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The Environment for Manufacturing and Automation in 2009 and Beyond

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ARC Advisory Group

This document discusses the environment for manufacturing and automation in 2009 and beyond. It summarizes the current global recession and its impact on manufacturing. Recent purchasing manager indices show manufacturing contracting significantly around the world. Industrial production and capacity utilization are down. The document also discusses consolidation trends in different industries and the challenges of an aging workforce. While 2009 will be a difficult year, the document argues that continued investment in key areas like infrastructure, energy efficiency and innovation will be important to drive future growth.

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Eye of the Storm: The Environment for Manufacturing and Automation in 2009 and Beyond Larry O’Brien Craig Resnick Research Director Research Director ARC Advisory Group ARC Advisory Group lobrien@ARCweb.com cresnick@ARCweb.com
Outline  Where are We Now?  Current Climate and Outlook for Manufacturing  Impact on Emerging vs. Industrialized Economies  Current Climate and Outlook for Automation  Impact on Emerging vs. Industrialized Economies  How are Different Industries Affected?  Where are We Going? 2 © ARC Advisory Group
Where are we now?  Recession is global  Recent economic news is pretty much all bad  Manufacturing is being hit hard  Investments still need to be made!  Curbing investment in certain sectors now could have negative consequences down the line 3 © ARC Advisory Group
The Global Recession  US has been in recession since December 2007  Europe officially fell into recession in November 2008  China economic growth dips below 10 percent for first time in three years  “After years of boom, China's GDP growth has now slowed for the last five consecutive quarters.” – October 2008 Report  “Brazil’s economy may grow as little as 1.5 percent this year as the global recession reduces demand for commodities and curbs consumer spending, said Itau Corretora de Valores SA, the brokerage unit of the nation’s biggest bank.” -- Bloomberg 4 © ARC Advisory Group
Impact on Manufacturing: A look at Recent PMIs from Around the World  PMIs, or Purchasing Managers Indices are a good indicator of overall health of manufacturing.  Shows purchasing manager trends in orders for materials.  Number of Below 50 indicates a general contraction in manufacturing.  “At 33.2 in December, the JPMorgan Global Manufacturing PMI posted its weakest ever reading and has sunk to new lows in each month of Q4 2008. Based on the average reading for the headline PMI, the performance of the worldwide manufacturing sector through 2008 is the worst for a calendar year since 2001.” 5 © ARC Advisory Group
December 2008 Manufacturing ISM Report On Business Month PMI Month PMI Dec 2008 32.4 Jun 2008 50.2 Nov 2008 36.2 May 49.6 2008 Oct 2008 38.9 Apr 2008 48.6 Sep 2008 43.5 Mar 2008 48.6 Aug 2008 49.9 Feb 2008 48.3 Jul 2008 50.0 Jan 2008 50.7 Average for 12 months — 45.6 High — 50.7 Low — 32.4 “Manufacturing contracted in December as the PMI registered 32.4 percent, 3.8 percentage points lower than the 36.2 percent reported in November. This is the lowest reading since June 1980 when the PMI registered 30.3 percent.” 6 © ARC Advisory Group
China Manufacturing PMI (Jan1, 2009, CEP News) - CLSA's Chinese performance of manufacturing index grew to 41.2 in December from 40.9 in November, according to Markit. The index has been below 50 - indicating contraction - since August 2008. "Chinese manufacturing activity was very weak in December. Output contracted at a record pace, employment fell for the fifth month and work in hand declined," said Eric Fishwick, head of CLSA Economic Research. "With five back-to-back PMIs signalling contraction, the manufacturing sector, which accounts for 43% of the Chinese economy, is close to technical recession," he said. 7 © ARC Advisory Group
European Manufacturing PMIs BERLIN, Jan 2 (Reuters) - Collapsing orders sent Germany's manufacturing sector into its biggest contraction in more than 12 years in December 2008, even though a slump in input costs allowed producers to cut their prices, a survey showed on Friday. The headline index in the Markit Purchasing Managers' Index (PMI) for Europe's biggest economy fell to 32.7 in December from 35.7 in November. The fall took the index deeper below the 50 threshold separating contraction from expansion. 8 © ARC Advisory Group
Industrial Production and Manufacturing Capacity Utilization in the US “Industrial production decreased 0.6 percent in November with declines widespread across industries. The drop in output in September was revised down, and the rebound in October was revised up, in large part because both the decrease due to the September hurricanes and the subsequent partial recovery in October were larger than previously reported. “ – US Fed 9 © ARC Advisory Group
Industrial Production and Manufacturing Capacity Utilization in Europe Source: Eurostat 10 © ARC Advisory Group
Another Key Indicator: the Price of Oil  Lower prices have stalled capital investment and caused project delays  Long-term demand is still increasing  Lack of capital investment will cause slingshot effect as prices begin to increase again Pending Legislation in U.S. to Better Control Oil Futures Speculation. 11 © ARC Advisory Group
Industry Trends: Oil & Gas  Oil & Gas Projects Delayed  Increased volatility and risk  Low price of oil deters investment in alternative fuels, oil sands, etc.  BUT…..  There are still many Process plant industry bookings for contractors; manpower requirements grew by over 90% between projects going on – the start of 2004 and the end of 2007. Refiners are making Source: Hydrocarbon Processing money now!  Upstream oil and gas is still growing significantly 12 © ARC Advisory Group
IEA report Shows Long-term Shortage and Supply Concerns  “For the next couple of years, the oil pipeline is well supplied. But that trails off after 2010. By 2015, the world needs to find an additional 7 million barrels per day of oil above and beyond all the exploration projects currently in the pipeline. And to get that oil to market by the middle of the decade, those exploration projects need to get started now. “  According to IEA, massive investments are needed in the global oil infrastructure ($26 trillion). 13 © ARC Advisory Group
2009: A Rough Year Ahead for Pharma and Biopharma  To meet the challenges in 2009, the industry needs to improve innovation, introduce new technologies, and ultimately improve efficiencies. Even though 2009 will not be as lucrative as previous years, the industry will continue to be profitable.  Regulation, congressional activities, and innovation will continue to play an important role in the industry for 2009. 14 © ARC Advisory Group
Global Recession Curbs Demand for Steel  The global recession has curbed demand for steel, prompting mills in Asia, Europe and North America to reduce purchases of raw materials, including iron ore. Rio has postponed a $2.15 billion expansion of the Corumba iron ore mine in Brazil as part of its plan to cut spending globally by $5 billion. Source: Bloomberg, IISI, China Metallurgical 15 © ARC Advisory Group
Global Automotive Industry on the Skids  Japan auto sales seen at 31-year low in 2009  Toyota suspends domestic production  2009 U.S. sales seen at 12.5 million, lowest in 18 yrs  Big three bankruptcy?  Goldman Sachs cuts global auto production, sales Domestic and National Auto Production 2007-08 Source: Automotive News forecasts 16 © ARC Advisory Group
How has ARC Revised its Growth Forecasts?  We have cut our growth estimates significantly for 2009  North America, Japan, Western Europe will Contract for 2009-2010  BUT we still expect the global market to grow  Recovery will take place after 2010 Revised DCS Market CAGRs 17 © ARC Advisory Group
Consolidation Suppliers and Users of Automation Have been Consolidating.
