Wednesday, April 8, 2015

Lean In the Oil Fields

Lean Manufacturing 2007 Article reprint by Ric Van Der Linden

We have all heard stories about the great results possible when lean techniques and culture are applied to manufacturing and assembly.  Though we hear less about lean in the service industry, lean concepts are being successfully applied there, and results are showing.  The oil fields are one area that has taken on lean as an initiative to not only deliver improvements, but to develop a culture of continuous improvement.


There are many similarities between lean applications in manufacturing and the oil fields.  Manufacturing is made up of suppliers and internal process steps that are focused on providing on-time delivery of quality products to customers.  The same is true with the oil fields.  The oil fields are considered “upstream;” their customers are “downstream” refineries.  The product is crude oil, which is piped to the refineries for further processing.  In order to deliver quality products on time to the refineries, there are thousands of process steps that must take place.  The majority of these process steps are provided as support services from varying suppliers to the overall process.

When lean practices are applied to manufacturing, we look for such achievements as: reduced overall lead-time to customers; reduction in inventories; increased uptime of equipment; freed capacity, which translates to more revenue; improved product quality; safer work areas; improved employee morale; and, finally, more profitable operations.  These same types of improvements can also be found in the oil fields.  In case of oil, there is a very strong alignment with the supply chain of outside support services.  So, the results seen within the oil fields themselves are extended to the supporting services.

Though oil fields can be looked at as a production operation with a goal to produce as much oil as possible, they are very service-intensive to develop and operate.  New wells are being created all the time.  Existing wells are being optimized to produce maximum output.  These processes require an organized effort from a variety of services.  Services in the oil field might include; engineering design, drilling, logging data, perforating pipe, installing pumps, laying pipe, installing electrical, testing fluids, and maintaining pumping equipment.  All of these services benefit from the application of lean concepts.

There is one common theme between manufacturing and the service-intensive oil fields: It’s all about flow.  In manufacturing, lean strategies focus on flow to customers, and drive to remove any barriers to that flow.  Manufacturing flow is very easy to see: There is a visual product that should be flowing towards the customer.  Restrictions to manufacturing flow might include batches, inventory, and machines and workers kept waiting.  In the oil fields and their supporting services, the primary lean driver is likewise to assure continuous flow.  In their case, flow consists of trucks, people, and equipment to the value-added location.  In contrast with manufacturing, where the product is flowing through a sequence of process steps, with value being added as it moves through the process steps, in the oil field (as in most service applications), the value flows to the fixed-position item.  The fixed-position item in this case is the well itself.

Oil producers in California’s San Joaquin Valley have spent years applying lean to oil fields. 

Located a couple hours north of Los Angeles, in and around Bakersfield, the San Joaquin Valley is one of the highest oil-producing regions of the nation.  Chevron Corp. (San Francisco, CA) is one of the two major oil producers in the valley, and it has seen great benefits from the application of lean concepts.  Chevron has spent the past few years applying both lean and Six Sigma (calling it Lean Sigma) within its own operations, and has worked to instill lean culture throughout the company’s supply chain as well.  Chevron took the approach of bringing in outside lean consultants to support the development of lean to key suppliers.  Initially, the focus was on teaching the basic lean concepts, and then transition to implementation of lean practices that would mutually benefit value streams from the suppliers to Chevron and to downstream customers.  In all, 24 Chevron suppliers have been affected positively by this dissemination of lean culture.  Following are some examples of lean in the supporting services.

In order to design and implement a new well, many services are required.  One such service, provided by KS Industries LP (KSI, Bakersfield, CA), included the installation of above-dash ground piping to transfer the oil.  This involves equipment, materials, and labor to install pipe supports, cut, weld, and install pipe.  KSI has been applying lean to its operations for the past few years.  One success includes efforts to streamline the setup process that occurs before the crews head out to the job sites each day.  As part of setup time reduction efforts, the parking lot has been redesigned to have all equipment flowing in one direction from assigned parking locations.  Efforts have taken place to assure the most efficient morning deployment of the over 200 employees and their work trucks.  Drinking water can be filled at each of the parking locations to prevent bottle-neck waiting for water.  Using the “water spider” concept, ice is brought to the trucks prior to departure allowing drivers time to focus on preparing to leave for the job.  Drivers have a centrally-located gas pump where they line up their trucks at night just before going home.  Then, someone working a staggered shift fills the trucks and puts them in their assigned locations so they are ready to go first thing in the morning.  In the end, they have reduced response time from their parking lot to the work sites, they have reduced cost to their customer, and they have increased capacity, which has resulted in additional business.

Braun Electric Co. (Bakersfield, CA) is another lean practitioner.  Braun provides installation of the electrical services for the pumps and other oil field equipment.  For the past few years, they have applied 5S on work trucks and utility trailers, which has resulted in improved efficiencies.  Initially they redesigned their work trucks as a team effort, with everyone deciding what belongs on the truck and where the items should be located.  Since then, all trucks are purchased to meet specific layout designs.  When new utility trucks arrive, they install custom plastic-formed 5S tool holders.  No matter what truck an individual drives, the tools and equipment are always available and always in the same location.  These changes result in fewer lost tools and reduced overall lead-time to finish jobs in a more efficient manner.

Other suppliers manufacture, deliver, and install equipment at each well site.  One of these suppliers utilizes point-of-use storage in a lean manner as they produce and deliver to their customers.  Raw materials and replenishable tooling have been relocated to appropriate work areas: manufacturing facilities, where equipment is produced, or the work trucks that deliver the equipment for installation.  Kanban/pull is another lean concept utilized as they produce equipment for their customers.  All equipment produced is delivered to the customers’ sites on trailers: When an empty trailer is returned to the shop, it serves as the visual signal to produce and fill the next order.  There are only a few such kanban trailers available in the system, which controls the amount of finished-goods inventory.  Reliance upon them has dramatically reduced inventory while still providing on-time quality delivery to this company’s customers.


These examples are just a few of the ways lean is benefiting the businesses that support the oil industry.  These same approaches can apply to most any other service business.  Practitioners of lean in the oil fields are achieving lead-time reductions, from customer requests to completion of service; raw material inventory reductions; increased equipment uptime; increased revenue, due to the freeing of capacity; improved product and service quality; safer work environments, due to less motion; improved morale of employees and customers; and more profitable operations as a result of the efficiencies gained. One of the basic underlying philosophies of lean is that the pursuit of perfection is ongoing.  Though many successes have occurred, there are always more opportunities ahead to improve the flow.



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