How to calculate ROI for downtime big data.
Just as True Downtime Cost ™ (TDC) justify Lean projects, it works for Big Data projects too.
- Time during which equipment or system is unavailable for use. ⇓ MORE ⇓
LEAN acronym for 8 forms of waste.
Defects, Overproduction, Waiting, Not utilizing talent, Travel, Inventory, Motion, Excess processing
- Down Time
- Time off work to relax.
This article introduces the two missing elements in most industrial big data initiatives that result in failure for end-users to realize their Return On Investment (ROI) goal. Gain insight on how to calculate ROI for industrial big data collection using a real downtime costing system, TDC.
We'll get to the two missing big data elements in a bit, but first, it may help to give you a little historical context for better understanding...
Back in 1995, we founded and introduced to the industry, True Downtime Cost ™ (TDC). We ran into the main barrier, realized ROI, or should I say, perceived ROI. Back then not many machines and systems were networked together. So the cost of implementing on each machine/system and getting the data to a single point for consolidation and analysis was much higher than it is nowadays. Of course, a compromised solution was arrived at, critical machines and systems, like bottlenecks, would have an HMI or other display device to indicate to operators and managers, the current OEE and TDC values. This communication was done to effect action and change to improve those values. Thus not only showing an acceptable ROI in real-time but displaying dollar amounts on the screen, as money has always been shown to be a great motivator. So the approach was kept simple and relevant to its end users. Later on, in this article, I share an excerpt from the "action plan" chapter of "True Downtime Cost - 2nd edition", as an example.
About a decade later the industrial sector started seeing networking of machine PLCs and systems more commonplace. Of course, fortune 500 companies and other world-class organizations led the way. TDC focus and application popularity was steadily growing in the industrial sector as a cost justification tool, and to better reflect the true ROI. TDC was especially popular to improve focus, effectiveness, and cost-justify lean six sigma initiatives. But downtime big data initiatives still did not become mainstream due to a second barrier, data overload. End users and vendors alike (like CMMS vendors) believed it was too cumbersome to add code that would consolidate and analyze the TDC data for strategy analytics. Even those who did collect the big data often did not perceive the true ROI, because they did not analyze and act on the analysis.
Fast forward to today …
Today you see millions in marketing campaigns to promote things like big data, the 'cloud' (store your sensitive data and apps offsite via the internet.), the "IIoT" (Again send your sensitive data over the internet.) Ironically, the marketing industry itself has realized the ROI on big data initiatives, along with other industries like IT, who even took it further to justify their Big Data ROI with a knock-off of TDC metrics, often referred to as 'Real Downtime Cost". But the industrial sectors still lag behind them, as is typical. (No offense to the industrial sectors, as government lags way further behind even them. J) Plus with potential damage to man or machine, the industrial sector has a lot more risk involved and should advance cautiously.
2 Barriers to Industrial Big Data:
- Realizing the ROI.
- Acting on the big data collected.
Yes, today the biggest data issue is not acting on the data collected. The same problem existed at the beginning of this long story. The paradox is, industrial companies and vendors alike don't realize the full ROI because they don't act on the data. They don't act on the data or even start the big data initiative because they don't perceive the full ROI. Just like with the Lean initiative, the glue that binds the two is TDC. Initially, without accounting for true downtime cost, or in many cases not accounting for downtime at all, they might perceive a 10-30% ROI. When in reality if they applied TDC costing metrics, it could be 300% or more! As said previously, money is the motivator, when the decision-makers see the true value, it makes them more likely to act on the data, which then in turn increases their ROI even more. Flipping the paradox into an ever-growing constant improvement driver. J
Side Note: Similar scenarios and barriers can be seen on the macro-level too. Take CMMS software for example. Today CMMS software has great data analysis and reporting capabilities. But those CMMS that do not apply TDC cost metrics within them, find many of their end users not using those features and acting on them. Thus not realizing the full ROI, and end-users wind up just using CMMS as record-keeping software, or worse, not using it at all. Without TDC, it is missing the motivator ... $$.
