Keywords: EAM, CMMS, Maintenance, Cement, Lafarge, IBM, Maximo.
Lafarge has become the leading supplier of cement globally due in part to its operational excellence, which provided the resources needed for both organic and inorganic growth. Since both raw material and energy costs are generally consistent within a given area or region, the key differentiator among competitors comes down to the ability to control costs while making a high-quality product. Effective maintenance management plays a key role here. To help ensure that best practices for maintenance management are employed, the Lafarge Cement division has been using IBM Maximo Asset Management for 15 years and is expanding adoption to 126 plants in 47 countries.
Modern Society Depends on Cement
Cement has been around a long time. An early version was used in Mesopotamia in the third millennium BCE and later by the Egyptians. Much of the Roman Empire was built using cement. Today, half the world's population lives in cities. By 2050, forecasts indicate that this will rise to 70 percent. The infrastructure that comprises a city – office buildings, stores, housing, bridges, roads, pipes, and more - use cement and concrete.
Most cement goes to ready-mix concrete suppliers that mix and deliver it to construction sites in cement trucks. The rest becomes raw material for making concrete-related products like drain pipes and other pre-formed components. In all cases, high quality, consistency, and strength are needed to provide a safe environment for citizens. Doing this at reasonable cost improves the quality of life in both developed and developing countries.
Cement Business Dynamics and Stockholder Value
The industry has established standards for the various types of cement. All Portland cement, for example, must comply with ASTM Specification C150, leaving no room for product differentiation. Then, consistent with Adam Smith's principles, the self-regulating nature of the marketplace establishes the prices.
Within an area or region, raw material and energy costs are consistent – all cement manufacturers use the same ingredients and process. Thus, the key differentiator among the competitors becomes operating excellence for controlling costs while making a high quality product. This includes high yield, energy efficiency, automation, uptime, and more. Particularly for a commodity product like cement, achieving these requires excellence in maintenance management.
The high operational performance affects more than margin; it also determines revenue. Due to its weight and bulk, cement tends to be expensive to transport. As a result, customers situated near a plant will have a lower total cost than those farther away. A plant serves its local market up to the point where a competitor is closer to the customer, with lower combined material and transportation costs. With higher margin, a company can afford to absorb some of the transportation costs and serve a larger geography to increase top-line revenues. The combination of good margin and improved revenues provides better financial performance with higher stockholder value.
Why Uptime Improves Stockholder Value
The cement industry has boosted efficiency by concentrating on the dry process of cement manufacture. Operations using the more energy-intensive wet process have been gradually phased out. The process for modern cement manufacturing has these basic steps:
Extract limestone and clay from a quarry; convey to the plant
Grind the stones into a fine powder called "raw mix"
Heat in rotary kilns to 1,450 degrees centigrade
Mix the "clinker" with gypsum, heat in a continuous kiln, and grind
Bulk ship (via road, rail, and ships) or package in 25-35 kg bags
Maintenance and Poorly Operating Equipment
Equipment that does not receive adequate maintenance tends to drift away from optimal performance. This can lead to degraded process control and product variability. To assure all production meets or exceeds the product spec, the equipment must be set at a point above spec. With more variation, more "quality giveaway" occurs.
Tighter Control of the Process with Good Maintenance Reduces Costs
Poor Maintenance and Unscheduled Downtime Issues
Reactive maintenance means that equipment runs until a failure occurs, after which maintenance attempts a repair. A component breakage often cascades into a much larger issue for the particular equipment, the production line, the plant, and the business. Business issues with unscheduled downtime include:
Customer satisfaction issues due to missed production schedules and customer shipment commitments - which becomes a major concern if construction delays result
Loss of work in process (WIP) due to incomplete processing causing scrap, and the associated waste disposal
Direct labor losses for removing and disposing of the waste materials from the equipment
Increased safety risk, which is quantified in health and cost losses – particularly when a major breakage occurs
Increased inventory to mitigate risks. In reaction to the customer satisfaction issues finished goods inventory increases so they can meet shipment commitments if equipment fails
With poor maintenance, assets wear out sooner and consume cash from the balance sheet to replace
The ramifications of poor maintenance have business impact. Customer satisfaction issues reduce revenue. The material and labor losses decrease profitability and earnings. The higher inventory consumes cash and negatively affects the balance sheet. The replacement of worn equipment also consumes cash. Ultimately, the effects from poor maintenance practices will have a negative impact on a company's financial performance and stockholder value.
