OE 4.0 and the Autonomous Plant

© 2020 LNS Research
OPERATIONAL
EXCELLENCE 4.0
AND THE AUTONOMOUS
PLANT10-11NOV2020

AGENDA
• Industry Trends and Challenges
• Re-Defining OE
• Operationalizing OE
• OE and Autonomy
• Recommendations and Summary

INDUSTRY TRENDS AND CHALLENGES
3

PROCESS INDUSTRY CHALLENGES
4
• Sustainability
• Managing Responsible Care® Operations and
Achieving Profitable Growth
• Translating Sustainability Requirements
into Risk Strategy
• Determining the Acceptable Risks and
How to Mitigate Them
• Achieving Operational Excellence
• While Maintaining Lean, Efficient, Effective,
and Safe Operations
What Keeps Operating Companies Awake at Night

MAJOR INDUSTRY TRENDS
5
COVID-19 Only Accelerating the Changes in the Way the Work is Done
1. Industry 4.0 / Smart Manufacturing
• Enabled by Disruptive Digital Technologies
2. Workforce Challenges
• Turnover, Retirements, Millennials … Knowledge Loss Increasing
• Connected Worker ► Safer, More Efficient, Highly Skilled Workforce
3. IT Coming to OT in a Big Way
• Virtualization, Containerization, Scaling, DevOps, DataOps, Open Systems, Software > Hardware
• IT/OT Convergence … New Organizational and Collaborative Models
4. New Operational Architecture and OT Ecosystem
• Compression of ISA 95 Layers
• Data Democracy ► Data Ops, Shared Access, Openness, Transparency, Context, Relevance

RESULT …. INDUSTRY IS DEFINING NEW GOALS
6
Can We Achieve Remote and Autonomous Operations?
• To answer those questions, LNS decided to revisit what it means to
be operationally excellent … and how it relates to risk management,
performance maximization and the autonomous plant
Thus We Will Address
• What is OE 4.0? New Definition, Drivers and Challenges
• Need for an Integrated OE Execution system
• Autonomous Plant Maturity Model and Characteristics
• What Will It Take To Get There

DEFINING OPERATIONAL EXCELLENCE
7

LNS FOCUSED ON OE NOT LONG AFTER INCEPTION
8
• In 2013-2014, we talked about Operational
Excellence as a journey
• Stated that people, processes, and technology
are the underpinnings of Operational Excellence
initiative
• Incorporates the multiple management systems
and continuous improvement capabilities like
Lean and Six Sigma
• Later in 2016, we represented OE through
the lens of a set of core pillars that acted
as the foundation of the OE platform
• But the platform was primarily EHS based
• We didn’t describe how the pillars integrated
Evolution of Our Thinking

SO WHAT IS OPERATIONAL EXCELLENCE?
9
Many Definitions … Lots of What It Is … But Little on “How to Do It”
• Industrie 3.0 definition mainly echoes Continuous Improvement initiatives
• Arising from the discrete industries …. Lean, Six Sigma, Kaizen
• McKinsey
• “The execution of the business strategy more consistently and reliably than the competition.”
• Business Dictionary
• “A philosophy of the workplace where problem-solving, teamwork, and
leadership results in the ongoing improvement in an organization.”
• DuPont
• “OE is the application of principles, systems, and tools to engage and focus everyone’s efforts on
meeting customer needs and continuously improving process performance. It focuses on minimizing and
managing downside risks while maximizing an operation’s performance and shareholder value.”

WHY DUPONT’S DEFINITION IS IMPORTANT
10
• The Critical Role of Leadership
• Leading by doing; setting the example; getting
your hands dirty too
• Focus on Operational Discipline (OD)
• By OD, we mean the “deeply rooted dedication
and commitment by every member of the
organization to carry out each task the
right way every time.”
• Speaks to culture and workforce capabilities
• Focus on Positive Outcomes
• Lower Risk
• Maximized Operational Performance
• More Satisfied Customers
• Increased Shareholder Value
Three Overlooked Concepts Critical to OE

OPERATIONAL DISCIPLINE ISN’T A NEW CONCEPT
11
• “Conduct of Operations (CoO) is the execution
of operational and management tasks in a
deliberate and structured manner.
• It is also sometimes called “Operational
Discipline” or “Formality of Operations.”
• Calls for an Operational Excellence Management
System (OEMS)
• Requires a culture of OD that drives:
• the understanding of,
• the adherence to,
• the questioning of,
• and the enforcement of the OEMS
Originated in 2011 from the Center for Chemical Process Safety (CCPS)

