ABB professes strengths; increases manufacturer competitiveness

ABB automation and power businesses turned around in 2003, and have now seen the fifth quarter of growth; orders increased 15%, revenue gained 13%, and earnings nearly doubled, according to Dinesh Paliwal, president and chief executive officer, ABB Inc., USA, and leader of automation worldwide.

By Control Engineering Staff April 21, 2004

Atlanta — ABB automation and power businesses turned around in 2003, and have now seen the fifth quarter of growth; orders increased 15%, revenue gained 13%, and earnings nearly doubled, according to Dinesh Paliwal, president and chief executive officer, ABB Inc., USA, and leader of automation worldwide.

With 10,500 U.S. employees and 20 manufacturing sites, ABB is a net exporter from the U.S., Paliwal noted, in opening remarks here on April 20, at the ABB Automation World 2004 Conference and Exhibition, in a presentation called “Results-Driven Automation.” The four-day meeting, with more than 800 attendees, was said to be ABB’s largest with conferences, exhibits, and events for end-users, system integrators, consultants, partners, and employees. About half were employees, consistently emphasizing “results-driven automation” through “best-in-class products, value-added solutions, performance services, and a partnership focus,” they noted.

ABB technology examples include more than $100 billion of automation installed base globally; increased efficiencies of variable speed drives save enough electricity to reduce CO2 emissions by 60 million tons a year; a five-year contract at a paper mill targets $40 million cost savings over the period. Eight suppliers connected to Renault use more than $160 million in ABB technologies producing a new model of automobile; installed base of ABB robotics is the largest globally at $1.4 billion and more than 100,000 units globally; Automation Technologies Services represent 20% of revenue with 10,800 service employees globally. ABB Automation, with more than 50,000 employees and 500,000 automation products shipped daily, includes brand heritage such as AccuRay, ASEA, Bailey, Brown Boveri, Entrelec, Fischer & Porter, Hartmann & Braun, Kent-Taylor, K-Flow, and others. “The name on the product may have changed, but value has not,” Paliwal said. The Industrial IT platform was mentioned liberally throughout the meeting, including the System 800xA base platform, which includes a common operations and engineering environment, and migration from and connections to earlier distributed control systems.

Presentations included positive market and technology trends, views from DuPont, Bechtel, DuPont, Intel, and Microsoft, as well as a look into ABB’s expanding automation services outsourcing.

Dick Hill, vice president of automation and of manufacturing advisory services, ARC Advisory Group, talked about “Major Market and Technology Trends Affecting the Automation Markets,” and spent time in two presentations advocating for intelligent applications of automation to improve business metrics and save costs. Hill, who also spent 17 years at Foxboro, says there’s an estimated $65 billion of installed automation systems at, or near, the end of useful life, “which could be holding you back from moving forward. Many of these systems were never intended to work together, designed to operate as islands of automation. Many factories are looking for business results,” he said, that cannot be reached with older systems.

Potential business cases for investing in new automation, Hill suggests, include an increase in unscheduled process downtime, tougher regulatory requirements, greater order visibility demands from customers, a desire to charge more for more tightly controlled quality, retirements of people with know-how, manual coordination of different parts of the plant (or enterprise), monthly determination of performance, challenges in keeping up with production plan changes, and added customer demands for customization.

Users should consider their controls as “legacy” when they no longer supports business demands. How can you tell if your system needs replacing or migration? If the control system cannot support advanced technology without lots of custom engineering, if the current automation system is being phased out, if changes in the system are complex to implement, if managers and planners and others in the plant cannot see what’s going on right now, and if it’s costly to maintain. In considering upgrades or replacement, Hill said, end-users should consider total cost of ownership and also lost benefits by not implementing a new system.

There’s a prize to be had with up-to-date automation, Hill said; a medium-sized chemical plant marked $25 million a year in savings through increased capacity of 1-3%, asset utilization increase of 3-5%, downtime savings of 40-50%, reduced asset savings of 10-15%, and energy savings of 5-7%.

James Porter, DuPont vice president of engineering and operations since January 1999, started with the company in 1966 in chemical engineering. He said DuPont operations best practices include automation and process control, process safety management and control, manufacturing effectiveness, transition management, project definition and management, energy management, environmental management, and maintenance excellence. “We think we can put $200-300 million to bottom line by doing what we do today better.” Efficient application of automation technologies can help with that, he suggested.

ABB is advancing its role in the services area. Stephen C. Rahr, vice president, ABB Performance Services, ABB Inc., spoke about “Co-Sourcing: A New Economic Model to Deliver Industrial Performance-Based Asset Services.” If your business isn’t getting the kind of return on net assets that it desires, outsourcing the automation function might be something to consider. Strategic reasons for outsourcing, Rahr said, include the need to improve business focus, reduce risks of technology implementation, accelerate business renovation by being a catalyst for change, and to free resources for other opportunities closer to the core business.

Top tactical reasons, Rahr said, which, applied without strategic reasons is like buying a 747 to get peanuts, are to improve return on assets (price performance), reduce operating costs, redirect capital funds, gain access to scarce resources, or if processes are difficult to manage or out of control. These are according to Source Outsourcing Institute, Rahr noted, and seemed like something ABB should tackle after employees watched IBM take over the ABB information technology services. ABB service range from paying for an expert for a few hours to ABB Full Service with hiring of maintenance staff to ABB Automation Performance Management, where automation services are purchase in a multi-year arrangement, as a utility, including outcome-based structure with risk-reward sharing, and automatic technology refreshes. More than 25 such arrangements are under detailed investigation by manufacturers, Rahr said. Other company models, he said, in other industries include Rolls-Royce “Power by the Hour” deals for aircraft engines, and GE MRI by the image (to avoid selling $2 million machines).

There’s a lot of savings to be had, Rahr pointed out, but “Overall, generally a‘compelling event’ is required to initiate change,” such as entry into a new market, a new competitor, extreme price pressure, or foreseen obsolescence. “As you get closer to controlling valves, customers get more nervous about turning it over. Those who have come to us to investigate this are used to doing outsourcing certain services in other areas,” Rahr said.

Control Engineering Daily News DeskMark T. Hoske, editor-in-chief