ECONOMIC JUSTIFICATION OF PLANT MODERNIZATION USING AUTOMATION

Alex Habib, PE

With the recent wave of corporate takeovers and plant acquisitions a new challenge is emerging
for managers and engineers to strive to make manufacturing plants safer and more productive
just to stay in business -- A relatively small investment in up-grading a plant’s automation
system can deliver a quick return-on-investment as well as ensure a safer, more productive,
environmentally clean operation and the ability to compete more effectively in today’s global
manufacturing marketplace.

Justification

• Market drivers:

The following are examples of some of the challenges facing existing manufacturing plants
in general and food processors, pharmaceuticals and specialty chemicals in particular:

o Large number of mergers and acquisitions

o Increased awareness of technology
o Profit margins shrinking
o Skilled labor shortages
o Increased competition and need to ensure customer satisfaction
o Short product turnaround
o Tighter safety and environmental compliance requirements

• Automation Master Plan:

It is recommended before any attempt is made to up-grade or modernize an existing

manufacturing facility that a well-coordinated long-term automation “Master Plan” be developed
for the entire site.

The following are some of the reasons for developing an effective “Master Plan” that can be
used for both short and long term planning:

o Identify the plant areas that will deliver the best payback when
automated
o Take advantage of available communication networking technologies
o Obtain better prices for system hardware, software and services
o Minimize spare parts and simplify plant personnel training
o Ensure buy-in from senior management to make sure the required funds are
available when needed when it is time to upgrade

Partitioning the plant by process areas can help in determining which area should be the first
candidate for retrofit (see Figure 1 as an example of a partitioned plant)
 Business Objectives Business Objectives Business Objectives
Process Objectives Process Objectives Process Objectives
Automation Objectives Automation Objectives Automation Objectives
Payback Payback Payback

Discharge

Gas Waste Treatment

U Train Process Units P

T A B C D E A S
Raw S
I 1 Extraction Distillation Reaction Compounding Drying C T
Material T
L K O
O 2 Extraction Distillation Reaction Compounding Drying
I A R
R Product
T 3 Distillation Reaction Compounding G A
A Extraction Drying Shipping
I I G
G 4 Extraction Distillation Reaction Compounding Drying
E N E
E
S Reaction
G
5 Extraction Distillation Compounding Drying

Liquid & Solids Waste Treatment

Discharge

Figure 1

In the example shown in figure 1 above three areas namely: Extraction, Distillation, Reaction
have been identified as candidates for an up-grade.

After establishing the business, process and control objectives a payback period is calculated
for each process unit.

Assuming that the manufacturing facility is in a sold out situation, that is, product demand is
greater than manufacturing capacity then it is relatively easy to justify the expenditure.
Usually a payback of less than two-years is acceptable by most enterprises.
 The following are examples of the different objectives (Figure 2)

Process
Business Objectives Control System
Objectives Objectives

Business, Process & Control Objectives

* Increase Throughput • Automate Batch Sequence

Increase • Add Operator Consoles
Sales * Add New Products
• Add Sensors
* Decrease Wasted Batches

Improve Delivery (Time to Market) • Improve sensor Accuracy

Increase
Price
Improve Quality • Optimize Process

Decrease Raw Material Usage

• Add Redundancy
Decrease
Energy and Utility Savings
Mfr.Cost • Add Safety

Decrease Disposal Cost and Instrumented System
Environmental Compliance Penalty
• Add Data Historian

Increase Equipment Life
• Close Control Loops

Increase Labor Efficiency

Figure 2

An example of a business objective could be to increase sales. In a product sold-out situation

the more product made in a specified time period (usually year-to-year), the more can be sold
and the more profit can be realized since certain operating costs such as manufacturing labor,
manufacturing overhead, G&A are likely to remain fixed. This translates into a process objective
to increase throughput, which in turn can be achieved by automating the batch sequence as a
control system objective.

Once the increase in sales (and profit) and the cost of automating the batch sequence has been
established and quantified, a payback can be estimated which depending on the return can
provide the incentive to upgrade the control system.

About the Author

Alex Habib, PE is an Automation and Validation Engineering Consultant. He holds a MSEE

degree and has over 19 years experience in automating and modernizing specialty chemicals,
food, Flavors, pharmaceutical and Bio-Tech plants and research facilities. Alex’s work
experience includes assignments at Hoffmann La Roche, Givaudan Flavors, IFF, Merck,
Invensys, Pfizer, Rhone-Poulenc, Olin Chemicals and Jacobs Engineering.
Tel: 732-742-7913
e-mail: alex-habib@msn.com