I’ve seen some great articles about operational excellence in oil and gas – how it’s defined and where organizations fall on the continuous improvement curve. I’ve noticed, though that few of them actually lay out the simplest and fastest ways to achieve operational excellence in oil and gas.
The single best way to get to operational excellence in oil and gas is to eliminate waste from your operations. That one (very complex) job can be broken into eight key components known as the Eight Wastes. This post will look at what they are and how to identify them.
1. Eliminate defects
Defects are one of the most obvious wastes. Defining defects becomes a little more difficult when looking across the entire oil and gas industry. One difficulty in defining defects is that you can have several defects in a single output (product or service), and still not have that output be defective (i.e., scrap).
Even if a defect doesn’t result in a defective product or service, it still creates waste in the system. That waste will likely translate to added costs for your process.
To fight defects, clearly define what the ideal product or service looks like, and make sure everyone that touches the process to produce that output knows what to look for. The employees who manage the process are your best resources for eliminating defects in your output.
2. Stop overproducing
Overproduction is the enemy of operational excellence. In oil and gas, many people see it as an asset. Operations puts out as many units as they can as efficiently as possible, and accounting keeps the value of the excess production as an asset on the books. Overproduction is really a waste that has to be inventoried and maintained until demand consumes the excess.
The problem with this type of waste is that it can viewed as a positive result. It is a cost to the overall business. Don’t let department goals outweigh the goals of the organization.
3. Keep the wheels turning
Processes always include handoffs between steps and other resource-dependent phases that sit idle as they wait for the next phase. This non-productive/non-value-adding wait time has a direct impact on the cost of running your business.
The quickest way to identify where and how wait times occur in a process is to walk the process flow and time each stage. Document instances when a document, part or employee is idle in the process. If you do this for just one process, you will be amazed at how much time and money is wasted due to inefficiencies.
4. Get the most out of your most valuable resource
If any improvement initiative is going to be successful, you need a motivated workforce. Respect for people means you allow them to work to their greatest potential, not squander their talents in the wrong seat on the bus, so to speak.
This is not an exercise in headcount reduction. It should be approached with the same desire to drive efficiencies as any other process improvement. At the core, operational excellence in oil and gas is about people. Any manager worth his or her salt will be able to tell you how his/her people excel, and where they would best serve the organization.
5. Minimize material transportation
The more products, documents and raw materials have to physically move to get to the end of a process, the more time, energy and cost are wasted. This is another easy waste to measure; you can physically follow the materials through the process and measure the total distance traveled and the distance between different stages of the process. Most people are amazed once they see the distance various parts and materials travel before they reach the customer. If the mapped flow of materials looks like a bowl of spaghetti, there is definitely room for improvement.
There are any number of ways to reduce the waste of transportation. Can you organize the raw materials closer to where they are used? Can you eliminate the movement of the materials altogether by doing repairs at the site of the equipment? An easy trick is to draw the flow of materials. The fewer turns and crossed lines, the better the flow of materials.
6. Eliminate excess inventory
Eliminating excess inventory is not the easiest task to accomplish. The practice of keeping excess inventory is usually justified by someone in operations or sales asking the question, “What if we get an order X units greater than we are used to?” No one wants to tell their client that they can’t fill an order because of a lack of inventory. Accurate sales data and rigorous analysis of that data are crucially important.
Reviewing historic sales data and understanding the factors that drive your clients to make buying decisions will tell you exactly what your inventory levels should be. Nothing is stopping you from applying a safety factor to your inventory levels, but that safety factor should be backed up with solid statistical reasoning.
7. Reduce strenuous movements
Much like the waste associated with moving parts and materials, motion deals with the movement of your personnel as they perform their work. Can the job sites be configured to eliminate excessive bending, lifting or other movements that increase worker fatigue?
For example, taking tools out of a toolbox under a work bench and placing them on a pegboard where they are easily accessible and visible can reduce excess movement of your employees. I’m not suggesting unilaterally changing your employees’ work sites, however. Get them to identify areas of improvement and work with them to make the job easier.
8. Eliminate extra processing, and significantly reduce headaches
One of the greatest headaches employees face is the burden of extra processing. How many approvals are required for any one document before it is finalized? Are approvals required at every stage of a document’s life cycle, or can the the process be sped up by eliminating one (or several) signature lines?
Extra processing due to rework can be identified when you understand the rolled throughput yield of your process. This is a measurement of the likelihood of passing each stage of the process with zero defect. Most companies focus on the process yield, which is the defect rate at the end of the process. If you only focus on the process yield, you ignore all of the rework and extra processing, and you will never achieve operational excellence in oil and gas (or any other industry).
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