Honeywell Process Solutions executives recently provided ARC Advisory Group with an update on the company’s outcome-based, Assurance 360 services offerings. According to the company, the program is helping industrial manufacturing plants worldwide maximize uptime and reduce their operating costs. The tiered program with guaranteed service levels was launched in 2013.
Key findings include:
- Better maintenance can contribute to both increased uptime and increased profits.
- The maintenance outsourcing contracts often provide better visibility into control system maintenance than an organization might have with an internal maintenance organization.
- Many companies are hesitant to enter into this level of relationship, but Honeywell has demonstrated the effectiveness of the approach, including in long-running contracts with several customers that pre-date the current formalized programs.
Based on Honeywell’s interactions with its customers, the company sees that industrial organizations face several business and market challenges. The need to increase business competitiveness is top-of-mind, but reducing costs in manufacturing facilities is just part of this equation. Adding to the challenges is the loss of competency due to the retirement of experienced workers. Manufacturers also struggle to find more ways to optimize asset performance and increase overall equipment effectiveness (OEE).
As a result, companies must re-evaluate how traditional value-added automation support services are delivered. Long-standing models that are customer-led and transactional in approach are being replaced by partnerships in which service providers take ownership of customers’ expected outcomes, and thus have “skin in the game.” This frees the customer to channel its increasingly limited resources and expertise into areas of the business that utilize their skills to enable improved outcomes.
A Different Approach
With its Assurance 360 services offering, Honeywell:
- Provides agreed service levels (rather than prescribed quantities of materials and labor)
- Takes a strategic view to minimize asset ownership costs
- Guarantees performance, and
- Uses automation to improve business outcomes
The company works with the customer to take a holistic, strategic view to improve business performance and minimize the total cost of ownership (TCO) with complete lifecycle management services. Assurance 360 provides a flexible, outcome-based service solution designed to help customers achieve continual performance optimization of their process automation systems. The goal is to achieve predictable operating expenses (OPEX) and capital expenditures (CAPEX); greater system stability, reliability and quality; and optimized total cost of ownership (TCO).
Optimizing Business for the Long-term
Honeywell told ARC that it designed Assurance 360 to deliver economic benefits throughout industrial operations by focusing on sustaining long-term control performance. The company achieves this through:
- Outcome-based deliverables that help ensure continuous improvement aligned with customer goals
- Enhanced operator effectiveness through alarm management and improving plant performance via loop tuning
- Minimized total cost of ownership (the company states Assurance 360 assessments have identified up to 20 percent cost savings by extending assets’ useful lifetime, reducing the need for third-party services, or minimizing staffing from previous levels)
- Flexible service levels: Honeywell can carry out complete delivery, augment the customers’ workforce and competencies, or provide remote surveillance and support
- Frees the customers support team from routine tasks and interventions to focus on activities that add more value to the customers business
- Technology road mapping that optimizes refresh schedules to decrease cost, accommodate operational constraints, and ensure supportability
Providing Customized Service Levels
According to the company, Assurance 360 provides a customer-specific program ranging from “Performa” solutions that build and complement the competencies and capabilities within a customer’s organization, to “Optima” solutions that Honeywell fully executes with guaranteed system performance.
Assurance 360 Performa
Assurance 360 Performa addresses labor and skills shortages by helping end users maintain equipment, controls and assets that are crucial to meeting production goals. Honeywell collaborates with the customer’s staff to develop valuable know-how and augment the workforce to tackle resource challenges. The company helps build competencies and sustain expertise within the customer organization through best practices in automation support, which are tracked by outcome-based metrics. With Assurance 360 Performa, a customer can expect Honeywell to:
- Cultivate knowledge and skills within the organization via 24x7 access to Honeywell specialists
- Manage the complete asset lifecycle by keeping control hardware and software up to date
- Deliver competent resources to complement the available workforce
- Implement Performance Management to provide a Honeywell focal point, report on system performance, recommend maintenance improvements, coordinate Honeywell activities, and act as a customer advocate within Honeywell
- Provide continuous system monitoring with alerts to incidents and data diagnosis for reporting, availability, capacity, and problem management
- Perform system audits to identify automation and cyber vulnerabilities and “Stable Platform” remediation requirements
- Provide cost certainty through an outcome-based model
Assurance 360 Optima: Guaranteed Benefits
Assurance 360 Optima delivers agreed service levels in system support, maintenance, optimization, and change management with guaranteed results. In a similar manner to a strategic partnership arrangement, Honeywell takes responsibility for providing the necessary skilled labor and materials to achieve the defined outcomes, with payment adjusted by the results attained. Assurance 360 Optima encompasses everything in Assurance 360 Performa, plus:
- Ensures support accountability through continuous scoring of service level attainment and a fee-adjusted schedule
- Guarantees against loss of view or control events through payment penalties, and over-and-above fee adjustments from other service level measurements
- Offers preventive maintenance based on best practices
Honeywell shared the experiences of three customers with ARC to highlight the benefits of the program.
