Lean Management: What can the automotive industry teach the oil and gas producers who fuel it?

The concept of lean manufacturing, which traces its origins to the Toyota Production System developed and perfected by the Japanese automobile manufacturer, is familiar to managers and employees in many of the largest volume manufacturing sectors, such as the automotive and aerospace industries. Numerous magazine articles and books have been written on the subject in the past 20 years as the lean concept grew in popularity and was revised, perfected and applied in an increasing number of manufacturing facilities throughout the United States and other industrialized regions.

The oil and gas industry, however, has basically observed these developments from a distance without considering the application of lean approaches to its operations activities and related challenges. Many in oil and gas view lean manufacturing concepts as well-received business approaches for manufacturers in other sectors, but they fail to recognize the relevancy or value of the lean management approach to their own daily activities. Organizations in every sector, including oil and gas companies, can benefit from the basic focus of the lean management approach: optimizing and stabilizing relationships among processes and suppliers in the value chain in order to reduce the costs and time associated with creating and delivering a product or service in an efficient manner.

In order to effectively apply lean approaches to the oil and gas industry, one must begin by revising the traditional goal that drives the development of oil and gas facilities. In the past, the industry has focused on "time to first oil" as an indication of a project's progress and success. The lean approach allows owners and operators to expand their focus to "time to full production," which establishes the most profitable operating phase of a facility as the benchmark for progress and success.

With this revised goal in mind, facility owners, operators and contractors must work to optimize the design, scheduling and flow of production processes by eliminating waste and rethinking the arrangement and utilization of resources so that all barriers to flawless value delivery are minimized or removed. To truly implement a lean approach to production, management must examine the entire system rather than merely seeking to optimize the individual steps within the larger process. Oil and gas companies must focus on the entire sequence of steps that transform and add desired value to their finished product, modifying and incorporating each individual process into a unified system that results in the shortest response time to market demands and the highest quality product possible.

The removal of the typical silos that separate owners, manufacturers and contractors involved in the various stages of the project life cycle of an offshore facility lies at the heart of this integrated, lean management approach. The traditional approach to facilities management involved individual decision makers making separate decisions based on differing goals that ultimately proved to be in conflict with the procurement process. When facilities management decisions are made within isolated vertical silos, individual pieces of the system are optimized while the larger system and processes often become less efficient and effective. The elimination of these vertical silos, which often serve to limit open communication and collaboration, represents an opportunity to remove the waste and barriers to efficient value delivery that are in direct opposition to the successful application of the lean management approach.

Effective optimization of the entire production process also requires the integration of multiple operations and maintenance services that have typically been handled by a number of individual contractors or suppliers working independently. A group of individual suppliers, each providing a single service, cannot effectively align their processes in a way that will result in a lean, cost-effective and efficient value chain due to differences in goals, strategies and methods. When one contractor handles training, another provides skilled labor, and a third offers assistance with computerized maintenance management systems, the cost and complexity of the project increases while the overall performance and efficiency diminishes.

The most efficient, and therefore lean, approach to facilities management involves the centralized management of a coordinated process of operations and maintenance services. The development of operating procedures and computerized maintenance management systems, recruitment and training activities, staffing solutions, and ongoing competency assessment programs should be consolidated into a single, seamless solution managed by a single contract partner with the experience and resources to provide consistent, high quality results across every discipline.

These individual activities and disciplines, despite their differences, are linked together as part of the larger facilities management system, and any movement or change in one of them causes movement or change in at least one of the others. When different contractors manage these individual activities separately, a contractor managing one process cannot effectively accommodate the movement or change in another area managed by a different contractor in a manner that minimizes the effect of the change on the larger system. A contractor managing the entire system can, however, anticipate upcoming changes within the disciplines and alter the integrated system accordingly so that any single change does not significantly affect the productivity or efficiency of the facility.

By partnering with a contractor who can provide an integrated solution linking operations, maintenance and personnel management with competency assurance, facility owners establish a relationship that allows for the development of business processes that interface and operate as one unit focused on achieving cost and throughput efficiency goals throughout the life cycle of the asset. Eliminating the numerous interfaces that characterize projects in which multiple contractors work individually to provide single services within the larger facilities management process results not only in a seamless solution to all facilities management challenges, but also increased cost control by reducing operating costs and delivering higher quality through improved safety and compliance performance.

This lean management approach can be taken one step further, with facility owners using the same contractor not only for all operations and maintenance services on a single project, but also for related services on additional, similar projects that they may be developing or managing. Too often, processes are designed with only a single facility in mind and, because of this, they are not easily transferred or applied to other projects. Integrating process and information management systems across a larger network of facilities and projects breaks down additional silos and allows for even greater elimination of waste and more efficient allocation of resources. This ability to optimize multiple projects through a lean approach to facilities management, integrated and implemented across a group of facilities by a single contractor, will continue to increase in importance, especially on deepwater projects as they grow larger and more complex.

The adoption of lean approaches in the oil and gas industry will allow facility owners and operators to align all resources involved in the value creation process in a way that is not only reliable, but also flexible enough to adapt to changing market demands and trends quickly and efficiently. The pursuit of continuous learning and improvement also represents a key characteristic of lean thinking that organizations in the oil and gas industry can implement in order to achieve world-class performance and status.

In many respects, oil and gas companies are no different from those in automotive manufacturing or any other production industry. All benefit any time they can identify and remove waste from production processes and, as a result, deliver increased value and quality in the most cost-efficient manner possible. The unique challenges that the oil and gas industry faces in the coming years demand a dedication to securing the improved productivity, quality, innovation and value creation based on market demands that serve as hallmarks of lean techniques.

Over the past century, the automotive industry has relied on oil and gas companies for the petroleum products that have literally fueled its development and growth. Oil and gas companies now have an opportunity to reap additional benefits from this long-term relationship. Automobile manufacturers have perfected the lean management approach and successfully applied it in a variety of production situations. It is time for the oil and gas industry to adopt the basic principles behind lean manufacturing and begin revising and perfecting them for its own benefit. The industry has little to lose from doing so, aside from unnecessary waste in the production and operations system, diminished efficiency, and increasing cost control issues.

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