Leveraging this expertise solves customer problems and creates a sustainable competitive advantage.
by Nate Maguire
September 5, 2017

Last of Two Parts

Part 1 of this article (Pumps & Systems, June 2017, read it here) introduced a few challenges that those in the pump industry face. In terms of energy, manufacturers and industrial facilities of all types consistently face energy/price volatility. They are also looking for ways to deal with increased costs associated with regulatory compliance legislation. Finally, they are operating in a business climate that expects increased corporate social responsibility (CSR).

The Solution

So how do industrial manufacturers address the challenges of price volatility, regulatory compliance and resource stewardship, and still successfully achieve their business goals? Many companies are turning to technology for assistance.

In a February 2013 article titled, “The Dawn of the Smart Factory,” IndustryWeek magazine detailed a manufacturing utopia known as the “Smart Factory.” This factory of the future is hailed as “a paradise of efficiency where defect and downtime, waste and waiting are long-forgotten issues of a long-forgotten age.” The driving force behind this trend would be plant managers and chief intelligence officers working together to create a seamless blend of data and production to “illuminate every turn of every machine, every cut of every blade, every move of every piece in its global dance to deliver.”

While the hyperbole in this article is heavy, the basic premise was echoed in a 2015 study by MarketsandMarkets, a publisher of premium market-research reports.

In its piece titled, “Smart Factory Market by Technology, Component, Industry, and Geography – Global Forecast to 2022,” its researchers found that the smart-factory market, in terms of value, is expected to reach $74.8 billion by 2022, with a compound annual growth rate (CAGR) of 10.4 percent between 2016 and 2022.

“The emergence of smart factories can be seen from the period of change toward cohesive control of the machineries, processes and resources with local intelligence,” read the report. “The increasing focus on saving energy and improving process efficiency, along with the integration of engineering and manufacturing through adoption of IoT (the ‘Internet of Things’) is expected to foster the growth of the smart-factory market.”

While the smart-factory operating principles promise to be a boon for industrial manufacturers who implement them, they will raise the complexity of the operation, which poses its own unique challenges. In fact, according to strategic-management consulting firm A.T. Kearney’s “How Much Does Complexity Really Cost?” survey of the top 30 companies in Germany, a reduction in operational complexity would boost earnings by more than €30 billion and increase earnings before interest and taxes (EBIT) by 3 to 5 percent.

A critical challenge for manufacturers is to embrace new technologies that help achieve the business outcomes that are desired while managing the inherent complexities of these new systems. This is where the accumulation and deployment of applications expertise becomes immensely critical.

In fact, Skip Giessing, president of DXP Enterprises’ Rotating Equipment Division, a company that has been supplying industrial pumps since 1908, sees no reason why demand for and importance of applications expertise won’t continue to grow in coming years. “I believe there will be an increased demand for outstanding supplier applications expertise as suppliers and manufacturers work together to tie technology to process-equipment networking, proactive health monitoring and reliability,” he said.

“The huge customer spend reduction will come when all the key equipment within a manufacturing plant is interconnected and ‘talking with one another’ and adjusting to changes, etc. Customers will need to know and understand how changes affect equipment performance and reliability and how and what to do in order to maintain maximum productivity through reliable uptime and equipment efficiency.”

So what exactly does “applications expertise” mean? At its most basic level, it is specialized knowledge of certain products in specific conditions. This knowledge can be used to create better business outcomes and, therefore, provide the foundation for gaining a competitive advantage.

Value chain mapFigure 1. Value chain map (Courtesy of PSG)

As Figure 1 illustrates, this type of expert knowledge varies across the value chain, so there are ample opportunities for increased collaboration among pump manufacturers and distributors, and among distributors and end users, to strengthen expert knowledge and enhance value creation for all.

Tools For Managing Costs

To better understand how applications expertise can help the operator realize the importance of improving equipment productivity, efficiency and effectiveness, ExxonMobil produced a Technical Help Desk Tip that spelled out ways to improve what it called “Overall Equipment Effectiveness,” or OEE. OEE is measured as a ratio of a plant’s actual output compared to optimal output, using equation 1, where: