Rockwell Automation, Inc. (ROK) Earnings Call Transcript & Summary

Thank you for joining today's webinar. [Operator Instructions] Today's event will be recorded and will be available right after it's completed. You can access the recording utilizing the same link that you use to access the live event. After the webinar, we will also be sending you an e-mail with resources from today's event, including the slides, handouts and event recording. Additional information on today's topic can be found in the handout panel of the webinar platform. With that, I would like to introduce today's speaker, Jamey Geer. Hey Jamey, how are you doing today.

Good. How are you?

All right. Thank you very much. So take it away.

All right. Well, thank you very much. So welcome, everybody, to FactoryTalk Batch, enabling life sciences manufacturing for today and tomorrow. Before we get started here, I kind of figured that I would do a quick introduction of myself. And basically, I'm Jamey Geer. I've been the product manager for batch control here at Rockwell for a little over 4 years, almost 5 years now. But I've been with Rockwell for over 15 years and have more than 20 years' experience in industrial and information systems. During those 20 years, I've worked in various fields and various roles, including working in the biotech, medical devices and pharmaceutical industries. And I'll start out with a little bit of just some level set and provide some context for the conversation that we're going to have today. We know that many of our customers and clients in various industries are facing similar challenges. But there are a few trends and challenges that we know are critical to the life sciences industry. First, whether you are trying to improve productivity or support agile manufacturing, maybe reduced time it takes to start manufacturing new products or introduced on new product lines. There's a heightened demand for manufacturing systems to be more modular and flexible. In fact, in recent years, we've seen that there are a number of efforts around standards and defining standards for modular manufacturing which seems to be a clear indication this is important to our customers and that there is more to come. And some of those standards have been very specific to our life sciences industries. Next, according to Korn Ferry future of work, the global talent crunch from 2018, there are projected 2 million manufacturing jobs that will go unfilled by 2025. For our Life Sciences customers, this is -- kind of has an even bigger impact. Basically, many of those positions also require specialized expertise and/or training which means that they are even harder to fill or replace. And then last but not least, here on my list today is digital transformation and we know that the digital transformation has been a topic for many years now. But recent world events have really accelerated and emphasized the value of digital transformation. And nearly all of our customers are at some point in their various stages of digital transformation. And nearly everybody is looking for help to accelerate that adoption. Some of the big problems that we're running into is around IT, OT technologies and really getting them to work together. In fact, it's kind of interesting. The McKenzie Group getting your organization ready for digital transformation in 2020, indicates that about 93% of executive respondents believe digital is critical to achieving their strategic goals. But yet, we are still seeing -- continue to see difficulties with marrying those technologies together. So now we'd just go into a quick poll, try to understand basically what the biggest challenge you're facing with your manufacturing systems is today? And understand what that means for you and where you want to go with that. So we'll give you a little bit of time here to answer the poll here. We talked a little bit about some of these answers already. What is the requirement for manufacturing systems to be more modular and flexible, some of the standards that are being worked out there, overcoming workforce and skill shortages, digital transformation and the integration of those digital systems. And then regulatory compliance, always a hot topic for our life sciences industries. So we still have quite a few people responding. So we'll give it another minute or 2 here. Interesting so far, it looks like that meeting the right regulatory compliance obligations while trying to modernize the systems is definitely a strong candidate. It doesn't look like the workforce skill shortages has a whole lot of traction. All right. It looks like things have slowed down here. So I'm assuming at this point, you guys are able to see the poll results and we'll go ahead and close out that poll link. It's kind of interesting. We've got a lot of entries around meeting regulatory compliance. Again, always a hot topic for this industry. I will be -- I will admit I'm a little bit surprised because I would have thought that we get a lot of that covered already, but clearly, something that is a challenge for you all and have to spend a little bit more time digging into that. All right. So throughout the rest of the day, we're going to talk a lot about specific products, things like FactoryTalk Batch or sequence manager and face manager, and you'll hear the product names come up. But I kind of want to just lay some groundwork here, some foundation and talking about batch as a capability of the control system. And really want to emphasize the fact that batch is not a product here, that it really is a capability of our control system, and it does cross over the boundaries of visualization and information as well as control. And it also crosses over the organizational boundaries of operations, design and manufacturing operations management. So if we kind of dig into this a little bit further, you can get an example of something like the batch engine is used to manage and control the execution of