Determination of the Rate of Return on Investment for CFD Modeling (Some Thoughts for Discussion)

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Determination of the Rate of Return on Investment
for CFD Modeling(Some Thoughts for Discussion)

• Robert W. Lyczkowski
• Energy Systems Division
• Argonne National Laboratory
• Annual Meeting
• Multiphase Fluid Dynamics Research Consortium
• Mendenhall, PA
• September 26-28, 1999

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Global Considerations

• Chemical plants handling liquids and gases have
  an average efficiency of 84 (Merrow, 1985)
• Producers handling solids experience a 63
  efficiency (Ibid)
• Experimental and testing work in the area of
  solids handling would have a high payoff (Ibid)
• Each month a solids-processing plant slips behind
  schedule is conservatively estimated to add 350k
  to the capital cost (Merrow, 1988)
• With improved understanding of granular solids
  behavior it is reasonable to expect an increase
  in reliability to 68 with savings of 730
  million/yr for new coal-fired power plants alone
  (Plasynski et al., 1992)

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Global Considerations Contd)

• A minimum of 40 of U. S. chemicals companies
  are involved with solids handling and produce
  more than 61billion/yr. (Ennis et al., 1994)
• If CFD modeling could narrow the gap between 84
  and 63 efficiencies by 1 , a 200 million
  savings would result
• QUESTION HOW MUCH EFFORT TO EXPEND TO EFFECT
  THIS SAVINGS??

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Quantitative Components of CFD ROI

• reduced time to finalize a design change to
  mitigate a specific problem
• reduction in the number of laboratory experiments
  to test the design change
• reduced time to scale up by reducing the number
  of pilot plant stages
• elimination of large scale experimental
  facilities
• decreased plant down-times
• increased throughput,

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Quantitative Components of CFD ROI (Contd)

• process optimization for improved energy
  efficiency
• reduction in pollutant formation
• streamlining the supply chain

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Qualitative Components of CFD ROI

• Better understanding of process behavior
• increased confidence
• increased ability to innovate
• increased product quality
• increased safety

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Return On Investment Template

• CASE STUDY No. 1
• COMPANY Precision Combustion, Inc.
• PROJECT Gas Turbine Combustor Optimization
• SOURCE FLUENT NEWS Vol. 7, Issue 2 (1998)
• COST BASIS Staff 200k/yr (fully
  burdend)
• CFD License 20k/yr (medium size
  company)
• Startup cost 100k amortized over 4
  years (25k/yr)
• Equipment 10k
  workstation amortized over 2 years
  
  (5k/yr assuming zero salvage value)
• MS 15 k/yr
  (includes secretarial, report
  preparation, travel)

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Return On Investment Template (Contd)

• SIMULATION EFFORT 1 month
• SIMULATION COST
• Staff 16.67k
• Equipment 0.4k
• Startup cost 2.1k
• License 1.67k
• MS 1.26k
• TOTAL 22.1k
• COST SAVINGS 200k (Fluent News, Vol. 7, Issue 2
  (1998)
• TYPE OF SAVINGS Elimination of Testing
• CFD ROI 200k/22.1k 9.05

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The Following slides are supplied through the
courtesy of Nurez Mapera of AEA Technology
Engineering Software, Inc.
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Batch Processing Business Drivers
To increase profitability, of course, but how...

• Generate a larger number of new products and
  introduce them more quickly and efficiently than
  the competition, and
• Reduce manufacturing costs and increase
  efficiency for existing products (to a varying
  lesser degree).

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Batch Processing Margin Squeeze
Reference The Development Factory, Gary Pisano
Historical Revenues
Profits and Costs
Margins
Historical Fixed Development and Manufacturing
Costs
Years from Product Launch
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Batch Processing Margin Squeeze
Reference The Development Factory, Gary Pisano
Historical Revenues
Profits and Costs
Margins
New Fixed Development and Manufacturing Costs
Historical Fixed Development and Manufacturing
Costs
Years from Product Launch
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Batch Processing Margin Squeeze
Reference The Development Factory, Gary Pisano
Historical Revenues
Revenues with Increased Price Pressures and
Shorter Cycles
Profits and Costs
Margins
New Fixed Development and Manufacturing Costs
Historical Fixed Development and Manufacturing
Costs
Years from Product Launch
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The Earlier the Better
Potential Savings ()
Process Chemistry
Pilot Plant
Production
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The Earlier the Better Benefits

• Conceptual design
• lt 5 of project man-hours gt 80 of cost
• Get it right first time culture
• Dependence on contractors vendors
• Black art vs. scientific approach
• Confidence level, quality and quantity of
  available information

Potential Savings ()
Process Chemistry
Pilot Plant
Production
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POPI Lifecycle Model
Reference Program on the Pharmaceutical
Industry, MIT

• Peak revenues of 550 million/year
• Revenues reduced to 225 million after patent
  expiration (7 years after product introduction)
• Cost of goods sold 21 of revenue

What if . . ?

• Reduce time to market by 4 months Improved
  co-ordination across RD and manufacturing(Save
  US1MM/day)
• Reduce cost of goods sold by 30 over 3 years
  Improved manufacturing practices (reduced costs,
  increased yield, etc.)

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Reference Program on the Pharmaceutical
Industry, MIT
350
Profits ( Millions)
Typical Profit Cycle
75
0
-200
1.00
8.25
15.50
22.75
30.00
Years
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The Opportunity

• 800 million

increased profit over 30 years
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Typical Batch Processing Tools