Operations Management Sales Training

October 2001 Internal use only

Flexible Plant Solutions for Real Business Results

Honeywell Confidential and Proprietary

Why Are We Here?

The good news:

Business.FLEX products delivered on/above plan in 2000 Customer satisfaction and success stories continue to grow

The even better news:

Business.FLEX market penetration is still relatively low High value sales opportunities exist with customers around the world Business.FLEX release 100 is now available

Objectives over next two hours:

Provide sales team with increased understanding of what Business.FLEX is Focus training on features of one suite and how to sell it Obtain feedback on how we can improve things

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Agenda

What is Business.FLEX? Focus on Operations Management

What problems are solved? What are the benefits? What do we offer? How do we sell it?

More information Q&A

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What is Business.FLEX?

Applications and services to improve plant profitability by enabling plant staff to work more effectively Unifies business goals with production automation for effective decision making Applications build on Uniformance, on one another, and on other Hi-Spec Solutions applications to provide a collaborative manufacturing environment for the process industries

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Business.FLEX Solution Suites

Operations Management
Monitor, highlight, and set priorities on deviations in manufacturing performance compared to plan Quality management

Blending & Movement Automation

Schedule, monitor, highlight, and set priorities on deviations in blending & shipping performance compared to plan

Production Management
Track, determine, and report production and gross profitability, including local inventory management

Advanced Planning & Scheduling

Align plan with corporate objectives, transform the plan into a production schedule, and establish operational targets for meeting the schedule

Honeywell Confidential and Proprietary

Agenda

What is Business.FLEX? Focus on Operations Management

What problems are solved? What are the benefits? What do we offer? How do we sell it?

More information Q&A

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What Problems Are Solved?

1.

Need: Improve reliability and reduce incidents Problem symptoms

Incidents occur, but limited understanding of root causes Monthly stewardship (daily follow-up is too time consuming)

Solution
Set limits for all key operating data, and record all deviations Ensure all limitssafety, environmental, design, operabilityare honored all the time Follow-up based on relative impact

Benefits
Fewer incidents, due to more accurate and consistent limits Fewer incidents, due to better analysis of root causes Capacity/yield improvements, due to operating closer to true limits

Key users
Operators, supervisors, and engineers

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What Problems Are Solved?

2.

Need: Improve capacity utilization and yields Problem symptoms

Monthly and daily plans are set, but operations must interpret the signals Limited ability to assess why the plan isnt being met Inconsistent ability to operate at true limits

Solution
Improve communications between planning and operations Set complete daily plans, not just key drivers Monitor, record, and explain deviations for analysis Follow-up based on relative impact

Benefits
Capacity/yield improvements, due to operating closer to true limits Improved customer satisfaction, as products are made more reliably

Key users
Planners/schedulers, operators, and supervisors

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What Problems Are Solved?

3.

Need: Integrate lab data with daily operations Problem symptoms

Lab data not available for daily decision making, or hard to find Specifications change, but details arent always communicated

Solution
Use lab data in calculations and analysis everywhere Link test results to product shipments Link sample schedules to operating plans

Benefits
Lab effectiveness, as lab activities are tie more closely to the rest of the plant End user effectiveness, as lab data are available everywhere

Key users
Laboratory staff, and plant users everywhere

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Benefits: General Comments

Benefits come from familiar areas: yields, capacity,

inventory, stock use, energy use, personnel To estimate potential benefits
Identify benefit areas where improvements are possible, e.g., where targets are missed, or incidents have occurred, or variability is high Identify engineering or business processes to improve Map applications to business processes to benefit areas Identify ways to maintain benefits once found
Baseline benefit areas before and after commissioning the software Collect and publish anecdotes

To prove actual benefits

Customers have indicated <1 year payback for

Operations Management We can do benefits studies, but they take time

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Benefit Areas for Operations Management

1. Benefit Area process monitoring and analysis early detection of poor operations/downgrading situations runs and yields monitoring, best operating cases Feedback actuals Yields & assays comparison process trends and history faster start-up of complex process units focus on problems/excursions more and accurate simulations, test runs and unit charge/yield/quality predictions improved troubleshooting and operating directions added improved operations efficiency and value overview balancing of complex-wide steam, fuel, H2 and components Potential Improvement 0.3% yield @ $1/bbl incremental yield 2 days/yr. on 1 unit @??? 0.2% capacity 1.0% yield value upgrade @ $1/bbl yield, 5/bbl capacity 1% fuel/steam reduction 2 to 5% H2 production reduction less to fuel 2% NGL streams recycling or slop reduction 2% of chem./cat. budget

2.

3.

4.

5.

