Keynote Address

Bob Taylor

May 3rd, 2010

PIRM 2010 Atlanta

Neucel Specialty CelluloseNeucel Specialty Cellulose

THE RELIABILITY PARADOX!

Virtually every Plant Manager recognizes the value of reliability.

And the components of a sound reliability program are seemingly well known and widely available.

Yet great reliability practices and results are rarely to be found - a realization that applies across all process based industries.

This is indeed a paradox !!

Many Plants, as a result of their operating history, are burdened with reliability problems that consume resources and slow down improvement efforts.

Failure to fully recognize the implications of Reliability as a probability outcome - with the elimination and prevention of reliability defects being critical to success.

Too much of the ‘reliability activity’ is aimed at detection and repair – and not enough at prevention of reliability defects.

Reliability improvement is largely thought of in a technical context only and does not adequately recognize the social and organizational obstacles faced every day by our operators, craftspersons, and front line supervisors - which are often formidable.

Reliability is not recognized as a core discipline of manufacturing – at least by most senior executives who control the purse strings - and hence financial support is much weaker then it deserves to be.

Inadequate leadership of reliability improvement efforts - especially at the point of impact - leads to weak execution.

Lack of planning and a solid Plan – supported by a long term strategy - to deliver both short term and long term results restrict reliability implementation progress.

Why do we have this Reliability Paradox ?

Dealing with a Plant History that has not been Dealing with a Plant History that has not been conducive to great reliabilityconducive to great reliabilityYou cannot change the history of the Plant but you can create a different future with a different focus going forward

Focus on reliability defects

Focus on prevention of defects rather then strictly detection and repair

Recognize that Reliability improvement is not just a Technical exercise – and that organizational and ‘social’ issues play a major role in realizing change

Develop high level Reliability metrics to gain the full financial support and commitment of the entire organization that Reliability deserves.

Develop the leadership skills to support fundamental change in reliability implementation.

Develop an effective Plan

1. Focus on Reliability Defects1. Focus on Reliability Defects

A reliability defect is any equipment problem that can lead directly or in combination to the impairment of a process - resulting in rate, downtime, quality, cost or safety and environmental degradation. Examples include the following.

Contaminated lubricationMisaligned couplingImproper coatingOverstressed windings of an electrical motorOverloaded bearingMissing covers on a cable tray

Recognize that defects may take considerable periods of time to show up in reduced reliability – but they eventually do show up!

The only way to improve reliability is reduce the number of defects present in the system.

While the elimination of reliability defects is important it is absolutely critical to alter the practices that continue to add new reliability defects to the system

The practices that originate Reliability Defects come from Maintenance, Production, Engineering, Procurement, and Management

Pay attention to the practices that lead to reliability defects

Production Start up positive displacement pump against a closed valveWash up hoses directed into bearings, chains, and sprockets that remove lubricationDischarge valves not lined up causing pumps to deadhead

EngineeringGrease points are hiddenInspection ports are not usedJacking bolts not installed not installed for alignment of heavy itemsBelt guarding is not ‘see through’

MaintenanceMisalignmentIncorrect PM frequency or contentLack of precision in repairs

ProcurementIncorrect Bill of MaterialsItems not properly kittedItems not properly issued from stores

ManagementSet arbitrary targets for storeroom inventoryReward ‘fire fighting’ not ‘fire prevention’Poor communication of vision and goalsHold excessive meetings that are not well conducted

The poor practices that create reliability defects are huge – with the entire organization contributing –and some of the practices are quite subtle – but no less destructive !!

How do you increase the focus on reliability defects ?How do you increase the focus on reliability defects ?

Train the complete organization to be aware of reliability defects and how to avoid the practices that create these defects.

Weave the recognition of defects into the usual systems approach to Reliability

Or be bolder – and address defects directly through a ‘behavioral based reliability’ focus.

