Determining the ROI for Safety

Copyright © 2011 Rockwell Automation, Inc. All rights reserved.

Determining theROI for Safety

JB Titus, CFSEPresidentJB TITUS & ASSOCIATES

Agenda

• Introduction• Current machine safety situation• Brief history / evolution of functional safety• Research overview & conclusions• The new “ROI Tool” basics• Live demo• Q & A

Copyright © 2011 Rockwell Automation, Inc. All rights reserved

Customer Feedback

Customers are asking for help in determining their ROI for capital projects with integrated safety systems that can:

• Reduce injury related costs • Improve productivity • Improve operational costs• and……

Improve their competitive advantageCopyright © 2011 Rockwell Automation, Inc. All rights reserved

Machine Safety – current situation

Machine Safety is becoming a core function delivering significant business & economic value: • Boosting productivity• And, the bottom line

Nearly ten years of application success storiesCopyright © 2011 Rockwell Automation, Inc. All rights reserved

Evolution / History

• In 2002, NFPA 79, Electrical Standard for Industrial Machinery, changed – allowing safety automation in domestic manufacturing.

– Hardwiring safety components was no longer the only solution

– The door opened for new safety certified automation products :

Safety PLC’s, Safe Drives, Safe Motion, Safety Field Bus, etc.


Evolution – adoption & challenges

Usage

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Determining economic value ?

ChallengesRisk Assessments, New Technologies, New Standards, New Practices, OSHA, Change

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Machine Safety Technology

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“The Machine Safety Technology Landscape”

Confidential Property of JB TITUS & ASSOCIATES


Evolution / History – new influences

• Updated safety standards

• Emerging Business Initiatives– OEE (Overall Equipment Effectiveness)

• Availability, Performance, Quality

(2002 to Present)

Impacting Your Safety Culture

NFPA 79 RIA 15.0615.06 IEC 61508

ANSI B11.0 ISO 10218-1 & 2 IEC 62061

ANSI B11.1 S - 2 EN ISO 13849-1

ANSI B11.19 ISO 12100

IEC 60204-1


Evolution / History – today

• Safety integrated vs hardwired• Integrated components / functions• Integrated diagnostics• Safety field bus• Safe motion• Safety sensors• Safety I/O

Machine Safety can reduce injuries & increase productivity--- Improved Bottom Line ---

Integrated Safety Solutions = Cost Savings The Value Proposition


Customer Testimonials

• “There’s not a day that goes by that I don’t equate a savings in some shape or form with our safety systems!”, Mike Douglas, Sr. Manager & Consultant Global Health & Safety, Design, Standards & Technology

• “A historical lack of accidents does not imply a current presence of safety. It simply means you’ve been faster than the machine.”, Bill Hilton, Director of Health and Safety

• “We took an order in May for a new machine, and we were able to deliver it by the middle of September – half the time it previously took.”, Thomas Butler, Managing Director, T. Butler Engineering

• “Thanks to Rockwell Automation Integrated Architecture, we only require one supplier.”, Roggero Magagni, Commercial Manager, Barilla Ivano Ondenei, Software Engineer, Barilla


A New ROI Tool – addressing economic value

• Existing ROI Tools do not exist for integrated safety solutions– Injury related costs, or productivity impacts

• A new comprehensive tool is needed:– It must be flexible and easy to use– It must address the value proposition of “Integrated Safety Solutions”

• Combining both injury & productivity data– It needs to address the EH&S concern for injury data– It needs to provide a credible result

The ROI Tool – Way Forward

ROI = Benefits ÷ Costs = %(Annualized)


ROI Tool – injury data research

– http://www.osha.gov/OshDoc/data_General_Facts/jobsafetyandhealth-factsheet.pdf

– Why should everyone be concerned about job safety and health?• Each year, approximately 6,000 employee deaths in industry • Another 50,000 die from illnesses caused by exposure to

workplace hazards • Approximately 6 million workers suffer non-fatal workplace

injuries • The annual cost to U.S. businesses of more than $125 billion



• Research example sites:

• White papers, articles, etc.– “Accident Costs (Rethinking ratios of indirect to direct costs)” – by Fred A. Manuele

– “A zero accident culture can impact profit margins”, Zurich Insurance

– “2010 Liberty Mutual Workplace Safety Index”, Liberty Mutual Research Institute For Safety

• Workers Compensation– State specific– Injury categories– Company accident history

• Interviews



• OSHA – Bureau of Labor and Statistics http://www.bls.gov/iif/oshwc/osh/os/ostb2435.pdf

– Table 1. Incidence rates 1 of nonfatal occupational injuries and illnesses by industry and case types, 2009– 34 pages of industries


ROI Tool –injury data research

• BLS (Injuries, Illnesses, and Fatalities) http://www.bls.gov/iif/oshsum.htm– Accumulated industry data since 1994– Everything…..a wealth of information



• Some web based tools:– National Security Council -

http://www.nsc.org/news_resources/injury_and_death_statistics/Pages/EstimatingtheCostsofUnintentionalInjuries.aspx

– OSHA Stats & Data - http://www.osha.gov/oshstats/index.html– Injury Cost Calculator - http://www.safetymanagementgroup.com/injury-cost-calculator.aspx– Utah Safety Council - http://www.utahsafetycouncil.org/content.asp?id=201– OSHA Fact Sheet -http://www.osha.gov/OshDoc/data_General_Facts/jobsafetyandhealth-

factsheet.pdf– OSHA incident rate calculator - http://www.safetymanagementgroup.com/osha-incident-rate-

calculator.aspx– ATI (ROI Calculator) - http://www.automatedtestinginstitute.com/home/index.php?

