MAKING CONNECTIONS

By Thomas F. Glenn, President

Petroleum Trends International, Inc.

May 2001

As discussed in Part I of this article, independent lubricant manufacturers employ the use of electronic technology in a wide range of applications that take place within the manufacturing gate (WGT) and outside of gate (OGT). Part II of this article looks at high impact technologies residing on both sides of the gate, including local area network (LANS), laboratory information management systems (LIMS), blending, tank monitoring, Wide Area Network (WAN), Wireless Local Area Networks (WLAN), and e-commerce platforms. In addition, it provides insights into factors influencing selection of technologies and an Internet link for information on technology providers.

Although packaging technology is not included in this article, it should be noted that packaging and fill lines do employ a significant amount of electronic technology, including metering electronics, labeling and imaging electronics, video systems, sophisticated controls, and others. These systems are, however, too complex to cover within the scope and space limitation of this article.

Within the Gate electronic technologies…

LANS

A Local Area Network (LAN) represents the backbone, or nerve center of an electronic community of devices. It provides a central communications link (a server) that allows computers, printers, hard drives, sensors, controllers, and other electronic devices to share data and resources. The basic components of a LAN include a file server, cables, network interface cards, peripherals, software, and workstations.

Most independent lubricant manufactures have LANs in place. And the good news is that many recently minted electronic devices and systems used by lubricant manufactures operate on a common communications platform that can be readily plugged into a LAN. Where in the past it may have taken special adapters and custom software to get an employee punch clock, weight scales, and other common devices talking to the network, today it can be a simple plug and play installation. This means it is increasingly important to assess the communication capabilities of new equipment prior to purchase in an effort to fully evaluate both the costs and benefits of interfacing with a LAN. And this evaluation should look beyond the actual function of the new equipment and consider it as a part of an electronic community sharing and operating on data with others in the community. In the example of the electronic time clock, although it may not actually save the employee any time to “punch in”, it could represent a significant saving in time for the front office, and even more in terms of the accuracy of compensation, when data moves instantly and directly from the clock to the accounting system.

LIMS

Most independent lubricant manufacturers operate a laboratory to assure products are blended to specification. In addition, some independents operate laboratories to provide oil analysis services to customers, or commercial laboratories as profit centers. Regardless of the size or complexity of the laboratory operation, each is required to record, calculate, report, and store and retrieve laboratory information. Each of these functions can be done manually or electronically.

Laboratory information management systems (LIMS) include a wide range of electronic technologies (hardware and software) designed to log samples, schedule testing, receive raw data from laboratory instrumentation, tag test data to the appropriate samples identifications and previous laboratory reports. LIMS systems are also used to perform calculation on raw data, produce reports, conduct quality assurance, and other laboratory functions. These systems are highly valued by commercial laboratories that process a large volume of samples in regulated industries (e.g. environmental, pharmaceutical)

In the most basic sense, LIMS is a database manager run on a PC. From there, a LIMS system can grow to include electronic interfacing with all laboratory equipment, direct-real time data transfer of result to customers, and communications with accounting and inventory control systems.

Although LIMS systems can reduce errors and stream line a laboratory operation, commercial systems are not typically a cost effective solution for independent lubricant manufactures. Low-end systems typically start at close to $25,000 and can move up very quickly from there. In addition to the upfront cost for LIMS, some vendors charge a user fee for each employee logging onto the system. The number of samples typically processed by an independent (~ 20 a day) would make an investment in such a system extremely hard to justify.

An alternative to buying a commercial-turnkey LIMS solution, an independent may find a more cost effective approach is to build a system A relatively simple system constructed on a Microsoft Access®, ORACLE or Microsoft SQL Server database. Such data verbose laboratory equipment as spectrometers, and gas chromatographs are increasingly capable of dumping data into the file structures of these databases as a standard digital output. The database becomes the heart of the system. It provides the independent with a platform to manage laboratory information and grow the system to communicate test results to customers and raw material suppliers, interface with laboratory equipment, exchange data with accounting and inventory software, and others on an as needed basis. By taking the “build” approach, an independent is in a stronger position to justify the initial costs of LIMS and pace investments in enhancements. Depending on capabilities, energy and interest level, and time availability of the staff, a homegrown LIMS solution will typically cost $5,000 to $10,000.