2. Focus on prevention of reliability defects rather then strictly detection and repair - Failure Developing Period

Time

Proactive Tools(design, operate and maintain so it never breaks)

Focus on Reliability Defect Practices

LubricationPrecision Balancing, Alignment, and AssemblyRCA/FMEASOP’sKPI’sTrainingLevel I/2/3 HousekeepingLiability Lists PM’s/RoundsPrecision Operation

Predictive Tools(fix it before it breaks)

Vibration AnalysisUltrasonicsThermographyOil Analysis

+ KPI’sProcess FlowProcess TemperatureProcess ConcentrationProcess Pressure

Reactive( fix it after it breaks)

When Down DoTCC’sEffective OutagesPlanning & Scheduling

Operator Checks

HeatNoiseSmellSmoke

Cost To Repair

Years Weeks DaysFailure

Performance Level

All Plants must achieve a balance between proactive and reactive work – but put a premium on keeping reliability defects out through improved proactive tools !!

3. Recognize that Reliability is not just a Technical exercise 3. Recognize that Reliability is not just a Technical exercise –– that that Organizational and Social issues play a major role in changeOrganizational and Social issues play a major role in change initiatives.initiatives.

Fundamental work Management issues which prevent people from doing good work

Poorly communicated job expectationsInadequate performance feedbackLack of proper tools and facilitiesLack of information - or even worse - wrong informationLittle opportunity to input one’s ideasHaving to deal with the same obstacles day after dayHaving little opportunity to learn and be recognized for one’s contribution

The closer one gets to the ‘point of impact’the more significant these issues become !!

From the perspective of the wage earner – the obstacles to effective job performance can also include:

Not getting vacation pay correctMis-communicating the shift scheduleLack of supervisor understanding of the collective bargaining agreement - often leading to an inconsistent - and therefore a confusing and frustrating administration of this contract.

From the front line supervisor’s perspective

Lack of understanding and support from HR when dealing with complex personnel issues.Poor communication of schedules and plans – compounded by (frequent) changes in plans

Empathize with the day to day work environment of the Empathize with the day to day work environment of the ‘‘point of point of impact impact ‘‘ personnel.personnel.

Key Organizational skills are required of Managers and SupervisoKey Organizational skills are required of Managers and Supervisors rs –– and just as needed as technical skillsand just as needed as technical skills

Change management

Effective two way communication

Engaging the workforce to build ownership and commitment

Management of conflict

Dealing with performance management issues

Holding one’s crew accountability to high performance levels

Many supervisors and managers lack sufficient skill in these key areas and thus results are severely compromised

Training and skill development in organizational skills are generally lacking in a formal educational curriculum and frequently shortchanged in professional development initiatives.

People skills are just as important as technical skills when attempting to improve Plant Reliability in a significant way.

Oct-0

9

Jun-0

9

Feb-09

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8

Jun-08

Feb-08

Oct-0

7

Jun-07

Feb-07

Oct-0

6

Jun-06

Feb-06

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5

0.9

0.8

0.7

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0.5

Date

%

_X=0.7807

UCL=0.8964

LCL=0.6650

0.679

0.8 Goal

20052006 2007 2008 200920052006 2007 2008 2009

1

1

1

Pensacola Plant Reliability (Oct 05 - Jan 24th 10)

4. Develop high level Reliability metrics to gain financial support proportional to its potential impact.- Develop and track a measure of Plant Reliability (PR)

A single PR measure is superior to a collection of maintenance metrics.

PR will make Plant Reliability more then just a ‘concept’

PR focuses the full organization on reliability improvement.

PR correlates to the ‘feel’of the operation.

PR improvement will not be instant but there is a

‘tipping point’

Neucel Plant Reliability Over 36 Month Period

50556065707580859095

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33

Time

Rel

iabi

lty

Quantify the Cost of Unreliability (COUR)

P la n t P E

Cont

rolla

ble

Var

ianc

es

7 87 67 47 27 06 86 66 46 26 0

5 0

0

- 5 0

- 1 0 0

- 1 5 0

- 2 0 0

S 3 6 . 2 0 7 4R - S q 7 1 . 2 %R - S q ( a d j ) 6 8 . 3 %

c o s t o f u n r e l i a b i l i t yC o n t r o l l a b le V a r ia n c e s = - 9 0 4 . 4 + 1 1 . 7 9 P l a n t P E

Cost of Unreliability

y = -0.01x + 1.595R2 = 0.8358

0.54

0.64

0.74

0.84

0.94

1.04

50 55 60 65 70 75 80 85 90 95

Reliabilty

Cos

t per

Ton

COUR links PR to the financial bottom line.

