PIMS® Global Lubricants & Greases
Supply Chain Benchmarking on 2010 Data
Performance assessment and improvement
Cost reduction and optimization
Keith Roberts
Annie Hanafin
Georg Oppitz
Elena Peñas
Peter Smith
Josef Coellen
Introduction to the project and its motivation
Lubricants manufacturers worldwide face many challenges. Economic uncertainty, high
material costs, ecological concerns and increasing competitive pressure are forcing them to
re-examine all areas of operations. Minimum cost and maximum flexibility are needed to
address new market realities.
Historically, there was pressure to increase market share, capacity and complexity:
• in regions where demand for many lubricants is falling, due to lengthened vehicle
service intervals and higher oil prices, companies are now having to make tough
decisions on plant and product rationalisation.
• in regions where demand for lubricants is rising due to increasing economic
development, companies are having to achieve the operational edge necessary to
build competitive advantage for market share growth and optimal capacity and
complexity management.
Over the last 18 years PIMS® has established its data-driven worldwide benchmarking
process and assembled the world’s only current database of lubricants and greases supply
chains. Leading companies use PIMS as the foundation for evidence based performance
improvement.
2
But why benchmark in the first place?
Because benchmarking gives you:
•
•
objective evidence of your true competitive position;
•
quantified and prioritised areas of improvement: how much of an improvement is
needed and what is the prize? (NB average $500,000 per plant in 2008);
•
better information systems: benchmarking makes it worthwhile to measure things
because it gives a valid comparison on each metric used;
•
•
a stimulus for change based on clear evidence versus real competitors;
•
•
better understanding of the key drivers of performance;
firm facts to base decisions on, rather than wishful thinking: this helps to avoid wrong
competitive moves;
the reassurance to everybody, where “hard change” is indicated, that the change is really
necessary;
a basis for analysing alternative future scenarios using real experiences of others who
have been there.
3
And why PIMS?
Because for more than 18 years we have provided lubes and greases manufacturers with
fast, effective and objective benchmarking, becoming trusted advisors, known for thorough
data collection and validation, good analysis and useful answers.
Because you can use PIMS deliverables to answer questions like:
• what should you do to get your operations to be world class? (process optimization)
• what are your advantages / disadvantages versus local competitors?
• where and how should you invest? Or divest? (portfolio optimization)
• toll-blending, outsourcing, maintenance: yes or not, too much or too little?
• how do you master performance and complexity drivers?
• are your targets feasible? Is your current strategy supported by objective evidence?
Because only PIMS has valid comparative data on over 160 plants in 40 countries, from over
20 of the world’s top oil companies, and a research-based analysis framework to clearly
show results to managers at all levels.
Because we assure data confidentiality: feedback never shows (or allows calculation of)
data on individual competitors.
4
Our data set: 199 lube + 50 grease plants in 2010 PIMS benchmarking
Europe:
67 lube plants
20 grease plants
34 companies
6 continents
Americas:
51 lube plants
17 grease plants
Asia & Oceania: 65
lube plants
10 grease plants
Africa:
16 lube plants
3 grease plants
Core methodologies: Look-alikes
We compare you against the performance of the best plants that resemble your plant’s
profile. Look-alikes are the closest structural peers: based on your current profile (scale,
product mix, complexity, labour cost environment and major "givens" for configuration, e.g.
% of base oil in via pipe etc.). We match you with your peers in each activity area, and
compare you with the best half (e.g. best four out of eight). Details of the matching criteria
are shown on the summary page for each activity area.
Key messages on productivity and operating performance.
C
PIMS global database
Finding plants worldwide
that match your profile
Benchmarking your activity
based performance against
best practice
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Core methodologies: local low cost peers
We compare you with the best half of your closest geographical/market peers in each
activity area (raw material receipt, blending, packing, laboratory, filling and despatch,
warehousing, other production costs and assets, G&A, etc.). What are they doing
differently and are they doing better?
Key messages on complexity, product portfolio, payroll costs, structure etc.