The decision to build, buy, or rent LIMS is primarily a function of sample volume. For most ILMA members, the solution would likely be to build.

Blending

Most independent lubricant manufacturers batch blend. Although seemingly simple, doing it right is not. Independent lubricant manufacturers are highly skilled in this method of blending and the lubricants produced are typically right on spec. In addition, it affords them an opportunity to produce small quantity batches and meet customer’s needs for specialty and custom products. Batch blending, however, is not very efficient and there are other options that employ the use of electronic technology that are.

One option, usually too expensive and inflexible for most independents is in-line blending (ILB). In-line blending will typically cost $100k to 250k to implement. It is an excellent process for steady state blending or high volume “big mover” lubricants. The pumps, and flow controllers used in an ILB, although quick, require a relatively large batch in order to level out variations in blending caused by ramp up and ramp down of the equipment. A system with 3 inch piping would require a minimum batch size of 1,000 gal to homogenize the blend. A 4-inch pipe would require roughly a 2,000 gal minimum

Another option is Simultaneous Metering Blending (SMB). SMB is similar to an ILB; however, it uses a serial blending approach that introduces a base component into the line first, followed by a mixture of base component and additives. It then finishes with the balance of the base component, as shown in Figure 1. Although each component is introduced “inline,” homogenization of the components takes place in the finished product tank, not in the line. Unfortunately, SMB systems also tend to be too pricey for many independents. Although the cost for such a system is relatively close to that of an ILB, an SMB offers independents the advantage of being able to produce smaller size batches.

An independent can build an SMB for about 30% less by purchasing the electronic heart of the system (a self contained batch blend controller) for $15,000 to $20,000, several meters at cost of roughly $10,000 each, a few pumps, and some piping. However, according to Todd Ignatius, Director of Sales & Marketing for FMC Blending and Transfer, “building a system from the ground up is risky business, particularly if the independent tries to economize further by building around a standard Programmable Logic Controller (PLC).” Ignatius notes, that, “constructing the algorithms necessary for a PLC to match a finished lubricant recipe with actual component flow rates can require far more money than the 30% saving over buying a complete plug and play SMB system.”

According to Ralph Beamer, president and co-owner of Globetech Services, Inc., a Naperville, IL based engineering firm, “the least expensive option, and a good fit for some independents looking to automate blending with electronic control technology is an engineered system employing the use of a mass flow meter to accurately measure the flow of basestocks and additives into a pigged manifold.” The mass flow meter can is interfaced to a set/stop value that controls the flow of each component in a blend into a pigged line relatively close to the blend tank. Each component of a blend is then batched through its respective line, metered accurately into the manifold and then introduced into the blend tank. The process is then repeated for each component with pigging in between. All of the blending takes place in the finished product tank. The cost for such a system would range from $20,000 to $50,000. Although relatively inexpensive and certainly very accurate and reliable, on the downside this approach would likely take more time than most others to complete a blend.

Each of the blending schemes described above are typically interfaced with an electronic master control system. In addition to monitoring and controlling flow meters, valves, sensors, and other components in the blending operation, the systems can be interfaced with back office software to handle such functions as:

Raw material inventory control

Procurement

Laboratory data handing

Customer service

Remote monitoring

The value of integrating electronic technology with blending in any of the above blending schemes is significant. Although such automation and integration of blending comes at a cost, it provides several significant advantages over typical small batch blending. One of the advantages is that automated blending is very accurate and consistent due to the high precision of the metering equipment and electronic controls. Product is on spec from start to stop, and with in-line blending can be delivered directly from the line to the tank truck or railcar. The second advantage, and one that could be particularly important to independent lubricant manufacturers, is reliability and dependability. Automated blending equipment blends basestocks and additives based on recipes and algorithms programmed into the master control system. Once programmed, the operator selects the product desired, enters batch size, and walks away. Although electronic and mechanical systems can break down (get sick), it’s exceedingly rare to see one pick up and leave because it found a better job.

