Commentary: Automation for changing industries

Can improved automation shore up sagging profits?

08/06/2008


Dow Chemical reported decreased profits for the second quarter of 2008. Why is that? What does it tell us about process companies in general? Does it point a direction for the future of process automation?

I don’t bring this up because I want to start monitoring financial data or offering investment advice, but Dow’s situation is well publicized, detailed, and probably common to many process industries. The Chicago Tribune reported:

“The company's costs for energy and raw materials surged 42%, or $2.4 billion, when compared with the second quarter of 2007, the largest year-over-year increase in its history, said Geoffery E. Merszei, executive vice president and chief financial officer.

“Dow spent $1 billion more on oil-related costs in the second quarter than in the first three months of the year, the company said. Dow announced last month that it was raising the prices of its products by as much as 25% in July after implementing across-the-board price increases of up to 20% on June 1. Increasing prices helped to offset its higher costs but did not cover them, the Midland-based company said.”

So what does this tell us? When a company as optimized as Dow watches its profits erode even when prices are going up by 20% and 25%, you know things are very serious. It’s also probably a safe bet that less sophisticated companies are suffering even more. If ever there was a situation where the time is right for upgrading control strategy to gain efficiency and reduce costs, this is it. Any process unit that is running at anything less than peak efficiency will cause the company to get hammered in the marketplace. Today’s cost structures leave no room for anything sloppy.

At the same time, there are more products and services available today to improve process performance than ever before: Control platforms that optimize production, asset management to maximize uptime and equipment life, data collection of any conceivable process variable, smart field devices that can communicate with or without wires, and the list goes on. With today’s financial climate, a company that does not make investments in new technology will most certainly see itself slip into the red, eaten alive by rising feedstock and energy costs.

—Peter Welander, process industries editor, PWelander@cfemedia.com ,
Process & Advanced Control Monthly
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