End User Industry Examples of Consolidation  Exxon and Mobil; Chevron, Texaco, Unocal and Phillips; BP and Amoco, Total acquires 50% of AMSO, ...  Dow Chemical, Union Carbide, Rohm&Haas; SABIC acquires GE Plastics; …  Pfizer acquired Warner-Lambert & Pharmacia; Glaxo Wellcome and SmithKline Beecham merger; Bristol-Myers bought drug unit of DuPont Chemicals; …  InBev acquires Anheuser-Busch; Heineken acquire Drinks Union (Czech Rep); too many to list,…  International Paper Acquires Argentina's Bolsaflex, Stora Enso finalises acquisition of Vinson [Brazil],…  Tangshan Iron & Steel Co., Handan Iron and Steel Group Co. and Chengde Xinxin Vanadium and Titanium Co. will become the Hebei Iron and Steel Group once the merger is complete  Tata Motors acquires Jaguar-Land Rover, Daimler divests Chrysler … Near misses and speculation  BHP Billiton bids for Rio Tinto Canceled  General Motors and Chrysler? Bottom line: Newly created enterprises need help to develop strategic plan! 19 © ARC Advisory Group
Elsag Bailey Fisher = Most Samsung (H&B, F&P) HD Baumann Recent Propack Milltronics Marcam August Intellution SACDA ETG Moore Systems (Divested) N-Pignone Profimatics SCADA Anorad Turbo-Werk Combustion PC&E Engineering P&F Safety Triconex Dynapro Vickers Kenonics Systems Alfa Laval L&N EJA Applied Aut. Automation Westinghouse L&N SCADA Entek IRD ORSI Cellier CSI Measurex APV Engineering Systems Mod. Innotec Daniel InterPlant SimSci Vectek Sequencia BJC Orion CEM Consulting Electronics Wonderware Xian Hensheng Shinwha Kuhlman Elect Saab Marine Allied Electronics Signal Eurotherm ICS Triplex Morgan Ber-Mac MDC POMS Quantum Pavillion Compex Eutech Engineering Solartron Mob. Goldstar Hon Tesch Danfoss Flow Entrelec SAT Bristol Bab. Tata Hon DataSweep US Filter DLI Eng. Walsh Damcos InterCorr Automation Gepa IndX HSB DMI PAS APC PacSim CEDES Robicon CMS Tecnologia Autom. Grp. Enraf APV (Divest) Incuity Soft. UGS ABB Emerson Honeywell Invensys Rockwell Siemens 20 © ARC Advisory Group
The People Challenge: Aging Workforce People Over Age 65  US Bureau of Labor Statistics 80 70 • By 2010 more than 25% of working population will reach retirement age Millions of People 60 50 40 • Trend will continue into foreseeable 30 future 20 10  Globally – Workers are Getting Older • Largest Group of Workers – over age 0 1900 1920 1940 1960 1980 1990 2000 2010 2020 2030 Source: US Census 45 and will double in next ten years Year • Fastest Shrinking Age Group of Workers between 35 and 44 – Changing Workforce Demographics from 2000 to 2010 arguably the most productive 60% 50% Source: US Bureau 52%  Europe is expected to lose 1 million of Labor Statistics 40% jobs annually for the next 25 to 30 30% 21% years 20% 10% • Severe shortage of skilled workers 0% and engineers! -10% -10%  Oil & Gas Industry -20% Number of People 35 to 44 Number of People 45 to 54 • 50% of its production engineers will Number of People 55 to 64 reach retirement age by 2010 Exodus of Workers is Reducing Companies’ Ability to Sustain Operational Excellence 21 © ARC Advisory Group
Investments Must Continue to be Made in Key Industry Segments, In Spite of Economy!  America’s Crumbling Infrastructure  Roads & Bridges  Water & Wastewater  Power industry  Aging control systems  Nanotechnology  Innovation Instrumental in Driving Economic Growth  Users and Suppliers Must Continue to Invest in R&D Sustainability is the Issue! Sustainability of Your Business! 22 © ARC Advisory Group
Infrastructure Needs Modernization  ARC Estimates Total of $65 Billion in Installed Process Automation Systems are Reaching the end of their Useful Life  The Majority of this is in the Hydrocarbons Sector in North America, Europe, and Middle East 33.7% New Plant Expansion 50.2% Modernization 16.1% 23 © ARC Advisory Group
Obama’s Infrastructure Plant and What it Means to the Automation Business  Infrastructure: $90 billion  Where does the money go?  $30 billion: Highway construction  $10 billion: Rail and transit projects  $31 billion: Modernize federal and other public buildings for long-term energy savings  $19 billion: Water projects Obama Mentioned Science in His Inaugural Address 24 © ARC Advisory Group
Obama Stimulus Plan Targets Energy  Energy: $58 billion  Where does the money go?  $32 billion: Fund a smart electricity grid  $20 billion-plus: Renewable energy tax cuts and a tax credit for research on energy efficiency and clean energy, plus a multiyear extension of the green energy production tax credit  $6 billion: Weatherize modest-income homes 25 © ARC Advisory Group
What the Plan Means for Automation  Power and Water will see Huge Investments  Increased Investment in Intelligent Building Automation Systems  Increased Emphasis on Boiler Efficiency  Sophisticated Approaches to Energy Management  Hundreds of Millions of Dollars Worth of New Systems and Instrumentation Will be Required  Money won’t enter the system until 2010-2011 26 © ARC Advisory Group
The Sustainability Challenge  In addition to having to deliver to a highly competitive, flat world economy, manufacturers have to meet the new SUSTAINABILITY challenge  Sustainability is the response to the increased pressure on the environment, the rising demand for natural resources, energy, and the need for a socially responsible approach to business  Sustainability will drive towards a higher level of COLLABORATION between organizations and systems and most likely a complete rethinking of traditional organizational structures  Automation Suppliers are uniquely positioned to help manufacturers meet the SUSTAINABILITY challenge with Collaborative Power and Control Solutions 27 © ARC Advisory Group
Manufacturing Today: Flat World has Raised the Bar for Manufacturers and Processors  Information and Communication Advances Have Made the World More “Connected” • Easier exchange of info, ideas and money • Global access to product/service suppliers  Business Has Become More Global • Many new, large markets to sell more products • Outsourcing of ―Core‖ activities • China (Manufacturing), India (Services) • New Capital Investments Business Drivers • Chevron Refinery (India), Dow (Middle East) Dynamic Customer Requirements • Increasingly complex global networks to manage Shrinking Product Lifespan More Demanding Customers  Business Has Become More Competitive Fierce Global Competition • More aggressive legacy-free competitors Global Markets, Supply Chains • Tougher Price/Product competition Greater Product Variety • Changing customer needs with local requirements Compliance and Tracking • Product proliferation Many Others • Product innovation and new product launch 28 © ARC Advisory Group
Sustainability Will Raise the Bar Even Higher Wal-Mart Corporate Environmental Sustainability Goals To be supplied To create zero To sell products that 100% by waste sustain resources & renewable energy the environment Stores 25% more 25% reduction in 20% supply base efficient in 7 years solid waste in 3 aligned in 3 years years  Fleet 25% more efficient in 3 years 29 © ARC Advisory Group
Sustainability Will Raise the Bar Even Higher PepsiCo PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today. Ft. Pierce Florida Energy Recovery “Green” Buildings Package Innovation Provide Respect and Conserve and Trustworthy Fairly Treat our Respect our PRODUCTS PEOPLE ENVIRONMENT 30 © ARC Advisory Group