6.

monitoring of chemical and catalyst usage avoid run outs optimum usage to yields and cycle life savings from excessive usage reduced lab sampling/labeling errors take samples when needed, not more, not less

0.5% bad samples @ large impact for some errors

Savings for a typical refinery or large chemical plant can exceed $1M /year. Payback typically ~1 year.
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Where to Look for Benefits

Yield improvement and stock loss management
More timely reporting of yield information Improved integration of yields with quality and operating conditions Planned vs actual yield comparison Potential reduction in salable variation Maximizing value-added product yields Increased capability to track/identify stock loss situations Improved operation coordination

Energy utilization
Improved monitoring of expected vs actual fuel utilization Improved monitoring of steam usage Efficiency status reporting

Inventory management
Improved inventory projection with timely reporting of high/low inventory trends which could negatively influence operations Reduction in contingency inventory levels

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Where to Look for Benefits (cont.)

Plant variable operating costs

Improved chemical/catalyst usage reporting Yield/quality fluctuation identification Daily material balance reconciliation reduces month-end corrections Minimizes chemical/catalyst runouts Improves ordering coordination Improved product specification give-away reporting Planned vs. actual product recipe reporting Potential reduction in product degradation Improved blend recipe and hence target setting and adherence

Logistics

Personnel costs
Reduction in engineering design cost Overall reduction in personnel costs

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LIMS Benefits
Validates product quality Tracks lab performance and validates lab procedures Provides secure quality data history
Supports Statistical methods, enforced equipment calibration and maintenance schedules, management of Standard Test Procedure documentation, Tracking of resamples and re-tests. Audit LIMS events Data can also be shared with process historian data for comparing quality data to process data in a single trending tool. LIMS can also be used in an integrated environment to provide warnings to operations through the DCS when product quality is below specification By defining and documenting lab processes. Activities as Batch Release, Product Certification facilitate order fulfillment with correct grade products. Next most valuable grade, along with re-generation of Certificates of Analysis for the new grade level. Relate Lab results to specific Research projects
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Stores quality data and facilitates quality data reporting

Supports quality processes such as ISO 9000

Provides workflow control

Provides a methodology for re-grading of off spec products

Provides project based analytical data

Agenda

What is Business.FLEX? Focus on Operations Management

What problems are solved? What are the benefits? What do we offer? How do we sell it?

More information Q&A

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Poll: How well do you understand Operations Management?

[PlaceWare Multiple Choice Poll. Use PlaceWare > Edit Slide Properties... to edit.]

Good: I can explain and demo it Fair: I can explain the concepts but need help with
detailed questions I've heard of Operations Monitoring - isn't that just for Exxon? Isn't that similar to @sset.MAX products? Huh?

Suggested Poll

The Solution

OPERATIONS MANAGEMENT monitors, highlights, and

set priorities on deviations in manufacturing performance compared to plan
Capture plan operating values and communicate the plan to Operations Manage quality data needed for Operations Calculate and record KPIs regularly Monitor measured values and KPIs against plan and record exceptions Prepare performance reports, highlighting KPIs and exceptions Provide tools to review and analyze Enable operational best practices Provide results via the Web so everyone knows the score Manages quality data

Target audience is the Operations Manager Linkages

Planning & scheduling provides the targets Advanced controls execute to the targets @sset.MAX solutions monitor equipment performance
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What We Offer Today

Individually licensed products

Operations Monitoring for systematic, daily monitoring of PHD tags, storing a complete history of deviations and reasons Event Monitoring for lightweight monitoring and notification Operating Instructions work flow tool to set/activate groups of targets by unit and operating mode Production Run Planning set/activate sequences of instructions to form production campaigns LIMS complete LIMS package especially good for medium and small process plants Lab Data Integrator (LDI) for integrating a third party LIMS; shares internals with the Honeywell LIMS product Product Spec Management manage specs across multiple sites

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What We Offer Today (continued)

One solution suite

Operations Management Suite bundles several products at a discount compared to buying individually Organized around a common business problem Our current focus is the complete packagethe suite Licenses are always sold with at least some Honeywell services ~20 work packages provide standard service descriptions, to be used as is or as the starting point for a custom proposal Each work package has a defined scope, deliverables, and work estimates Sales team selects the work packages that make sense for a customer Annual fee (18-20% of license) entitles customer to upgrades and Help Desk support

Services

Support

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What Operations Management Does

Common reporting

Unit operating targets set every day based on operating modes KPI calculations for specific process units PHD collects process data

Deviations calculated every hour, stored, and flagged with explanations

Fixed operating envelope targets updated occasionally

Economic factors help set priorities

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What Operations Management Does (cont.)

