Building Better Blending Plants


World champion blending plants arent necessarily newer or bigger than the competition. Its better management that makes them more efficient, more productive and more profitable, says Annie Hanafin of Malik Pims.

Hanafin, global lubricants benchmarking manager with Malik Pims in London, described how the worlds top 15 world champion lubricant blending plants differ from all the rest at the ICIS Pan-American Base Oils & Lubricants Conference in Jersey City, N.J., last month.

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Malik Pims benchmarks over 200 lubricant blending plants, including 67 in Europe, 66 in Asia, 34 in North America, 20 in Latin America and 16 in Africa.

Hanafin defined champions as the most efficient, lowest cost and highest productivity plants, and she separated the 15 winners by size into nine large plants (making over 85,000 tons per year, or about 25 million gallons per year) and six smaller champions making less. The Americas, Europe and Asia are each home to three of the large champions, while just one of the small champs calls Europe home, two are in the Americas, and three are in Asia.

Large Champs

The world champion large plants, said Hanafin, are actually a little smaller than all the rest, producing on average 161,000 t/y of lubricants, compared to average volume of 188,000 t/y for the rest. Surprisingly, they have smaller batch sizes, averaging just 36 tons per run, compared to 49 tons per run for the rest. They also have smaller filling run sizes.

Large champs are significantly more complex than their competitors, said Hanafin. They have significantly more SKUs than same-sized nonchamps. Looking at other metrics, Hanafin noted that the champs are better at stock level management and blend corrections.

Large world champion plants are over $14/ton cheaper than the rest, despite paying their people more. Their people are over 35 percent more productive, said Hanafin. Champs require just 0.66 people per thousand tons of lubricants produced, compared to the rest who need 0.9 people. The champs people cost $65,600 per head, compared to $53,600 per head for the rest. Yet the champs total production cost per ton is $86.9/ton, compared to $101.50/ton for the rest.

Large champions have an annual cash cost advantage of over $2 million, said Hanafin. The main areas of difference are warehousing and loading, and bulk material receipt and filling. They are better managed.

Small Champs

Unlike the large champs, smaller champions lower their costs by having large filling run sizes, and they are less complex, with fewer SKUs than their non-champion peers. Small champs produced 64,100 t/y on average, compared with 42,300 t/y at the rest. Tons per run averaged 26 at the champs, compared to 21 tons per run at the rest.

Small champions on average packed just 208 lube SKUs, while the non-champion blenders averaged 360 SKUs.

Like their larger fellow champs, the small champs have better inventory management, better service levels, better quality control and better health, safety and environment results.

Small champs have a $53/ton operating expense advantage over their non-champion peers, said Hanafin, with more savings on losses and on allocated headquarters costs. Small champs need 0.91 people per ton of lubricants produced, compared to 1.43 people for the rest of the small blenders. Small champs people cost $43,600 per head, compared to $41,500 for the rest. Yet the small champs total production costs $68.6/ton, compared to $121.6/ton for the rest.

This translates to an annual advantage of $2.5 million over the competition, Hanafin said.

New plants and new equipment dont assure efficiencies, she emphasized. World champion plants are older than the rest.

Champions get to the top and stay at the top mainly by being better managed, she continued. New equipment does not guarantee low operational costs. Champions continuously but modestly invest; they set a limited number of realistic goals and achieve them; they have great inventory management; they take responsibility and train their people to solve problems.

Its not magic, its professionalism, Hanafin concluded. Its a road open to all, even the most cash-strapped, volume-deficient, complexity-ridden, ill-equipped plants.

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