People are the winning edge

By : Jim Pinto,
San Diego, CA.

Success can only be developed by consistent, long-term investments in people and leadership. It requires sustained development budgets for automated processes and plant equipment - which requires strong and committed, in-house engineering talent.

A version of this article was published by:
Automation World, January 2004

I remember visiting a Chinese steel plant several years ago. It seemed comparable to most steel plants - operators were bustling around, loading and stacking the raw materials, with the roar of the blast furnaces in the background. I thought to myself, this could be anywhere in the world today - Sheffield England, Sao Paolo Brazil, Pittsburgh USA.

Up past the proverbial catwalk was the instrumentation room, filled with old but serviceable displays, meters, recorders, switches and controls. I asked my host, an instrument engineer, where their process and controls information came from and he showed me - an old textbook, like one you might find at any US swap meet. And then I looked at his library - there was Bela Liptak’s Instrument Engineers’ Handbook, first edition, midst other similar tomes and the usual collection of supplier catalogs.

I asked him, "Do you follow these textbooks closely, or do you develop your own variations?" And he smiled wisely, "Ah, we also have our own secrets..."

This was when I realized that most of the basic knowledge related to the industrial revolution - how to make steel, cement, plastics, or just about anything else - has already been widely disseminated. Anyone who wants to do it, does it.

Exports breed competition

In third-world countries, where previously they did not have the required “technology”, western engineering firms and equipment suppliers came to help, with short-term business attitudes. These were lucrative export sales. They facilitated the transfer of technical know-how, purely from a short-term profit perspective.

But, the benefit was only transitory, because the global customers quickly caught on and caught up. Many “third-world” countries have now learned to make steel, chemicals, plastics, just about as effectively as anyone else. The technological edge has been lost and the knowledge has become a commodity. Now there is fierce global competition. There are many more suppliers competing for the same business. And in other countries, local suppliers have the edge.

Meanwhile, in the US and Europe, with technological leverage minimized, the primary users of the same processes were feeling the financial crunch. Driven by the bottom line, they looked first for cost improvements and overhead efficiencies. Jobs were cut; low-level labor and semi-skilled operators were eliminated by automation - DCS and automatic controls that yielded cost and performance improvements.

But the automation suppliers too were looking for growth through exports. They were selling their improvements to the competitors too, wherever they could, which nullified the advantage. There is more modern control equipment today in some foreign steel plants than at some antiquated facilities in the US. Today, China is a hot export market.

At this stage, driven by the need for short-term results, financial controls took over. Jobs were cut to match results, beyond just direct labor and reduction of plant overhead. At many major companies, Dupont is just one example, the jobs of instrument and process engineers, mostly working on longer-term process improvements and equipment upgrades, were eliminated. Paradoxically, hundreds of engineers were immediately hired back as “consultants”. Few understand the financial intricacies involved - it has something to do with converting personnel to “variable costs” to minimize overhead ratios and fixed burdens - classic bean-counter myopia.

Lost knowledge base

But clearly, the knowledge base was being lost. A lot of long-term process experts and instrumentation engineers, with deep and intimate knowledge of key equipment and processes, were now “independent contractors”, available to competitors in the US and worldwide. The proprietary edge was being frittered away, a casualty of short-term financial thinking.

At this stage, recognizing the need for engineering expertise to keep equipment and processes up to date, some end-user companies have partnered with major automation suppliers to take complete responsibility for all automation systems. It seems like a mutually beneficial arrangement.

But, this raises many questions: How do you choose the primary automation vendor/partner? Simply select one of the major automation suppliers (from a handful of global contenders) and exclude bright, up-and-coming companies? Abandon the multitude of systems integrators and other significant suppliers of materials, instruments and equipment, to rely solely on one source? Will the relationship be profit based, or on a cost-plus basis? After settling on a primary supplier, internal engineering talent soon becomes non-existent; so, who will negotiate upgrades and contract changes? If the selected automation supplier flounders financially, how will the situation be corrected?

Think on this - quality, price and availability are all becoming commodities in the fast-moving new global business environment. To succeed, you need a competitive differentiator - the proprietary edge. And this cannot come through short-term "consultants". It can only be developed by consistent, long-term investments in people and leadership. It requires sustained development budgets for automated processes and plant equipment - which requires strong and committed, in-house engineering talent.

Like that Chinese engineer, you need to say, "Ah, we have our secrets...!"

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