(FORTUNE Magazine) – BP's Texas City petrochemical plant Betting $75 million on "Project Future" at a sprawling Gulf of Mexico facility triggers a 55% increase in productivity.

Amid a jumble of minaret-like distillation towers, fat natural gas furnaces, and massive storage tanks, all connected by snaking thick pipes, BP's sprawling petrochemical plant in Texas City, Texas, is changing the face of an industry. Instead of highly trained technicians manually monitoring hundreds of complex processes, the work is now done faster, smarter, and more precisely by computer--and from inside the air-conditioned confines of a softly lit control center. The result: greater efficiency, improved market responsiveness, and significant savings.

The improvements are the result of Project Future, a two-year, $75 million investment in computerization and automation. Completed last year, it has already paid for itself in additional revenues and operational savings, and has solidified the Texas City plant's standing as a leading producer of specialty chemicals. Productivity has increased a steep 55%, enabling the reassignment of 10% of the plant's workers. Energy use has fallen too; the plant now uses 3% less electricity and 10% less natural gas--savings that amount to millions of dollars--and produces fewer CO2 emissions.

The BP (formerly British Petroleum) complex stretches over 1,400 acres 30 miles southeast of Houston on the Gulf of Mexico. It is BP's largest single chemical operation, combining a refinery and an adjacent petrochemical plant that together employ 2,740 people. The plant's most important product is paraxylene, one of the so-called aromatics and a source of polyester used in fibers for carpets, clothing, and many other products. The Texas City plant can transform a $30 barrel of oil into 13 pounds of paraxylene, along with gasoline, diesel, and jet fuel worth $60.

On the face of it, controlling the production of petrochemicals would seem a simple task. Liquids undergo transformation from sticky distillate to high-value raw material as they flow continuously through pipes and valves. But initial impressions are misleading. Process manufacturing requires a number of complex steps, each of which must be executed perfectly. Something as simple as shutting the wrong valve can spoil a batch of finished chemicals or even contaminate the entire facility.

Traditionally operators of petrochemical facilities have tried to reduce the risk of mistakes by playing it safe. Instead of running units at full capacity, technicians back off the throttle--it's a little like buying a Ferrari and then driving it at 40 mph. But half-speed production takes a toll on worker efficiency. Bored operators monitor valve positions or take occasional readings and spend the rest of their time reading the sports pages.

BP knew it needed to put pedal to the metal at Texas City. First constructed in 1947, the plant is the world's largest producer of paraxylene, churning out 2.5 billion pounds a year. But global overcapacity and fierce price competition from Asia convinced BP in 1999 that it needed to make game-changing improvements in productivity. It decided to totally renovate the facility, starting with the automation of 650 key valves and going all the way to the centralization of operations in a computer-controlled hub. To do the job, it assigned 50 engineers to the project full-time and assembled a small army of outside contractors--450 in all.

Computerizing meant uprooting the Texas City culture and replanting it anew. Process-control operators who thought of themselves as expert craftsmen had to learn their jobs over again and wondered what computers could teach them. Plenty, it turned out: everything from simple lessons about automation to complex ones that forced them to reevaluate the plant's capabilities.

To start with, everyone was able to grasp the importance of automating the plant's critical valves that ensure the orderly flow of chemicals. Before computerization, an operator would visually inspect the valve stems to make sure they were lined up correctly. Then the operator would start the pumps at, say, a source tank to begin the flow of chemicals toward the shipping dock.

With the new system, engineers installed electronic actuators on the valves and connected them to a network run by a computer. They also created graphics that project a representation of the pipes and valves onto screens. When an operator wishes to redirect a flow of chemicals, he selects the appropriate valves using a special display and sends a command to move the valve actuator. The computer lines up all the necessary open valves and closes others, and then turns on the pumps. Says Sanjeev N. Vora, a chemical engineer who led the project: "We put logic behind the valves. When somebody starts to open a wrong valve, the computer will automatically tell him he's opening a wrong one."

Besides serving as electronic extensions of human eyes, computers also weigh and compare the thousands of variables required for production. They can monitor daily fluctuations in the price of different chemicals and adjust production accordingly. The computers look longer term too. In the past, analysts spent a week or more trying to figure out the optimum production of a given product. So managers ran the plant based on monthly projections and frequently wound up with excess product. Today sophisticated algorithms incorporated in the software align the plant to switch to profitable production immediately and take quick advantage of changes in the spot market.

