How can cigarette manufacturers find a general decision strategy for automation investments? The following model, based on a type of scorecard analysis, may help.
Automation is "the technique, method or system of, or operation of, controlling a process by highly automatic means, as by electronic devices, reducing human intervention to a minimum", says Dictionary.com.
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Once upon a time "automation" was a magic word, not only in the cigarette industry. Automated manufacturing cells were erected everywhere, automatically guided vehicles (AGVs) served this machinery and each cigarette manufacturer had at least one secret cabin with "tomorrow's technology", filled with robots waving their arms about. Even in the developing Asian countries twenty years ago, original equipment manufacturers (OEMs) were being asked for touch screens for machinery and primary equipment. And the OEMs learned and responded to the demand for increased automation. Today, each cigarette machine, regardless of its real age, has a nice touch screen which it got at the latest when its was overhauled. The machine's old relay heart has been replaced with a new, a state-of-the-art computer heart with many new functions.
Cost restrictions have caused investments in automation to return to more practical considerations. This means that investments in automation are viewed as capital expenditure, which serves mainly to minimise operational expenses. The money spent on automation equipment - such as computers or automated handling - is expected to lead to direct paybacks in terms of operational cost reduction over a certain period. Associated effects, such as improved transparency, repair support and tracking and tracing capabilities, are seen - but this merely glosses over how automation is regarded today.
Finding the correct strategy for investments in automation boils down to finding the answers to a series of questions:
What are my targets?
How important are these targets in the particular case?
In which area should investment be made?
What are the particular benefits?
Below is a guideline on how this can be done in a systematic way.
What are my targets?
Important targets for investment in production automation are:
- Production flexibility: This is the ability to switch between products, to produce small charges efficiently and to react fast to different market requirements. This ability is improved by the employment of the appropriate equipment, e. g. internal product buffers, which are unthinkable without a certain level of automation.
- Reduction in manpower: Reducing the workforce remains a major intention when investing in automation.
- Factory uptime: Production uptime is of particular interest if capital expenditure for the factory is high.
- Transparency: Transparency of production comes with automation and gives management the opportunity to make quick and correct decisions.
- Material and product savings: Any automated tool or method that results in material or product savings is welcome as payback is tangible (if the savings can be quantified).
- Resource savings: Reducing consumption of ingredients, utilities and energy have become so much more important and are significant factors in cost evaluation.
- Product quality: The quality of the finished goods is a competitive factor and of particular importance for new, premium or globally sourced corporate brands.
Prioritising targets
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It is evident that prioritising targets balancing is a very important first step. For example, a fixed budget is set for all production sites, and spending for a particular site will be adjusted according to company strategy for this particular plant. Moreover, for simplicity, we assume that capital expenditure related to each target is identical, which must be reviewed carefully in application.
In an ideal world this is done before the production site is set up. In the 1990s, when tobacco consumption was growing worldwide, PMI built up its greenfield factories in the former Eastern block along a certain model, and the China National Tobacco Corporation (CNTC) erected a couple of identical-style factories in China, which were found to be "best suited" for the task. This approach is a valid one if targets are identical.
In the real world of existing production sites, where the automation set-up was created by a combination of site history and the aims of those running the plant, considerations for the future must be included in the equation. This challenge is now being faced in particular by companies merging with others, most recently e. g. Imperial and JTI, which acquired Altadis and Gallaher, respectively. In cost-driven approaches, where the amount of money to be spent is limited, the best site strategy is to analyse the existing situation and adjust future investments with the (new) corporate strategy, just by establishing the particular site balance scheme.
Three simple scenarios, which may not completely reproduce reality, illustrate this balancing procedure (readers can construct their own scenarios). It is assumed that there is a "base level" considered to be the minimum company standard. With the simplifying assumptions made above, the size of the filled area in the graph reflects roughly the amount of capital expenses spent for automation. One factory can hold more that one production profile, which is the case in many factories (see graphs on page 51).
Scenario 1, "Cheap, long-term runners, expensive manufacturing", may characterise a production where personnel savings and high utilisation of expensive high-speed machinery may be in focus. On the other hand, because of the low price of the products, one does not need to focus too much on product quality.
Scenario 2, "Manufacturing premium products in a low wage country", reflects a production where transparency and quality are the main focus, followed by high material use and utilisation of (potentially expensive) machinery. Personnel savings and utility costs in this scenario are considered to be not that important.