Economic Stimulus: Clean Energy  Stimulus Push Gets Greener Tint - “President-elect Barack Obama and congressional Democrats are intensifying work on a stimulus plan that would dole out roughly a half-trillion dollars on an array of "green“ projects and infrastructure initiatives such as building renewable energy plants, improving the electrical grid & installing "smart" meters” Wall Street Journal, Dec 6, 08  Jobs, Clean Energy are Key to Obama Stimulus Plan - “Obama aide states: "Given the magnitude of the problems, you're going to need a large plan. Much of what we would do is double duty, with the effect of helping aggregate demand today but also enhancing the productivity of the economy for years and decades to come”. "Green jobs, healthcare technology and infrastructure fit that.“ Los Angeles Times, Dec 6, 08  China's $586 billion stimulus package is its - "biggest contribution to the world," Premier Wen Jiabao said Monday, as hopes rose that heavy spending on construction and other projects would help support global growth by fueling demand for imported machinery and raw materials. AP, Nov 10, 08  European Economic Recovery Plan ”… immediate budgetary impulse amounting to 200B Euro and kick-start investment to modernize infrastructure. It will drive a competitive Europe ready for the low- carbon future.” Jose Manuel Durao Barroso, Pres., European Commission Nov 26, 08 31 © ARC Advisory Group
Agenda Setting the Stage for Sustainability 32 © ARC Advisory Group
Climate Change Creating Havoc Mean Temperature Change CO2 Concentration Scientists project a 3º to 7º F World CO2 Emissions rise in global temperatures by 2100 – Consequences could be dramatic • 3.7º F = Arctic ice disappears • 5.4º F = Amazon disappears • 7.2º F = Agriculture declines 33 © ARC Advisory Group
The Addition of Power Generation Capacity is Getting Harder Energy Conservation and Management a Must  Asian demand for equipment and services drives up Capital Goods Prices globally  The cost of new plants is rising very rapidly Index Value  Example: US estimated costs for new PowerGen capacity • Up 19% in the last year • Up 69% since 2005 • Up for all types of plants • Steam • Combined cycle • Wind • Nuclear • Hydro (These measures includes design, equipment, and construction; exclude fuel costs) 34 © ARC Advisory Group
Manufacturers and Processors Have The Most To Gain By Saving Energy • Uses more energy than any other single sector; >1/3 of U.S. energy consumption • Produces approximately 30% of U.S greenhouse gas emissions Energy Use Transportation • Accounts for more than 35% of U.S. Industry 27.2% natural gas demand 33.4% • Accounts for 28% of U.S. electricity demand • Energy is key to economic growth in Commercial domestic manufacturing Residential 17.9% 21.5% • Many companies have been unable to pass higher energy costs on to their customers, which has impacted their profit margins negatively Source: US Department of Energy 35 © ARC Advisory Group
Major Energy-Intensive Industries Sustainability impacts ALL! Industrial Energy Intensity vs. Energy Consumption 1000 Energy-Intensive (Thousand Btu/$ GDP) Industries Petroleum Energy Intensity 100 Primary Paper Mining Metals Chemicals Nonmetallic Textiles/Apparel Wood Minerals 10 Tobacco/Beverages Food Processing Plastics/ Fabricated Metals Furniture Rubber Transportation Leather Printing Machinery and Computers Miscellaneous Electrical 1 10 100 1000 10000 Energy Consumption (Trillion Btu) Source: US Department of Energy 36 © ARC Advisory Group
Energy Challenges Create Drivers For Sustainability  The World Commission on Environmental and Development defined Sustainability as the development that meets the needs of the present without compromising the needs of future generations  The Core Principle is care and respect for the environment and the society we live in  By applying this approach manufacturers judge the success of product designs not only by the financial but also by the contribution to society and the ecosystem  The concept of sustainability reaches beyond environmental stewardship  Sustainability is a positive business approach that has as much to do with delivering economic benefits, and being a responsible member of the community, as it has to do with reducing the environmental impact 37 © ARC Advisory Group
Agenda What does Sustainability mean for Manufacturers? 38 © ARC Advisory Group
To the Pillars of Operations Management… Infrastructure Integration Functionality •Real-time Plant Support •Enterprise •Production Planning •Technology Platform •Design & Engineering •Production Execution •Applications Platform •Operations, Controls, & •Product Data Tracking •Business Processes Equipment •Visibility & Analytics •Security •Supply Chain & External •Quality Enforcement •Role-based Portals Operations •Inventory Logistics •Unified view •Product Support Ops •Asset Mgmt •Product Support Operations Management 39 © ARC Advisory Group
… add three more for Sustainability ECONOMIC ENVIRONMENT SOCIAL • Customers • Climate • Wellness • Employees • Energy • Diversity • Suppliers • Water • Products • Government • Emissions • Safety • Community • Waste • Community The Triple Bottom Line 40 © ARC Advisory Group
ARC’s CMM provides a Model to help achieve Sustainability  Manufacturers must deploy Collaborative Manufacturing Management (CMM) tools to effectively connect to their customers and suppliers, as well as to connect within their own enterprises  CMM is the management practice that controls the key business and manufacturing processes of a manufacturing enterprise  CMM builds upon a collaborative infrastructure, business process management services, and real- time strategic business management tools  CMM leverages critical applications, production systems, and enterprise information, to maximize the responsiveness, flexibility, and profitability of the manufacturing enterprise 41 © ARC Advisory Group
ARC’s CMM Model Stresses Collaboration Via A Three Domain Service Based Infrastructure Excellence Throughout Operations Enterprise Domain is Essential to Value Chain & Enterprise Performance Enterpris e Domain Business Operations External Systems Value Chain Supply-Side Customer & Domain Materials Service Based Order Management Infrastructure Value Chain Domain Fulfillment Systems Systems Plant/Factory Operations Systems L ifecycle Domain External Internal Lifecycle Domain ARC’s Three Domain CMM Model 42 © ARC Advisory Group
ARC’s CMM Model Requires Processes To Be Synchronized And Integrated In Real-Time Business Suppliers Customers Production 43 © ARC Advisory Group
Questions Manufacturers Must Address To Be Synchronized And Integrated In Real-Time  Hardware – Do manufacturers have the hardware platforms at the plant floor and at IT level, that enable collaboration between power, automation, and the enterprise?  Software – Are manufacturers deploying software platforms at the plant floor and at IT levels that enables collaboration between power, automation, and the enterprise?  Services – Do manufacturers have access to the services required to install, deploy, and maintain the necessary platform infrastructure?  Human Capital – Is the entire organization, from CEO on down, committed to eliminating all silos and deploying the collaboration necessary to achieve sustainability? 44 © ARC Advisory Group
What Characteristics Are Required To Be Synchronized And Integrated In Real-Time? Multi-domain functionality on a single platform: power, logic, motion, HMI, and process control Capability to deploy multiple control applications on a single platform for End Users and OEMs Common engineering development platform for the design and integration of multi-domain power and automation systems Open, modular, and scalable control architectures that enable highly distributed automated manufacturing environments Use of de-facto standards for network interfaces, languages, etc., allowing data exchange as part of networked multi-vendor systems 45 © ARC Advisory Group