As they got deeper into the project, Texas City technicians discovered they had even more to learn from computers than they realized. The optimizing programs suggested process improvements that human operators had considered dangerous. For example, computers instructed that distillation columns in which chemicals are separated be run at unusually high temperatures and pressures. "It didn't make sense to us," says Scott C. Njaa (pronounced "nya"), who led software applications on the project. "We thought we would make less paraxylene. But it turned out that the computer model was driving us in that direction to make more benzene because the price had spiked up."

To learn to use the computers, Texas City operators traveled to the Cambridge, Mass., headquarters of AspenTech, a major supplier of computer programs to refineries, petrochemical plants, and related process industries. They tested models of the units they would be working with and began to understand how the models worked and the variables interacted. They learned how to move valves and how fast and how far they could move them.

After the operators returned to Texas from their week and a half of training, they immediately began to see increases in production as well as energy savings. They found, for instance, that they could get a paraxylene-making unit up to production speed in 32 days instead of two weeks. Before, operators ran distillation towers at the same temperatures day and night, seven days a week. Now they save energy by adjusting the equipment's temperatures to reflect changes in the weather.

The result has been a huge shift in the workplace environment. Operators who used to lazily watch machinery running at half speed can now concentrate on a wider range of functions. "Our operators would just sit there and worry about the feed valve," says Njaa. "How far open was the valve? Once every hour or two they would look at the product quality and say, 'Yup, still looks good.' Now the control module looks at it every minute and asks, 'Am I making as much as I can? And if I make a move, can I make a little bit more? Or use a little less energy?'" While the computer sweats the details, operators are freed to survey production trends stretching days ahead.

Automation also simplifies difficult jobs. Texas City technicians now can remotely control an important process that involves scraping frozen crystals from the inside of a tank. When paraxylene is made, a stream of mixed chemicals is fed into a large vessel called a crystallizer, which looks like an old-fashioned hand-cranked ice-cream maker that happens to be 80 feet tall. The stream is poured down the walls of the crystallizer, and scraper blades wipe it away when the paraxylene freezes. In the past operators had to go out to the crystallizer, monitor the process and temperatures, manually open a valve, and then decide if the stuff was frozen. Now the computer monitors those conditions and controls the scraping automatically.

From their screens in the control rooms, operators can keep an eye on most of the plant through TV cameras and watch large displays with colored graphs that plot trends in temperature, pressure, and liquid flow speeds. Outside sensors can detect when rain is falling--it can interfere with sensitive processes by excessively cooling a hot production unit. When a measurement is recorded that indicates falling water, a flashing light on a screen alerts an operator. The operator checks the data and takes corrective action by remotely manipulating valves to adjust the temperatures of the production units until the rainstorm passes.

Perhaps the most unexpected benefit from Project Future has been opening the eyes of BP engineers to ways they can better use their plant. "I grew up as an engineer on these units, and I thought I knew them very well," says Vora. "I realize now how we didn't take full advantage of the units' capabilities." Adds Peter J. Nowobilski, a Ph.D. chemist: "We've gained insights into how we can improve and change operations to create higher throughput." Automation and computerization at Texas City have turned out to be less of a threat--and far more of a benefit--than anyone could have anticipated.

R.R. Donnelley's Roanoke plant At this giant facility, which makes 3.5 million books a month, productivity has risen 20%, and service has improved.

For decades many companies in the commercial printing business have viewed production as more of a craft than a manufacturing activity. They focused on turning out beautiful books and magazines rather than efficiency and productivity. As a result, printing has lagged behind other industries in new technologies.

R.R. Donnelley, the U.S.'s largest commercial printer and the No. 1 manufacturer of books, has taken a different course--and reaped big rewards. At its Roanoke, Va., plant, where presses run around the clock producing 3.5 million four-color books a month, Donnelley has created a showcase for innovation. The Roanoke plant has boosted productivity 20% since 2002 and is taking business from competitors with faster service.

The printing industry has suffered in recent years from overcapacity. While U.S. manufacturing as a whole ran at 75% capacity, printing was operating at only 45%. That's a big shortfall for the country's third-largest nondurable-goods industry (after chemicals and food). "Commercial printing traditionally has been centered on assets--buying new production equipment--rather than on what the customer needs," says Robert S. Pyzdrowski, president of operations for Donnelley's $3.1-billion-a-year printing business.

In a pioneering move, Donnelley has turned that old-fashioned approach upside down. Shortly after arriving from Emerson Electric in 1997, Donnelley CEO William L. Davis declared that printing had fallen at least a decade behind other types of manufacturing. So he began a drive to increase productivity by improving equipment utilization and supply-chain efficiency, and reducing time lost due to worker injuries. (In July, Davis, 60, announced he would retire as CEO when a successor was found.)