batches, we've got the editors and design software that are used to create the collateral and design the processes and really do -- take advantage and set the ground for some of the modular functionality that we're going to talk about the rest of the day, integration with enterprise systems through our API and enabling that integration of ERP and MES in order to carry out that ordering, scheduling and material management integration across the system as well as the embedded batch controls and embedded batch control inside of the controllers with phase manager and sequence manager, allowing our OEMs and equipment designers to embed that basic batch execution into their equipment. And then last but not least, batch generates a significant amount of contextual data that can be used for reporting and analytics and to gain insight into the performance and reliability of your systems. So a little bit earlier, we talked about the need for modular and flexible systems, and one of the keys to those modular flexible systems is leveraging the power of modular design. And that's really a key tenant of FactoryTalk Batch and separating the capabilities from the equipment and the personnel as defined in our S88 standard or ISA88 standard, is truly embedded in the factory talk batch application. So as a foundation for that, we use the concept of recipes to make multiple -- to make products, excuse me, and similar to using a recipe in your kitchen to make multiple products or multiple things in your kitchen, we can utilize the same equipment in a manufacturing environment to make multiple products using different recipes. By using this concept of recipes, it also allows customers to reduce time and overall effort. It takes to do changeovers because you're just changing recipes and improve overall equipment utilization. So it makes it really easy to introduce new products. So by utilizing recipes, it allows you to introduce new products using the existing personnel and equipment, and it reduces the time and effort to get new variations into the system as well. One of the other significant advantages of using this approach is that it can reduce your regulatory effort by reusing those existing process building blocks in new recipes. So there's no actual change to the automation or the equipment itself. And so you can take advantage of the fact that those are already working and have been validated somewhere else. So -- as you're preparing for the future and looking at things like plug and produce and those modular design concepts and standards, using modular design today is a way for you to prepare for that tomorrow, and we are working on things within FactoryTalk Batch that would allow us to provide additional functionality around plug and produce and really take advantage of some of the new standards, while also setting you up or reusing the existing systems that you have today? And then last but not least here, it allows you to quickly change production and allows your manufacturing operations management teams to be a little more agile and change the products that are being produced or the schedules based on supply chain management or the availability of materials and/or equipment. So being flexible and agile is great and this is really whether you're in a control room or accessing it from a mobile device, it's a common interface and it's significantly more intuitive. So you can use it in a web browser, you can use it in embedded HMI components, and one of the great things about this is that it is actually the same interface. So it is that same common interface across those multiple different platforms. It helps reduce the amount of training required because it's based on a significant amount of user interface research and user feedback from a number of shows. As many of you have probably been in some of those backroom sessions where we've done our user experience, demos and receive feedback from those. The other really great thing here is that the workflows are significantly improved over previous applications, and it really is significantly more intuitive. So I mentioned digital work instructions earlier and those digital work instructions, how they can help reduce overall errors and operator deviations or process deviations. But digital work instructions can also help you reduce the dependency on training and specialized expertise by providing guided steps that are in context of the actual running batch and verifying inputs and enforcing standards. So the batch digital work instructions are a part of the actual execution of the recipe, which gives us another unique opportunity, which is the ability to mix both manual instructions and automated execution in the application. So if you've got a mixture of manual instructions and automated pieces of equipment, then you can actually mix those together into a recipe. If you're in the process of transitioning from paper-based records or procedure-based records and automating systems, we can actually take the same steps that you would do in an automated system and turn those into a manual instruction that you can use on either a manual system or an automated system, and they can actually run 1 line manual and 1 line automated side by side. All right. So as many of you know, FactoryTalk Batch has a -- and has for a very long time, really since the initial release of batch, a comprehensive API. And with the API, it's very effective and can be used to basically do anything that our client applications can do. That batch server -- the API is built into the batch server. But although we've had it for a long time, and I really can't do anything, it's not really suited for -- well suited for today's web-based technologies. So in May of 2019, we introduced the enterprise integration API which is a subset of the functionality of that batch server API and it's really designed to make it easier to integrate with the web-based technologies and ERP systems. The API was specifically