Putting lean to work

The benefits of lean manufacturing in the oil and gas industry, according to Matthew F. Kenna, VP of Manufacturing at WSP & WEPCO, Alkhorayef Petroleum.

“One of the major tools within the Lean toolbox is the concept of single piece flow and the removal of batch processing within the plant and field operations”
-Matthew F. Kenna

Lean manufacturing is designed to remove waste (non-value added processes) through the entire life of product, from the supplier of the raw material to delivery of product to the customer. Forms of waste include waiting, excessive movement, re-work, over production, unused creativity, and over management. I have practised Lean for 11 years. My Lean work has been mostly in the oil field and given the tough delivery and well conditions I can assure you that this is the best system for any oil field manufacturing. Every well is a small manufacturing plant and each plant needs different equipment as the conditions for each plant are unique.

Forecasting and inventory in the oil field will not help you get the proper piece every time. This is particularly important given the economic conditions we all find ourselves in these days. Quick delivery of equipment for any given well with high quality is what you want. One of the major tools within the Lean toolbox is the concept of single piece flow and the removal of batch processing within the plant and field operations. Batch processing comes from the concept that economies of scale drive the cost down for the benefit of the customer and the company. This however leads to longer lead times. Single piece flow recognises that the customer usually only needs one unit at a time and receiving 100 at a reduced rate usually leads to extra costs when you consider the full cycle of cost not just the one cell or process. In the oil and gas industry the beat (or tact) of the customer comes from the rig count they have available. If they only have one rig why ship them 10 pieces of equipment?

Efficiencies
In Lean you recognise that long transport times to market do not add value and tend to lead to batch thinking. Long lead times lead customers to think they better order a large batch of pumps to ensure they don’t run out. The customer also might recognise a savings if they order a large batch (batch discounting) however, if you review your cost for the whole cycle (not just the cell of purchasing) you will probably find that the cost savings are wiped out. It is largely recognised in most industries around the world that inventory can cost up to 45-50 percent per year. APC can apply single piece flow and get product to the customer faster based on the tact (beat) of the customers rig availability. Toyota (the leanest company in the world) not only have their suppliers next door they set up their plants where their customers are – they don’t centralise.

Alkhorayef Petroleum is unique in that it is the only manufacturer of ESP equipment located in the Middle East, which is one of the largest users of ESP equipment in the world. Many of the other ESP companies centralise in one area. By applying lean manufacturing at WSP, the overall delivery of motors (in process time not including back order) has been reduced 87 percent, pumps 93 percent, and seals 92 percent.

APC is currently accessing the needs of our customers in our WEPCO foundry and is applying lean principles to deliver a quality product.  We are also reviewing the customers’ needs in Libya and Kuwait and using some of the Lean principles there to deliver better service with a reduced need for capital. In the book Natural Capitalism Paul Hawkin, AmoryLovins and Hunter Lovins refer to Lean and how it applies to the environment. One waste, which I feel is the largest of all waste, is over production. Over production occurs when either the production is completed before it is required by the customer, when the product is produced and never consumed by the customer or the product is produced and quality issues prevent consumption by the customer. In all these instances, natural resources are consumed at a higher rate than necessary.

Matthew Kenna put his lean manufacturing experience to work for Alkhorayef in 2008 and has completed a Lean Management conversion for two factories – a foundry and an ESP plant. Kenna has a finance degree from the British Columbia Institute of Technology and is a Certified Management Accountant (1992).