copyright © 2009 cemex research group, ag “surprise free” manufacturing facilities utopia or...

Copyright © 2009 CEMEX Research Group, AG

“SURPRISE FREE” MANUFACTURING FACILITIES Utopia or Reality?

Silfredo Jaramillo

CEMEX Technology Vice Presidency - Switzerland

Copyright © 2009 CEMEX Research Group, AG - 2 -

THE CEMENT INDUSTRY TODAY IS QUITE DIFFERENT TO THE ONE MANY OF US JOINED A COUPLE OF DECADES AGO!

Our industry – referred to in the past as “rough” – is nowadays challenged with multiple demands to deliver cleaner, safer and sustainable conditions to society

Our companies are scrutinized to see if we comply with the multiple laws & regulations enforced upon us

The cement industry is now a product of globalization (i.e., highly geographically dispersed)• This has influenced how our company operates

Thus, cement companies dedicate an enormous amount of effort to create specialized departments• To assure the integrity in each aspect of their operation facilities

• Develop and implement a set of procedures, operative practices, methodologies and software aids

We need to find the tradeoff between global standards and local requirements• And at the same time as pursuing a “Surprise Free” environment in our facilities

Market changes force us to design strategies valid across all economic cycles• In order to timely react and adapt plans for delivering profit to our shareholders

The dilemma of how to maintain the license to operate while improving profitability represents the greatest challenge


WHY ARE WE SEEKING “SURPRISE FREE”MANUFACTURING FACILITIES?

Over the years, the Cement industry has struggled with unexpected operational issues•Such as equipment failures, raw material inconsistencies, personal injuries, loss of lives, etc.

A “surprise free” environment is equivalent to safety, sustainability and profitability•Key role in determining operational performance of a company

Asset based companies such as ours rely heavily on strategies & programs to manage assets life cycle•Our results and performance are derived from this

Despite what has been achieved in our industry to attain a high level of performance and efficiencies, there is still an opportunity to improve operational risk mitigation

•Already reached in other heavy industries where disasters have a high impact

In large companies, it is common to establish individual functions to “take care” of particular issues •Important to maintain the profitability of the business

However, in spite of all our efforts we are still faced with costly “nasty surprises”

Is it unrealistic to believe that we can drastically reduce these surprises?


ARE WE SUPPORTING OUR PEOPLE ENOUGHTO FACE THE CHALLENGES?

Plant managers must tackle shareholders’ demands, top management and staff functions, together with the reality of producing cement, aggregates or ready mix

• Manufacturing seeks to assure product availability• Management wants to guarantee business profitability• Quality expects to conform with established requirements• Authorities request to comply with local regulations• Corporate demands to fulfill company global strategies

In our industry, Plant managers are people grown within our Plants

• They know and understand the process, product, people and community they are managing• However, a technically strong minded plant manager will hardly provide a balanced management profile

At times, management is overwhelmed with issues and cannot cope with numerous requests in due time

• Even when “surprises” do occur, some knew that someday it may happen

Therefore, to reduce surprises as much as possible, it is key to support the Plant Mangers’ decision making process by prioritizing multiple requests


WHAT DOES PROPOSE THIS MODELTO REDUCE “SURPRISES” ?

This paper presents a model aimed to reduce operational surprises, identify facilities’ constraints and prioritize needs to improve facilities performance during its lifecycle

• Squeezing out information from the specialized studies already available into the company• Compiling gathered data to visualize in a standard model the facilities’ needs• Structuring investment criteria from operating units

This model seeks to integrate existing variables rather than introducing another factor into the equation

These variables, in the form of specialized studies, provide valuable recommendations which need to be linked to each other and prioritized

• We realized that some times when a surprise arises some of the staff in the plant already knew it could happen, but did not know when to tackle it

This model contributes to CEMEX intention for structuring investment criteria from operating units• By integrating under a pyramidal integration approach data analysis provided by specialized sources

In CEMEX we believe that this will help our facility management make wiser decisions and reduce surprises….


FEATURES OF THE CEMEX “INTEGRITY MODEL” CONCEPT

Consolidates, aligns and categorizes valuable soft and hard information produced by specialized areas in a logical and actionable way•Avoids falling into the “illusion of control” trap

Combines local production facility needs in a global company strategy•Prioritize findings, deviations and opportunities•Address the facilities’ needs in order to optimize CAPEX spending

Suitable in any economic cycle•In times of abundance, contributes to find an equilibrium regarding allocation of resources•In times of crisis, provides useful information to distribute scarce resources to right places

Applicable to Cement-related business lines (e.g., cement, ready-mix, aggregates)

Aims to squeeze out all information produced around productive facilities rather than the integrity concept that currently exists in the market•To estimate the probability that a risk may occur

This model aims to reduce “surprises” in productionfacilities focusing on controllable aspects


HOW DOES THE PROPOSED INTEGRITY MODELINTENDS TO ACCOMPLISH THIS?