1. 2. 3. 4. 5. 6.

Establish operating envelope Calculate KPIs Set economic targets Monitor systematically Report results Manage quality data

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What LIMS Does

LIMS LDI

Laboratory management
Manage samples and sample schedules Manage product specs and test methods

Issue Certificates of Analysis

Calibrate lab instruments

Quality data management

Enter data, with verification and auditing Import data from lab instrumentation Store all quality data for an extended period Distribute results to PHD

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What LIMS Does (continued)

LIMS LDI
(some)

Reporting
Standard, on demand reports for consistent access to quality data Excel Companion for ad hoc analysis Web access and Digital Dashboard

(future)

(future)

Integration
Provides quality data for advanced applications Get specifications, report results to ERP systems with the Business Hiway product Reduce costs with shared configuration through Uniformance Results available in PHD

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How Operations Management Works

Operations and Process Engineers

Process Engineers and Process Experts

Set Safety & Related Targets

KPI Calculations

Monitoring

Deviation Analysis

Planner and Scheduler

Set Daily Instructions & Targets

Uniformance Database

Source systems Control system Laboratory (etc.)

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Reporting Performance KPIs Deviations Priorities

Shipping

Typical Implementation Steps

Stepwise approach works best, not big bang Plan naming conventions, responsibilities, organization Install/update Uniformance Collect quality data with LIMS or LDI Pick one process unit Develop KPI calculations
May include inferred and predicted properties

Deploy Operations Monitoring to monitor the operating

envelope Add Operating Instructions for economic targets Tune configuration and update plan Extend to additional process units

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Work Packages
What are work packages?

Standard service descriptions, with scope, deliverables, required skills, and engineering hours
Costs and overheads are calculated by the Proposal group
Complete application Independent feature of an application

Available packages
Operations Management 1a Kickoff phase 1b Install Uniformance 2a LDI 2b LIMS Small Implementation 2c LIMS Large Implementation 2d LDI Lite 3a Operating Instructions 3b Planning System Interface 4a Calculate CDU KPIs 4b Calculate Reformer KPIs 4c Calculate FCC KPIs 4d Calculate Hydrocracker KPIs 4e Calculate Coker KPIs 4f Calculate Ethylene KPIs 5a Predict Crude Qualities 5b Improve Crude Predictions 6 Process Unit Monitoring 7 Project Completion

Each package does one thing:

Packages can be combined into larger solutions

Using work packages

Work with customer at work package level to define scope Use work packages to quickly get to a scope and budget Modify if needed

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SWOT
Strengths Comprehensive solution Strong domain expertise Proven applications Strong value proposition Weaknesses User interface Requires PHD Limited project know-how Internal skepticism and confusion Threats Competitor demonstrating whole solution at the high end Home grown systems at the low end

Opportunities Unique value proposition APC and Uniformance installed base Leverage Alert Manager, SUMMIT, other technologies

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Competition
Internal and Historian Vendors (OSI, etc.)
Offering Spreadsheets and home grown tools Our Advantages Complete solution suite Support and total cost of ownership Their Claims I can code that in a day with a spreadsheet We already do that Our Rebuttals Show customer list Can a spreadsheet pass an audit or a resignation? Show breadth of solution

System Integrators
Offering Full product and service suite Turn key delivery Benefits studies Our Advantages Complete solution suite Support and total cost of ownership Their Claims Problem is too big for Honeywell or involves non-Honeywell parts Honeywell products only work for refining Our Rebuttals Show them our customer list Show our implementation methodology

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Competition (continued)
Big commercial LIMS vendors
Offering Sophisticated, purpose-built LIMS Our Advantages Better integration Our LIMS well suited for medium/small process plants Their Claims More features Better user interface Our Rebuttals Make the lab part of the automation solution, not an island

Small commercial LIMS vendors

Offering Purpose-built LIMS Our Advantages Better integration Their Claims Price Better user interface Our Rebuttals Consider total cost of ownership, including integrating LIMS to other applications

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Road Map

Situation today
Operations Management products date back to 1991 Business.FLEX 100 is released to consolidate the Business.FLEX products, and to deliver many enhancements and bug fixes

Current priorities 2001-03

Web-based reporting and daily use forms Integration with User Alert and Alarm Configuration Management KPI management, especially navigation and visualization

Other initiatives 2002+

Continued LIMS enhancements OLAP and other analysis tools Operator logbook Interfaces to planning & scheduling tools, and others

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Agenda

What is Business.FLEX? Focus on Operations Management

What problems are solved? What are the benefits? What do we offer? How do we sell it?