Lafarge's Maintenance Excellence
ARC gained insights from an extensive interview with Mirela Petca Matache, IT Director Maintenance & Quality Systems, Lafarge Cement Division. Lafarge began implementing Maximo 15 years ago and the company's initial success led it to expand its use into the other plants. The company uses the solution to plan, schedule, and manage maintenance activities and manage maintenance-related costs within regions.
Using common Maximo data, for example, individual plants within a region can share the more expensive or seldom-used spare parts inventory among others nearby. Sharing job plans allows each plant to gain experience from the business best practices others, and achieve excellence without "re-inventing the wheel."
Lafarge has integrated Maximo with its ERP (JD Edwards) for purchasing and finance. Also, integration with AspenTech InfoPlus.21 historian provides equipment downtime tracking. Combined, these applications perform as a single end-to end system.
Three Instances - One per Global Region
Lafarge has (with continuing deployment) one instance of Maximo per region for the Americas, Europe, Middle East and Africa, and Asia. With good and reliable response times, users use it with confidence and keep it current. Since the regions do not share or transfer resources (spare parts or technicians), there's no need to communicate real-time information across regions to execute work orders. Having technical and application support in each region avoids coverage issues across time zones. Also, since each area has its own ERP system (alignment efforts continue), the company can avoid the complexities of integrating data across disparate ERP platforms.
Lafarge has upgraded many times and now uses IBM Maximo Asset Management v7.5. The add-on Maximo Asset Management Scheduler provides planning for weekly, shut down, and long-term plan work orders. Inspectors use Maximo Mobile to process work orders while they are doing the work. The Mobile application is streamlined to business need and user role. It enhances data integrity (by avoiding paper) for incident tracking, inspection execution and follow-up via IBM Cognos software provides extensive data analytics for cost analysis, trending, plant specific reports, and KPIs (prebuilt and custom for local interests). Cognos has the capacity and capability to cover large data sets over the many plants.
Sharing and Standardizing on Best Practices
After nearly 5,000 years, the cement manufacturing process has matured, with very similar processes and types of equipment in place across all plants. Globally, Lafarge has standardized on the same asset hierarchy, application configuration, and scheduling methodologies. It has common templates for asset classification, creating work orders, planning, scheduling, mobile, and purchasing requisitions. This consistency reduces errors and system support requirements. Also, the templates capture best practices and provide the means to share them globally across time zones, languages, and cultures. Ongoing user feedback helps ensure continuous improvement.
Lafarge is extending Maximo to include work orders for operator-driven reliability in which production personnel do some routine work, as well as for inspections and equipment used in product quality analysis.
Benefits of Good Maintenance Execution
Good maintenance management clearly provides the company with a significant competitive advantage since the differentiator comes through managing costs and standardizing on best operating practices, which Lafarge does globally. Also, lower cost allows a plant to serve a larger area. Maximo gives Lafarge the management tools necessary to execute at a high level of operational performance. According to the company, the operational benefits achieved or targeted include:
Improved MTBF and MTTR
Reduced risk with higher uptime to meet the production schedule
Better cost control for both maintenance and product losses (yield)
Reduced spare parts inventory requirements with fewer stock-outs
Preventive maintenance reduced emergency (corrective) work orders to a maximum of 5 percent
Ability to meet customer on-time delivery commitments with lower finished goods inventory
Good proactive asset care programs extend the assets' life to help reduce capital expenditures
Operational improvements provided through good maintenance practices help enhance margin, revenue, and the P&L statement. This also conserves cash that benefits the balance sheet. With better financial metrics, shareholder value increases. With good margins and shareholder value, Lafarge gained the resources needed for both organic and inorganic growth that allowed it to become the leading supplier of cement globally.
Deploying standards provides a preconfigured set of tools tailored to support best practices and business needs. With numerous iterations in the evolution of the templates, one lesson learned at Lafarge was that adoption across over a hundred plants in diverse geographies requires broad communication and involvement by all stakeholders. This includes middle management, which involves obtaining business buy-in and ownership.
ARC recommends that companies embarking on a similar technology rollout should invest in an extensive change management process that includes stating and communicating the business issues driving change, clearly defining the project upfront, explaining the changes and especially anticipated benefits, and incorporating stakeholder feedback.
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