Cost metric
Non-cost metric
You
Local low cost
Traffic-light code:
1.25 Unfavourable position
Neutral position
0.8 Favourable position
No immediate message
PIMS can amend the default definitions and boundaries of “local” areas to meet clients
needs, so long as the number of “local” observations in the database can guarantee 100%
confidentiality.
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PIMS deliverables
Results comprise three different level of benchmarking reports:
•
•
•
The plant data appendix (PDA) is for plant and country managers. It is the place where
one plant’s performance is assessed and compared in great detail against its best lookalikes and local low cost peers.
The regional report is for regional managers. It shows all plants in a region (e.g.
Europe) benchmarked against each other and regional quartiles. It also tracks the
plants and the regional quartiles over time. It is the first report presented to the client
as it is used in the data review stage to spot possible mistakes in inputs.
The Executive Summary is the final report, where all the key issues arising from the
more detailed reports are highlighted and reviewed from a different perspective. This
reports also provides PIMS suggestions and priorities (ranked by financial “prize”).
Executive
Summary
Low
Regional
Report
(Quartiles &
Time Series)
Level of detail
Plant Data
Appendix
Hi
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The input Data Form
PIMS Lube/Grease Plant Benchmarking
Company
Page 1
Year of data
Volume unit
Country
Plant
Distance unit
Currency
PIMS Lube/Grease Plant Benchmarking
Country
Page 2
Plant raw material receipt (including bulk finished product)
Into plant:
Base oil
Bulk additives
Packed additives
Bulk fin. product
Total no. different
types of test
Total no. tests per
equipment
year
Base oil handling points between refinery and LOBP:
Total
Volume inbound
(1=pipe/2=ship/3=barge/4=rail/5=road)
Input cost*
*Row optional
No. storage tanks
By mode:
Volume out
Mode in
Mode out
No. stockouts
Av. distance
Transport cost
No. movements
Line items/mvmt.
Av. days stock
No. specs.
Days lead time
No. active quality certifications
% of batches:
1 = yes (or equiv.); 0.5 = part
% of tests (row sum =100%) by process stage
Material receipt
In-process contr
Product release
Post production
% corrections
TS 16949?
OSHA 18001?
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Bulk filling and despatch (including base oil and other bulk)
Pipe
Bulk ship
Out by:
Bulk barge
Bulk barge
Capacity utilization %
Bulk rail
Bulk rail
% orders despatched OTIF
Bulk road
Bulk road
Line items /mvt.
Packed
Packs & pack materials
Lubricant blending
Including pre- and re-blends:
Number of runs
Volume blended
Total
Number of units
<11M3 (3000 gal)
Manual
Semi-auto
Overall line-hours
Automatic
Available
Setup+maintce
Blending
In-line
Load cell
Tank blends
Total blended
By order:
Volume as % of capacity
Toll %
To order %
Marine
Hydraulic
Bulk
Own VI improver pre-blends as % of VII usage
Excluding pre- and re-blends:
Packed
Motor oil
Gear oil
Finished product tank stocks:
For stock %
Total 100%
Days stock
Total 100%
No. storage tanks
Ind./other simple Ind./oth. complex Blended non-lubes
Total
Volume lubricant produced
No. grades
No. grades = 80% of prodn.
No. new formulations this year
No. finished product runs
Av. no. components
Typical cycle time (hours)
Lubricant packing
Large packs (IBCs, drums, kegs, pails) Small packs (up to 10 litres, 2.5 gallons)
Large packs
No. lines
Large pack overall line-hours
Person-hours
Small packs
Small pack overall line-hours
Available
Setup+maintce
Filling
No. lines
Person-hours
Available
Setup+maintce
Filling
IBCs
Drums
Kegs
Pails
3 to 10 litre
1 or 2 litre
<1 litre
Total
Manual
Semi-auto
Automatic
By pack type:
Volume packed (in house)
Volume packed (outsourced)
No. runs
No. SKUs
No. pack footprints
Grease production and packing
Equipment: No. lines (units)
Total personhours
Volume unit
Overall line-hours
No. batches
No. flushings
Available
Setup+maintce
Production
Cooling
Continuous line
Autoclaves + contactors
% batches
special greases
Preparation vessels
Finishing kettles
Mills + homogenizers
Finished grease tank stocks:
Packing:
Days stock
Small packs
No. storage tanks
Thickener type:
>10 kg. packs
Al complex
Ca soap
Volume packed
Ca complex
No. lines
Li soap
Person-hours
Li complex
Line-hours
Other soap
No. runs
Polyurea
No. pack footpr.
