Meridium

Recently, Energy Central held a webinar that hosted several hundred people.  The audience was interested in the relationship between Smart Grid and Generation Management (GM).  Dan Brown, retired executive and active utility industry consultant taught how base load assets must move very quickly as consumers and commercial operations move load.  Smart Grid puts a much more strenuous impact on generation assets from the shifting load.

A major concern the spills out of that is the cost of reliability.  How do I have these base load plants that are designed to run at a base load and now there are moves in assets from solar, to wind, etc.  Here is the strenuous impact on the assets and the expectation of the maintenance organization to adjust and respond to these new dynamic operational parameters. 

He nonetheless, stated that organizations can learn the path to low-cost reliability.  There is a certain disciplined approach to gathering data to enhance reliability processes without sending the costs to unattainable levels.  Reliability best practices are built on a strong foundation that is built on the work order.  As layers are added to this foundation, the organization's work culture increasingly submits data and information for reliability analysis.

Having this established, growing knowledge base can also benefit the younger workforce coming in to replace the retiring workforce.  Having this knowledge base is essentially "bottling" the knowledge of the experienced workers.  This can stem the growth of the knowledge gap that many utilities are experiencing.

Dan also made reference to the all-important operations-maintenance relationship.  This adds important layers to the foundation.  A well executed operator rounds program can bring more discipline and data integrity.   More incisive, fleet-wide decisions can be made more effectively and results can be leveraged from unit to unit and plant to plant.  This established disciplined approach can help engineering processes like reliability centered maintenance (RCM) to be easier and more accurate.  Another major area of value for having these layers of data integrity can lead to better pre-outage planning meetings and critical-path outage planning.

During the webinar there were a couple of poll questions as well that revealed some interesting trends.  The Energy Central webinar can be accessed here if you'd like to hear the full presentation.

• We exposed financial vulnerabilities of manufacturing plants while offering enterprise risk management solutions to strengthen them
• We showed how Asset Performance Management is an important foundational part of corporate governance best practices moving forward

How exactly did we do that?  The conference general session was made up of the CEO's of a number of companies - Emerson Process Management is one of them.  A senior executive from Marsh risk consultants was another contributor.  Not the very least of some of the best and brightest was the Publisher of Forbes Magazine.

But to whom did they speak to?  They spoke to some of the most important people in the world.  Was this a gathering of CFO's and policy makers?  No.  Was this a group of industry magnates or banking executives?  No. 

Who were the people listening to these great and influential speakers?  People involved in the discipline of reliability engineering.  What?  Reliability engineers?  Why are they so important?

If you listen to Rich Karlgaard's presentation (Rich is the publisher of Forbes magazine) he explains how the current economy recession and recovery is like that one of the 1970's.  He points out that the 1970's made up a tremendous decade for start-ups with the likes of FedEx, Microsoft, and Southwest Airlines.  But he also pointed out how and why there were companies that failed during that decade.

The companies that did not come back in the '73 - '74 recession were the ones that didn't figure out that there were technological advances that could be exploited.  With this recession recovery, the companies that see and embrace the technological changes and leverage them to their advantage over their global competitors that don't.   

The audience these great minds were speaking to are the best and the brightest in the world of reliability engineering.  Companies that emerge from this recession will do so largely due to the fact that they've put technological advances into the capable hands of reliability engineers.  These people will team up with their visionary Information Technology counterparts and elevate the financial performance of asset-intensive enterprise beyond levels that have been considered possible by the Board of Directors.  Add to this team, people those who work in risk management.  You will then have a conduit of data that stems from the performance conditions of the production assets of the plants directly to the CFO's office.  Visibility and access to asset performance data will be a key differentiator between the companies that make it and the ones who do not.

 

Like many others, my wife and I are trying to closely monitor our budget during these tough economic times.  We often go grocery shopping twice a week and spend more than we have budgeted.  To remedy this, we have started saving our grocery receipts to track how much we are spending.  Despite our good intentions, we aren't always effective.  For example, a week ago, I found an untouched pile of two to three months' worth of receipts.  
Apparently, we haven't done much more than simply collect the data.  In its present form, the data in our receipts isn't meaningful.  We can't act on the information and so we haven't changed our habits.  All we know is that we need to cut our grocery costs.



In the world of asset performance management, there is a better way.

