Our Service organization has been creating some extremely interesting white papers that I think you will all find useful. I plan to share them here in installments over the next weeks and months. The first one addresses a very tricky issue in the process industries - How to improve safety and profitability without disrupting operations.
Here is the first of 6 installments ******************
Process industries are inherently hazardous, and maintaining safety in processes and operations has become increasingly complex and costly. But too often, companies have difficulty demonstrating a clear return on investment in their safety activities. With both safety and financial concerns being a high priority, those in the process industry sometimes struggle to reconcile them.
In 1994, the world’s regulatory environment was still reacting to the Bhopal, India gas leak that had occurred a decade before.
At that time, the American Institute of Chemical Engineers (AIChE) undertook a study to figure out how much emerging safety regulations actually cost. It concluded that, across all industry segments and plant sizes, the average U.S. industrial facility would start at 40 percent compliance and spend no less than $5.8 million over a decade to effectively achieve full safety compliance.
The return on investment (ROI)? The kind that gives financial executives gray hair: potential cost avoidance.
That was 27 years ago, and process safety management has since come a long way. First, ongoing investments are thought to be far higher than the AIChE had calculated – “upto one-third to one-half, or even more, of the capital and operating costs of the new plant handling the hazardous operations,” declares an abstract for another old study: The Real Cost of Process Safety – A Clear Case for Inherent Safety, published in November 2003 by Process Safety and Environmental Protection, the journal of the European Federation of Chemical Engineering.
But also important: the ROI is now known to be far more tangible than the “what-if” costs of an avoided incident.
Even 10 years ago, safety processes and technologies were being viewed for their impact on Overall Equipment Effectiveness (OEE) and plant efficiency. According to the results of a study by the Center for Chemical Process Safety, as cited in a 2001 workshop report, facilities that embed safety into their daily operations typically achieve a 5 percent productivity increase, 3 percent reduction in production expenses, 5 percent reduction in maintenance costs, 1 percent savings in capital expenses and 20 percent reduction in insurance costs.
The timeline sends a clear message: While the cost of safety in process industries has far exceeded estimates from the dawn of the modern safety era, the benefits of safety are more tangible and substantial as well.
The simple assessment is that most companies can increase manufacturing flexibility, profitability and overall competiveness while improving safety, with little disruption and minimal capital expenditure.
These savings arise across the process safety area, but we will focus here on those related to process automation. Many companies have paid for these potential benefits with process automation capabilities that now exist in-house but are being underutilized or ignored.
The trick is knowing where these potential gains are hidden. Here, according to ABB Process Automation safety experts, are five areas where most companies can easily unlock improvements in safety and, quite possibly, profitability.
Check back next week for the first of the five ways. And as always, we look forward to your comments.