COUR is a direct measure of the waste due to unreliability

COUR is equally relevant in either a sales or production constrained operation

COUR can be readily determined – empirically.

COUR – and its correlation to PR – are needed to raise support for reliability throughout the organization.

5. Develop the leadership skills to support fundamental change i5. Develop the leadership skills to support fundamental change in reliability n reliability implementation.implementation.

Our Leaders must have several common characteristics.

Be humble - with a desire to learn - and the confidence to accept reality for what it is !!

Know ‘what good looks like’ - for both the technical and organizational aspects of reliability improvement.

Have the managerial courage to set what will often look to the organization like unreasonable expectations and then the tenacity to followup at the Point of Impact until the expectations are met.

Have the ability to develop a plan around the critical few vs. the urgent many.

Show perseverance – as there will be many obstacles to face!

‘Knowing what good looks like’ and the ‘ability to plan’ can be taught -but it is hard to teach the skill set of ‘humility’, ‘perseverance’ and ‘courage’. This latter set must be mentored and ultimately learned !! 15

6. Develop an effective Reliability Improvement Plan6. Develop an effective Reliability Improvement Plan

Plan characteristics

Plan is supported by a strategy

Supports the idea of ‘do more of less’ vs. the familiar ‘do less of more’

Addresses organizational as well as technical concerns

Has realistic (but still challenging) time lines for expected change

Recognizes the ‘tipping point’ phenomenon of change

Avoids being seduced by promises of short term gains where fundamental change is required.

Neucel Strategy Neucel Strategy –– embodied in our RoadMapembodied in our RoadMap

RoadMap Principles

Be a doer – not a list maker Tell the TruthWork with a sense of urgencyAssess at the Point of ImpactCall to account poor performanceRecognize and celebrate significant milestones

RoadMap Themes

Do More of LessMinimum Effective DesignPoint of ImpactFelt LeadershipIn the GameImpaired Function (revealed by speed,

temp, flow, conc, vibration, sound, etc.)Reliability Defects Changing the Conversations

RoadMap Tools

P200 Crew MeetingsLine of sight (LOS) Key Process Indicators (KPI’S)BenchmarkingLevel I,II,III HousekeepingOperator Rounds CycleWhen Down DoStartup/Shutdown/Operational ChecklistsScripted Shift Turnover Trouble Cause Correction (TCC)Standard Operating Procedures (SOP’s)PM CyclePlanned & Scheduled MaintenancePlanned W/O BacklogRCFA (ACE/CFA), Non Conformance RptFMEA (RMCM)Liability List Critical Spares ListPrecision Maintenance & OperationsEffective OutagesProject ManagementRoles & Responsibilities DescriptionTraining – Job Skills ListLearning AssignmentsLeadership Attributes

What Has This Reliability Focus Done For Us At Neucel What Has This Reliability Focus Done For Us At Neucel –– A Small Company With A Minimum Of ResourcesA Small Company With A Minimum Of Resources

Daily Average Production From Jan 2007 to Present

0.75

1

1.25

1.5

Janu

aryMarc

h

May July

Septem

berNovem

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nuary

March

May July

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AugustOcto

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ruary April

Actual - V91 Equivalent - Indexed to January 2007 Target - Non-Capital Target - With Capital

Neucel Specialty Cellulose Results

Production Cost From Jan 2007 to Present

0.60

0.85

1.10

Janu

aryMarc

h

May July

Septem

berNovem

berJa

nuary

March

May July

Septem

berDece

mberMarc

h

June

AugustOcto

berDece

mberFeb

ruary April

Actual - V91 Equivalent - Indexed to January 2007 Target - Non-Capital Target - With Capital

SummarySummary

The Reliability Paradox does exist - and won’t be solved if we continue to emphasize the same approach that has proven ineffective over a lengthy period of time.

The historical approach is largely reactive, technical in nature, and emphasizes low level maintenance metrics only.

It can be resolved however with a proactive focus on reliability defects supported by the quantitative, high level and well understood measures of Plant Reliability and true Cost of Unreliability - with a sound recognition of the social as well as the technical requirements for fundamental change.

Questions Questions

btaylor@neucel.com