The vast potential of IIoT is finally giving industrial companies the ability to control their business performance in real time and drive operational profitability improvements – safely and sustainably.
Two decades ago, determining the business impact of improved efficiency was a relatively simple task. Since the costs of energy, material, and the value of the products produced were relatively stable over long periods, determining value was as simple as determining the total quantities of each and multiplying by the fixed values of each. Improvements in efficiency essentially directly translated to improvements in operational profitability.
Over the last two decades, this has changed dramatically. Today these costs tend to change very quickly. In the wholesale energy market, each generator places daily price bids to sell power and adjusts quantities in up to 10 price bands every five minutes.
With the deregulation of electric power grids, the pricing dynamics of the electric power industry increased to the point at which the trading price is now calculated every 30 minutes.
This is also true for other energy sources, such as natural gas, the price of which can also change every 15 minutes. The dynamics of raw material pricing has also increased over the last twenty years. For example, the price of base metals can change multiple times every minute.
Web-based outlets such as Amazon and direct business-to-business interactions are able to respond much more quickly to this changing price than the average manufacturing plant, which reviews its operations monthly.
In Australia, there is a plan to move to five-minute settlement over the next three years. This would help reward more flexible resources (including batteries) as they respond more efficiently to the impact of sudden changes in output.
The result of this dynamic shift is that it is much more challenging to convert efficiency improvements into financial terms. Today, the operational profitability of an industrial operation is almost as dynamic as the efficiency of the processes.
Trying to manage operational profitability on a monthly basis, as many companies do, no longer works the way it had. Profitable efficiency is a real-time control problem that needs handling in a very similar manner to process control.
But in the age of connectivity and the Industrial Internet of Things (IIoT), business managers and plant personnel alike have never had better opportunities to measure and improve the profitability of their operations in real time. Increasing the visibility into your plant assets and process performance can increase your margins by as many as 10 points. That equates to $1.3 million for a large plant.
Driving profitable efficiency starts with optimising the performance of each industrial asset so that it performs its prescribed work in the safest, most environmentally sustainable, reliable and efficient manner possible.
Increased connectivity, computing power and technology means it is possible to put real-time control, interoperability and communication at every level, from the simplest plant asset all the way up to the supply chain.
Gifted with more connectivity and computing power, smarter, connected products, e.g., pumps, are now able to control, monitor and secure themselves to become autonomous assets. This better, automatic real-time control can then be extended upward, all the way to the value chain asset sets.
Empowered with the ability to control every asset in real time, even intangible assets like energy, raw materials and production, companies are now able to conduct business and respond to fluctuations, especially the business functions that have been historically transactional.
Controlling operational profitability and efficiency requires interdependent control strategies. In fact, what is required is a cascade control strategy in which profitability control is cascaded to efficiency-based process control.
The combined control strategy is referred to as profitable efficiency and is what industry requires to continually maximise both operational efficiency and operational profitability.