For the better part of a century, engineers applied real-time control to improve the efficiency of industrial operations. As industrial equipment and processes became more and more complex, controlling efficiency was essential. Today, although controlling efficiency is necessary, by itself it’s insufficient for the ever-increasing business demands of industrial businesses.
The primary overall measures of the impact of improved efficiency are increased process throughout, with reduced energy consumption and reduced material consumption. The goal was to maximize throughput while simultaneously reducing energy and material consumption. Two decades ago, determining the business impact of improved efficiency was a relatively simple task. Since the costs of energy, material, and the value of the products produced were relatively stable over long periods, determining value was as simple as determining the total quantities of each and multiplying by the fixed values of each. Improvements in efficiency essentially directly translated to improvements in operational profitability.
Over the last two decades, this has changed dramatically. Where the price of energy, materials and products had been relatively stable for long periods, today they tend to change in very short time periods. For example, with the deregulation of electric power grids the pricing dynamics of the electric power industry increased to the point at which the price of electricity in the U.S can change every 15 minutes. This is also true for other energy sources, such as natural gas, the price of which can also change every 15 minutes. The dynamics of raw material pricing has also increased over the last twenty years. For example, the price of base metals can change multiple times every minute. The same effect is starting to cause faster fluctuations in product pricing and with web-based outlets such as Amazon and direct business-to-business interactions; this is going to increase.
The result of this dynamic shift is that it is much more challenging to convert efficiency improvements into financial terms. Today, the operational profitability of an industrial operation is almost as dynamic as the efficiency of the processes. Trying to manage operational profitability monthly no longer works the way it had. Operational profitability is a real-time control problem that needs handling in a very similar manner to process control.
Controlling operational profitability and efficiency requires interdependent control strategies. In fact, what is required is a cascade control strategy in which profitability control is cascaded to efficiency-based process control. The outputs of the profitability controllers provide the set points to the efficiency-focused process controllers.
The combined control strategy is referred to as profitable efficiency and is what industry requires to continually maximize both operational efficiency and operational profitability.