Scenario 3, "New products in a medium wage country", may be a scenario of a pilot plant, which must be flexible and issue high quality, while factory uptime and material/resource savings are considered to be of less importance.
Where to invest?
Investments in automation in cigarette factories today focus on a number of functional categories which can be classified in terms of:
- Transport of material: This means pack, case, carton or container conveyors, but also automatic guided vehicle (AGV) solutions, as proposed by companies such as CS, Egemin, Frog.
- Unpacking/packing/stacking: This is focused on C48 carton unpacking (from all leading primary OEMs such as Hauni, Garbuio Dickinson, Comas, Heinen-Köhl, but also KSEC from China), shipping case packing and palletising (including the use of robots), e. g. from ABB.
- Warehousing of raw material/finished goods: Building up automated warehouses - including automated in-feed, discharge and rack robots and warehouse management systems (WMS) - is a business where a considerable number of suppliers exist. This business is not tobacco-specific.
- Internal product buffers: This includes cut-filler container stores (block/rack/conveyor type), filter buffering and cigarette linkup buffering (e. g. Hauni's Varios, Resy and Balance, Molins' Concord, G.D's B21 and S 140, Focke 741 and others).
- Brand change and size change support: This means intelligent primary blend switchover (holding more than one blend in production sections at the same time) and quick brand change/quick size change support at the maker/packer.
- Product tracking and tracing: Includes data collection, barcode printing and radio frequency identification (RFID) technology.
- ERP/MES support: Enterprise resource planning systems (ERP) close the gap between office and production and manage the data warehouse. On the ERP side, SAP dominates the market. Well-known suppliers of "front end" management execution systems (MES) which assist production in recipe management, tracking/tracing, scheduling, reporting and other functions are, amongst others, Siemens, Hauni, Xavo and Wonderware.
- Machine HMI (human interface)/PLC innovation: This means the replacement of older hardware with new equipment from e. g. Siemens, Beckhoff, Rockwell, which incorporates progress in speed, capacity and communication. It is frequently an issue in machine conversion and rebuild.
- Gentle handling of material: Automated solutions can better keep process parameters within their limits, e. g. for tobacco processing and cigarette-/filter-making. Other third-party solutions can improve cut-filler machine-feeding design in combination with pneumatic tobacco transfer (e. g. from Neotechnik, Riedel).
- Energy/utility control: This large field covers energy minimisation (illumination and air conditioning) and utility supervision.
- Online and offline quality controls: This covers advanced, online sensors in primary (provided by e. g. NDC Infrared, Tews, Malcam and others), semi-automatic and automatic cigarette and filter sampling (e. g. Borgwaldt, Sodim) and automated laboratory equipment.
- Offspec rejection: This category includes automatic foreign particle ejection (e. g. Safeline, Best or Key Technology solutions in primary) or machine detectors/ejectors offered as an option for processing and making machinery (e. g. Hauni, G.D and others).
What are the particular benefits?
Finding the right investment strategy in this jungle of opportunities is difficult. One way is to consider how specific functions hit the targets. The generic table (table 1, "What are the benefits?") may give an idea of how investments in different categories score. Note that the table is only a rough scheme that needs to be filled with more detailed information.
Finding the right answer
The procedure for obtaining an answer is by the combination of balancing with the scoring table. For the given scenarios, the following investment strategy (see table 2) for automation capital expenses can be derived, using a simple spreadsheet analysis.
The investment strategy for scenario 1 to 3 implies: from the given balancing process, different automation investment strategies can be derived. In each scenario, the highest scored fields are marked in green. It is clear that certain installations may be "mandatory" for some companies (e. g. "tracking and tracing"). Another important consideration is that the intended use of a production line may change in the future and migrations must be possible in any case.
It is noticeable that in two very different scenarios brand change and size change support is in focus. This is due to the fact that in scenario 1 and 2 high utilisation of (potentially expensive) machinery is addressed in the balancing scheme needing a fast brand change.
Interpreting the result may lead to strange conclusions, new balancing or correction of the scoring table. This is valid because the investment model is best suited to company targets if assumptions and result tables are in line with internal best practice.
Dr Friedemann Roether, head of inno.tob and partners, an independent services and technical consulting company. Enditem