Tank monitoring

Tank monitoring is an electronic technology with feet planted firmly within and outside of the independent lubricant manufacture’s gate. It’s vocation, however, is the same in both locations. Tank monitors provide a means to measure how much lubricant is in a tank and plan accordingly. Outside the gate technology is a service provided to independents customers to assure they do not run out of product and to assist the supplier in panning deliveries (vendor managed inventory). The value of each of these function can be readily appreciated by any sales rep having received a call from an “angry” (or worst yet, a soon to be ”former customer”) because they shut down operations due to lack of lube, or by a driver that just completed a 25 miles run top off a tank reportedly “empty” and is now unavailable to service the “angry” customer. Even beyond the occasional and sometimes inevitable bumps in the road, tank monitoring can be an effective means of reducing transportation costs by allowing you to better plan deliveries and allocated resources (trucks and people).

Tank monitors come in a verity of flavors. They include simple level sensors that trip when the fluid reaches a predetermined level(s), ultrasonic sensors that bounce a beam of sound off the top of the lube to measure volume, and submersible pressure sensors that gauge volume based on pressure differentials. The real value in these often-innocuous little workhorses is in their communication skills. Tank sensors typically tell your customers how much lube they have in their tanks and fire the same information to your office in the form of a report. The communications can take place over a dial up modem, a cellular phone circuit system, bounced off a satellite, or faxed. In addition, suppliers of tank monitoring systems typically offer central monitoring with web access. Central monitoring provides an lubricant supplier with the opportunity to check any customers inventory from anywhere in the world by going to a website

The costs of tank monitoring systems run from a low of about $300 a tank to high of nearly $5,000 a tank. A typical installation would cost roughly $1,000 a tank for the equipment and roughly another $1,000 a tank for installation. Cost is a function of the sensor technology (precision and accuracy), level of sophistication in the telemetry, tank distance from control panel, power supply, central monitoring, report requirements, and other variables. A high-cost system might be one monitoring tanks in a remote region of the world where the sensor is powered by the sun and bounces information off a satellite. Low-cost systems are available that include sensors with and onboard computer chips. The sensor, which includes a phone line, is dropped into a tank and plugged directly into a nearby phone jack. A lube supplier can then call that line from a remote location and program the sensor to report on tank levels at a prescribed interval. These systems are ideal for totes and other lower volume applications, or for very costs sensitive accounts.

Tank monitoring systems are used the same way within the gates. They report on basestock and additive inventories. Tank monitoring systems on both sides of the gate can be integrated to create a seamless communications between raw material requirements and customer demand. Theoretically, this would provide an lubricant manufacture with the opportunity to electronically order basestock and additives based on monitoring a real time customer demand and reorder set points communicating directly with raw material suppliers. Although these systems can be built, there are currently believed to be too expensive for a typical independent.

Outside the Gate electronic technologies…

WAN, and WLANS

A Wide Area Network (WAN) is similar to a LAN except it uses telephone lines, satellite transmissions, and other systems that reach outside of the manufacturing gate to network other corporate locations. Although independents typically do not operate WANs, it is not unusual for one to dial into a WAN via a supplier’s extranet. This could give them access to the suppliers network for exchange of data, information, and other functions that streamline procurement, custom service and technical support. Access to a WAN is not the same as visiting a website. You are actually on another company’s network and typically have access to privileged information and functionalities not available to web surfers.

