Stay agile
in an accelerating business environment

By : Jim Pinto,
San Diego, CA.

Today's business keeps changing fast. There are too many unforseen technology changes and basic operating shifts which change the ground-rules. To sustain business performance in this environment, companies must develop agility.

A version of this article was published as
Staying life cycle agile by:
Automation World, October 2004

Today, there is a plethora of management tools – tracking and software systems – to maximize capital equipment and software systems return on investment.

I like the idea of integrating the conceptual and design phases of products and equipment with the manufacturing and utilization processes throughout the useful life cycles. Life Cycle Management (LCM), or Product Lifecycle Management (PLM), is supposed to accelerate revenue, reduce costs, improve quality, ensure compliance, and drive innovation throughout product and equipment lifecycles.

But, I get a twinge of doubt when I wonder whether these are just new buzzwords for extending PERT charts to everything, and a means of keeping management tabs from end to end. How does one really schedule and measure the cost of innovation? Does LCM really deliver more end-to-end effectiveness and improve ROI?

The problem with all this good systems thinking, though, is that business changes fast. Problems usually arise from major changes that come mid-stream – technology shifts, as well as basic operating shifts such as outsourcing, which change the ground-rules. And they relate not only to large manufacturing process equipment, but extensive MES and other manufacturing and business software systems that involve major change.

In more than a few companies recently, I’ve seen expensive capital equipment lying around, unused. It’s not simply a matter of optimizing equipment life cycles through good maintenance and repair, but not even getting around to using the equipment sufficiently because its useful life cycle was curtailed by changing circumstances. This does happen more often than many would like to admit.

In one supposedly streamlined automated plant, I saw a vision monitoring system which must have cost well over $ 1 million, being operated experimentally by a student intern. She was reading the manuals and playing with the machine. A little digging unearthed the underlying problem: By the time the equipment arrived, it was useless; the people who were supposed to be trained to use the equipment had been eliminated in a downturn. The useful life-cycle had turned out to be zero. But, it had to remain operating for the specified life cycle, so that the financial investment could be amortized according to the original plan. Writing it off would have involved a significant and immediate loss.

Today, extensive software systems are available to do all the important jobs of management of assets and equipment life-cycles. But midst the information measurement and feedback tools, serious errors often stem from human judgments that cannot forecast major changes. The problem is acceleration – as fast as one can get a handle on things, the targets move. A specific piece of equipment, or software, may be progressing satisfactorily at one moment in time. But, by the time it is delivered, if that is several months, the playing field may already have shifted. Or worse, changing business conditions, e.g., transfer of a complete production process offshore, may make the equipment valueless.

Equipment life cycle management is simply about having the right equipment available at the right time, and the right place, and at the right cost. The problem is the time and effort – and the knowledge – it takes to do a serious evaluation of the choices. Most often, the people charged with doing evaluations are simply too busy to do a sensible job. And, so they fallback on the statistics and justifications provided by equipment suppliers, which are clearly biased in their own favor.

A good supplier, particularly one with a good track record, should have done all the marketing homework. But that may be myopic, and may not have taken into account the emergence of new technologies and alternative systems. On top of that, by the time the justification moves up the management ladder, the equipment is ordered, and then delivered, and training for operators completed to make it operational, it may already be outdated. The LCM reporting grinds to a halt. And one can hardly blame diligent suppliers when disruptive change occurs.

To correctly evaluate equipment life-cycles and financial break-even analyses, not only must the cost of equipment (or software system) be considered, but also delivery time, operator training and implementation. What seems like equipment that will provide a significant payback within a short-period (perhaps even a year) may turn out to be relatively useless and simply takes up valuable space on the plant floor. It eats up profits over the “projected life” which turns out to be virtually nothing. Of course, no one wants to take the big write-off all at once.

To sustain business performance in this environment of ever-increasing cost of ownership, companies need agile investment strategies. Implementation time must be measured against technical obsolescence. Also, disruptive tactical changes must be considered at each step, allowing for changes to be made when different tactical steps are taken.

Remember to stay agile. All the LCM tools in the world won’t help you to forestall change. That vaunted capital expenditure which will allow your company to leapfrog competitors may turn out to be tomorrow’s white elephant.

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Copyright 2003 : Jim Pinto, San Diego, CA, USA