Page5 Maintenanceasafactorworthbillions–There‘sstilllotstobedone

Page6 ValueorientedMaintenance–Basisanddriverforsustainablesuccess

Page7 Studydesign–TheConMotoMaintenanceScoreTest©

Page8 LevelmodelofMaintenanceandAssetManagementExcellence

Page9 Resultsofevaluation–Industrycomparison

Page10 Industry-specificvaluecreationareas

Page12 Keyfactorsinsuccessfulimplementation

Page13 Excursus:OverallEquipmentEffectiveness(O.E.E.)

Page14 Results–What‘sthebottomline?

Page16 Yourcontactperson

MarkusMärzDirectorBusinessDevelopmentConMotoConsultingGroupGmbHmaerz@conmoto.de

NilsBlechschmidtManagingDirectorConMotoConsultingGroupGmbHManagingDirector [email protected]

Dr.LeonhardWeckSeniorPartnerandManagingDirectorConMotoAkademieundTrainingweck@conmoto.de

©2014ConMotoConsultingGroupGmbH.Allrightsreserved.Forrepeatordersandreprintingauthorisationpleasecontact:

ConMotoConsultingGroupGmbHBoschetsriederStr.6981379MunichGermany

Tel.:+49(0)8978066-138Fax:+49(0)8978066-101Email:[email protected]

Authors

The huge significance of both the chemical andthepharmaceutical industries for theeconomy isbeyondquestion.In2012alone,thetwoindustriesturnedovermorethanfourbillioneurosworldwide.Aretheydifferentorsimilar?Howeverdifferenttheproductsof thechemical andpharmaceutical in-dustriesmaybe, they still havenumerouspointsincommon.Bothhaveahigh levelofequipmentintensity1 and automation, sophisticated processtechnology,complexvaluecreationprocessesandextensiveregulatoryrequirements.

The chemical industry primarily produces in-termediate goods and is therefore heavily dependenton itsuser industries.Accordingly, its developmenttendstobeaheadoftheoveralleco-nomy.Thus, for example, thesectorwasable torecoverrelativelyquicklyfromtheserioussetbackscausedby thefinancial crisisof2009and reporttwo recordyears in2011and2012.At thesametime, growth is distributed very unevenly. In par-ticular, someAsiancountries–withChinaaheadoftherest–wereabletogrowdisproportionately.TheforecastsoftheVCI2areevenpredictingthatby 2030, almost half of the chemical productionin theworldwillbe located inChina,whileespe-ciallyinEurope,thesliceofthecakewillbecomeeversmaller(seeFigure1).Evenso,Chinaiscur-rentlyfalteringsomewhatasanengineofgrowth.Althoughadeclineisanticipatedworldwideinthepolymerandspecialistchemicalssegments,pro-ductionremainsatahighlevel.Onthecostside,thechemicalcompaniesareconfrontedwithcons-tantpressureasaresultofincreasingrawmaterialandenergyprices.

Thepharmaceutical industry isvery importantbe-cause of demographic change and medical ad-vancesalone.Itisoneofthemostdynamicindus-try sectors in theworld. In2011,more than three quartersof its total turnoverwasstillgenerated inNorth America, Europe and Japan. But here too,countriessuchasChinaandBrazilarecatchingup.Overall,thesectorischaracterisedbylesssensiti-vitytoeconomicfluctuations.Atthesametime,therateofexpansionhasslowednoticeably in recentyears.This is linked,amongother things,with therequirementsandregulationsofhealthpolicy,whichhaveastrong impactonthebasicconditionsandearningspotentialofthepharmaceuticalindustry.

There are certainly some factors that have a ne-gative effect on business development and thuson long-term competitiveness in both industries.The chemical and pharmaceutical companiesshould now focus on pushing their efficiency tosustainably withstand the increasing cost andrelocation pressures and to defend their marketshares.TheConMotoprojectstudymakesitclearthat chemical andpharmaceutical companies dohave a future in Europe, too. The key to this is Value oriented Maintenance and Asset Manage-ment–asoneofthemostimportantcostblocksinproductionthatissusceptibletoinfluence.

Yourssincerely,

NilsBlechschmidt

Preface

3

Source: VCI-Prognos-Studie (Oct. 2012)

Rest of Europe

Germany

USA

Rest of World

China

Japan

2011[%]

2030[%]

15,012,1

24,4

16,5

3,45,6 29,0

47,1

11,07,4

13,415,0

Figure 1: Distribution of worldwide chemical production in 2011 and 2030 in percent

1) Intensity of equipment (investment rate) = Fixed assets ÷ Total assets2) Verband der Chemischen Industrie e. V.

Cost ef�ciency

Shutdown optimisation

Stock of spare partsInvestments

Overall Equipment Effectiveness (O.E.E.)

Reliability

PROFIT ORIENTED VALUE CREATION

VALUE ORIENTEDMAINTENANCE/

ASSET MANAGEMENTEFFICIENT CAPITAL

EXPENDITURE

Executive Summary

4

ChemicalandPharmaceuticalprojectStudy

There is hardly any other industry in which pro-ductionsystemsandequipmenthavesuchahugeimportance as in the chemical andpharmaceuti-cal industry. And yet, inmany companies, thosesystems are too often shut down. The cause isfrequentlyinadequateMaintenanceandAssetMa-nagement–companieswastebillionsinthisway.