Honeywell had a 30-year relationship with Refining NZ, but each realized the current arrangement was not working to the best interests of either party. The two decided to transition to an outcome-based relationship that entailed developing a structured approach centered around the why, what, and how of such a relationship and alignment of business strategies. A “relationship charter” was drafted that allowed the visualization of goals and behaviors, elicits executive commitment, and provides a basis for future reference. Regular reviews are held with stakeholders to ensure the relationship stays focused.
Two key benefits realized from this program include opportunities to create value and Honeywell’s transformation from a “vendor” to a “partner.” Refining NZ sees opportunities to create value by reducing risk, removing areas of waste, and increasing revenue. Maintenance is even more proactive, and the site has increased its focus on cybersecurity. The program gives the customer better access to competency and the stability offered by the local Honeywell office.
Oil Refinery in North America
A leading oil refinery in North America was seeking to reduce the number of recurring system alarms and errors. System alarms were reported through the refinery’s Experion Server Alarm and Event (A&E) Client. System errors were reported by Experion Service Node-monitored parameters. Excessive system alarms and alerts reduced the effectiveness of the control room operators and made the refinery’s distributed control system (DCS) and networks less robust and reliable.
Honeywell told ARC that under its Assurance 360 agreement with this refinery, it provides agreed upon service levels, rather than just prescribed quantities of materials and labor. It helps them take a strategic view to minimize the total cost of ownership, guarantee performance and utilize the automation system to improve business results.
To date, the partnership reduced the number of system alarms by 96 percent, and system errors have decreased by 98 percent.
With Assurance 360, the refinery significantly increased operator effectiveness. Once system alarms and errors were minimized, console operators receive meaningful DCS status information, which then can be quickly corrected before problems escalate to potential downtime. The refinery also improved the integrity of its process control network. There are now fewer network communication issues in stations and servers. DCS reliability improved as a result of proactive efforts to resolve hardware and software concerns involving hard drive replacement, disk drive space and server memory identified by reports. Lastly, cybersecurity improved due to the deployment of effective anti-virus measures and upgrades recommended by Service Node reports.
For several years now, ARC has been stressing the need for end users to come to grips with the realities of the “Great Shift Change.” Control systems continue to get more sophisticated, cyber-threats are ever changing, and manufacturing facilities are staffed to operate, not optimize. This results in staffing that cannot keep up from either a time or skills standpoint. ARC believes that turning to appropriate third parties to help with tasks outside the core competencies of the organization will be crucial to stay competitive. In addition to increasing the need for third-party support, new digitalization technologies have reduced the costs and increased the potential responsiveness of third-party support.
One thing that stands out is that the contract with Honeywell will likely provide better visibility and concrete statistics into control system maintenance performance than an organization might have with an internal maintenance organization. The KPIs used are well-planned and well-thought-out by both parties. ARC is not aware of an end user that has put this amount of effort into tracking its own staff, simply because the same degree of scrutiny isn’t often applied for internal organizations as when negotiating a financial contract with a third party.
Honeywell’s adoption of a measurable outcome-based model can go a long way toward ensuring a well-communicated and well-planned relationship with its customers. ARC expects the resistance to this level of intimacy to drop as the financial pressures on old business models force organizations into new models that focus on key corporate competitive advantages.
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Keywords: Honeywell, Outcome-based Services, Support, Assurance 360, Partnership, DCS, Experion, ARC Advisory Group.