designed and developed to integrate with the Rockwell MES system, PharmaSuite, but it can be used with any third-party system as well. Continuing on the topic of digital transformation. Analytics has been a topic for many years now. And one of the things that we've heard time and time again is that our customers would like more access to the batch data that's generated as well as additional insights and the analytics associated with that data. So we've been working with our industry teams and industry solutions teams as well as our product operations management teams to help bring new batch performance analytics. Many of you have probably seen a demo of this, either last year automation fair or a private demo from one of our members of the analytics team. And the first version has been available for almost a year now, and we are very, very close to releasing a second version of the Batch Performance Analytics. The goal here with this Batch Performance Analytics is to provide you with that golden batch capability, right, unlocking that information, providing insights and information about the KPIs. And oftentimes, when we say golden batch, it's a loaded term. And so I want to just really quickly set the stage here that when we're talking about golden batch, we're not talking about necessarily just a batch that was the one batch that was your standard for moving forward. We're talking about using KPIs and other flags in order to monitor and identify deviations in the process or where there could be improvements in the process. And so it's more than just a single batch, although the concept is still focused around that golden batch. Another area that we're partnering with other groups within Rockwell, specifically with our digital tech transfer team, is the concept of digital tech transfer. And the idea here is that we would like to be able to reduce your time to market and reduce that -- the whole development cycle by providing you with a way of transferring knowledge across the different stages of the product life cycle. So specifically, we're looking for taking information from the R&D department and turning that into small-scale batch and test and doing small scale batch testing and really flushing out the functionality of those small -- of those batches and verifying the efficacy and then moving on into full-scale production and the idea here is that there's a lot of information that's transferred on paper, there's a lot of information that needs to be -- that's expertise that needs to be transferred between different places. And so we're providing a tool to help manage and transfer that information. All right. So running a little bit ahead of time here. I think I've been speaking a little faster, but that's okay. Talk a little bit about what's next for our batch process control. So coming up next in batch process control, we're going to continue that adoption of modular capabilities and modular functionality. We're going to -- modular manufacturing practices. We're going to add some ability around scripted editing to support some more plug and produce type functionality and specifically around area models and recipes. We're going to do adoption of standards, things like OPC UA, NAMUR MTP and the BPOG really working together with those teams in order to make your manufacturing systems more modular and scalable. We're going to expand our ongoing enterprise integration APIs and really make it easier to integrate those systems, bring the technologies between IT and OT closer together and then provide additional performance and data access enhancements around the batch historical data specifically getting into adding additional information to the batch historical data using common practices like UTC timestamps and improving our database performance by using some new common practices inside of our batch historical databases. Continuing our modernization of our batch systems with refactored back end. So we've got a couple of back ends that really are on some older technology that we're bringing forward into some new technology as well as improving our user interfaces, specifically around our operator interfaces and our editors and providing intuitive workflows and adoption of things like version control and integration into common services. And then we want to expand the capabilities of our current high availability offering and provide additional features and functionality around that, including providing the ability to continue execution of batches without going to held during a changeover as well as providing some additional functionality around support for the ControlLogix 0 blind time. And then last but not least here is embracing that digital transformation adoption really spending a lot of time with digital tech transfer and batch performance analytics and partnering with those teams in order to improve our digital transformation. So based on the conversation that we've had today, I'm hoping that you're looking at this, seeing that as you move forward with your flexible modular manufacturing processes, as you're looking to complete your digital transformation and move forward and modernize your systems, we are your partner, Rockwell is your partner. We can help you in all those different ways. We're uniquely positioned to help you with the flexibility and the modularity as well as working towards strong partnerships with the operations management teams in order to build and use common technologies for those digital transformations and enterprise integrations. And then last but not least, is overcoming some of those personnel limitations in terms of workforce shortages and allowing you to build procedures and digital work instructions that reduces the dependency on expertise. So I'm a little ahead of schedule here, but I'm going to go ahead and open it up for questions at this point. So if you have questions, go ahead and enter them into that chat system, and we'll take a look at them here.