One thing is clear: the importance of mainte-nance increases as the equipment intensity andinterconnection or the automation of productionincreases. In the investment-intensivecompaniesof the chemical and pharmaceutical industry, upto60percentofthetotalproductioncostscanbeinfluenceddirectlyandindirectlybytheefficiencyofmaintenanceandassetmanagement.This isasignificant lever for the successof thecompany.Butwhatisthebenchmarkfortopperformanceinmaintenanceandwherearethecompaniestoday?

The ConMoto Consulting Group has examined indetail the Maintenance and Asset Performanceof a total of 158 companies and production siteson fourcontinentsover therecentyears.Thiswasnot completed on the basis of questionnaires butof severalweeksofprojectworkwitheachofourclientsonsite.Intheindustrysectorchemicalsandpharmaceuticals,theefficiencyof67differentsitesinGermany,Austria,Switzerland,France,theUSA,BrazilandIndiawasanalysedandoptimised.Theseincludebothconcernsandcorporationslistedonthestockmarketaswell asmediumsizedcompaniesfromthesegmentsbasicinorganicchemicals,petro-chemicals, polymers, silicones, fine and specialistchemicals,detergentsandbody-careproducts,ba-sicpharmaceuticalmaterialsandspecialities.

The companies are currently a long way fromfirst-class maintenance and asset management. The average evaluation of the chemical/pharma-

ceuticalsector is just47%incomparison tobestpractice. Even the best company in the class stillhasconsiderableroomforimprovementat70per-centmaintenancematurity.

Thequestionnowarisesastowhatistobedonetosetnewstandardsforprofitorientedvaluecreationwithefficientcapitalexpenditure.Forward-thinkingdecisionmakersrecognisethenecessity,aboveall,ofpushing forwardwith increasing technical avai-labilityandreliabilitywhilereducinglife-cyclecostsof production systems and equipment. Both theindustry-specific valuecreationareasand thekeyfactors in successful implementation are summa-risedinthisstudy.

Thesuccessesachievedinthechemicalandphar-maceutical industries speak for themselves. Thecompanieswereabletomoveupagood1.5levelsonaverageontheirwaytoMaintenanceandAssetManagementExcellence.The implementationpro-jectscompletedalsoshowthat inall relevantKeyPerformance Indicators, objectively measurableimprovementswereachieved.Forexample, itwaspossible to improve theOverall Equipment Effec-tivenessbybetween2and15percentagepoints.As a consequence, one of the central profitabilityindicators, themaintenancecost rate,wascutbybetween7and27percent.Inotherwords,itwaspossibletoachieveasignificantlyhigheravailabilityand therefore additional value creationwith lowerresourcecosts.

These advances in operational performance alsohad a sustainably positive impact on financial results: companies that combine a high level ofeffectiveness and efficiency are among themosteconomicallysuccessfulintheirindustry.Theche-mical/pharmaceutical project study by ConMotopointsoutthewayforward.

Yourcontactperson

´

ConMoto Consulting Group GmbH, MunichBoschetsrieder Str. 69

81379 Munich

Germany

Tel.: +49 (0)89 78066-0

Fax: +49 (0)89 78066-101

ConMoto Consulting Group GmbH,

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ConMoto Consulting Group

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HeadofConMotoCompetenceCentre ValueorientedMaintenanceandAssetInnovation

NilsBlechschmidtManagingDirectorConMotoConsultingGroupGmbHManagingDirectorConMotoStrategieundRealisierung

Tel.:+49(0)8978066-114Fax:+49(0)8978066-101Email:[email protected]

ConMotoConsultingGroup

We have been supporting companies for more than 24 years to secureandimprovetheircompetitivenessandsustainability.Around80consultants,distributedacrossourofficesinMunich,Stuttgart,Vienna,St.Gallen,BratislavaandShanghai,workcompetentlyandwithcommitmenttorealisethebestpossiblebenefitsforourclients. Wecreateadvantage!This is the guiding approach of our implementation-oriented consultancy.

Nils Blechschmidt is managing director at ConMoto ConsultingGroupGmbHaswell asmanagingdirector atConMotoStrategieundRealisierung.Heisresponsibleforthefieldof“ValueorientedMaintenanceandAsset Innovation”.Asanexpert inthisareaandwith extensive knowledgeof various sectors, such as aerospace,engineering and plant construction, automotive and componentsupplier,plasticsprocessing,pulpandpaperandtransporttechnol-ogyaswellasprocess(chemicals,steel,pharmaceuticalsandfood),hegivesnumerouslectures.Since1997hehasbeenspeakerinre-nowned expert forums, like PlantMaintenance, EuroMaintenance,WorldMaintenanceForumandconferencesofVDIwithparticularemphasisonMaintenanceExcellenceandLeanProduction.BeforehistimeatConMoto,NilsBlechschmidtwasemployedastheTech-nicalHeadofanaircraftmaintenancebusinessforsevenyears.HecompletedhiseducationasagraduateengineerinAerospaceTech-nologyattheUniversityoftheBundeswehrinMunich.HepassedapostgraduatestudiesleadingtoaMasterofBusinessAdministra-tionatHenleyManagementCollege(UK).