Top Asset Lifecycle Management: Driving Profit in a Budget Constraint Environment Introduction to Asset Management extracts from Aberdeen Group presentations Please join us for the following upcoming Aberdeen Group Webinar: August 19, 2010 Achieving Environment, Health and Safety (EH&S) in Today’s Plant

What is Reliability? Definition In other words, we tie $ directly Availability Performance Rate Quality Rate Overall Equipment Effectiveness =XX Meaningful definition: ABB Confidential and Proprietary Information MTBF: Mean Time Between Failure

EmpowermentReliability Scorecard Asset Management Prevention Education/Training Design for Reliability RAM Modeling OEE Reliability Consulting provides a path to success Performance Mgmt. Multi-skilling Operator Driven Reliability Teamwork Roles & Responsibilities Org. Structure Vision & Mission People Mgmt. of Change Contractor Mgmt. T/A or S/D Mgmt. Materials Mgmt. Standardization Failure Investigation Mtce. Work Mgmt. Process Reliability Centered Mtce. Risk Based Inspection Life Cycle Costing CMMS/Data Mgmt. PdM/Cond. Monitoring Basic PM Critical Equipment Ranking Tools/Methods Customer Training Hrs/Emp. Learning & Growth PM Compliance Internal Business Process Mtce $ as % RAV Financial Measurement Total Plant Reliability ® Best Practice Working Partially Working Not Working/Absent Reliability Consulting benchmarks customers to identify strengths, recognize improvement opportunities and deliver actionable roadmap ABB Confidential and Proprietary Information

Why reliability? Operational Excellence is biggest profit contributor Company Profit Operational Excellence Reliability Excellence Operational Excellence is biggest controllable contributor to sustainable profit. Operational Excellence needs a reliable foundation:  People Processes  Tools Metrics ABB Confidential and Proprietary Information

© AberdeenGroup Outline  Introduction  Research Methodology  Survey Demographics  Making the Best-in-Class  P.A.C.E. (Pressures, Actions, Capabilities, Enablers)  Recommendation  Questions

© AberdeenGroup Aberdeen’s Methodology End-User Investigation: PACE Framework P A C E P ressures: External and internal forces that impact an organization’s market position, competitiveness, or business operations. A ctions: The strategic approaches that an organization takes in response to industry pressures. C apabilities: The business competencies (organization, process, etc…) required to execute corporate strategy. E nablers: The key technology solutions required to support the organization’s business practices.

© AberdeenGroup Aberdeen Maturity Class Framework key Performance indicators (KPI) Asset Downtime Overall Equipment Efficiency (OEE) Maintenance Cost Reductions Total Respondents: - Top 20% - Middle 50% - Bottom 30% Respondents are scored individually across KPI Best-in-Class Industry Average Laggard Maintenance Budget Change

© AberdeenGroup Aberdeen Maturity Class Framework  What are Best-in-Class companies doing differently?  What pitfalls are they avoiding?  Why are they achieving greater success?  What technologies and services are enabling them to succeed? Asset Downtime OEE Maintenance Cost Reductions

© AberdeenGroup ~ 145 Qualified Survey Respondents  Size:  31% Small (Rev. < $50 million)  33% Mid-size (Rev. $50 million ~ $500 million)  36% Large (Rev. > $500 million)  Headquarters:  60% North America  26% EMEA  13% Asia-PAC

© AberdeenGroup Seniority Represented 2% 7% 10% 11% 41% 6% 23% CxO Vice President Senior Management Director Manager Staff Other

© AberdeenGroup Decisions for Asset Lifecycle Management 32% 36% 41% 47% 52% 60% 64% 65% 81% 0%25%50%75%100% Environment and energy management Safety - Employee and Asset Asset decommissioning Asset commissioning Training and certification Asset repair / refurbish / overhaul Spare parts management New asset procurement Asset reliability and maintenance Survey Question: Please describe which of the following decisions you influence?

© AberdeenGroup Industries Represented

© AberdeenGroup Top Pressures driving companies to focus resources on asset management 7% 8% 20% 21% 24% 43% 71% 0%25%50%75%100% Respond to attrition in workforce Minimize health and safety related incidents Adhere to corporate sustainability Initiatives Regulatory Compliance Respond to aging infrastructure Need to delay CAPEX in the current economic environment Maximize Return on Assets All Respondents