Clay
No. SKUs
All other
Volume grease made
No. production runs
No. grades
No. colours
Av. no. components
Av. hours/batch
ISO 14000?
% reject
Lubes
Greases
Volume moved
Plant
Laboratory (lubes and greases production related)
The electronic
version of the
PIMS data form
also provides a
diagnostic sheet
to help clients
spot possible
macroscopic
mistakes and a
cost split sheet to
explain how the
costs are split
during the
analysis according
to the allocation
keys provided.
Volume lubes
Volume greases
Volume other
Automation (0=no, 0.5=management, 1=operation)
No. filling positions No. movements
No. SKUs
Av. days stock
Volume out
% cust. collect
% exports
Area unit (m2 or ft2)
Plant warehousing and loading / unloading (packed products)
Packed:
No. bulk orders
Packed inbound product
Volume in
Lubes
Packed warehouse:
Automation (0=no, 0.5=management, 1=operation)
Greases
% product refilled/relabelled
Other
No. movements out
Total
No. movements in
Total
Warehouse capacity:
No. orders
% orders OTIF
% cust. collect
Line items /mvt.
Shelf
Block inside
% volume out: 1-product pallets
Block outside
Area of storage
For customer
No. pallet places
Other
% exports
Split pallets
Containers
Free loaded
Losses in plant + warehouse
Lubes:
Value lost
Greases:
Volume
Value lost
Volume
Empty packs:
%
Stock count losses
Stock count losses
Recovered downgrades
Recovered downgrades
% value lost
Cost per 100 drums
Slops
Slops
Cost per 100 1 litre (quart) packs
Pack cost data
General data on energy, systems, maintenance planning, health, environment, safety etc.
Days/year
plant
operated
Energy use:
Units
Volume
Control systems: 1 = yes; 0.5 = part
Cost
Steam
Automated production scheduling
Gas
Adapt to weekly sales forecast
Electricity
Other
(specify
type)
HES:
Activity based costing
Fuel oil
Maintenance %
that is
Mandated
Volume
Number
Spills
Other environmental incidents
Lost-time accidents
Other planned
First-aid injuries
Reactive
total 100%
Overall plant breakdown of costs, people, assets
Split of people and costs
by area:
No. people
Operations
Maintenance
People cost
Operations
Maintenance
Person-hours
Standard
Non-people cash cost
Overtime
Operations
Maintenance
Outsourced
Bulk raw materials in
Pack raw materials in
Lubricants blending
Lubricants large packs
Lubricants small packs
Greases prodn & packing
Laboratory
Bulk filling
Warehouse
General & administrative
Total
. . of which
Management
Energy (as above) + utilities
Direct employees
Rents, tax, permits
Contractors and temps
Split of G&A in-plant Cost in plant Gen
activity vs services shared & admin row 124
from HQ:
cells E+I+K
Allocated cost
from HQ
Operations
Security + safety
Maintenance
Office
Outsourced
Accounting
Other
Personnel
Owned fixed assets and depreciation:
Data processing
Procurement
Gross book value
Production planning
Lube plant
Engineering
Grease plant
HES/security/legal
Warehouse
General
Notes
Total
% of non-people cash cost that is
HQ-determined price
Transport
Net book value
3-year average
capex / year
Leased fixed assets:
Annual
depreciation
Calc. gross book
value
Annual lease cost
Total
Plant opex = E125+F125+I125+J125+K125+I138+K138 (excludes freight in, losses, allocated cost)
Notes
©2009 PIMS Europe Ltd.15 Basinghall Street London EC2V 5BR +44 20 7776 2800 (fax 2828) Email: lubes@pimsconsulting.com
Version 1.4
©2009 PIMS Europe Ltd. +44 20 7776 2800 (fax 2828) lubes@pimsconsulting.com
Person-hours to fill this form
Version 1.4
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Potential additional benchmarks for 2010
Order to despatch time in days (agile production), split between bulk, large packs, small
packs, greases, etc.. Need to split produced to order versus delivered from stock. Suggest
capturing the minimum, average of lowest 80%, average of top 20%, and on time in full
despatch performance (on a line item basis?).