Agenda Driving towards a Solution 46 © ARC Advisory Group
C-PACS Model Device Control Network Network Logic HMI Logic Process HMI Control Motion Power Common Development Common Tagging & Platform & Configuration Single Database Tools Process Motion Power Control Networks Motion Domain Specific Solutions Are Converging to Improve Performance 47 © ARC Advisory Group
Collaborative Power And Control Solutions C-PACS articulate the convergence of multiple disciplines on a common platform C-PACS specify functions under a single environment C-PACS promote the value of the common communications infrastructure C-PACS recognize the value of standards in automation C-PACS demonstrate the importance of a single power, and control platform 48 © ARC Advisory Group
C-PACS – The Foundation for CMM Business Process Components Enterprise Supply Chain Management Business Systems Processes Product Lifecycle Management Service-Based ISA 95 Work Flow Service-Based Infrastructure Architecture Models Operations Management Factory Mfg Ops & Factory Operations Production Production Automation Systems & Processes Processes Services Product Production Definition Management Control & Device OPC-UA Networks: Real-Time POWER: Power Meters, Circuit Breakers, Transfer C-PACS Switches, Intelligent Motor Control Centers,… Automation: Motor Drives, Logic, Motion, HMI, Sensors, Actuators,… 49 © ARC Advisory Group
C-PACS and Operations Management Enables Collaborative Production Systems CPS Enterprise/Business Operations Inbound Supply Chain CRM & Logistics Operations Management Collaborative Production Product/Plant Outbound Design and Environment Supply Chain Engineering & Logistics Production Resources 50 © ARC Advisory Group
CPS Incorporates The Plant Floor, Power, and Operations Management Business Planning & Supply Chain Management Production Production Production Production Definition Capability Plan Information Operations Management CMM Manufacturing Operations Management CPS Common Information Infrastructure Continuous Batch Discrete C-PACS C-PACS - Power Management, Controllers, Devices, Machines, Networks 51 © ARC Advisory Group
CPS Turns Data into Actionable Information  Common Actionable Context Data Model Work Processes & State • Role based dissemination of information  Real-time Performance Management Common Time Context Data Quality Mgmt • Performance Intelligence Dynamic Plant Reference Model Application Portfolio • Resolution to Unit Operation Level • Operator Engagement • Targets, progress and trouble analysis The Knowledge Workplace in real-time Requires added Dimensions of Context • Operational Perspective/Financial Impact Plant  Common View CEO Manager • Plant and Corporate ―single version Dashboards of the truth‖ Real-time Key Accounting System RPM Performance Measures • Aggregation of Operations Intelligence CFO Maintenance Real-time and Business Intelligence Operations Data Engineer Worker 52 © ARC Advisory Group
Application Example* UPS Worldport - Louisville, KY The world’s largest fully automated package sorting facility Sort Capacity Per Hour: 421,000 packages Number of Conveyor Drives: 25,314 Miles of Transport Conveyors: 128 miles Power consumption: 72 MVA (City of Louisville: 114MVA) Facility Size: 5.6 million square feet YTD Overall Investment > $2 billion IT Equipment 4,500 Scanners 6,000 PCs *Source: Presentation by ARC at Schneider Electric Initi@tive 2008 1,500 Printers >500 Data Comm Devices 380 Servers 53 © ARC Advisory Group
UPS Worldport - Scope of Supply by C-PACS Solution POWER AUTOMATION Redundant 13.8 KV Feeders 23,700 Variable – 1220 Amp Main Frequency Drives Switchgear 3,100 PAC’s & PLC’s – Mimic Panel 44 4000 Amp Substations 10 High Voltage Lineup’s > 100 Power Logic Panels (energy metering) 790 Motor Control Panels (MCP’s) 3,750 Remote Control Panels (RCP’s) 54 © ARC Advisory Group
UPS Worldport - Louisville, KY System Schematic for C-PACS Solution Global 20 Enterprise Applications (aprox.) Message Hub High Level Control Database Application (CPS) Data Collector Data Collector Data Collector Sorting Sorting These Sorting separate System No.1 System No.2 System No.3 sorting Vendor A Vendor B Vendor C systems Content: Content: Content: are fully • PACs & PLCs • PACs & PLCs • PACs & PLCs • Motor Drives • Motor Drives integrated • Motor Drives • Power Logic Energy • Power Logic Energy • Power Logic Energy at the data Metering Metering Metering (C-PACs) level 55 © ARC Advisory Group
KPI Efficiency Goals Accomplished through Advanced Automation Solutions ! 1999 2007 % Grade Lane Worldport (manual) (automated) Volume 495,000 pps 812,000 pps 64 Design Capacity 215,000 pph 304,000 pph 41 Staffing (Sorting) 1984 2362 19 Productivity (per 48 pph 93 pph 94 person) Injuries (LTI) 10.9/yr 2.0/yr -82 Missorts 1/2226 1/4554 -51 pps: packages per sort (1 sort: aprox. 2.4hrs) pph: packages per hour 56 © ARC Advisory Group
Impact on Sustainability ? ECONOMIC ENVIRONMENT SOCIAL • Customers • Climate • Wellness • Employees • Energy • Diversity • Suppliers • Water • Products • Government • Emissions • Safety • Community • Waste • Community The Triple Bottom Line 57 © ARC Advisory Group
Increased Efficiency Impacts Sustainability Positively ECONOMIC • Information leverage and system flexibility enhancement through enterprise collaboration ENVIRONMENT • Energy efficiency maximization through use of variable speed drives for motors wherever possible •Throughput increase and sorting error reduction through advanced automation solutions implementation • Jet and truck fuel reduction by maximization of the sorting intelligence of material handling solutions • Increased visibility and regulation of power consumption through Power and Automation collaboration SOCIAL • 82% Reduction in Injuries (LTI) 58 © ARC Advisory Group
Summary and Recommendations  Manufacturing and Processing Companies face significant challenges not only from a flat world, but also from Sustainability requirements  Sustainability demands collaboration across organizational silos (e.g. infrastructure vs. manufacturing)  C-PACS creates opportunities for Manufacturing and Processing Companies to optimize across the entire enterprise:  Energy consumption for infrastructure and process  Coordination between consumption and cogeneration  C-PACS is a key component of CPS, and it empowers knowledge workers through actionable information  Common actionable context and KPIs that link manufacturing performance to business and sustainability goals Automation Suppliers help meet these challenges with Collaborative Power and Control Solutions 59 © ARC Advisory Group
What Can We Collectively Do To Navigate Through The Economic Turbulence ? √ Recession is global √ Recent economic news is pretty much all bad √ Manufacturing is being hit hard But: √ Investments still need to be made! √ Curbing investment in certain sectors now could have negative consequences down the line √ Companies cannot cut their way to growth and prosperity Industry Leaders Need to Plan Now for the World Beyond the Current “Gloom and Doom” 60 © ARC Advisory Group
Agenda Consider ARC Your Partner In Navigating Through This Difficult Period! 61 © ARC Advisory Group
Thank You For more information, contact the author at cresnick@arcweb.com or visit our web pages at www.arcweb.com 62 © ARC Advisory Group

