There is a sea change in the route to market for valves. One aspect is that IIoT and data analytics will be providing vast amounts of data on total cost of ownership (TCO). Current data will be available to the operator’s corporate specialists who increasingly will be making the major purchasing decisions. By Robert McIlvaine – The McIlvaine Company
These corporate specialists will have not only currentTCOs on each valve but they will have the knowledge of their processes and the unique TCO parameters. These will not be people easily persuaded by a standard sales presentation or even a comprehensive analysis which does not take into account uniqueTCO parameters for the process in question.
TCO has long been a desired but ex- pensive, time consuming and difficult basis for decision making. As a result initial price has had unwarranted influence on purchasing decisions for high performance valves. More than half of the valves are in the high-performance category. This includes both critical and severe service where performance has a bigger impact than initial price. It also includes valves as part of a unique package regardless of the design. A general performance valve may have a life of seven years without much repair but will then be replaced rather than repaired. A high performance valve could have a life of 10-15 years. The repair costs will exceed the initial purchase price. In addition other factors such as labor and production impacts can be major cost generators.
Each application is unique. Maintenance of a valve on an offshore oil rig will be much higher than for an on-shore location. Each valve type and each process create different cost factors.
LTCOV: The most important navigation tool for this sea-change in the route to market will be the Lowest Total Cost of Ownership Validation (LTCOV). The obvious question is how the LTCOV differs from the common “white paper”. Here are the differences:
The LTCOV addresses the unique process parameters for a specific purchase.
• Validation is achieved by the input of Subject Matter Ultra Experts (SMUES).
• The unique process parameters and cost factors are supported by decision systems with case histories, analyses and economic tables.
• The LTCOV is kept current.
• The LTCO is further validated by addressing criticisms of third parties including competitors.
• This input from third parties is implemented through the decision systems.
The digital generation with access to data analytics and the Industrial Inter- net of Wisdom (1) will be leading the way in the market sea-change. The LT- COV will be a primary navigation tool. Therefore, those suppliers who have the best products and can validate LTCO will be the most successful. How can a supplier address this sea-change and provide the desired LTCOV’s? Here is the step by step recommendation:
1.Use “Advanced Forecasting” to prioritize industries, processes and even all the major individual prospects.
2. Start with the most potentially lucrative segment and create an LTCOV for it.
3.The LTCOV process steps are
a. Select a vendor to coordinate the LT- COV. (1)
b. Understand the process as well as the process operator does.
c. Gather all the cost data relevant to the application of your valves relative to that process.
d. Support that data with case histories, customer testimony and verifiable analyses.
e. Validate the LTCO with the input from one or more Subject Matter Ultra Ex- perts.
f. Disseminate the LTCOV to the potential purchasers.
g. Provide open on-line discussions of the LTCO.
h. Support decision systems covering the process and all the relevant products and services.
i. Provide continuous review and updating of the LTCO.
j. Encourage the development of subject matter ultra-experts both within the organization and without.
k. Interconnect all the people within the supplier organization to improve and leverage the LTCO market approach.
Remote O&M:The LTCOV will be greatly impacted by the scope of responsibility of the valve manufacturer. A purchaser can be considering a process management system which includes a competitor’s valves. There is no unique process related valve knowledge which is utilized. The valve sensor data is transmit- ted directly to the cloud. Alternatively, the valve manufacturer develops a gateway process management sub-system which reflects his valve knowledge relative to the specific process. Even though the two valve offerings may be equal the superior process management system available from the valve company will show the LTCO.
The repair and maintenance of valves far exceeds the initial cost. Periodic disassembly of valves rather than maintenance based on need is costly and risky. With remote monitoring the valve experts at the supplier company can be monitoring every valve in every one of a customer’s plants. A very clear LTCOV is achieved by offering a yearly fixed price contract to repair and maintain all the valves at a cost lower than the presentTCO. Unneeded maintenance is eliminated and valve problems are spotted in time for remedial action instead of after irreparable dam- age. This requires the development of subject matter ultra-experts within the company. It also requires coordination with the general process management supplier. A tier of expertise is needed. Most anomalies can be addressed by the process management control room. Where the valve vendor expertise is needed there would be the first tier who would handle most problems followed by the subject matter ultra-expert. The on-line support plus the yearly fixed price contracts for maintenance will generate revenues much greater than those for the new valves. (2)
Summary: This sea-change in the route to market for valve companies will not only impact market shares but margins, R&D and the fundamental building blocks for success. (3) Those companies who leverageTCO information to develop better products will find ready acceptance. The result will be faster process improvement and higher profit margins for those companies who divert more funds from promotion to R&D. Some investment will be required but the first year’s return will exceed the investment. The ultimate impact is so large that it should be a very high priority for valve companies. Valve companies can first focus on automation and IIoT or on achieving and documenting LTCOV. An automation consultant will recommend the automation focus but an approach where the two initiatives are pursued in tandem makes more sense. In fact, the LTCOV knowledge is necessary prior to providing optimum automation.
(1) 5 step business program published by the McIlvaine Company
(2) IIoT & Remote O&M published by the McIlvaine Company
(3) Industrial Valves: World Markets published by the McIlvaine Company
Robert McIlvaine is the CEO of the McIlvaine Company which publishes Industrial Valves: World Markets. He was a pollution control company executive prior to 1974 when he founded the present company. He oversees a staff of 30 people in the U.S. and China.