Organization structure in global/regional/national offices of multi-plant companies. In
particular, how many people are involved in planning and deciding what to produce where
for which customer and ensuring the necessary resources and materials are in place?
What key performance indicators are used by the oil companies and their transport
companies in distribution to customers? From the transport companies, how do lubricants
compare to other products? (Suggested focus on 12 countries or so: USA, Canada, Mexico,
Brazil, Germany, France, Italy, UK, Spain, Poland, Turkey, China).
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Regional report: bar chart examples
Plant summary - total volumes & no. grades by product type
Company X Region 1 2008
Volume
350000
No. grades
300
Grease
Non-lubes
Industrial/other complex
300000
Industrial/other simple
250
Hydraulic oil
Marine oil
200
Gear oil
Motor oil
200000
150
No. of grades
Plant summary - total packed product volumes & SKUs by pack type
150000
Company X Region 1 2008
Volume
120000
100
100000
No. SKUs
Grease small
800
Grease large
< 1 litre
100000
50
50000
Region 1 Compan
av
y X av
Volume and stock keeping units are plotted
in bar charts, plant by plant and against
region and company averages. The split
between different pack volumes together
with the SKU/volume ratio give an
immediate feeling of the warehouse tasks,
complexity and competitive position within
the region.
Total volume tons
3-10 litres
0
700
1-2 litres
600
Pails
80000
0
Kegs
500
Drums
IBCs
60000
400
No. of SKUs
Total volume tons
250000
Volume and grades are plotted in bar
charts, plant by plant and against region
and company averages. The split between
different lubricants, non-lubes and grease
together with the grades/volume ratio give
an immediate feeling of plants structure,,
complexity,
mission
and
regional
competitive position.
300
40000
200
20000
100
0
0
Region 1 Compan
avg
y X avg
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The regional report also shows time series of costs, complexity and productivity
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Regional report: table-bubble chart examples
PIMS shows your
cost and
performance
position relative to
your competitors in
the agreed region
boundaries.
Is there room for
improvement? If
so, where do you
have the highest
potential to reduce
costs?
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Regional report: quartiles-table examples
Key performance
indicators are
shown against adhoc regional
percentiles while
traffic light colour
coding is
employed to
highlight clear
performance gaps
against
regional
competitors. A
number of tables
like the one in the
example are
reported in the
RDA to cover all
activity areas and
cost centres.
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The plant data appendix (PDA)
Within the PDA each plant is benchmarked individually against the best look-alikes and local low
cost peers and the report is specifically designed to:
•
•
•
•
•
•
highlight any possible performance gap at plant level in areas like raw material receipt,
lubricants blending and packing, grease production and packing, bulk filling and despatch,
plant warehouse, losses, G&A, overall heads, assets, maintenance and utilities costs.
show ad-hoc time series to analyze and highlight volume, costs and productivity changes for
those plants who regularly participate in the PIMS benchmarking project.
illustrate and explain the clients what are the complexity drivers in each activity area and
their computed weight and impact on the relative complexity index.
explain the cost split between the lubes, greases, warehouse and non-lubes related
activities by area
decompose, with the help of waterfall-graphs and specific support tables, the overall costs
into both financial and non-financial metrics, which are promptly benchmarked against
look-alikes and local low cost peers at each level of PIMS decomposition.
use a traffic light colour coding to highlight the competitive position against peers.
