- By Bill Lydon
- The Final Say
By Bill Lydon
Automation asset management should be part of the business strategy for a manufacturing company to remain competitive, and automation professionals need to help their organization properly plan investments.
The accounting and financial systems in many manufacturing organizations treat the useful life of equipment and automation systems as the same. Production equipment typically has a significantly longer useful and productive life than automation and control systems. Defining the same useful and productive life for automation and control systems really doesn't make sense with the rapid changes in technology. An unfortunate example of this is the number of older PCs running in plant operations with old operating systems, such as Windows 3.x versions that have known cybersecurity risks and are not capable of running newer, more secure software. This hardware remains in place, since it has not reached the end of its financial depreciation time. In this case, financial considerations take precedence over secure operations.
As another example, the president of a machine builder that designs and builds a range of machines gave me a tour of his operations. He demonstrated a highly flexible machine for a manufacturing customer that featured impressive controls and automation. In contrast, as we toured the facility, he showed me some very large older machines that had been shipped to them from a major manufacturer to be renewed with new bearings drives and other fundamental maintenance items. I asked why that manufacturer did not purchase the new, more flexible and efficient machines? He told me they had advised the manufacturer to do just that, but the accounting department would not allow it, because the machine had not been fully written off on the financial books. He further emphasized that the new machines would provide much greater efficiency and flexibility in manufacturing. This is another example of how not focusing on the overall goal of the organization can be a counterproductive.
Accounting systems use depreciation based on the useful life of an asset for financial write-offs. Once these depreciation schedules are defined for an asset, it is difficult if not impossible to change, since there are tax and investment implications. It is critical to define the useful life of automation systems up front.
Thinking of asset life-cycle management (ALM) separately for production equipment and automation and control systems is a better way for manufacturers to manage. The classical definition of ALM is the process of optimizing the profit generated by your assets throughout their life cycle. Separating the useful and productive life of automation and control systems, so they can be changed throughout the life cycle of the production equipment to make manufacturing more efficient, will keep your company competitive.
In addition to replacing automation and control systems, significant upgrades need to be estimated in advance and built into ALM investment plans.
Rather than complaining that management doesn't understand the need for improved automation and control, automation professionals need to frame the discussion around the need for the company to invest to remain competitive. Automation and control systems orchestrate manufacturing assets to gain the greatest flexibility, productivity, quality, and efficiency to keep manufacturers competitive. Considering this from another perspective, keeping older automation and control systems in place can make manufacturing noncompetitive, leading to lost profits.
ALM is particularly important with the move to manufacturing digitalization that requires investment in a wide range of new technology, including smart sensors, edge computing devices, and high-speed communications to create a more responsive and competitive holistic manufacturing system. The benefits of these investments include more responsive operations, higher quality, lower maintenance costs, and greater productivity. These investments bring the opportunity for providing data for full end-to-end analytics and benchmarking operations against virtual digital twins. Smart sensors and edge computing devices may require separate depreciation schedules.
Automation professionals need to serve multiple stakeholders throughout the manufacturing organization in this new environment, providing decision makers with the information needed to successfully run the business. This requires investment in automation and control systems to support these efforts. Stakeholders should be reminded that technology is a competitive weapon to be used to gain an advantage relative to other manufacturing competitors in your industry.
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