Annie Hanafin, global lubricants benchmarking manager with Malik Pims in London, gave a fascinating talk at last months ICIS Base Oils & Lubricants Conference in the U.S. Malik Pims benchmarks over 200 lube blending plants around the world (including 67 in Europe and 16 in Africa), and Annie described how the top 15 world champion blending plants differ from all the rest. She defined champs 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, and six smaller champions making less.
Large champion plants surprisingly have smaller batch sizes; they are more complex with significantly more SKUs than non-champions of the same size. Large world champion plants are over $14 per ton cheaper than the rest despite paying their people more, she said. Their people are over 35 percent more productive. On the other hand, small champs lower their costs by having large filling run sizes, and they are less complex, with fewer SKUs, than their non-champion peers.
Large champion plants have an annual cash cost advantage of over $2 million, compared to all the other bigger blenders. The main areas of difference are warehousing and loading, and bulk material receipt and filling. In other words, they are better man- aged. Small champions enjoy a $53/ ton operating expense advantage over non-champs, with more savings on losses and headquarters costs. The performance gap translates to an annual cash cost advantage of $2.5 million for small champion plants.
Champions get to the top and stay at the top mainly by being better man- aged, Annie said. 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, Annie concluded. Its a road open to all, even the most cash- strapped, volume-deficient, complexity-ridden, ill-equipped plants.
Dick Beercheck, Gloria Steinberg Briskin and all our colleagues at LNG Publishing Co. join me in wishing you a prosperous and healthy 2014.