Finally, a summary list of issues (performance gaps) flagged by the whole report is shown,
highlighting the PIMS top six priorities based on those areas with the greatest financial “prize”.
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PDA: priority areas against look-alikes and local low cost peers
Cost and non-cost
metrics are here
benchmarked
against look-alikes
and local low cost
peers, by activity
area, taking into
account the typical
decomposition from
total cost
production to
operating cash cost,
non operating cash
costs and
depreciation plus
lease costs. The
PIMS top 6 areas are
also highlighted by
the greatest
potential return
computed from
actual performance
gaps .
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PDA: data summaries with complexity drivers and cost split explained
PIMS defines complexity
as those factors that are
intrinsic to the plant’s
mission: controllable in
the medium term, but
fixed in the short term.
The scale is 50% =
average, over 60% = high,
below 40% = low.
As complexity is the
driver of manning levels
and productivity, it is also
the key driver of costs in
medium to high labour
cost countries.
Please note: The PIMS
complexity index is
volume corrected: high
volume plants often have
“lower” PIMS complexity,
but also lower cost/ton.
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PDA: your performance against look-alikes and local low cost peers
PIMS shows your cost
and performance
position relative to
your closest
competitors (in your
local area) and to
structurally similar
“look-alikes”
Is there room for
improvement? If so,
where do you have
the highest potential
to reduce costs?
To answer these
questions, PIMS
provides you with
detailed analysis
across plant activity
areas…
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PDA: quality of look-alike matching explained
PIMS finds plant areas from the database, that are structurally similar to you (look-alikes).
Matching criteria are clearly stated and the quality of the match is also displayed. Transparency
despite confidentiality is the goal.
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PDA: support tables
Not all metrics
analyzed and
computed can be
decomposed and
included in a single
waterfall-graph given
the activity area.
To support the study
of performance gaps,
waterfalls are followed
by in-depth tables that
show the benchmarks
for both cost and noncost metrics that are
key performance
indicators for a given
activity.
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PDA: performance gaps and PIMS top 6 priorities
PIMS provides you with
areas for improvement
by activity area. These
include benchmarks on:
• Payroll cost per
head
• Maintenance costs
and other
overhead costs
• Complexity
• Stock levels
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The executive summary
The Executive Summary is the final report, where all the key issues arising from the more detailed
reports are highlighted and reviewed from a different perspective. This reports also provides
PIMS suggestions and priorities based on the financial prize.
This report is specifically designed to show:
• all the key messages resulting from the analysis, evaluating the key performance gaps region
by region, plant by plant, activity by activity, etc...
• the objectives and the scope of the project with relevant details on how key indices and
metrics are computed.
• the up-to-date list of participants with a regional split of the plants included in the exercise.
• the trends in lubricants supply chains gathered by PIMS consultants after talking with several
hundred people around the world during the project lifetime.
• important research findings from the up-to-date database (like actual versus “par” lubes
production and warehouse cash costs, plant cash cost against plant complexity index etc...)
• the overall lube plant and warehouse cost efficiency indices (actual vs. Par) with their
relative global regional and local percentiles.
Finally, a range of follow-up options is also presented on how you can fully benefit from PIMS
value-added services tailored to the lubricants and greases supply chain (membership,
performance analysis workshops, Lubes IT benchmarking, Lubes Technology benchmarking, etc...)
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Executive Summary: portfolio highlights and possible improvement areas
In the Executive
Summary you will find a
list of priorities (ordered
by potential financial
return) at corporate
level, useful for portfolio
planning and strategy,
where the traffic light
colour-coding highlights
the competitive position
of each plant in all areas
of activity.
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Executive Summary: research findings
Once the entries in the database have passed the quality check on PIMS side, a number of
research activities on the database will be performed by PIMS consultants to provide participants
further insights on quantitative trends and correlations typically between costs and drivers of
costs and/or PIMS performance indexes; when possible, also on time series data.
