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Oil & gas firms should develop lean enterprise

Oil & gas firms should develop lean enterprise

Oct 14, 2014

By Thabo Ndlela, Director at IFS Africa

‘Lean’ production philosophies have traditionally been associated with high volume repetitive manufacturing industries like automotive and electronics, but they can also benefit Engineer–to-Order (ETO) companies working in the oil and gas sector.

Lean is a systematic approach to identifying and eliminating waste through continuous improvement and covers the complete spectrum of your value chain. Depending on its level of integration from design through engineering into build, installation and service, some of its benefits for a company in the oil and gas sector may include:

• Improved bid management and win ratios from data re-use and business focus.
• Better project control, risk mitigation and cost management through the integration of project management activities with back office functions.
• Improved design and delivery data through web-portal collaboration with customers and suppliers.
• Reduced data input and errors through sharing common data from design to manufacture, installation and service.
• Increased business capacity through synchronising delivery milestones with current work tasks.
• Reduced customer delivery cycle times through parallel planning and concurrent activities.
• Improved customer delivery dates from common data and integrated design, build and installation solution.
• Improved quality and design by analysing failures.

How can oil and gas companies adopt lean principles?
When adopting the concepts of a lean enterprise you need a systematic approach. Your organisation will need to develop a strategy for deploying lean enterprise concepts and there are a range of systems and technologies to guide you through this process. Lean practitioners have defined the following five basic principles and how these can be adopted:

• Value – Lean thinking demands that anything that does not add value to a customer must be eliminated. But only what your customers perceive as value is important. This will often require a complete review of each step in the customer buying process to create for them a hassle-free buying and service experience.
• The Value Stream – Once you’ve understood the value that you deliver to your customers, you need to analyse all the steps in your business processes to determine which ones actually add value. You will need to review those processes to see how these can be improved to provide better customer value.
• Flow – This relates to the uninterrupted movement of physical objects and data within the enterprise. In a complex ETO company, this will mean that information from design will flow into engineering and into estimating and into projects and to procurement. In a complex contract this will mean, as sections are completed in one department, they are made available to others – rather than a single department spending weeks completing the contract before any information is made available. Flow challenges the tradition of processing in batches and moving these batches from one department to another or from one machine to the next. This requires the removal of physical barriers and co-operation across functions. The goal is to reduce the time it takes to complete an end-to-end process.
• Pull – Rather than working from a forecast of potential customer demands (push) system, the goal in lean is to perform a process by linking it directly to a real customer demand (pull’ system).  In ETO organisations, there are often broken links between when the customer requires part of the delivery to when the delivery is available.
• Perfection – As you continually eliminate waste from your processes and flow information, product or services, you will realise that there are always changes that can be made in the goal of perfection. The continual re-evaluation of the entire value stream is essential to remove non-customer value adding activities.

These five lean principles need to all work together and are fundamental to the elimination of waste. Companies working in the oil and gas sector need to revisit each of them as improvements in one area provide opportunities for improvements in another.

About Thabo Ndlela
Thabo Ndlela recently joined the IFS Africa Board as Director. He brings 15 years of experience in IT management and electronic business to his role. Ndlela has served as a CIO in the manufacturing, media, banking and hospitality industries for companies such as Sun International, Absa and the SABC.

He also provides strategic advisory services to company boards on IT governance, IT strategy, enterprise architecture and technology sourcing. Ndlela is a frequent speaker at IT conferences such as Gartner, ITWeb and Brainstorm CIO forums. He currently chairs the Westcon Group board and is an independent trustee for the Cisco Foundation.

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