In my job, I have the opportunity to talk with many reliability and maintenance professionals.  These men and women also deal with a lot of data.  They collect data from multiple sources such as work orders, process historians, and condition monitoring.  These professionals find that they are most effective when they analyze their data and create actionable recommendations.  They do this using tools such as APM software.  Using such tools, they save money, mitigate risks, and increase uptime. 

These tools allow companies to view, analyze, and then use key data to create performance management strategies.  For example, many companies eliminate defects using failure modes and effects analysis (FMEA).  By further analyzing data, they create qualitative risk profiles.  Engineers perform root cause analysis to discover why events occured.  Using this data, they prevent future events.  Many companies use tools like this to optimize all of their activities to save time and money.  I am genuinely impressed by what they accomplish.

Let's return to my family's grocery buying habits.  As I stood in my kitchen a week ago looking at the pile of receipts, I realized that having a grocery shopping tool equivalent of APM software would make saving time and money very easy.  Data analysis would enable us to make the right decisions.  This is how it might work:

 - Analysis of our shopping trips (like work order histories) might reveal that we spend less time waiting to check out after 7:30 PM due to less store traffic.  

 - Doing root cause analysis, we might find that we buy more non-essentials like sweets, exotic foods, duplicates, etc. when go to the grocery store hungry (since everything looks good).  

 - A cost analysis might tell us how much more we spend on an average trip by buying name brand products instead of generic or how much more we spend buying items at full price instead of on sale days.  

 - By making food spoilage a failure mode, an FMEA analysis might reveal that for every 5-6 fresh fruits and vegetables we buy, 1-2 of them goes bad before we get a chance to eat them.  
 
 - Analysis might also reveal that going with an incomplete shopping list doubles the number of trips that we make to the store (having to return to buy essentials we forget) as well as lengthening the duration of each trip.  

 - Analyzing our route through the store might reveal that haphazardly written grocery lists cause us to revisit an aisle twice because we forget about an item at the bottom of the list.  

 - Using condition monitoring and critical spares analysis, we could know when we were low on milk, toilet paper, trash bags, or laundry detergent.  We would also know how much of each we should stock up on at a time.  


I'm guessing that such decision enablement would save us hundreds of dollars and between 50-100 hours a year.  What could we do with that extra money and that extra time? 

During this year's Meridium Conference, Jeff Dudley of Dow Chemical asked a similar question with regards to eliminating unplanned events.  A summary of his presentation is found here: http://www.apmadvisor.com/archivearticle.asp?id=191
   

I was flying across Canada one day when I peered out of the window to notice a stream of brown lubricant washing across the outer skin of the jet engine.  I was struck with fear and concern in the pit of my stomach.  What could be wrong with this plane I'm riding in?  I realized at that moment that I was a critical stakeholder in the business of aerospace (yeah right... that's what I was thinking...).  Four groups of stakeholders:

1. The traveler wants to get from point A to point B safely, comfortably, and quickly
2. The operator of the airplane fleet wants to keep delays, cancellations, and in-flight shutdowns to a minimum
3. The manufacturer wants to increase market share, command a price point that precisely meets the needs of the passenger and of the operator, and preserve various revenue streams through a variety of purchase/lease agreements and service contracts
4. The FAA, NTSB, and other regulatory bodies that ensure public safety

1. Gather all internal business leaders
2. Define a dollar amount of loss that could shut down the business or impact share price
3. Each internal leader lists what risks could bring about such a material loss
4. The leaders would then assign personnel to identify the steps needed to eliminate, mitigate, or transfer the risk.

When I was much younger I set out to learn as much as I could about personal finance and household budgeting.  (What I would have given for Financial Peace University back then!)  I did pretty good but I had multiple systems.  There were gaps that existed between these systems.  I tried to manage those gaps with my memory.  Needless to say I made some mistakes, incorrect assumptions, and I went overdrawn once or twice.  So as I set out to be more on top of my personal finances, I established a management system that worked against me. 

A conversation I had with a Risk Management professional earlier this week made me think about how Risk Management can itself be a possible contributor to risk.
 

"we have multiple regulatory agencies, multiple commercial parties, multiple jurisdictions, multiple technical parties and humans holding all of this together. This is great material for a novel, not a deterministic or even tightly defined statistical model."

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