OE 3.0 VS. OE 4.0
12
Roots of OE 4.0
• Operational Excellence Management Systems (OEMS) began to emerge in the
HPI in the mid-1990s as a means to respond to EHS and process safety incidents
with a more structured compliance management framework.
• Outlined EHS and security performance expectations expressed as a framework of
scope and objectives, policies, processes, procedures and responsibilities.
• So what’s the difference between OE 3.0 and OE 4.0?
• In OE 4.0, we shift away from safety and compliance to comprehensive risk
management, moving beyond mere EHS & PSM compliance to a pro-active,
integrated operations system.
OIMS
Operations Management System - Report 201,
Updated in 2014 to Reports 510/511
IPIECA = International Petroleum Industry, Environmental Conservation Association

INSTITUTE FOR OPERATIONAL EXCELLENCE
13
Describes OE as a Journey of Continuous Improvement
• Where “each and every employee can see the flow of value
to the customer and fix that flow before it breaks down.”
• By defining Operational Excellence in this way, it applies to every level and
every person in the organization, from executives all the way down to the
employees producing the product or service.
• It’s clear, concise, practical, and, most importantly, actionable and teachable.
Everyone in the organization “gets it.” They know that, in their respective areas,
there should be a visible flow of product or information.
• They should be able to recognize if that flow is normal or abnormal and what to
do if it is abnormal, all without requiring the assistance of management.”

SO WHAT DEFINITION CAN WE LAND ON?
14
Key Characteristics
• Means to deliver on the company’s strategy
• Journey toward value creation for the company and its customers
• Holistic flow of production and information
• Cross-functional … integrates the pillars and silos
• Inclusive of Continuous Improvement and Innovation processes and tools
• Proactive not just reactive … help to score results, not just be a scorekeeper
• Leverages new digital technologies
• Clear, concise, practical, actionable, measurable, and teachable = SMART*
• Lower operational risk, lower operating costs, profitable growth, and higher customer satisfaction
• Human performance, skills, culture and discipline are critical components
*SMART = Specific, Measurable, Achievable, Relevant, and Time-bound

OE 4.0 DEFINITION
15
• Journey
• It’s not a program, it’s a way of business conduct
• Outcomes
• Lower operational risk, lower operating costs, profitable
growth, and higher customer satisfaction
• Growth
• Understanding what the market wants
and creating an uninterrupted value stream
• Adaptability
• Adjusts to changing conditions and risks
• Disciplined
• People, skills, culture, commitment
Sustainable Value Creation Through a Holistic Approach …
Supported By An Enabling Execution Platform
Source: Korn Consulting

OPERATIONALIZING OE
16

BARRIERS TO OE 4.0
17
Organizational, Process and Technical
• Organizational
• How to organize around OE, not just by departments and functions
• IT/OT and Other Support Convergence
• Empowering teams closest to the operations with decision-making authority i.e. holacracy
• Process
• Understanding the integrated workflows and dynamic management of change
• Identifying the opportunities for improvement, innovation and automation
• Technical
• Getting the Ecosystem data architecture right …
• Defining and implementing the execution platform … EHS + Quality + EAM + APM + HCM …
• Defining the right performance metrics, amongst the plethora of existing ones
• Rip & Replace vs. Phase-in
• On-premise vs. Cloud vs. mobile

WORKFLOWS TOUCH MULTIPLE SYSTEMS
18
Integration and Interoperability Are Necessary to Drive Efficient and
Effective Execution and Provide Visibility to Current Operations
APM 4.0
Digital Twins
EAM System
ERPHistorian
Asset Strategy
PSI / Document
Task / Compliance
Procedure
Asset Health
Operator Logs /
Shift Handover
Work Request /
Work Order
Management of
Change (MoC)
Corrective Action
(CAPA)
Incident
Work Permits
Tag / Event / IOW
Operator
Rounds
Asset
Condition
Findings
Need
Change
Need Non-
Work Order
Corrective
Action
Monitoring
Reference Document
Execution of Task
/ Monitoring
Mobile Procedure
Over the Limit
Data Collection
Mobility
Platform
APM 4.0
Failure Modes Library
3D Engineering /
Content Management
Best Practice
Processes & Procedures
Content Management
Process Historian
EHS System
Parts Inventory
Purchase Order
P.O.
Request
Real-Time Data
Events
Need
Repair

OE INTEGRATED EXECUTION SYSTEM
19
Winning Characteristics
• Integrated Workflows and Visualization
• Single system for OE
• Outcome-based Metrics
• Not just OEE, but e.g. production losses
• Comprehensive Risk Management
• As-Is and AI/ML predictive capabilities
• Content, Best Practices and Templates
• Enables rapid implementation
• Modular and Interoperable
• Permits co-existence with other applications
• Allows for phased implementation
• Customizable for innovation
• Easy integration with other mfg. systems