More information Q&A

Honeywell Confidential and Proprietary

Sales History for Operations Management

Uniformance sites Sites with OM or OI Sites with LIMS or LDI Penetration 2002 Est. Growth > 1000 ~ 60 ~ 80 < 10% ~ 20%

Orders
20 15 10 5 0
1998 1999 2000 2001 2002

Sales by Region
Sales by Industry
Americas A/P EMEA OM/OI LIMS/LDI

10

Refining
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Chemicals

Other

Current Customers
Industry Region Company Sites Ref. Chem Other NA EMEA A/P ACCO Building Products 1 X X Agrium 2 X X AKZO 2 X X Alcoa 1 X X Al-Jubail Petrochemicals 1 X X Andersen Corp 1 X X BP 1 X X Chevron 2 X X Conoco 1 X X DEA Mineraloel AG 1 X X Eagle Picher 1 X X ExxonMobil 50 X X X X X Honeywell Performance Polymers 1 X X Huntsman 5 X X Idemitsu 2 X X Kyokuto Petroleum 1 X X Lang & Peitler 1 X LG Chemicals 1 X X Nansei Sekiyu 1 X NCRA 1 X X NODCO 1 X X Nova Chemicals 16 X X X Petro-Canada 1 X X Petronas 3 X X X X Samsung Petrochemical 1 X X SASOL 1 X X Saudi Chevron 1 X X Sembawang Utilities Terminal 1 X Shell/Equlion/Motiva 9 X X Showa Shell 4 X X Singapore Chemical Company 1 X X SK Corporation (formerly Yukong) 1 X X Sunoco 1 X X Toa Oil 1 X X UOP 1 X X WMC 2 X X Woodside Petroleum 1 X X Worsley Alumina 1 X X Applications OM OI LIMS X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Notes

NOTES AND COMMENTS Source: Product shipping records plus known commitments. Shows current customers of at least one Operations Management product.

Half w ay through implementation

In many cases implementation projects are still going on. Not every site belonging to a customer has every application.
Includes Engen Durban refinery

Recent wins are shown in green.

Only 1 license delivered to date

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Case Study: ExxonMobil

Order Value: very large Scope
Operations Management implemented in ~50 plants over 5 years Many other Uniformance and Business.FLEX products

Kill shots
Strategic account relationship and selling at the right level Honeywell product breadth Willingness to work closely to meet customer needs

Benefits achieved by customer

??? Probably > $1-2 M per site annually

Project execution
License fees Customer-funded development Consulting and occasional implementation services
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Case Study: Shell/Equilon ESP

Order Value $6.2M (including @sset.MAX) Scope
Operations Management implemented across 9 refineries Integration with User Alert and ACM

Kill shots
Strategic account relationship and selling at the right level Well conceived study Honeywell product breadth

Benefits achieved by customer

??? Probably > $1 M per refinery annually

Project execution
License fees Customer-funded development Consulting services, including a pilot and a prototype
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Case Study: Eagle Picher LIMS

Order Value $0.1M Scope
LIMS at a very small chemical plant, replacing paper and pencil

Kill shots
Account relationship Rapid, effective implementation by a senior consultant using a standardized methodology

Benefits achieved by customer

???

Project execution
License fees Implementation services

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Sales Strategies
1. Determine what business problems the buyer faces 2. Assess the customer and the opportunity
Company profile: first tier? Second tier? Opportunity scope: one product? Solution suite? Corporate-wide?

3. Target refining, petrochemicals, chemicals, mining, related 4. 5. 6.

process industries Target customers who already have Uniformance or a Honeywell connection Sell at the right level: to the operations manager Sell solutions to business problems
Sell solutions, not feature/function Sell the complete solution suite story first (top-down) Settle for individual product sales as necessary Plant the seeds for selling up later

7. Engage the sales consultants to match products to needs

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Likely Customer Profiles

First tier company seeking a common solution for multiple plants, probably anticipating a step out in performance Mid-tier process plants seeking a complete solution for a single plant, probably building on Uniformance, RMPCT, or related Hi-Spec products First tier company seeking commercial products, to use as basis for in-house initiatives Small/medium process plants seeking point solutions such as LIMS

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Sales Tactics by Company Profile

First tier company seeking a common solution for

multiple plants
Manageability? Propose consulting assignment or benefits study to lock in customer interest Sell solution suite products, plus access to consulting expertise Opportunistically sell implementation services Will influence our product road map Sales cycle likely to be 12-36 months Involve sales consultants and product managers Manageability? Sell solution suite including full implementation services May require benefits justification; if so, propose initial benefits study May influence our product road map Sales cycle likely to be 12 months Involve sales consultants and product managers

Mid-tier process plants seeking a complete solution

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Sales Tactics by Company Profile (cont.)

