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By: Prof. Giuseppe Mascarella
giuseppe@valueamplify.com
By: Prof. Giuseppe Mascarella
Download summary at:
www.valueamplify.com
What Drives Value?
What is Value?
A Business Performance Improvement that is aligned
with the organization CSF and that enables the
organizat...
PMI Project Envisioning and CFO Requirement
Contact giuseppe@valueamplify.com
What’s the Difference of Project vs Product?
Value Propositions Structure:
The opportunity to make a business improvement ...
REJ Is an Engineered Approach To Assess and Plan the Value
Contact giuseppe@valueamplify.com
Hypothesis
Chart
Business
Assessment
Chart
Business Assessment: Finding Value Driven Hypothesis
.
OEE
CSF (Critical Success Factor)
Use data to produce high
quality(...
Contact giuseppe@valueamplify.com
Value Based Project KPI (Key Performance Indicators)
www.oee.com
Step 2: MAP SOLUTION
Purpose:
• Build a solution aligned with findings from
the Business Assessment Roadmap
Contact giusep...
Identify the business activity
or process that that affects
the most CSFs
Contact giuseppe@valueamplify.com
Contact giuseppe@valueamplify.com
Identify Factors That Create Obstacles
Pattern 1: Cause and Effect
Opportunity
Automate Dis-intermediate Synergy Competency
Pattern 2: Maturity Model Progression
Contact giuseppe@valueamplify.com
Contact giuseppe@valueamplify.com
The Solution Based on Best Practices
Gartner Group Model
Contact giuseppe@valueamplify.com
Five Steps to Benefit Qualification
Contact giuseppe@valueamplify.com
Sample Data Driven Scenario: Electricity Usage Optimization
Maximize profitability by dynamically operating well sites bas...
Increasing OEE Means Increasing ROI
Step 1-2: Current Input-Output
- Estimated period: 3 years
- Yearly Revenues: $ 800,00...
How Does Analytics Play a Role
Contact giuseppe@valueamplify.com
Increasing OEE Means Increasing ROI
Modeling ROI Calculations in preparation for customer engagement
Regarding Costs, we e...
XXProject Proposal Summary
Some of the feature discussed”
 Rich and customizable real time production reports
from furnac...
By: Prof. Giuseppe Mascarella
Download summary at:
www.valueamplify.com
By: Prof. Giuseppe Mascarella
giuseppe@valueamplif...
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ROI of Machine Learning In IoT

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AGENDA
-How Do I Build an Economic Justification for ML?
-ROI Case Study: ML in Manufacturing
-Reference Architectures with Microsoft IoT suite

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ROI of Machine Learning In IoT