The Integrity Pyramid considers all information produced during different stages of the asset lifecycle

•Systematically considers all outcomes from the sources related to a production unit•Incorporates external assessments and local audits•Aligns all reports in a single process of analysis•Segmented in tiers and blocks

1. CSI: Cement Sustainability Initiative2. GR: Global Results

Manufacturing facilities

Performance Tracking

World Region Country Plant Detail

Self Assessments

Plant Assessments

Risk Companies

Process Assessments

Sustainability

CSI1 commitments

SOX Compliance

Energy Reports

Performance KPIs

Incidents ReportsInfrastructure

Human Resources

Operational Practices

Operational Performance

Planning

Manag.

Mas

ter

Pla

n N

eeds

Design Construction

Acquisition

Ope

ratio

n

Mai

nten

ance

&

Upg

rade

s

Decommissioning

Asset lifecycle

Mas

ter

Pla

n N

eeds

Design Construction

Acquisition

Ope

ratio

n

Mai

nten

ance

&

Upg

rade

s

Decommissioning

Asset lifecycle


MODEL DESCRIPTIONScores are given to each block

Scores in each block indicate which areas need attention

A single pyramid is generated by manufacturing facility•Divided in 6 tiers and 27 blocks•Updated each time internal or external assessment reports are conducted•Pyramids can be combined to visualize geographic aspects, common implications, etc.

Management

Planning

Operational performance

Operational practices and procedures

Human Resources

Infrastructure

The six tiers describe the potential risks in the facilityIntegrity Index


MODEL DESCRIPTIONScores are given to each block

Scores in each block indicate which areas need attention

A single pyramid is generated by manufacturing facility•Divided in 6 tiers and 27 blocks•Updated each time internal or external assessment reports are conducted•Pyramids can be combined to visualize geographic aspects, common implications, etc.

The six tiers describe the potential risks in the facility

Each tier divided in blocks to reflect and identify risks•Blocks to be rated by an appraiser•To be automatically colored as green, yellowor red according to the risk level•Levels based on algorithms previouslydefined


MODEL DESCRIPTIONExecuting and taking actions

The model enables the feedback process among all departments by defining plans and aligning them to local and global strategies

Likelihood of occurrence

High impact 0 3 6 9

Medium impact 0 2 4 6

Low impact 0 1 2 3

No likelihood

Low likelihoodMedium

likelihoodHigh likelihood

Once information is processed through the Integrity Pyramid, each block from each tier describes the status of the facility, including all Integrity Risks with different level of urgencies and priorities.

These levels are the basis to generate the actions recommended to the facility.

A dashboard that displays urgency, priority and next steps is the basis for future recommendations.


BENEFITS IDENTIFIED BY IMPLEMENTING THIS MODEL

Useful for benchmarking purposes and to compare plant’s integrity index among individual facilities, regions inside a country, BU’s, or at corporate level

Anticipates deviations and detects issues with enough time

•To take the right actions and reduce unexpected surprises or risks

Identifies and globally shares assets management best practices among plants

Optimizes capital expenditure to assure facilities’ reliability

Provides additional and structured information to manufacturing facilities

•To contribute to development of local and global company strategies

Generates structured analysis to support company’s annual plans and programs

•e.g., ranking charts, block events, and topics charts by facility, country or region

Continuously provides feedback to all sources participating in the model

•Enriches their vision and general awareness about all issues affecting the facilities


CLOSING REMARKS

It is a fact: in manufacture facilities, primarily the managers can identify and describe the main issues affecting the day to day tasks

However, industries have more stringent requirements to comply with environmental regulations•e.g., emissions reduction, climate change, sustainable construction, waste management

In addition to the above, multiple internal requests oblige us to find new ways of working to be more efficient•This raises the complexity in determining what must be done in order to comply with

The challenge is to simultaneously maintain our operations Surprise Free and be profitable

We believe that by deploying the “Integrity Model,” manufacturing facilities will be better supported to perform the work they do in a more effective way

In CEMEX, we are making it real!


QUESTIONS?

Surprises always exist – it is a matter of managing probabilities

copyright © 2009 cemex research group, ag “surprise free” manufacturing facilities utopia or...

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