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The Environment for Manufacturing and Automation in 2009 and Beyond

  • 1. Eye of the Storm: The Environment for Manufacturing and Automation in 2009 and Beyond Larry O’Brien Craig Resnick Research Director Research Director ARC Advisory Group ARC Advisory Group lobrien@ARCweb.com cresnick@ARCweb.com
  • 2. Outline  Where are We Now?  Current Climate and Outlook for Manufacturing  Impact on Emerging vs. Industrialized Economies  Current Climate and Outlook for Automation  Impact on Emerging vs. Industrialized Economies  How are Different Industries Affected?  Where are We Going? 2 © ARC Advisory Group
  • 3. Where are we now?  Recession is global  Recent economic news is pretty much all bad  Manufacturing is being hit hard  Investments still need to be made!  Curbing investment in certain sectors now could have negative consequences down the line 3 © ARC Advisory Group
  • 4. The Global Recession  US has been in recession since December 2007  Europe officially fell into recession in November 2008  China economic growth dips below 10 percent for first time in three years  “After years of boom, China's GDP growth has now slowed for the last five consecutive quarters.” – October 2008 Report  “Brazil’s economy may grow as little as 1.5 percent this year as the global recession reduces demand for commodities and curbs consumer spending, said Itau Corretora de Valores SA, the brokerage unit of the nation’s biggest bank.” -- Bloomberg 4 © ARC Advisory Group
  • 5. Impact on Manufacturing: A look at Recent PMIs from Around the World  PMIs, or Purchasing Managers Indices are a good indicator of overall health of manufacturing.  Shows purchasing manager trends in orders for materials.  Number of Below 50 indicates a general contraction in manufacturing.  “At 33.2 in December, the JPMorgan Global Manufacturing PMI posted its weakest ever reading and has sunk to new lows in each month of Q4 2008. Based on the average reading for the headline PMI, the performance of the worldwide manufacturing sector through 2008 is the worst for a calendar year since 2001.” 5 © ARC Advisory Group
  • 6. December 2008 Manufacturing ISM Report On Business Month PMI Month PMI Dec 2008 32.4 Jun 2008 50.2 Nov 2008 36.2 May 49.6 2008 Oct 2008 38.9 Apr 2008 48.6 Sep 2008 43.5 Mar 2008 48.6 Aug 2008 49.9 Feb 2008 48.3 Jul 2008 50.0 Jan 2008 50.7 Average for 12 months — 45.6 High — 50.7 Low — 32.4 “Manufacturing contracted in December as the PMI registered 32.4 percent, 3.8 percentage points lower than the 36.2 percent reported in November. This is the lowest reading since June 1980 when the PMI registered 30.3 percent.” 6 © ARC Advisory Group
  • 7. China Manufacturing PMI (Jan1, 2009, CEP News) - CLSA's Chinese performance of manufacturing index grew to 41.2 in December from 40.9 in November, according to Markit. The index has been below 50 - indicating contraction - since August 2008. "Chinese manufacturing activity was very weak in December. Output contracted at a record pace, employment fell for the fifth month and work in hand declined," said Eric Fishwick, head of CLSA Economic Research. "With five back-to-back PMIs signalling contraction, the manufacturing sector, which accounts for 43% of the Chinese economy, is close to technical recession," he said. 7 © ARC Advisory Group
  • 8. European Manufacturing PMIs BERLIN, Jan 2 (Reuters) - Collapsing orders sent Germany's manufacturing sector into its biggest contraction in more than 12 years in December 2008, even though a slump in input costs allowed producers to cut their prices, a survey showed on Friday. The headline index in the Markit Purchasing Managers' Index (PMI) for Europe's biggest economy fell to 32.7 in December from 35.7 in November. The fall took the index deeper below the 50 threshold separating contraction from expansion. 8 © ARC Advisory Group
  • 9. Industrial Production and Manufacturing Capacity Utilization in the US “Industrial production decreased 0.6 percent in November with declines widespread across industries. The drop in output in September was revised down, and the rebound in October was revised up, in large part because both the decrease due to the September hurricanes and the subsequent partial recovery in October were larger than previously reported. “ – US Fed 9 © ARC Advisory Group
  • 10. Industrial Production and Manufacturing Capacity Utilization in Europe Source: Eurostat 10 © ARC Advisory Group
  • 11. Another Key Indicator: the Price of Oil  Lower prices have stalled capital investment and caused project delays  Long-term demand is still increasing  Lack of capital investment will cause slingshot effect as prices begin to increase again Pending Legislation in U.S. to Better Control Oil Futures Speculation. 11 © ARC Advisory Group
  • 12. Industry Trends: Oil & Gas  Oil & Gas Projects Delayed  Increased volatility and risk  Low price of oil deters investment in alternative fuels, oil sands, etc.  BUT…..  There are still many Process plant industry bookings for contractors; manpower requirements grew by over 90% between projects going on – the start of 2004 and the end of 2007. Refiners are making Source: Hydrocarbon Processing money now!  Upstream oil and gas is still growing significantly 12 © ARC Advisory Group
  • 13. IEA report Shows Long-term Shortage and Supply Concerns  “For the next couple of years, the oil pipeline is well supplied. But that trails off after 2010. By 2015, the world needs to find an additional 7 million barrels per day of oil above and beyond all the exploration projects currently in the pipeline. And to get that oil to market by the middle of the decade, those exploration projects need to get started now. “  According to IEA, massive investments are needed in the global oil infrastructure ($26 trillion). 13 © ARC Advisory Group
  • 14. 2009: A Rough Year Ahead for Pharma and Biopharma  To meet the challenges in 2009, the industry needs to improve innovation, introduce new technologies, and ultimately improve efficiencies. Even though 2009 will not be as lucrative as previous years, the industry will continue to be profitable.  Regulation, congressional activities, and innovation will continue to play an important role in the industry for 2009. 14 © ARC Advisory Group
  • 15. Global Recession Curbs Demand for Steel  The global recession has curbed demand for steel, prompting mills in Asia, Europe and North America to reduce purchases of raw materials, including iron ore. Rio has postponed a $2.15 billion expansion of the Corumba iron ore mine in Brazil as part of its plan to cut spending globally by $5 billion. Source: Bloomberg, IISI, China Metallurgical 15 © ARC Advisory Group
  • 16. Global Automotive Industry on the Skids  Japan auto sales seen at 31-year low in 2009  Toyota suspends domestic production  2009 U.S. sales seen at 12.5 million, lowest in 18 yrs  Big three bankruptcy?  Goldman Sachs cuts global auto production, sales Domestic and National Auto Production 2007-08 Source: Automotive News forecasts 16 © ARC Advisory Group
  • 17. How has ARC Revised its Growth Forecasts?  We have cut our growth estimates significantly for 2009  North America, Japan, Western Europe will Contract for 2009-2010  BUT we still expect the global market to grow  Recovery will take place after 2010 Revised DCS Market CAGRs 17 © ARC Advisory Group
  • 18. Consolidation Suppliers and Users of Automation Have been Consolidating.