  1. 1. By: Prof. Giuseppe Mascarella giuseppe@valueamplify.com
  2. 2. By: Prof. Giuseppe Mascarella Download summary at: www.valueamplify.com
  3. 3. What Drives Value?
  4. 4. What is Value? A Business Performance Improvement that is aligned with the organization CSF and that enables the organization to make optimal use of its resources within the context of acceptable Risks. REJ is the framework for effective application of it Contact giuseppe@valueamplify.com
  5. 5. PMI Project Envisioning and CFO Requirement Contact giuseppe@valueamplify.com
  6. 6. What’s the Difference of Project vs Product? Value Propositions Structure: The opportunity to make a business improvement of CSF with What (brand and description of product) will improve “What” ( CFS relevant) for “Who” (target audience/stakeholders). Contact giuseppe@valueamplify.com
  7. 7. REJ Is an Engineered Approach To Assess and Plan the Value Contact giuseppe@valueamplify.com
  8. 8. Hypothesis Chart Business Assessment Chart
  9. 9. Business Assessment: Finding Value Driven Hypothesis . OEE CSF (Critical Success Factor) Use data to produce high quality(profitable) level steels and reduce cost of reworks.
  10. 10. Contact giuseppe@valueamplify.com Value Based Project KPI (Key Performance Indicators) www.oee.com
  11. 11. Step 2: MAP SOLUTION Purpose: • Build a solution aligned with findings from the Business Assessment Roadmap Contact giuseppe@valueamplify.com
  12. 12. Identify the business activity or process that that affects the most CSFs Contact giuseppe@valueamplify.com
  13. 13. Contact giuseppe@valueamplify.com Identify Factors That Create Obstacles Pattern 1: Cause and Effect Opportunity
  14. 14. Automate Dis-intermediate Synergy Competency Pattern 2: Maturity Model Progression Contact giuseppe@valueamplify.com
  15. 15. Contact giuseppe@valueamplify.com The Solution Based on Best Practices Gartner Group Model
  16. 16. Contact giuseppe@valueamplify.com
  17. 17. Five Steps to Benefit Qualification Contact giuseppe@valueamplify.com
  18. 18. Sample Data Driven Scenario: Electricity Usage Optimization Maximize profitability by dynamically operating well sites based on variable cost structure • x0% of production costs are electricity • Smart Grid connects well to customer and utility • Utility charges real-time rates based on Smart Meter readings • Price of oil determines well site operational parameters • Minimal acceptable well pressure maintained at all times • Pump speed maximized when revenues > costs Maximize Profitability 0.0 1.0 2.0 3.0 4.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Time of Day (24 hour clock) Optimized Electricity Consumption Electricity Costs ($/kWh) Pump Speed (x100) Electricity Cost Forecasting (Real-time Model) Variables • Supplier • Season • Temperature • Time of day • Load 0.00 5.00 1 3 5 7 9 11131517192123 Time of Day (24 hour clock) Electricity Costs Ŷ = 𝑏0 + 𝑏1 𝑋1 Variable Energy Consumptions 0 50 100 150 1 3 5 7 9 11 13 15 17 19 21 23 PumpSpeed Time of Day (24 hour clock) By Time of the Day Step 4: ComparisonStep 1-2-3: In-Out-Effectivness Contact giuseppe@valueamplify.com
  19. 19. Increasing OEE Means Increasing ROI Step 1-2: Current Input-Output - Estimated period: 3 years - Yearly Revenues: $ 800,000,000 - Yearly EBITDA: 6.5% - Percentage of Revenues which can be affected by data: 18.0% - Discount Rate: 9.0% - We adopt a conservative approach, estimating for each OEE increase of 10.0%, an IFO increase of 10.5%. Step 3: Effectiveness - Source: Bob Hansen, Overall Equipment Effectiveness, pp 47-66; where it is estimated, for each increase of 10.0% of OEE, an incerase of 21.0% of IFO (Income from Operations). Contact giuseppe@valueamplify.com
  20. 20. How Does Analytics Play a Role Contact giuseppe@valueamplify.com
  21. 21. Increasing OEE Means Increasing ROI Modeling ROI Calculations in preparation for customer engagement Regarding Costs, we estimate, a yearly total amount of $100k, adding internal costs related to the data usage and customization. The costs have been actualized, calculating the NPV, using the discount rate. Regarding OEE, we estimate the various improvements along the years, thanks to the Value Amplify Analytics solution. Considering the assumptions, we calculate the effect of data insight solution on IFO, basing on a conservative approach. Eventually, considering the NPV of the impact of data (gain minus costs), we calculate the ROI, as: NPV [Gain - Cost (related to data)] / NPV [Cost (related to data)] Plant A Year 1 Year 2 Year 3 Total Cost XX Solution Package $ 50.000 $ 50.000 $ 50.000 $ 150.000 Azure Units $ 50.000 $ 50.000 $ 50.000 $ 150.000 Customization/Operations $ 20.000 $ 15.000 $ 15.000 $ 50.000 Total Cost $ 120.000 $ 115.000 $ 115.000 $ 350.000 NPV [Total Cost (related to Q3)] $ 120.000 $ 105.505 $ 96.793 $ 322.298 OEE - Start of Period 60,0% 61,2% 62,1% From 60% to 63% (approx. +5%) OEE Improvements (Per Year) 2,0% 1,5% 1,0% OEE Improvements (Cumulative) 2,0% 3,5% 4,5% OEE - End of Period 61,2% 62,1% 62,7% Revenues $ 800.000.000 $ 800.000.000 $ 800.000.000 $ 2.400.000.000 IFO (EBITDA 6,5%) $ 52.000.000 $ 52.000.000 $ 52.000.000 $ 156.000.000 % of "Revenue from product" in scope 18,0% 18,0% 18,0% IFO influenced by Q3 - Start of Period $ 9.360.000 $ 9.360.000 $ 9.360.000 $ 28.080.000 IFO Improvements using Q3 (%): IFO Increment = 2,10* OEE Increment 4,2% 7,4% 9,5% IFO Improvements using xx (%) - Conservative: IFO Increment = 1,05* OEE Increment 2,1% 3,7% 4,7% IFO influenced by Q3 - End of Period $ 9.556.560 $ 9.703.980 $ 9.802.260 $ 29.062.800 Gai $ 196.560 $ 343.980 $ 442.260 $ 982.800 Gain - Cost (related to Q3) $ 76.560 $ 228.980 $ 327.260 $ 632.800 NPV [Gain - Cost (related to Q3)] $ 76.560 $ 210.073 $ 275.448 $ 562.082 ROI (Discount Rate 9,0%): 174,4%
  22. 22. XXProject Proposal Summary Some of the feature discussed”  Rich and customizable real time production reports from furnace to warehouse  Use of Machine Learning to prevent quality issues and rework  Visual and interactive diagnostic on complex problems  Planning for high quality and lower costs of variables  No installation required, pay-per-use model Production managers that want to increase OEE by up to 6% use Project XX to lower production costs and prevent rework due to lack of predictive quality systems. This project in itself has a target potential of 175% ROI, with a payback in 1 year.
  23. 23. By: Prof. Giuseppe Mascarella Download summary at: www.valueamplify.com By: Prof. Giuseppe Mascarella giuseppe@valueamplify.com

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