First tier company seeking products for in-house

initiatives
Sell products plus access to consulting expertise Opportunistically sell implementation services Unlikely to be interested in a benefit study Unlikely to influence road map unless several plants are involved Sales cycle likely to be 6-12 months Involve sales consultants

Small/medium process plants seeking point solutions

Sell individual products plus standard services drawn from the work package library Try to sell up to a complete solution, either immediately or piecemeal Unlikely to influence product road map Sales cycle likely to be 3-9 months Involve sales consultants

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What to Expect During the Sales Cycle

Recognize the opportunity scope: Individual product sales
Typically $100,000 licenses + services with a 3-9 month sales cycle Sell an individual product to satisfy plant needs to lower/middle management Success often based on feature/function and total price Sell up from Uniformance Typically $500,000 licenses + services with a 3-12 month sales cycle Sell a complete solution to plant management Success often based on credibility of delivering benefits Sell up from APC, OM&S, Uniformance, etc. May involve a study, consulting up front to help clarify specific value proposition

Solution suites

Corporate standard

Selling down from the top Long lead time, selling across the corporation Sell vision, direction, size, resources to deliver

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Sales Tactics by Opportunity Scope

Individual Products Economic buyer Plant staff; aim for plant management Less important Sometimes; focus on capabilities Show product capabilities Good product, fits your needs and can grow with other products Solution Suites Plant management Less important Sometimes; focus on solution Show completeness of solution Complete package designed to solve your problem Corporate Standard Corporate staff; need plant champion Demonstrate vision Follows after high level agreement Show vision and product directions Strong vision, backed up with complete products and delivery capabilities

Executive presentation Respond to detailed requirements? Value of demos, trial evaluations, and literature Key message

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Things to Look For

Problem/Opportunity Monitoring for reliability, especially with centralized administration Personal monitoring KPI monitoring KPI calculations and navigation Setting daily production targets Solution Operations Monitoring User Alert (from @sset.MAX) Operations Monitoring Work packages available for refining KPIs; see road map Operating Instructions

Setting production campaigns, e.g., in chemical plants

Integrating planning with monitoring and quality data Management of change and traceability Managing multiple limits for targets Laboratory management at medium/smaller process plants Interface existing LIMS

Operating Instructions plus Production Run Planning

Operations Management suite Operations Monitoring and Operating Instructions (or full suite) Limit set feature of Operations Monitoring and Operating Instructions LIMS LDI

Managing product specs at multiple plants

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Product Spec Management or POMS eSpec

Pricing and Proposals

License fees
USD 60-200,000 for the complete Suite ($16-65,000 for individual applications), depending on site size Suite is sold as an indivisible bundle, at a discount compared to buying the individual products

Services
Always sold with services Proposals and services by Hi-Spec Scope varies, typically starting around 1000 engineering hours for implementing the Suite Prototype and starter projects for single applications typically start at around 200 engineering hours

Projects
Usual range is USD 100-200,000 for a single application (including services), and up to $1M for a suite at one site

Support
Usual policy: 18-20% of license fees
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Agenda

What is Business.FLEX? Focus on Operations Management

What problems are solved? What are the benefits? What do we offer? How do we sell it?

More information Q&A

Honeywell Confidential and Proprietary

Where Do I Get Help and Information?

Mel Head
Business.FLEX Sales Consultant - North America

Ken Nghiem
Business.FLEX Sales Consultant - North America

Francois Lelerc
Business.FLEX Business Manager

Jim Christian
Operations Management Product Manager

Marty Israels
Business.FLEX Marketing Manager

http://intraspec.iac.honeywell.com/BusinessFLEX
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Poll: What now?

[PlaceWare Multiple Choice Poll. Use PlaceWare > Edit Slide Properties... to edit.]

More technical and functional information More sales-related information More on projects and deliverables That's enough!

Suggested Poll

Poll: What this presentation useful?

[PlaceWare Multiple Choice Poll. Use PlaceWare > Edit Slide Properties... to edit.]

Yes! Yes, but I need more technical depth Yes, but I need more marketing collateral or sales
support No, not enough new or useful information No, no interest in these products

Suggested Poll

Agenda

What is Business.FLEX? Focus on Operations Management

What problems are solved? What are the benefits? What do we offer? How do we sell it?

More information Q&A

Honeywell Confidential and Proprietary

Summary

Operations Management is one of four Business.FLEX

suites Operations Management delivers target setting, monitoring, reporting, and quality data management
One solution suite plus many individual products

Complete solution sells for USD 100,000 and up Over 100 satisfied customers now using solution

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