  • 19. End User Industry Examples of Consolidation  Exxon and Mobil; Chevron, Texaco, Unocal and Phillips; BP and Amoco, Total acquires 50% of AMSO, ...  Dow Chemical, Union Carbide, Rohm&Haas; SABIC acquires GE Plastics; …  Pfizer acquired Warner-Lambert & Pharmacia; Glaxo Wellcome and SmithKline Beecham merger; Bristol-Myers bought drug unit of DuPont Chemicals; …  InBev acquires Anheuser-Busch; Heineken acquire Drinks Union (Czech Rep); too many to list,…  International Paper Acquires Argentina's Bolsaflex, Stora Enso finalises acquisition of Vinson [Brazil],…  Tangshan Iron & Steel Co., Handan Iron and Steel Group Co. and Chengde Xinxin Vanadium and Titanium Co. will become the Hebei Iron and Steel Group once the merger is complete  Tata Motors acquires Jaguar-Land Rover, Daimler divests Chrysler … Near misses and speculation  BHP Billiton bids for Rio Tinto Canceled  General Motors and Chrysler? Bottom line: Newly created enterprises need help to develop strategic plan! 19 © ARC Advisory Group
  • 20. Elsag Bailey Fisher = Most Samsung (H&B, F&P) HD Baumann Recent Propack Milltronics Marcam August Intellution SACDA ETG Moore Systems (Divested) N-Pignone Profimatics SCADA Anorad Turbo-Werk Combustion PC&E Engineering P&F Safety Triconex Dynapro Vickers Kenonics Systems Alfa Laval L&N EJA Applied Aut. Automation Westinghouse L&N SCADA Entek IRD ORSI Cellier CSI Measurex APV Engineering Systems Mod. Innotec Daniel InterPlant SimSci Vectek Sequencia BJC Orion CEM Consulting Electronics Wonderware Xian Hensheng Shinwha Kuhlman Elect Saab Marine Allied Electronics Signal Eurotherm ICS Triplex Morgan Ber-Mac MDC POMS Quantum Pavillion Compex Eutech Engineering Solartron Mob. Goldstar Hon Tesch Danfoss Flow Entrelec SAT Bristol Bab. Tata Hon DataSweep US Filter DLI Eng. Walsh Damcos InterCorr Automation Gepa IndX HSB DMI PAS APC PacSim CEDES Robicon CMS Tecnologia Autom. Grp. Enraf APV (Divest) Incuity Soft. UGS ABB Emerson Honeywell Invensys Rockwell Siemens 20 © ARC Advisory Group
  • 21. The People Challenge: Aging Workforce People Over Age 65  US Bureau of Labor Statistics 80 70 • By 2010 more than 25% of working population will reach retirement age Millions of People 60 50 40 • Trend will continue into foreseeable 30 future 20 10  Globally – Workers are Getting Older • Largest Group of Workers – over age 0 1900 1920 1940 1960 1980 1990 2000 2010 2020 2030 Source: US Census 45 and will double in next ten years Year • Fastest Shrinking Age Group of Workers between 35 and 44 – Changing Workforce Demographics from 2000 to 2010 arguably the most productive 60% 50% Source: US Bureau 52%  Europe is expected to lose 1 million of Labor Statistics 40% jobs annually for the next 25 to 30 30% 21% years 20% 10% • Severe shortage of skilled workers 0% and engineers! -10% -10%  Oil & Gas Industry -20% Number of People 35 to 44 Number of People 45 to 54 • 50% of its production engineers will Number of People 55 to 64 reach retirement age by 2010 Exodus of Workers is Reducing Companies’ Ability to Sustain Operational Excellence 21 © ARC Advisory Group
  • 22. Investments Must Continue to be Made in Key Industry Segments, In Spite of Economy!  America’s Crumbling Infrastructure  Roads & Bridges  Water & Wastewater  Power industry  Aging control systems  Nanotechnology  Innovation Instrumental in Driving Economic Growth  Users and Suppliers Must Continue to Invest in R&D Sustainability is the Issue! Sustainability of Your Business! 22 © ARC Advisory Group
  • 23. Infrastructure Needs Modernization  ARC Estimates Total of $65 Billion in Installed Process Automation Systems are Reaching the end of their Useful Life  The Majority of this is in the Hydrocarbons Sector in North America, Europe, and Middle East 33.7% New Plant Expansion 50.2% Modernization 16.1% 23 © ARC Advisory Group
  • 24. Obama’s Infrastructure Plant and What it Means to the Automation Business  Infrastructure: $90 billion  Where does the money go?  $30 billion: Highway construction  $10 billion: Rail and transit projects  $31 billion: Modernize federal and other public buildings for long-term energy savings  $19 billion: Water projects Obama Mentioned Science in His Inaugural Address 24 © ARC Advisory Group
  • 25. Obama Stimulus Plan Targets Energy  Energy: $58 billion  Where does the money go?  $32 billion: Fund a smart electricity grid  $20 billion-plus: Renewable energy tax cuts and a tax credit for research on energy efficiency and clean energy, plus a multiyear extension of the green energy production tax credit  $6 billion: Weatherize modest-income homes 25 © ARC Advisory Group
  • 26. What the Plan Means for Automation  Power and Water will see Huge Investments  Increased Investment in Intelligent Building Automation Systems  Increased Emphasis on Boiler Efficiency  Sophisticated Approaches to Energy Management  Hundreds of Millions of Dollars Worth of New Systems and Instrumentation Will be Required  Money won’t enter the system until 2010-2011 26 © ARC Advisory Group
  • 27. The Sustainability Challenge  In addition to having to deliver to a highly competitive, flat world economy, manufacturers have to meet the new SUSTAINABILITY challenge  Sustainability is the response to the increased pressure on the environment, the rising demand for natural resources, energy, and the need for a socially responsible approach to business  Sustainability will drive towards a higher level of COLLABORATION between organizations and systems and most likely a complete rethinking of traditional organizational structures  Automation Suppliers are uniquely positioned to help manufacturers meet the SUSTAINABILITY challenge with Collaborative Power and Control Solutions 27 © ARC Advisory Group
  • 28. Manufacturing Today: Flat World has Raised the Bar for Manufacturers and Processors  Information and Communication Advances Have Made the World More “Connected” • Easier exchange of info, ideas and money • Global access to product/service suppliers  Business Has Become More Global • Many new, large markets to sell more products • Outsourcing of ―Core‖ activities • China (Manufacturing), India (Services) • New Capital Investments Business Drivers • Chevron Refinery (India), Dow (Middle East) Dynamic Customer Requirements • Increasingly complex global networks to manage Shrinking Product Lifespan More Demanding Customers  Business Has Become More Competitive Fierce Global Competition • More aggressive legacy-free competitors Global Markets, Supply Chains • Tougher Price/Product competition Greater Product Variety • Changing customer needs with local requirements Compliance and Tracking • Product proliferation Many Others • Product innovation and new product launch 28 © ARC Advisory Group
  • 29. Sustainability Will Raise the Bar Even Higher Wal-Mart Corporate Environmental Sustainability Goals To be supplied To create zero To sell products that 100% by waste sustain resources & renewable energy the environment Stores 25% more 25% reduction in 20% supply base efficient in 7 years solid waste in 3 aligned in 3 years years  Fleet 25% more efficient in 3 years 29 © ARC Advisory Group
  • 30. Sustainability Will Raise the Bar Even Higher PepsiCo PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today. Ft. Pierce Florida Energy Recovery “Green” Buildings Package Innovation Provide Respect and Conserve and Trustworthy Fairly Treat our Respect our PRODUCTS PEOPLE ENVIRONMENT 30 © ARC Advisory Group