FOCUS OF OE 4.0 … KEEP THE PLANT ON SETPOINT
20
Lost Opportunity = Magnitude of Deviation x Time of Deviation
Minor Deviations
Risk to
Operations
Incident
Avoidance
Graphic Source: Operational Sustainability LLC
Time to Detect
and Respond
Effectiveness of
Response

GETTING THERE
21
Various Approaches
1. Data Integration
• Create shared data model supporting multiple distinct applications
2. Workflow Integration
• Use low code/no code tool to integrate workflows from various applications
3. Analytics On Top
• Extract data from multiple systems and analyze for insight
4. New Execution System
• Integrated yet modular and interoperable by design
• Designed and built for the process industries
5. Or, do you wait for one
of your existing vendors to
expand their product
functionality?

SO WHY CHANGE YOUR OE APPROACH?
22
Drivers for Change
• Reduced Operating Risk and
Safer Operations
• Industry incidents on the rise
• Don’t just see where you are, see
where you are going
• Reduced Downtime and
Performance Maximization
• Faster problem identification
• Faster response
• Operational Discipline
• Silo’ed systems don’t support
collaboration and teamwork
• With fewer people on site, workforce
efficiency and effectiveness is critical
The past two years (2018-2019) has been another turbulent period for
the energy industry, with an unusually high number of large losses.”
“The very best sites, with the most mature process safety cultures, have
consistently shown it is possible to run a facility without losses across the
duration of their lifespan, and across a range of external regulatory
standards and oil prices.” Marsh 100LL 1974-2019
The best operators save 10+% on insurance bills
Even with the right maintenance strategies and inspection program, inefficient
response produces production losses and quality issues, as reflected in the
usual performance metrics: throughput, yield, conversion, capacity, utilization,
energy, quality, emissions, inventory carrying cost, promised delivery, etc.
Look for 2%-5% improvement, in some measures potentially more.
Productivity suffers when efforts are wasted and often redundant. Systems
must facilitate doing the right task the right way every time.
Anticipate a 10%-30% improvement.

OE, PERFORMANCE OPTIMIZATION AND AUTONOMY
23

WHAT IS AUTONOMY?
24
Definitions Vary
• Watson & Scheidt (2005) “Systems that – without manual (human) intervention –
can change their behavior in response to unanticipated events during operation.”
• Don’t confuse autonomy with an automation system which “performs defined instructions
within a limited scope of operation.”
• Key Characteristics:
• Self-controlling … more than automation, both controls and adapts
• Self-managing … automates decisions, maintains and optimizes itself …
• Self-learning … improves over time
• But remember … autonomous systems are not sentient
• One still has to give the system goals and objectives, and specify constraints and boundaries

DOES PERFORMANCE OPTIMIZATION = AUTONOMY?
25
Not Quite …. But It Is the Plant’s Gas Pedal and It’s Well On Its Way to AO
Challenges
• Integration
• Workflows
• Visualization
• Move to Cloud
• Infusion of AI/ML
• Support Model
• Remote Operations
• Company vs. Vendor
Data
Reconciliation
Production
Accounting
Model
Rigorous/Hybrid
Planning
Scheduling Optimization
APC APC APC
Process Historian
Control Systems
ERP
Raw Material Selection
Production Targets
Operating Targets & Timing
Logistics Plan & Timing
Corrected Model
Corrected
Data
Raw
Data
Trading &
Hedging
Demand Forecasting
Contractualization
Markets

AUTONOMY MUST ADDRESS ALL THE WORKFLOWS
26
• Models being integrated for
truer non-linear representation
• Planning + Scheduling + Process + OPT/APC
• Engineering to EAM and APM
• 3D models as data source for analytics
• Process and utilities with electrical
• Comprehensive energy and emissions
management
• APM to Production Scheduling
• Availability tied to supply chain
More Than Performance Optimization
Operations
Maintenance
& Reliability
Supply Chain
Metrics
• Quantity
• Quality
• On-time Delivery
• Customer Satisfaction
Metrics
• Availability
• Capacity
• Utilization
• OEE
Metrics
• Throughput
• Conversion
• Yield
• Quality
• Safety
• Energy
• EH&S
Design &
Engineering
Metrics
• As-Built = As-Operated
• Management of Change
• Compliance