Wireless Local Area Networks (WLAN) is fundamentally LANs without the wires. They run the range from complex wireless systems that provide distributed data across the entire LAN, to such devices as a personal digital assistant (PDA), and hand-held optical scanners. Sales reps are already using WLAN technology to “beam” business card information between PDAs and LANs. In addition, hand-held optical scanners are becoming more visible at trade shows to literally scan contact information off the lapel badge of show attendees.

Driven by intense competition in a growth market, PDA technology is advancing rapidly and directionally moving to bring cellular phone service, computing power, WLAN communication, GPS navigation, multimedia tasking, optical scanning, photography, Internet access, and other technologies into a common plug and play platform that fits in the palm of your hand. Expect to see these devices become an increasingly important tool in the hands of sales representatives, lubrication engineers, technical service representatives, operations managers, and product delivery personnel. These powerful and adaptable devices will likely find use for product cross referencing, lube surveys, uploading orders, guiding sales reps and drivers to customer location, and even finding the location of your drivers and sales reps (within 3 meters of actual).

WLAN devices are just as comfortable within the manufacturing gate as they are outside the gate and in the case of PDAs, GPSs and others WLAN devices, can be very affective and affordable technologies. In addition to assessing the utility of WLAN devices, evaluation the operating system and expandability of are important selection criteria.

E-commerce

Part I of this article provided insights into the different options available to independents for implementing e-commerce initiatives. In addition, it concluded that the upfront capital required to “build” or “buy” a meaningful e-commerce solution would quite likely be well beyond the means of an independent lubricant manufacturer and the cost of ownership would be even greater over time. As a consequence, independents would likely finding that “renting” an e-commerce solution from an application service provider (ASP) or Internet marketplace is the most cost effective solution.

But who to choose and how?

The important factors to consider when choosing an ASP are similar to the factors considered in choosing any business partner. First, do they really understand your business and provide products and services that speak to your customers and ultimately your bottom line? In the increasingly competitive world of e-commerce, more and more providers are trying to pound square pegs into round holes simply to remain solvent. They offer generic e-commerce “solutions” that look great in demos, however, in practice they are unable to discern the differences between packaged and bulk, or pounds vs. gallons, or appreciate the challenges and nuances of piping meaningful technical service and content to customers over the Internet. Furthermore, it is not unusual for supplier of a generic solution to give you a blank stare when asked about integration with legacy systems. Signing on with a provider that does not understand the lubricants business, even more importantly, the business of independent lubricant manufactures, is a high stakes gamble with bad odds.

Another important factor to consider in selecting an ASP is health. A year ago, the number of companies stepping up to say, “I can deliver an e-commerce solution” would have numbered over one dozen. However, as a result of flawed business models, poor financing, acquisitions, and other market factors, the list is much shorter today. With that as a backdrop, it is important to conduct the necessary due diligence to assure that the company you select is financially healthy and run by a solid management team.

A third, and equally important consideration in supplier selection is the ASP’s ability to help drive top line revenue and create internal efficiencies. Beyond simply thinking of an ASP as an electronic order taker, it should be viewed within the context of your entire operation and its ability to work with others (real and virtual) to reduce costs and increase profits. In many resects, this issue addresses the common theme in each of the electronic technologies discussed in this article. That theme being the power of interconnectivity and digital communication.

Much like managers and supervisors are challenged to maximize the productivity of employees by encouraging good communications and teamwork, electronic technologies must also be taught to communicate and work like a team to reduce costs and increase profits. An ASP solution that is afraid to talk to the electronic technology responsible for blending lubricants because it too technical, or an inventory control system that doesn’t have the communications skills to speak to a customer’s WAN, or worse yet, an immature accounting system that simply refuses to speak with its customers accounting system if it calls on the internet, can all put one at a significant competitive disadvantage.

Some ASPs aspire to being the most effective platforms to get electronic technologies talking and working like a team. Along with your LAN, an ASP is well positioned to deliver on this vision. With that in mind, the choice you make today for an “e-commerce platform” could end up also being your choice for a key player in tomorrow’s virtual business management team.