  • 31. Economic Stimulus: Clean Energy  Stimulus Push Gets Greener Tint - “President-elect Barack Obama and congressional Democrats are intensifying work on a stimulus plan that would dole out roughly a half-trillion dollars on an array of "green“ projects and infrastructure initiatives such as building renewable energy plants, improving the electrical grid & installing "smart" meters” Wall Street Journal, Dec 6, 08  Jobs, Clean Energy are Key to Obama Stimulus Plan - “Obama aide states: "Given the magnitude of the problems, you're going to need a large plan. Much of what we would do is double duty, with the effect of helping aggregate demand today but also enhancing the productivity of the economy for years and decades to come”. "Green jobs, healthcare technology and infrastructure fit that.“ Los Angeles Times, Dec 6, 08  China's $586 billion stimulus package is its - "biggest contribution to the world," Premier Wen Jiabao said Monday, as hopes rose that heavy spending on construction and other projects would help support global growth by fueling demand for imported machinery and raw materials. AP, Nov 10, 08  European Economic Recovery Plan ”… immediate budgetary impulse amounting to 200B Euro and kick-start investment to modernize infrastructure. It will drive a competitive Europe ready for the low- carbon future.” Jose Manuel Durao Barroso, Pres., European Commission Nov 26, 08 31 © ARC Advisory Group
  • 32. Agenda Setting the Stage for Sustainability 32 © ARC Advisory Group
  • 33. Climate Change Creating Havoc Mean Temperature Change CO2 Concentration Scientists project a 3º to 7º F World CO2 Emissions rise in global temperatures by 2100 – Consequences could be dramatic • 3.7º F = Arctic ice disappears • 5.4º F = Amazon disappears • 7.2º F = Agriculture declines 33 © ARC Advisory Group
  • 34. The Addition of Power Generation Capacity is Getting Harder Energy Conservation and Management a Must  Asian demand for equipment and services drives up Capital Goods Prices globally  The cost of new plants is rising very rapidly Index Value  Example: US estimated costs for new PowerGen capacity • Up 19% in the last year • Up 69% since 2005 • Up for all types of plants • Steam • Combined cycle • Wind • Nuclear • Hydro (These measures includes design, equipment, and construction; exclude fuel costs) 34 © ARC Advisory Group
  • 35. Manufacturers and Processors Have The Most To Gain By Saving Energy • Uses more energy than any other single sector; >1/3 of U.S. energy consumption • Produces approximately 30% of U.S greenhouse gas emissions Energy Use Transportation • Accounts for more than 35% of U.S. Industry 27.2% natural gas demand 33.4% • Accounts for 28% of U.S. electricity demand • Energy is key to economic growth in Commercial domestic manufacturing Residential 17.9% 21.5% • Many companies have been unable to pass higher energy costs on to their customers, which has impacted their profit margins negatively Source: US Department of Energy 35 © ARC Advisory Group
  • 36. Major Energy-Intensive Industries Sustainability impacts ALL! Industrial Energy Intensity vs. Energy Consumption 1000 Energy-Intensive (Thousand Btu/$ GDP) Industries Petroleum Energy Intensity 100 Primary Paper Mining Metals Chemicals Nonmetallic Textiles/Apparel Wood Minerals 10 Tobacco/Beverages Food Processing Plastics/ Fabricated Metals Furniture Rubber Transportation Leather Printing Machinery and Computers Miscellaneous Electrical 1 10 100 1000 10000 Energy Consumption (Trillion Btu) Source: US Department of Energy 36 © ARC Advisory Group
  • 37. Energy Challenges Create Drivers For Sustainability  The World Commission on Environmental and Development defined Sustainability as the development that meets the needs of the present without compromising the needs of future generations  The Core Principle is care and respect for the environment and the society we live in  By applying this approach manufacturers judge the success of product designs not only by the financial but also by the contribution to society and the ecosystem  The concept of sustainability reaches beyond environmental stewardship  Sustainability is a positive business approach that has as much to do with delivering economic benefits, and being a responsible member of the community, as it has to do with reducing the environmental impact 37 © ARC Advisory Group
  • 38. Agenda What does Sustainability mean for Manufacturers? 38 © ARC Advisory Group
  • 39. To the Pillars of Operations Management… Infrastructure Integration Functionality •Real-time Plant Support •Enterprise •Production Planning •Technology Platform •Design & Engineering •Production Execution •Applications Platform •Operations, Controls, & •Product Data Tracking •Business Processes Equipment •Visibility & Analytics •Security •Supply Chain & External •Quality Enforcement •Role-based Portals Operations •Inventory Logistics •Unified view •Product Support Ops •Asset Mgmt •Product Support Operations Management 39 © ARC Advisory Group
  • 40. … add three more for Sustainability ECONOMIC ENVIRONMENT SOCIAL • Customers • Climate • Wellness • Employees • Energy • Diversity • Suppliers • Water • Products • Government • Emissions • Safety • Community • Waste • Community The Triple Bottom Line 40 © ARC Advisory Group
  • 41. ARC’s CMM provides a Model to help achieve Sustainability  Manufacturers must deploy Collaborative Manufacturing Management (CMM) tools to effectively connect to their customers and suppliers, as well as to connect within their own enterprises  CMM is the management practice that controls the key business and manufacturing processes of a manufacturing enterprise  CMM builds upon a collaborative infrastructure, business process management services, and real- time strategic business management tools  CMM leverages critical applications, production systems, and enterprise information, to maximize the responsiveness, flexibility, and profitability of the manufacturing enterprise 41 © ARC Advisory Group
  • 42. ARC’s CMM Model Stresses Collaboration Via A Three Domain Service Based Infrastructure Excellence Throughout Operations Enterprise Domain is Essential to Value Chain & Enterprise Performance Enterpris e Domain Business Operations External Systems Value Chain Supply-Side Customer & Domain Materials Service Based Order Management Infrastructure Value Chain Domain Fulfillment Systems Systems Plant/Factory Operations Systems L ifecycle Domain External Internal Lifecycle Domain ARC’s Three Domain CMM Model 42 © ARC Advisory Group
  • 43. ARC’s CMM Model Requires Processes To Be Synchronized And Integrated In Real-Time Business Suppliers Customers Production 43 © ARC Advisory Group
  • 44. Questions Manufacturers Must Address To Be Synchronized And Integrated In Real-Time  Hardware – Do manufacturers have the hardware platforms at the plant floor and at IT level, that enable collaboration between power, automation, and the enterprise?  Software – Are manufacturers deploying software platforms at the plant floor and at IT levels that enables collaboration between power, automation, and the enterprise?  Services – Do manufacturers have access to the services required to install, deploy, and maintain the necessary platform infrastructure?  Human Capital – Is the entire organization, from CEO on down, committed to eliminating all silos and deploying the collaboration necessary to achieve sustainability? 44 © ARC Advisory Group
  • 45. What Characteristics Are Required To Be Synchronized And Integrated In Real-Time? Multi-domain functionality on a single platform: power, logic, motion, HMI, and process control Capability to deploy multiple control applications on a single platform for End Users and OEMs Common engineering development platform for the design and integration of multi-domain power and automation systems Open, modular, and scalable control architectures that enable highly distributed automated manufacturing environments Use of de-facto standards for network interfaces, languages, etc., allowing data exchange as part of networked multi-vendor systems 45 © ARC Advisory Group