Basic
Controller
3. Because the basic controller doesn't
respond properly, the dynamic matrix
controller cannot push to constraints, so is
limited or even gets bumped offline
2. But as the pump moves along the P-F curve,
the controller can no longer compensate, so
operators put it in manual
TOWARD AUTONOMOUS OPERATIONS
27
Example
LEVEL 2 - DCS NETWORK BUS
Advanced
Control
Platform
LEVEL 3 – ADVANCED APPLICATIONS BUS
Remote I/O
Smart Instruments
Drives, and Actuators
Historian
Machinery
Monitoring
Connected
Worker
FT
CV
Operator
Rounds
HMI
1. As the pump begins to exhibit
variation, the controller responds
and adjusts the flow
4. Likewise, the optimizer cannot fully optimize since
its underlying control mechanisms do not respond
properly, so goes offline
5. CbM-based of vibration data and
pump performance calculations in the
historian flag reliability and
maintenance that the pump needs
attention, so the outside operator
inspects the pump, the results of which
are stored in the EAM system.
Operations is informed.
6. How can only a few personnel
analyze and understand all these
relationships across literally what
could be hundreds of critical assets,
across so many disparate systems,
in just one plant?
? ?
EAM / APM
3D Engineering
Quality, EHS
LIMS
Optimization
Platform
Field Device
Manager
Planning Scheduling
Data
Reconciliation
Loop
Tuning

MATURITY MODEL TO MAP THE PATH FORWARD
28
Research Focus ► Extend Model to All Relevant Plant-Related Functions
Level State Description
Supply &
Trade
Planning &
Scheduling
Control
Room
Field
Opns
Main
Insp
Perform
Maximize
EHS Etc. Technology
What Has to
Happen to Advance
to the Next Level
0 Manual
No Autonomy: Humans carry out all
necessary operations without assistance.
1 Advisory
Operations Assistance: Automation
systems provide decision support for
necessary operations by remote/digital
assistance. Humans always responsible.
2 Assistance
on Request
Automation systems are in control in
certain situations on request (humans pull
support, e.g. for plant startup). Humans
always responsible.
3 Supervised
Assistance
Automation systems are in control in
certain situations. Plant actively alerts to
issues and proposes solutions. Humans
confirm. Humans may be remote.
4 Managed
Assistance
Autonomous operations in certain
situations: automation system has full
control in these situations. Humans
supervise actions. Humans may be remote.
5 Self-
Managing
Fully autonomous operation in all
situations. Humans may be completely
absent from plant.

THE CI CYCLE MUST EVOLVE … LEVERAGING AI/ML
29
CI
Plan
Do
Check
Act
Plan
Do
CheckLearn
Act
From ‘Plan-Do-Check-Act’ to “Plan-Do-Check-Learn-Act’
OE

SUMMARY AND RECOMMENDATIONS
30

THE PATH TO AUTONOMY FLOWS THROUGH OE 4.0
31
You Must Have An OE Strategy Enabled By An Integrated Execution System
• Workflows must reflect how the work is actually done … not just by silos
• Identify opportunities for cross-functional innovation and automation
• Software and system must be evenb-driven
• The right foundational architecture and infrastructure elements must be in place
• IT’s challenge, along with OT, is to build the value chain highway upon which supply chain, operations and
their supporting functions can navigate
• We’ll see robotics, drones, video, blockchain and robotic process automation in the mix too
• Prediction … autonomy will drive IT and OT to merge into simply “T”
• Remember software can be made to support collaboration in ways
that hierarchical organizational reporting structures cannot do
• Solutions must be organized around problem identification and solving
• Technology ultimately will not be the limiting factor … change management will be … and always is

AUTONOMY WILL NOT OCCUR IN A GIANT LEAP
32
Instead Autonomy Will Occur in Phases Over Time
• Knowledge management and learning systems are keys to autonomy
• Yes this means AI/ML, but also collaborative/learning systems directed at the frontline workforce
• Autonomy should support holacratic* organizations
• Invest in and build trust in your frontline people, and the systems
which support them
• When your team members are asked who does one report to, the
answer should be “it depends on what problem we are solving.”
• Not all companies or industries will autonomize to the same degree or at the same rate
• Companies need to set their own targets commensurate with their trust levels and risk management
• Both vendors and owner/operators must work together to build out the maturity model to shine the light on the
path forward
*Holacracy is a new way of structuring
and running your organization that
replaces the conventional management
hierarchy. Instead of operating top-
down, power is distributed throughout
the organization – giving individuals and
teams freedom to solve problems while
staying aligned to the organization's
purpose.

STAY TUNED FOR MORE FROM LNS
THANK YOU
33

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