Global is as global does

Global business doesn't come much more global than privately held Tetra Pak. One of the world's largest makers of packaging solutions for the food industry, it operates in 165 countries and employs 21,000 people worldwide.

On March 3, the company announced a worldwide purchasing agreement with ABB for global implementation of the automation vendor's products, with the first contract covering ABB's System 800xA Extended Automation solution. Future contracts may include instrumentation, motors, drives, and low-voltage products.

"We supply dairy and beverage processes, and carton packaging for factories all over the world," explains Lars-Eric Dentner, general manager for plant automation within Tetra Pak's Processing Systems division. "It's important for us to have a supplier with a complete product portfolio—one that offers global support."

For Scott Spencer, head of marketing at ABB's process automation division, the Tetra Pak deal typifies a sea change that's under way in the global automation market. "When we're dealing with global companies, we're asked to respond on a global basis: companies with global assets want to deal with vendors with a global capability," he says. "They want consistent reporting, quality of service, and pricing—they don't want to pay one price in one country, and another price in another country."

But if articulating the globalization imperative is straightforward, the challenge of meeting it is far more problematic. Pricing, it turns out, is probably the least of the issues raised: ABB, for instance, simply has two global price lists—one presented in U.S. dollars and one presented in euro—and gives customers the option of buying from either list.

Other issues prove more vexing. As Spencer observes, the automation industry traditionally operates on a country-based business model, organizing and optimizing activities within national boundaries. "Globalization forces us to optimize the global P&L, not the country-based P&L," he says. "We need to deploy the best resources we have, wherever they are located, and not worry about who gets the credit for the deal, or who books the revenue."

At the top end of the market, this can be accomplished through "global accounts." Rockwell Automation, for example, recognizes 25 customers in this way, including Cincinnati-based Procter & Gamble, Atlanta-based Coca-Cola, and Vevey, Switzerland-based Nestlé.

It's a profitable distinction. Typically, notes Urs Marti, Rockwell's European marketing director, global accounts buy 50 percent more by way of products and services than a comparably sized non-global account customer.

"Essentially, we follow them around the world," says Marti. That involves establishing a significant presence in rapidly industrializing countries of the Far East and Eastern Europe, where operations have traditionally been very limited. For example, Copenhagen-based Carlsberg, another global account, operates in more than 50 countries, including China, where it owns or co-owns no fewer than 20 breweries.

Packaged, industry-specific solutions, capable of worldwide delivery, are another way of meeting the needs of global customers—especially those not large enough to qualify as global accounts. As with any other packaged solution, the trick lies in achieving the right blend of functionality and flexibility.

For Rockwell—which offers industry-specific solutions for industries as diverse as life sciences, food processing, brewing, and automotive—the flexibility part of the equation means being sensitive to customers' preferred mode of delivery. "Some customers, such as Nestlé, prefer to work with integrators," explains Marti, "while others—in the pharmaceutical industry, for example—expect Rockwell itself to do the implementation."

Whatever their industry, global customers invariably have a more demanding procurement agenda than their nationally based peers. At the product level, consistency, maintainability, and ease of deployment are key drivers.

"Global customers want to be able to take a product or a production line and transplant it from one country to another," says Ian Bowman, director of marketing for Siemens Automation and Drives. "Production lines can be made up from equipment from anywhere in the world, and can be set up anywhere in the world. We need to have the infrastructure in place to install and support plants around the globe."

What's more, notes Bowman, customers look to automation vendors to compensate for a lack of expertise within their own organizations. "Whereas in the past customers had large engineering departments, the same level of expertise isn't there these days," he says. "Instead, customers want to get the support they need from us."

And it's not just design and installation support. As with their products, globalization places exacting demands on automation vendors' service offerings. To begin, observes ABB's Spencer, achieving internationally consistent levels of performance in activities such as plant maintenance forces many customers to evaluate core competencies.

In other words, running a production line in China, India, or Eastern Europe is one thing—and hiring and training local engineers to maintain those standards is quite another. "We see a lot of companies recognizing that their core competence is in manufacturing, and not maintaining automation equipment," Spencer says. "That is our expertise, and customers are not only looking for us to undertake it, but undertake it better—delivering increased uptime, productivity, and asset utilization."

A year after ABB took over maintenance activities at Carter Holt Harvey's pulp & paper mill in Tokoroa, New Zealand, for example, overall equipment effectiveness (OEE) on the containerboard line had increased by more than 3 percent, OEE on the pulp line had increased more than 4 percent, while maintenance costs had gone down by 15 percent. Over two years, production volumes rose by 8 percent, while productivity rose by 36 percent.

Energy efficiency is another core capability in demand, given electricity costs that reflect oil prices at more than $60 per barrel—especially in parts of the world where geography and local resources preclude extensive power generation from coal or hydroelectric resources. "Of the energy consumed in a plant, 80 percent might be used by industrial motors," says Bowman. "Over five years, the energy cost of running a piece of equipment can exceed the cost of buying it."

Automation solutions enable more energy-conscious equipment operation, he notes, by fine-tuning temperatures and running speeds to conserve expensive watts.

Services are becoming more strategically oriented as vendors seek to differentiate themselves. There's growing recognition, for example, that it makes sense to leverage an automation vendor's in-depth familiarity across an entire industry to drive hard-dollar benefits to the bottom line. "These days, we're spending less time talking to our global customers about product features, and more time about risk management, time-to-market, asset optimization, and total cost of ownership," says Rockwell's Marti.

During the construction of the Shanghai Ethylene Chemical Complex, for example, a $2.7-billion ethylene cracker complex located in Shanghai Chemical Industrial Park, automation vendor Emerson Process Managementwas tasked to not only engineer and implement the automation and control systems, but also to help manage multiple international and local suppliers involved in the instrumentation of each of the 10 plants in the facility.

The benefits were twofold. "Learning the intricacies of one vendor's products, rather than those from several vendors, saved the user time and money, as well as warehouse storage for spare parts and new components," notes Emerson Program Director Stanley Ee. "Working directly with many instrument companies would have meant losing a tremendous amount of efficiency, and consumed much more time," adds Adrian Howell, Shanghai Ethylene Chemical Complex's process control manager.

One new twist on globalization, says Peter Martin, VP of performance management at Invensys Process Systems, is that automation vendors "are being pulled into areas where we hadn't expected to be pulled." But when faced with a need to cut production costs, a move to a low-cost economy isn't necessarily the right answer, he observes. "There were some very simplistic notions about globalization in the 1990s, and frankly, some of them haven't stood the test of time."

In particular, what he describes as "chasing after the low-dollar human resource" can deliver a boost to labor productivity that can prove all too transitory. "Moving a textile plant from Mexico to Turkey, for example, costs a lot of money that takes several years to recover. And before long, you might need to move it again. You are better off looking at how you can manufacture more efficiently where you are, through automation, without moving—which is what we're helping customers figure out."