Your old DCS could be costing more to maintain than to replace. It’s a shocking thought, but it’s often true when all costs are considered.
When the housing bubble popped a few years ago, some homeowners suddenly found themselves with mortgages larger than their home’s value. Some process plant operators working with outdated DCS platforms can find themselves in a similar inversion: the cost of maintaining their old system is greater than migrating to a new one.
If you’re skeptical, wondering how such a thing could be possible, you’re not alone. When we make this suggestion to clients and prospects, they ask, “A new DCS is going to cost millions of dollars, in terms of new equipment, engineering costs, retraining and perhaps major infrastructure rebuilding. My old DCS is hanging in there. How can I justify an expensive replacement project to management?”
The answer to this very reasonable question is found in a method of engineering, economic, and financial analysis referred to as TCO (total cost of ownership). TCO tries to consider all the costs related to a product over its lifetime. The TCO of your car isn’t just the purchase price, but everything you spend on it: gas, financing, maintenance, etc., over all the years you own it. The same approach can be applied to a DCS over its lifetime, typically 20+ years. Let’s look at how MAVERICK applied this analysis to a recent DCS migration study in a large U.S. paper mill.
The majority of the DCS platforms in this paper mill were obsolete and no longer actively supported by their manufacturers. Original replacement parts were hard to find and remanufactured parts had high failure rates. The control engineers and technicians spent a large part of their time just keeping the systems running.
As part of the study, MAVERICK wanted to calculate the TCO for those old systems. We documented the initial DCS installation costs, subsequent upgrades and maintenance costs—including the time the control engineering and technician staff spent doing maintenance-related work—over a period of 24 years. More importantly, we also estimated the cost of lost mill production due to unplanned outages and upsets caused by DCS failures and other related issues. Finally, we extrapolated these rising costs over the next several years, as the systems became increasingly unreliable and parts became harder to replace and remanufacture.
Next, MAVERICK used bids from several DCS vendors to perform a similar analysis for a new DCS looking 20 years into the future. The investment cost for installing the new DCS was offset by several cost reductions and savings:
- The initial maintenance costs are very low and increase slowly over the first 10 to 15 years with the new DCS.
- The initial upgrade costs are similarly very low and managed by formal programs offered by the DCS vendors.
- The cost of lost production drops dramatically because the new DCS is much more reliable.
When the extrapolated TCO for a legacy DCS was compared with the estimated TCO for a new DCS, the TCO of the new DCS was significantly lower, with the projected cash flow difference yielding a before-tax, internal rate of return of 12.3%. Now, that’s something you can take to management!
This is just the financial side of the picture, but we know beginning a discussion with financial benefits gets management listening. There are also major performance improvements possible with a new DCS platform. Over many DCS migration studies and projects, we’ve seen marked improvements in process visibility and safety (improved HMI features), process operability (improved control functions and features), alarm management, cyber security and utilization of new technologies, all resulting in reduced operating costs and measurable productivity improvements. Get a MAVERICK expert to assist you with a TCO analysis to prove the value of replacing your legacy DCS.
This post was written by Jim Ford. Jim is a senior consultant at Maverick Technologies, a leading automation solutions provider offering industrial automation, strategic manufacturing, and enterprise integration services for the process industries. Maverick delivers expertise and consulting in a wide variety of areas including industrial automation controls, distributed control systems, manufacturing execution systems, operational strategy, business process optimization, and more.