© AberdeenGroup Defining Best-In-Class Performance Definition of Maturity ClassMean Class Performance Best-in-Class: Top 20% of aggregate performance scorers  2% Asset Downtime  92% OEE (Overall Equipment Efficiency)  -14% Maintenance Cost Change  -8% Maintenance Budget Change Industry Average: Middle 50% of aggregate performance scorers  5% Asset Downtime  84% OEE (Overall Equipment Efficiency)  -3% Maintenance Cost Change  -1% Maintenance Budget Change Laggard: Bottom 30% of aggregate performance scorers  17% Asset Downtime  68% OEE (Overall Equipment Efficiency)  4% Maintenance Cost Change  4% Maintenance Budget Change

© AberdeenGroup Strategic Actions 24% 27% 35% 45% 0%25%50% Equip operations and maintenance employees with real-time visibility into asset condition Establish a risk based approach to be predictive towards asset management strategies Synchronize asset performance with corporate performance objectives Establish collaboration across functional departments Improve visibility into complete asset lifecycle to improve decision making All Respondents

© AberdeenGroup Competitive Framework – Process Capabilities Best-in-ClassAverageLaggards Process Asset management decisions are based on a risk based approach 44%34%32% Dynamically updated asset management processes across the enterprise as new best practices are developed. 38%34%20% Process established to understand the criticality of asset to determine the most effective maintenance approach 56%44%24% Source: Aberdeen Group, June 2009

© AberdeenGroup Competitive Framework – Organization Management Capabilities Best-in-ClassAverageLaggards Organization Executive ownership and sponsorship for asset management strategies across the enterprise 60%53%29% Established cross-functional team to foster collaboration across production, maintenance, finance, engineering and corporate groups 44%26%14% Established Centers of Excellence for capturing and promoting best practices for asset management across the enterprise 53%26%20% Social networking tools used to drive collaboration among current as well as past employees 25%17%0% Source: Aberdeen Group, June 2009

© AberdeenGroup Competitive Framework – Knowledge Management Capabilities Best-in-ClassAverageLaggards Knowledge Management Centralized knowledge warehouse to store asset data from different plants 44%32%19% On-demand asset lifecycle information easily accessible by employees 40%32%15% Failure data is used to perform root cause analysis to understand the impact and the probability of equipment failures 44%36%30% Source: Aberdeen Group, June 2009

© AberdeenGroup Asset Information 33% 47% 51% 61% 64% 73% 91% 0%25%50%75%100% Asset Lifecycle Expectation Asset Utilization Equipment Vendors Asset Condition / Status Asset value Spare Parts Inventory Maintenance Schedule Asset Location All Respondents

© AberdeenGroup Competitive Framework – Performance Management Capabilities Best-in-ClassAverageLaggards Performance Management Asset Performance metrics are linked to financial metrics 38%34%33% Asset Performance can be compared across plants 38%34%33% Source: Aberdeen Group, June 2009

© AberdeenGroup Key Performance Indictors (KPI) 34% 32% 31% 25% 66% 38% 44% 81% 0%50%100% ROA Profitability Cost of Downtime Revenue Growth Total Maintenance Cost 37% 46% 59% 49% 50% 56% 63% 0%50%100% LTA MTBR Asset Reliability MTBF OthersBest-in-Class

© AberdeenGroup Energy and Carbon Management Best-in-ClassAverageLaggards Sustainability Energy management integrated with the overall asset management strategy 33%14% Maintenance schedules and alerts are based on asset condition and energy efficiency 33%22%10% Carbon emission levels are regularly collected and monitored 53%34%29%

© AberdeenGroup Criteria for Purchasing New Asset / Equipment 94% 75% 63% 50% 38% 25% 19% 22% 27% 34% 58% 63% 78% 0% 20% 40% 60% 80% 100% Asset reliability Cost of asset maintenance Asset functionality Availability of spare parts Energy requirement New product Introduction (NPI) Learning curve Percentage of Respondents Best-in-ClassOthers

© AberdeenGroup Competitive Framework – Technology Capabilities Enterprise Asset Management Source: Aberdeen Group, June 2009 n= 114 EAM Adoption Enterprise Asset Management (EAM) Integrated with Enterprise Resource Planning (ERP)

© AberdeenGroup Technology Enablers n= 114 Source: Aberdeen Group, June 2009

© AberdeenGroup Recommendation: Laggard to Average  Establish executive focus for asset management.  Break down departmental silos and establish cross-functional teams to enable collaboration.  Focus on understanding the criticality of assets based on past and current asset data.

© AberdeenGroup Recommendation: Average to Best-in-Class  Improve visibility into complete asset lifecycle.  Consider energy requirements while making asset buying decisions.  Invest in an Enterprise Asset Management (EAM) system.

© AberdeenGroup Recommendation: Best-in-Class  Synchronize asset performance to corporate performance.  Enable real-time visibility into asset conditions by investing in wireless solutions.  Establish Integration between EAM and ERP systems.