  • 46. Agenda Driving towards a Solution 46 © ARC Advisory Group
  • 47. C-PACS Model Device Control Network Network Logic HMI Logic Process HMI Control Motion Power Common Development Common Tagging & Platform & Configuration Single Database Tools Process Motion Power Control Networks Motion Domain Specific Solutions Are Converging to Improve Performance 47 © ARC Advisory Group
  • 48. Collaborative Power And Control Solutions C-PACS articulate the convergence of multiple disciplines on a common platform C-PACS specify functions under a single environment C-PACS promote the value of the common communications infrastructure C-PACS recognize the value of standards in automation C-PACS demonstrate the importance of a single power, and control platform 48 © ARC Advisory Group
  • 49. C-PACS – The Foundation for CMM Business Process Components Enterprise Supply Chain Management Business Systems Processes Product Lifecycle Management Service-Based ISA 95 Work Flow Service-Based Infrastructure Architecture Models Operations Management Factory Mfg Ops & Factory Operations Production Production Automation Systems & Processes Processes Services Product Production Definition Management Control & Device OPC-UA Networks: Real-Time POWER: Power Meters, Circuit Breakers, Transfer C-PACS Switches, Intelligent Motor Control Centers,… Automation: Motor Drives, Logic, Motion, HMI, Sensors, Actuators,… 49 © ARC Advisory Group
  • 50. C-PACS and Operations Management Enables Collaborative Production Systems CPS Enterprise/Business Operations Inbound Supply Chain CRM & Logistics Operations Management Collaborative Production Product/Plant Outbound Design and Environment Supply Chain Engineering & Logistics Production Resources 50 © ARC Advisory Group
  • 51. CPS Incorporates The Plant Floor, Power, and Operations Management Business Planning & Supply Chain Management Production Production Production Production Definition Capability Plan Information Operations Management CMM Manufacturing Operations Management CPS Common Information Infrastructure Continuous Batch Discrete C-PACS C-PACS - Power Management, Controllers, Devices, Machines, Networks 51 © ARC Advisory Group
  • 52. CPS Turns Data into Actionable Information  Common Actionable Context Data Model Work Processes & State • Role based dissemination of information  Real-time Performance Management Common Time Context Data Quality Mgmt • Performance Intelligence Dynamic Plant Reference Model Application Portfolio • Resolution to Unit Operation Level • Operator Engagement • Targets, progress and trouble analysis The Knowledge Workplace in real-time Requires added Dimensions of Context • Operational Perspective/Financial Impact Plant  Common View CEO Manager • Plant and Corporate ―single version Dashboards of the truth‖ Real-time Key Accounting System RPM Performance Measures • Aggregation of Operations Intelligence CFO Maintenance Real-time and Business Intelligence Operations Data Engineer Worker 52 © ARC Advisory Group
  • 53. Application Example* UPS Worldport - Louisville, KY The world’s largest fully automated package sorting facility Sort Capacity Per Hour: 421,000 packages Number of Conveyor Drives: 25,314 Miles of Transport Conveyors: 128 miles Power consumption: 72 MVA (City of Louisville: 114MVA) Facility Size: 5.6 million square feet YTD Overall Investment > $2 billion IT Equipment 4,500 Scanners 6,000 PCs *Source: Presentation by ARC at Schneider Electric Initi@tive 2008 1,500 Printers >500 Data Comm Devices 380 Servers 53 © ARC Advisory Group
  • 54. UPS Worldport - Scope of Supply by C-PACS Solution POWER AUTOMATION Redundant 13.8 KV Feeders 23,700 Variable – 1220 Amp Main Frequency Drives Switchgear 3,100 PAC’s & PLC’s – Mimic Panel 44 4000 Amp Substations 10 High Voltage Lineup’s > 100 Power Logic Panels (energy metering) 790 Motor Control Panels (MCP’s) 3,750 Remote Control Panels (RCP’s) 54 © ARC Advisory Group
  • 55. UPS Worldport - Louisville, KY System Schematic for C-PACS Solution Global 20 Enterprise Applications (aprox.) Message Hub High Level Control Database Application (CPS) Data Collector Data Collector Data Collector Sorting Sorting These Sorting separate System No.1 System No.2 System No.3 sorting Vendor A Vendor B Vendor C systems Content: Content: Content: are fully • PACs & PLCs • PACs & PLCs • PACs & PLCs • Motor Drives • Motor Drives integrated • Motor Drives • Power Logic Energy • Power Logic Energy • Power Logic Energy at the data Metering Metering Metering (C-PACs) level 55 © ARC Advisory Group
  • 56. KPI Efficiency Goals Accomplished through Advanced Automation Solutions ! 1999 2007 % Grade Lane Worldport (manual) (automated) Volume 495,000 pps 812,000 pps 64 Design Capacity 215,000 pph 304,000 pph 41 Staffing (Sorting) 1984 2362 19 Productivity (per 48 pph 93 pph 94 person) Injuries (LTI) 10.9/yr 2.0/yr -82 Missorts 1/2226 1/4554 -51 pps: packages per sort (1 sort: aprox. 2.4hrs) pph: packages per hour 56 © ARC Advisory Group
  • 57. Impact on Sustainability ? ECONOMIC ENVIRONMENT SOCIAL • Customers • Climate • Wellness • Employees • Energy • Diversity • Suppliers • Water • Products • Government • Emissions • Safety • Community • Waste • Community The Triple Bottom Line 57 © ARC Advisory Group
  • 58. Increased Efficiency Impacts Sustainability Positively ECONOMIC • Information leverage and system flexibility enhancement through enterprise collaboration ENVIRONMENT • Energy efficiency maximization through use of variable speed drives for motors wherever possible •Throughput increase and sorting error reduction through advanced automation solutions implementation • Jet and truck fuel reduction by maximization of the sorting intelligence of material handling solutions • Increased visibility and regulation of power consumption through Power and Automation collaboration SOCIAL • 82% Reduction in Injuries (LTI) 58 © ARC Advisory Group
  • 59. Summary and Recommendations  Manufacturing and Processing Companies face significant challenges not only from a flat world, but also from Sustainability requirements  Sustainability demands collaboration across organizational silos (e.g. infrastructure vs. manufacturing)  C-PACS creates opportunities for Manufacturing and Processing Companies to optimize across the entire enterprise:  Energy consumption for infrastructure and process  Coordination between consumption and cogeneration  C-PACS is a key component of CPS, and it empowers knowledge workers through actionable information  Common actionable context and KPIs that link manufacturing performance to business and sustainability goals Automation Suppliers help meet these challenges with Collaborative Power and Control Solutions 59 © ARC Advisory Group
  • 60. What Can We Collectively Do To Navigate Through The Economic Turbulence ? √ Recession is global √ Recent economic news is pretty much all bad √ Manufacturing is being hit hard But: √ Investments still need to be made! √ Curbing investment in certain sectors now could have negative consequences down the line √ Companies cannot cut their way to growth and prosperity Industry Leaders Need to Plan Now for the World Beyond the Current “Gloom and Doom” 60 © ARC Advisory Group
  • 61. Agenda Consider ARC Your Partner In Navigating Through This Difficult Period! 61 © ARC Advisory Group
  • 62. Thank You For more information, contact the author at cresnick@arcweb.com or visit our web pages at www.arcweb.com 62 © ARC Advisory Group