By: Prof. Giuseppe Mascarella

Transcription

1 By: Prof. Giuseppe Mascarella

2 By: Prof. Giuseppe Mascarella Download summary at:

3 What Drives Value?

4 What is Value? A Business Performance Improvement that is aligned with the organization CSF and that enables the organization to make optimal use of its resources within the context of acceptable Risks. REJ is the framework for effective application of it

5 PMI Project Envisioning and CFO Requirement

6 What s the Difference of Project vs Product? Value Propositions Structure: The opportunity to make a business improvement of CSF with What (brand and description of product) will improve What ( CFS relevant) for Who (target audience/stakeholders).

7 REJ Is an Engineered Approach To Assess and Plan the Value

8 Business Assessment Chart Hypothesis Chart

9 Business Assessment: Finding Value Driven Hypothesis. OEE CSF (Critical Success Factor) Use data to produce high quality(profitable) level steels and reduce cost of reworks.

10 Value Based Project KPI (Key Performance Indicators)

11 Step 2: MAP SOLUTION Purpose: Build a solution aligned with findings from the Business Assessment Roadmap

12 Identify the business activity or process that that affects the most CSFs

13 Pattern 1: Cause and Effect Identify Factors That Create Obstacles Opportunity

14 Pattern 2: Maturity Model Progression Automate Dis-intermediate Synergy Competency

15 The Solution Based on Best Practices Gartner Group Model

16

17 Five Steps to Benefit Qualification

18 Pump Speed Sample Data Driven Scenario: Electricity Usage Optimization Maximize profitability by dynamically operating well sites based on variable cost structure Step 1-2-3: In-Out-Effectivness Variable Energy Consumptions Electricity Cost Forecasting (Real-time Model) Variables Supplier Season Temperature Time of day Load By Time of the Day Time of Day (24 hour clock) Ŷ = b 0 + b 1 X 1 Electricity Costs Time of Day (24 hour clock) Step 4: Comparison Maximize Profitability x0% of production costs are electricity Smart Grid connects well to customer and utility Utility charges real-time rates based on Smart Meter readings Price of oil determines well site operational parameters Minimal acceptable well pressure maintained at all times Pump speed maximized when revenues > costs Optimized Electricity Consumption Time of Day (24 hour clock) Electricity Costs ($/kwh) Pump Speed (x100)

19 Increasing OEE Means Increasing ROI Step 1-2: Current Input-Output - Estimated period: 3 years - Yearly Revenues: $ 800,000,000 - Yearly EBITDA: 6.5% - Percentage of Revenues which can be affected by data: 18.0% - Discount Rate: 9.0% - We adopt a conservative approach, estimating for each OEE increase of 10.0%, an IFO increase of 10.5%. Step 3: Effectiveness - Source: Bob Hansen, Overall Equipment Effectiveness, pp 47-66; where it is estimated, for each increase of 10.0% of OEE, an incerase of 21.0% of IFO (Income from Operations).

20 How Does Analytics Play a Role

21 Increasing OEE Means Increasing ROI Modeling ROI Calculations in preparation for customer engagement Plant A Year 1 Year 2 Year 3 Total Cost XX Solution Package $ $ $ $ Azure Units $ $ $ $ Customization/Operations $ $ $ $ Total Cost $ $ $ $ NPV [Total Cost (related to Q3)] $ $ $ $ OEE - Start of Period 60,0% 61,2% 62,1% OEE Improvements (Per Year) 2,0% 1,5% 1,0% OEE Improvements (Cumulative) 2,0% 3,5% 4,5% OEE - End of Period 61,2% 62,1% 62,7% From 60% to 63% (approx. +5%) Revenues $ $ $ $ IFO (EBITDA 6,5%) $ $ $ $ % of "Revenue from product" in scope 18,0% 18,0% 18,0% IFO influenced by Q3 - Start of Period $ $ $ $ IFO Improvements using Q3 (%): IFO Increment = 2,10* OEE Increment 4,2% 7,4% 9,5% IFO Improvements using xx (%) - Conservative: 2,1% 3,7% 4,7% IFO Increment = 1,05* OEE Increment IFO influenced by Q3 - End of Period $ $ $ $ Gai $ $ $ $ Gain - Cost (related to Q3) $ $ $ $ NPV [Gain - Cost (related to Q3)] $ $ $ $ ROI (Discount Rate 9,0%): 174,4% Regarding Costs, we estimate, a yearly total amount of $100k, adding internal costs related to the data usage and customization. The costs have been actualized, calculating the NPV, using the discount rate. Regarding OEE, we estimate the various improvements along the years, thanks to the Value Amplify Analytics solution. Considering the assumptions, we calculate the effect of data insight solution on IFO, basing on a conservative approach. Eventually, considering the NPV of the impact of data (gain minus costs), we calculate the ROI, as: NPV [Gain - Cost (related to data)] / NPV [Cost (related to data)]

22 XXProject Proposal Summary Production managers that want to increase OEE by up to 6% use Project XX to lower production costs and prevent rework due to lack of predictive quality systems. This project in itself has a target potential of 175% ROI, with a payback in 1 year. Some of the feature discussed Rich and customizable real time production reports from furnace to warehouse Use of Machine Learning to prevent quality issues and rework Visual and interactive diagnostic on complex problems Planning for high quality and lower costs of variables No installation required, pay-per-use model

23 By: Prof. Giuseppe Mascarella By: Prof. Giuseppe Mascarella Download summary at: