Blog Post Lean in Oil and Gas — What you Need to Know Now

Overproduction, one of the 8 wastes of Lean. Image: Hakan Forss



Lean in Oil and Gas — What you Need to Know Now

Lean Manufacturing, Lean Processes, Lean X. It seems everyone is talking about Lean process these days. Google “Lean” and you’ll be greeted with millions of search results — 213,000,000 results to be exact.

Google “Lean in oil and gas” and you’ll get fewer results (only 25,700,000), but still it’s not hard to see that Lean is gently infiltrating the oil and gas sector.

“Lean consulting” again, turns up millions of results. It seems more and more industries are turning to Lean.

What is ‘Lean’?

What began as Toyota Motor Corporation’s response to customer demands post WWII and progressed to become ‘Taiichi Ohno’s Toyota Production System’ is now a way of thinking that has taken manufacturing and other industries by storm.

Essentially, lean is a way of thinking centered on knowing what the customer wants and ensuring the entire supply chain is producing it with minimal waste.

Overproduction, one of the 8 wastes of Lean. Image: Hakan Forss

Overproduction, one of the 8 wastes of Lean. Image: Hakan Forss

In Addition:

• Lean shifts focus away from individual components of a business to overall flow of product through the entire process

• Lean is about the ‘value add’ (what customer wants)

• Lean aims to eradicate waste that occurs in the supply chain

• Lean strives for continuous improvement

Who’s Doing Lean in Oil and Gas?

If Linkedin is anything to go by then Lean is a key component of business these days.

• 94,973 professionals on Linkedin have ‘Lean’ somewhere in their job title.

• In the oil and gas field, there are just under 3,000 Lean practitioners listed on Linkedin.

According to Lean expert and Applied Performance consultancy’s Jim Beswick P.Eng FMM, it’s primarily the larger oil and gas corporations who embrace Lean.

“You have the major companies doing things, most of those are the internationals, the Shells, the Totals, StatOil, Suncor (the Canadian exception) because they have history of doing it in Europe so they’ve brought that practice across with them,” Mr Beswick says.

“The local operators don’t have that exposure so we don’t see as many of them doing things.”

Future uptake of Lean in Oil and Gas

Mr Beswick says now major players are expecting their contractors to work with them in developing Lean process improvements. He sees Lean in oil and gas progressing in much the same way as in the automotive industry.

“You’re either going to be doing [Lean] because you recognise it for the value to brings to your company, in that you want to cut costs and increase productivity, or that you need to do it because your major customers are expecting it.”

Oil price challenge

In today’s climate, Lean could offer alternatives, or at least pair with drastic cost cutting measures by companies in response to record low oil prices. “For companies at the moment it is — how do I cut costs and at the same time retain the ability to deliver the right product to my clients, and develop the capability to grow again when the upswing happens?” Mr Beswick says.

Complex Oil and Gas

Lean aims to realign companies back to what the customer wants, which in oil and gas changes from stage to stage in the production chain. But the ultimate goal, Mr Bestwick says, is clear. “[In oil and gas] you have big projects, you have degrees of complexity that you don’t have in other industries and at the root of it it’s very simple — you need to produce oil or gas.

Complex oil and gas

Lean thinking is being applied across the oil supply chain, from upstream manufacturing with service companies and planning to downstream production and completions.

For example, borrowed tools from manufacturing such as ‘quick changeover’ is vastly improving drill rig set up, operation and pull down.

Mr Beswick explains a rig set up as, “the same as doing a formula one pit stop: how do you make it as fast as possible?”

The Lean wastes

In essence the Lean approach locates and eliminates unseen or unnoticed ‘waste’ occurring across the entire production chain. And by waste we’re not talking about staff. Waste ( or the Japanese ‘Muda’) in Lean refers to transportation, waiting, overproduction, defects, inventory, movement and extra processing.

Eliminating time wasting practices like these is cause for celebration — how many of you have had to redo work you thought completed, wait around for information, or walk back and forth for tools that should really be within your reach?

Small Changes make Biggest Impact

Take this case study – The problem: A contracting company struggles to keep contract with major producer. Productivity is low. Low oil prices are increasing pressure. Action: The Company consults with Applied Performance. A Lean Process Map of the labourer’s days finds 2 hours per day are lost in set-up and 1 hour is lost in pack-up.

Traditionally the approach to solving low productivity is a technology fix such as “can we give them a power tool to do the job over a manual tool?” However in Lean, simple, small changes to workplace setup and process can make all the difference.

What worked? Small changes to:

• Work schedule and distribution

• Signing in procedure

• Changing the tools setup and location

Result = 1.5 hours gained per day.

“Everyone was busy”

“For that mining contractor, everyone was being busy. Everybody was working hard all the time,” Mr Beswick says.

“When we started to really look at exactly what people was doing, then we started to identify the times when they were working hard because they were pushing a tool box or moving it to a truck… they were all working hard but were they actually adding value?”

This, in essence is what Lean is about, that is, looking at the ‘value add’ of how things are being done. It’s about focusing on the ultimate value — producing what the customer wants — and shaving off the unimportant bits.

Mr Beswick says the biggest issue for many companies is they don’t capture their best methods of working; meaning they can’t then standardize that high performance level across the company.

Office Workflow

Contrary to common perceptions of Lean as a manufacturing vice, office workflow is a major focal point. An engineer and indeed any office worker faces the same waste problems as any manufacturer. “Engineers end up searching for information, redoing things, waiting for information — same problems, different solutions are required,” Mr Beswick says. The solution? It’s about looking at the workflow, finding the inefficiencies and then working out how to tackle them.

“How can we standardise the process as much as possible and at the same time keep our engineer’s ability to innovate and drive improvement?”

Office Case Study

Office workflow at an engineering company was improved through a Lean approach.

1. Process mapping found a bottleneck in the data entry department.

2. Changes were made in the way the engineers did their drawings before being sent to Data Configuration.

3. This reduced Data Configuration department’s workload by around 50 per cent for no extra work being done by engineering.

Good Intentions let Down by System Failures

“All companies start off wanting to be efficient. All companies actually start off efficient but things change.” As a company grows aspects of production become more complicated but often processes don’t change. This is how a company that starts off strong, can quickly becomes inefficient — by not updating its processes with real time change.

Approaching Lean in Oil and Gas — The Right Way

Lean offers effective tools and approaches like ‘Jidoka’, ‘Kaizen’, ‘Six Sigma’ and ‘Poke-Yoke’ (yes these are real terms) but while these offer great savings it’s important to approach Lean holistically.

According to Lean teachings, a company should be asking two questions:

1. What is the value add? That is, what does our customer pay for?

From here it becomes evident what processes are value adding and what processes are wasteful or not adding to the ultimate value add/product. “Examples [of waste] would be waiting, reworking things because you made a mess of it the first time, movement, doing things the customer doesn’t require you to do — over processing,” Mr Beswick says.

2.How does work flow in the Organization?

Do things happen smoothly and concurrently and in good sequence or do they happen in spurts and lags? “When [processes] happen smoothly things are efficient and quick and things that are efficient and quick are always cheaper.”


Major Challenge for Companies

Much of the literature on Lean supports the idea that Lean is about a mindset, a holistic approach and cannot be truly effective with a ‘tools-first’ approach.

“This is the challenge with Lean, it’s so much easier to approach it from ‘lets do the tools’, rather than ‘let’s do the right approach’ and then use the right tools,” Mr Beswick says. “It’s so much easier for a company to want to apply a tool because then they can say, ‘yes I’ve done that’ rather than apply a mindset which requires a cultural change.”

Indeed cultural change is one of the major challenges Mr Beswick and other Lean professionals within companies face.

Without strong leadership direction and consistency, knowledge in middle management and skilled employees to carry out the vision, Lean faces big challenges in effecting change.

The history of Lean

Toyota’s production line today. Image: Department for Business, Innovation and Skills

Toyota’s production line today. Image: Department for Business, Innovation and Skills

Post WWII, the Toyota Motor Corporation reinvented the mass manufacturing wheel. The company was forced to approach car manufacturing differently from their giant competitors in the US (Ford Motor Company) and in Europe. A smaller customer market meant they couldn’t operate on mass scale. Customers wanted variety and Toyota needed to be able to produce more than one model on the same assembly line without compromising on time and quality.

What followed were ground breaking approaches that form the foundations of Lean.

Focus was shifted away from individual components of the production line to overall flow of product through the entire process. The rule of ‘make on demand’ stopped overproduction of parts; preventative maintenance on machines saved dollars and time down the line; rapid exchange of tools and dye allowed production of different car models and makes without halting production.

Toyota was able to achieve a production line with low cost, high flexibility, high quality and short lead times in response to customer demands.

Source: Oil and Gas Jobs