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Executive Summary: cost efficiency indexes
New since 2009, PIMS introduced cost efficiency indexes for both lubricants plant and warehouse. These
indexes go beyond the consolidated PIMS complexity indexes developed in the PDA, defined and
benchmarked separately for each activity area. Keeping in mind that the best lubricants plant is not the one
with lowest cost, but the one with the best ability to manage complexity; just being “best quartile” on cost by
eliminating all complexity (and all the margin) will not do. PIMS “cost efficiency index” provides a way of
determining whether a plant is performing well, given the job it has to do and the location it has.
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Project timeline (for those who join in the main cycle)
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How will we work with you?
Lubricants benchmarking
PIMS consultants work with you through a 5-stage process, and they will have a face-to-face
meeting with you at least 3 times (kick-off, data review, final results, see previous slide). From
2009 PIMS streamlined and improved communication and interactions with clients personnel
through the Lubes Customer Portal, specifically developed to ensure data quality, provide
consistent 24/7 training and better support, guarantee more transparency, enhance services
customization. PIMS consultants will interact with key plant personnel, and validate the data with
your planners and financial accountants to develop a comprehensive profile of your plant
operations, comprising over 100 key metrics.
PIMS then models your plant against regional and local competitors and against matching plants
globally. We identify which areas of the plant are performing strongly, and which need
improvement.
We spell out relative pay rates, productivity levels, complexity, maintenance load, cycle times and
quality performance in each area, versus appropriate peers.
PIMS correct for key differences outside your control, such as scale, complexity, location, inbound
logistics, and product mix. Comparisons are "apples to apples". We give you key insights into
improving your production operations. Together, we pinpoint priority areas and help you to
develop action plans for performance improvement.
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Lubes Customer Portal: ensuring data consistency
What does the portal do?
•
•
•
•
•
uses current IT solutions to improve communication not just between PIMS
consultants and clients, but also at client level internally thanks to both the
up-to-date sections “Project Agenda” and “My organization’s Tasks”, where
both PIMS and clients communicate information on tasks and deadlines
plus the relative status.
enhances coordination among travelling PIMS consultants as well as
transparency and uniformity in response to clients questions.
gives participants the opportunity to display concerns and suggest
improvements through PIMS moderated and anonymous discussion
boards, in real time, when ideas are generated and issues found, ensuring
that they will not get forgot or misunderstood in the development of PIMS
analysis and documentation.
allows participants to use multimedia tutorials specifically designed to
make PIMS reports and documentation more understandable and usable
supports the ®PIMS Lubes Membership, making available online articles,
presentations and results based on PIMS research on the Lubes and
Greases extensive and unique database(s)
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Participants feedback
Customer satisfaction: 95% rate us “good” or “very good”.
• “PIMS helps to bring about change by providing a common language between
operating units, showing priority areas of focus, setting targets and surfacing ideas
for improvement. PIMS facilitates an excellent benchmarking process and builds
cost consciousness.” Gustavo Aldaya, Shell
• “After a relatively painless input the benefits in benchmarking against the (global &
local) best in class are huge!” Andrew Hartwig, Engen
• “PIMS is the lighthouse that guides our way.” Jose Tirado, Lubrisur
• “PIMS benchmarking has been very helpful in making us improve over the years.
PIMS has been very helpful in letting us know where we are and where we want to
be.” Jose Vaz Serra, Galp
• “For the first time we have a clear picture of where our competitive position is on
costs. This will lead to actions to improve our position.” Karel Dedek, Orlen Oil
The PIMS main benchmarking circle is updated every two years; each cycle is bigger than
before and over 90% of participants renew.
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Main contacts
Keith Roberts
Project Director
keith.roberts@malikpims.com
Annie Hanafin
Project Manager
annie.hanafin@malikpims.com
Georg Oppitz
Consultant
georg.oppitz@mzsg.ch
Peter Smith
Senior Consultant
peter.smith@malikpims.com
Elena Peñas
Consultant
karsten.tammer@mzsg.ch
Pims Associates Ltd.
15 Basinghall Street
London EC2V 5BR England
Tel: +44 20 7776 2800
www.malikpims.com
PIMS Associates Ltd. Is a company of Malik Management St. Gallen, Switzerland.
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