Upgrade vs. Modernize: How to Decide?
A significant number of manufacturing plants are over 20 years old with legacy automation systems reaching predicted end-of-life. With the U.S. Securities and Exchange Commission estimating that new middle-class consumers will add $8 trillion to consumer spending by 2020, it may be time for these plants to plan for the future. While that figure can indicate higher profits for companies in the near future, it also means that manufacturing equipment will be more taxed as consumer demand increases.
Time for a Change?
It’s time to consider how your organization will address the obsolescence risk: upgrade vs. modernize. If you’re using the terms “upgrade” and “modernize” interchangeably, we should talk about the differences. Knowing what you need and when you need it makes the difference between meeting your productivity goals and experiencing prolonged downtime. Let’s look at the difference.
Upgrade: Upgrading focuses on a specific machine or line to address outdated technology. This usually involves a smaller investment, providing a one-for-one replacement of aging equipment for a modern version.
Modernize: Applying contemporary technology to address obsolescence, Modernization improves productivity and creates a foundation for meeting both current and future business objectives. Typically, it involves a more significant investment with a higher return over time.
Is Modernization the Right Choice?
If you’re contemplating whether to upgrade or modernize, here are some questions to ask:
- Do we need to migrate from discontinued equipment to reduce risk? (If yes, upgrade)
- Are we able to meet continuously changing consumer demand? (If not, modernize)
- Do we need to cut operating costs, improve productivity, or reduce downtime? (If yes, modernize)
- Do we need to have end-to-end visibility of our operations, allowing us to be more responsive? (If yes, modernize)
- Do we want to access data to identify process improvement opportunities? (If yes, modernize)
- Are our manufacturing systems able to meet the challenges of modern manufacturing? (If not, modernize)
Can You Justify the Cost?
Because it’s a larger (and often longer-term) investment, you might meet some resistance to the cost of modernization. And you’re not alone. Those who manage the numbers can fall on the side of upgrading because they have not quantified the benefits of modernization. Here’s a three-step strategy for determining what’s right for your operation:
- Collect. Assess your current state by collecting information. Inspect the application, machine, line, or plant through an installed base evaluation (IBE), which is a cost-effective way to identify obsolesce risks.
- Analyze. Determine where you can make the greatest impact. Identify your most critical equipment, the biggest threats, and the associated options.
- Plan. Define your scope based on the application requirements, opportunities for productivity improvements, schedule, budget, and ROI based on long-term business objectives. A Front End Engineering Design (FEED) study can help define answers to these questions and plays a critical role in preparing for a successful project.
Can You Prove the Value?
Look at the outcomes you want to achieve and work backward. Are you trying to accelerate productivity and efficiency? Do your legacy systems have the precautions in place to protect intellectual property? And if they don’t, what’s the risk? What is the true cost of downtime?
Benchmark studies show FEED studies result in a 30% cost reduction and a shorter project timeline. If capital investments budgets are limited, a FEED study can be used to plan your modernization project into phases to reduce initial cash flow, maximize productivity, and minimize risk.
We Can Help You Decide.
Where are you leaning as you consider upgrade vs. modernize? Based on your current state, upgrading might be the answer. For others, modernization is the better long-term investment. Our Automation Specialists can help you make that determination and then provide expert recommendations. Contact us today!