Big Data Action Plan:
Below is an excerpt from chapter 10 "Action Plan" of "True Downtime Cost - 2nd edition". It will give you some idea of how to start from the TDC perspective. You can get the book at the link above to learn what is the real downtime costing system TDC, how to define downtime cost for better business continuity, and much more.
True Downtime Cost Action Plan:
Overview of the action plan:
When introducing TDC into an organization it is necessary to get both senior management and shop floor buy-in. This requires careful planning to be sure you communicate the necessary information needed by each group for its support of the TDC initiative. A well-structured plan and timeline showing the sequential steps involved in the project, the necessary resources and costs, need to be developed and explained to all parties.
Steps along the way...
For change to succeed, you must start from the top, down. start by asking your plant manager or corporate manager to review a copy of this book. Let the manager know you would like to put together a team to create an action plan best suited for your facilitie's situation. Also mention you would like the manager’s input and welcome their involvement.
Select a team:
If you are an individual company, select a team size that is right for your particular situation. It is well known in world class-establishments you want at least a machine operator, a maintenance person, and someone from management.
If you are a corporation implementing this action plan, you will need “a reasonable sample” of employees from the companies under you. You should start your plan and team-building with one of your companies as a test.
Before taking it corporation-wide have a corporate team analyze the process of implementing TDC, the results, and refine the investigation standard operating procedure. You would then implement the new action plan on all companies within your corporation.
Set a goal:
The team’s first assignment is to set a goal that is right for your company. Our advice is “it is better to have a goal that is too high, than one that is too low”. Remember to include solid financial methods of measuring success as one of your goals.
The fact that you are implementing a methodology that enables you to closely monitor monetary value sets you up for success. As an example, if your goal was to review your two most costly lines and automate true downtime cost for them, you should see the displayed downtime cost go down, or the equipment will be down for less time, indicating a real saving to report. With goals in place, you can develop a roadmap to profit from TDC knowledge.
Develop a plan:
Next, you need to create a plan to reach your goal. As with any solid plan, it needs a timeline and allowance for contingencies. Also, remember to ‘plan to plan’, set time aside to analyze progress, address issues, and review the plan accordingly. Whatever level you chose, your plan will be in two parts. The first being the TDC implementation plan and the second being the TDC utilization plan. Both are equally important to your overall success.
Below is a recommended plan template for minimum implementation and utilization. It includes a worked example plan. You can always start out small and let success be the drive for further implementation throughout your facility.
- Area of implementation
- Method of implementation
- Time to be completed
- Define technical steps and targets
- Evaluate the area of implementation-defined in the goal.
- Determine steps
- Place steps in the timeline template
- Apply methods of implementation in accordance with timeline
- Determine roles and resources
- Request from the different groups, department or individuals, what need be done of them.
- At the same time, brainstorm on methods for your organization to benefit from the TDC knowledge gained by reaching your implementation plan.
- Once the TDC implementation plan has succeeded, record the benchmark baseline of TDC, and move on to the TDC utilization plan below.
- Implement your reaction plan based on the new TDC tools available.
- This may be as simple as managers making better decisions.
- Every week or month, survey those involved and report to assess the current monetary value that has been earned/saved by utilization of the new TDC knowledge.
- After 3, 6, or 12 months, interview all above to summarize report on much money the TDC knowledge has saved your company.
- Make this known to all, from the top down.
After the above, in chapter 10 of the book, it is followed by a detailed example plan. Then that section is followed by the following sections of chapter 10 ...
Implementing Automated Data Collection
Utilizing TDC in Daily Decisions
Then it's on to chapter 11. You can read all the chapters and sections by download the book at True Downtime Cost - 2nd edition.
The Bottom Line:
Incorporate True Downtime Cost metrics into your big data, analyze big data and use strategy analytics, and most important ... ACT on insight gained.
Related Learning Path:
We recommend ...
1st HMI Basics
3rd OPC SCADA
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