option=com_content&view=article&id=58&Itemid=65– National Council on Compensation Research -

https://www.ncci.com/NCCIMain/Pages/Default.aspx


ROI Tool –injury data research summary

Research revealed a Ratio “Range” of 2 : 1 to 14 : 1

Indirect Costs vs Direct Costs

Indirect Costs Direct Costs• Lost productivity • Medical expenses• OSHA fines • Rehabilitation expenses• Repairs to property • Wages to workers• Temporary employees • Worker’s Compensation• Accident investigation• Insurance/legal expenses• Corrective action


ROI Tool – injury data research results

• The new ROI Tool will:– Provide a default ratio of 2 : 1– Provide a user selectable ratio from 1 : 1 to 14 : 1– Consider reducing Indirect and Direct Injury Costs as benefits– Allow zero (0) entries for both Indirect and Direct Injury Costs

Indirect Costs vs Direct Costs


ROI Tool – productivity data research

• Influence - Safety standards allow safety automation products (“listed for such use”) to be used for safety-related functions since 2002.

• White papers, case studies, & interviews– Example result - Using GuardLogix controllers instead of traditional safety relays

helped GM greatly reduce installation and debug times for new body-shop equipment. Previously, wiring for a typical five-robot cell required 640 wires/cables; with the GuardLogix system, the wiring was reduced to a five-wire cable. Furthermore, the plug-and-play functionality and debug features reduced installation and maintenance time and costs. “GM’s Road To Safe Manufacturing””

• Business metrics – can Overall Equipment Effectiveness (OEE) be applied?

Economic Value & Integrated Safety Solutions



• OEE is an innovative method to measure productivity performance. More specifically, it is a statistical metric to determine how efficient a machine is running.

• OEE is calculated by multiplying together:Availability x Performance x Quality = OEE

• The combination is the value a machine contributes to the production process.

What is OEE?



• Availability = (Planned Production Time – Unplanned Downtime) (Planned Production Time) • Performance = (Cycle Time x Number of Products Processed) (Production Time) • Quality = (Number of Products Made – Number of Products Rejected) (Number of Products Made)

What is OEE?



• OEE is calculated by multiplying together:Availability x Performance x Quality = OEE

• Example - 90% x 95% x 99.5% = 85.1% OEE• So what?

– A recent Aberdeen Group study surveyed 236 manufacturing executives • Best-in class had 4% less unscheduled downtime. • Industry average• Laggard

What is OEE?



• Availability - Goal is to demonstrate that “integrated safety solutions” can reduce unscheduled downtime of a machine. This reduction can then be calculated into “unscheduled downtime savings” via the following variables: – Unscheduled Downtime per Week in minutes– Operations Cost of Downtime per minute(not including lost production)– Weeks of Unscheduled Downtime per year– Reduction Factor of all unscheduled downtime that is attributable to the proposed

integrated safety solution. A default of 4% is built into the calculation (Aberdeen Group Study).

– Note - Unscheduled downtime is caused by several factors such as; mechanical and "other" breakdowns, material shortages, scheduling issues, intermittent connections, miss-feeds, jams, operator or maintenance mistakes, etc.

Translating OEE to the Balance Sheet



• Performance - Goal is to demonstrate that the “integrated safety solution” can improve the production levels of a machine by driving more machine "up time" and/or greater cycles per period (hour, shift, day, week, etc.). This increase in production can then be calculated into “increased profit” to the bottom line via the following variables:– Increased Units Produced per Week– Scheduled Production Weeks per year– Profit Contribution dollars per unit




• Quality – Our research thus far has not supported a definitive relationship to first run quality produced parts as relates to the “integrated safety solution”. Therefore, we have not included any developed algorithms that would equate a quality impact to a company's balance sheet that directly relates to an “integrated safety solution” investment.

• We are considering an updated ROI Tool revision that could address improved quality and the related improvements to the bottom line.



ROI Tool – capital investments & depreciation

• Capital Investment – the “integrated safety solution” investment can drive a new depreciation schedule– Complete machine control & functional safety system upgrade– Functional safety system upgrade

• Applying Depreciation – An expense write-off– An investment benefit

Depreciation’s impact to the Balance Sheet


ROI Tool – productivity data research results

• The new ROI Tool will:– Provide fields for entering project related data as prompted– Provide a default reduction factor of 4% for reduced unscheduled

downtime with user input capability – Provide a depreciation default of 10 years with user input capability– Allow zero (0) entries as needed for any user


ROI Tool – project cost

• Integrated Safety System - scope of supply– Controls, software, field devices, cabinets, installation, training,

etc.

Integrated Safety Systems are proven to improve productivity, safety & the bottom line


ROI Tool - basics

ROI Tool Development Objectives:• Introduce a simple but comprehensive algorithm with expansion

capability• Results need to be credible• Provide web based access• Provide an off-line work sheet• Typical users:

– EH&S executives & staff– Operational management – Safety engineers– Project engineers


ROI Tool – basics “work sheet”


RA Safety Portal – landing page


http://discover.rockwellautomation.com/safety

ROI Tool Summary

A new comprehensive ROI tool is here:

• It is flexible and easy to access on the web• It is easy to use and an off-line work sheet is provided• It addresses the value proposition of “Integrated Safety Solutions”• It addresses the EH&S concern for injury data• It applies to all industry segments• It provides a credible result by combining injury data & productivity

data in one tool

Customers can now determine their ROI for capital projects with integrated safety systems



Questions ?


Thank You!

JB Titus, CFSEPresidentJB TITUS & ASSOCIATES

Determining the ROI for Safety

Business

Transcript of Determining the ROI for Safety