At the same time, Donnelley began paying more attention to its customers. "Booksellers told us that their biggest issues were either being out of stock or having too much stock," says Candice L. Harold, vice president of sales for book-publishing services. "Our solution has been print-on-demand, which provides book publishers with just-in-time product when they want it."

In the past publishers pursued "buck per book" printing costs by producing 100,000 copies of a new work--and sometimes winding up with 50,000 unsold books in their warehouses. Now quick, efficient press changeovers, along with new types of automation, make it possible to profitably print 50 copies of a single-color book or 2,500 copies of a four-color book. The publisher can then gradually increase the press run after testing the market. The rise of book sales through Amazon.com also has boosted demand for small editions, and the new flexibility allows publishers to reprint classics and other books in manageable quantities. At the other extreme, Donnelley can still manufacture millions of copies of a single book, as it did when it turned out most of the eight million copies of J.K. Rowling's latest Harry Potter saga.

The Roanoke plant is a sprawling steel, brick, and glass structure of some 288,000 square feet, erected on a gently sloping hillside overlooking Roanoke Valley, with the Blue Ridge Mountains in the distance. Home to some 300 workers, it was struggling in 2001 when vice president and plant manager Donal L. Robb, 43, arrived. Donnelley had just closed five plants and laid off 3,000 workers from a total company payroll of 34,000. Print orders were lagging, and productivity suffered because the plant lacked modern process-management tools. Unhappiness with nighttime shift work and uncertainty about the plant's future had pushed employee turnover to 25% a year.

Robb set out to make improvements in every area of the plant. Besides increasing productivity and lowering costs, he aimed to build customer satisfaction by measuring performance factors such as schedule attainment and reduction of spoilage. Robb also wanted to make the workplace safer. High-volume commercial printing requires lots of interaction between people and machinery, which can lead to significant rates of injury.

Once he had reassured workers that Donnelley intended to keep the plant open, Robb began to create a culture of continuous improvement. He and his managers introduced methodologies such as Six Sigma (which seeks big quality increases through eliminating defects), process variability reduction (which relies on data for process improvements), and 5S (borrowed from Toyota), which stands for "sort, shine, set in order, standardize, and sustain," and which seeks to keep work areas spotless.

At the same time Robb began to apply new technology. The process begins when the contents of a book arrive via the Internet as a PDF (portable document format) file and go to the plant's spacious prepress department. The intricate manual operations required to prepare text and pictures for printing have traditionally caused the biggest bottlenecks. But unlike most printers, Roanoke makes its plates digitally instead of from photographic film. With the elimination of steps like duplicating and cleaning the film, a job that once took hours can now be completed in 12 minutes.

All-digital processing has other advantages too. It produces cleaner and sharper plates because, unlike film, electronic type doesn't have to be repeatedly handled and thus exposed to dirt. The all-digital workflow also makes possible the creation of electronic instructions, known as ink presets, that help improve productivity and quality. That has drastically reduced "make ready" time, when trial copies are run. "We've recently seen a spike in our productivity because plates are more consistent," says Robb.

Roanoke also handles paper more efficiently. "We used to manage paper as you would gravel or coal," says process manager Chris Jackson, calculating how much was used by comparing it with the average weight of the massive rolls. Now electronic sensors measure the actual feet consumed and convert that data to weight of paper used. The plant can also identify problems and report them electronically to the paper mill. As the paper cascades like a fast-forward waterfall through the presses, computers monitor the color and quality of the printing, and automatically make adjustments.

At the end of the press run, printed sheets are folded into signatures, containing as many as 32 pages each. They remain stored on reels until they are ready to be bound a few hours later, with dimensions set by computer. Printed books with covers and jackets attached are pulled off the line by workers at regular intervals to confirm quality--a holdover from the old days, since robots are not yet smart enough to do the job. Finally the books are stacked for shipment in containers or shrink-wrapped by machine and immediately shipped. Roanoke has no warehouses; by precisely scheduling production runs, the plant has eliminated the need to store books.

With these new digital techniques, the Roanoke plant produces 75% of its titles in two weeks or less, compared with four to six weeks for a four-color book in a traditional plant. A shorter period for make-ready allows the plant to devote more time to production. Overall, Roanoke has increased throughput 20% without having to buy an additional press or another binding line--a saving of $15 million. Touring the Roanoke plant recently, an important client told Robb, "This is what a printing plant should look like." It took money, machinery, and manpower, but it has helped nudge the craft of bookmaking into the 21st century.