Great. Thank you very much, Jamey, for this perfect presentation. And yes, we would like to open it up for your questions. So I encourage you to answer your questions there in the Q&A section of the webinar platform. And Jamey will be -- will have enough time to answer all of the questions, I suppose. So we've got some more time until the end anyway. So I encourage you to ask your questions now. I will start by reviewing some of those first questions that came in and reading out one of those. First question that came in was when will FactoryTalk Batch Support Windows Server 2022?

All right. So FactoryTalk batch will be supporting Windows 2022 actually just completed testing on that for batch 15 and even the sequence manager 2.01 component. So that should be approved here shortly, and you'll see that get posted to the PCDC. We'll also continue to support it in Batch 16 and the next release of the Sequence Manager HMI controls as well.

Sounds good. So next one that came in was what are the licensing requirements for the new batch view?

Yes. So licensing requirements for the new batch view. If you're using the HMI components embedded inside a FactoryTalk View SE, there are no license requirements. It's actually included as part of the View SE licensing. And if you would like to use the web-based interface in order to use it in a browser or on a mobile device, that does require a per-user license. It's a concurrent user license. So that means that if you've got 2 users using it at the same time, then those users would both need to have a license in order to use it.

I see. Okay. And what are the recommendations for connecting or integrating with enterprise systems?

Yes. So basically, we don't have specific recommendations around how to do this other than to tell you that we have a comprehensive batch server API and that new enterprise integration API and you can utilize those as best you need in order to do that integration. If you are integrating with something like PharmaSuite where we already have some design practices around that, I would recommend that you get in touch with our services team and see -- or the PharmaSuite team and talk to them about how that integration is done already.

Great. Next question is FT Batch versus PlantPAx differences and what scenarios to use, one versus the other?

What scenario to use, one versus the other. So actually, I mentioned earlier in the presentation, but batch is really a capability of our system. And so when we talk about the system here at Rockwell, our control system, our distributed control system is truly PlantPAx. So PlantPAx can include batch or cannot include batch. And as a capability of the system, FactoryTalk batch is a part of a PlantPAx system. They are not exclusive. There's some ongoing integration work that we're doing in order to keep up with some of the changes in features and functionality that PlantPAx is putting out. But for the most part, they are one and the same and batch is really a part of the PlantPAx system.

Okay. Great. Paul is also asking us a batch server redundancy on the list of future improvements?

Paul, yes. So batch server redundancy is on the list of future improvements. So that was one of the points there in that previous slide. We are working on improving our high availability. It's not committed to a specific release at this point, but we do have plans and have started to lay the foundation for what that will be moving forward.

Sounds great. So what about PAx DCS integration for the future? A question by Armando.

Yes. So Armando, I think that hits along the same lines as whether FactoryTalk Batch and PlantPAx or what the difference is. We are definitely looking at continuing our integration with PlantPAx and improving that integration. There's new version of the batch application toolkit that demonstrates how to use the DMNEP capabilities of the PlantPAx objects as a part of our patch applications as well as some future enhancements around how we actually integrate into some of those other objects as well.

Great. Mark Fisher here is going back to the previous question. Do you need to deploy PlantPAx in order to use the FT Batch?

No, you don't have to use PlantPAx to use FT Batch. I mentioned before, we see batch as a capability and FactoryTalk Batch adds that capability to our PlantPAx system, but it is not a requirement to use FactoryTalk Batch. PlantPAx is not a requirement to use FactoryTalk Batch. You can use FactoryTalk Batch without it.