Lean Six Sigma Usage in the Oil and Gas Industry
Lean Six Sigma is a methodology used to improve business functionality and make it more efficient in the process. The main objective of Six Sigma is to implement a process that systematically gets rid of inefficiency and defects. Six Sigma uses a set of quality management methods, using statistical data and creating a special infrastructure of people, also called “champions,” within the organization.
Every Six Sigma project is carried out as part of an organization following a defined sequence and has quantified financial targets. All in all, Six Sigma is customer-centric and its main objective is to deliver value, reliability, and high performance to the customer. Today, Six Sigma is used as one of the major themes for Total Quality Management (TQM).
Lean Six Sigma is often associated with manufacturing processes, etc., but in reality, its applications are applicable across all industries, regardless of the type of process. Major changes and value additions have been achieved with the methodologies of Lean Six Sigma. Such is the case in the oil and gas industry.
The oil and gas business is a highly important industry that affects the world in the event of any fluctuations in any process, inconsistencies in the supply chain, and more. A major chunk of these challenges revolves around innovation, unforeseen environmental conditions, price volatility, and the adoption of methodologies to improve the overall output with minimal waste.
To achieve this goal, Lean Six Sigma offers groundbreaking opportunities and analysis.
Lean Six Sigma focuses on maximizing value for customers while keeping the resources used to a minimum. This process requires focusing on defects in the products or services, and also the elimination of waste, as waste management is the key to having an efficient process.
To achieve this requires information about the current process, analyzing it, understanding how the process works, and then identifying those flaws and waste. The Lean methodologies enable you to understand the process and important work of implementing changes, thus leading to overall improvements. It also provides the methods for continuous improvement, which include measuring the effectiveness of changes and determining when the next round of changes is required.
The simpler way of looking at Lean Six Sigma is that it breaks down a complex process into simple, scalable parts, which makes the overall process of improvement easier and more effective.
There are many popular examples of companies that showcase the spectacular results and effectiveness achieved by engaging Lean Six Sigma methodologies. Some of the famous names using and benefitting from Lean are General Electric, Toyota, Motorola, 3M, Amazon, and Boeing.
Why do Lean Six Sigma and the Oil and Gas Industry complement each other so well?
Lean has a solid track record of success with effective and successful implementations across industries over the years. This has expanded its methodology, which is trickling down into areas such as Healthcare and Oil & Gas, transforming how these hallowed businesses handle their operations. Due to a lack of standardized guidelines and also the heavy dependence on machinery and different processes, the energy industry is increasingly turning Lean.
- Changing market conditions
One of the major reasons for Lean Six Sigma’s adoption and application in the Oil and Gas industry is the ever-growing need and 24×7 production of oil refinery plants. Oil & Gas companies have to be flexible and more agile to succeed as there is immense competition in the industry, which continuously faces price volatility, technical innovation, and an uncertain regulatory environment.
Owing to these unfavorable and ever-changing conditions, many oil and gas companies are hesitant to adopt a standardized and continuous improvement method. However, when these methods are applied thoughtfully with a long-term view in mind, they can bring monumental changes to the production and supply chain. That’s why the Lean Six Sigma model is becoming popular in the oil and gas industry.
- Target Improvements
Simplifying the process and breaking it down to get a better understanding is one of the primary objectives of the Lean mindset. As the oil and gas sector is inherently complex, simplification is not easy, but the Lean methodologies do provide a structure to keep the process, its function, and improvement in a controlled zone. This helps a great deal in simplifying and making the process efficient.
- Capital Projects
As the oil and gas industry is ever-changing, almost every company working in it comes with a new objective, a new goal, new people, and a new mindset. This can also occur with existing companies as new capital projects do involve changes, which can lead to a new set of challenges and a completely different learning curve. This creates hurdles in maintaining or increasing the performance of processes or the entire organization.
One way to mitigate these challenges is to use project data and leverage it to understand the issues or reasons behind faults, defects, etc. But there is no procedure and the data available is scattered, rendering it of little to no use.
By adopting the Lean approach, standardization of data and its storage can be achieved by creating a repository, which can enable one to build on what is learned during every capital project. This will also enable all employees and executives to track project progress in real-time from anywhere.
- Equipment Manufacturing
Manufacturing companies face market demand fluctuations, but those producing equipment for oil and gas companies face several varied challenges, such as legislation, political interference, foreign policy, logistics issues, and also discoveries.
Also, manufacturing companies for the oil and gas industry create sophisticated equipment that is built in varying quantities and custom configurations. Most of the equipment is not repetitive and thus has varying defects, etc. Thus, Lean methodologies can improve this function by creating a standardized set of rules so defects, etc. can be controlled to a permissible limit.
In the oil and gas sectors, the lean approach is highly beneficial and can be applied to individual processes, assets, or the entire organization. It helps an organization achieve the ultimate goal of having an effective yet efficient process with complete safety and no delays. Also, another major benefit of using Lean methodologies is that problems become visible, and working to correct them is much simpler.
Modeling Lean for Oil & Gas
Adopting Lean methodologies in the oil and gas industry requires a deep understanding of the principles of the processes and what drives them. One cannot simply copy the successful implementations of GE, Toyota, 3M, etc. as Lean Six Sigma approaches the problems or issues with a new way of thinking, and not with new tools, or old tools integrated with new ones. Also, if copied, the results obtained can be random and even difficult to maintain continuously.
Thus, leaders need to embrace both the principles and practices of Lean Six Sigma and make sure to see the approach as a system of improvement focused on identifying and resolving the most pressing problems in the organization. This replaces the old method of working with complicated signals, gut feel, top-down management chains, etc., and provides a simpler, more scientific way of functioning that enhances the overall functioning, production, and supply of the organization.
In some major oil and gas companies, Lean Six Sigma methodologies were applied, and extremely successful results were achieved. Let’s look at some of the processes that greatly benefited from the Lean methodology and its applications. The stories and processes mentioned below have been taken from Lean Six Sigma Applications in the Oil and Gas Industry: Case Studies.
One of the leading oil and gas companies realized that the average rig-move time of its sample fleet, which consisted of 8 top rigs, was pushing the business plan by 4 days. This called for a drastic need for Lean Six Sigma to optimize rig-move operations.
By leveraging the DMAIC approach, 70% of the new recommendations from Lean Six Sigma were put into effect immediately. This resulted in a 61% improvement in rig-move performance. Another phenomenal result was that an additional 258 days of oil production opportunity was achieved.
- Inventory Optimization
A drilling contractor provides drilling services through offshore equipment units and drillships. The high availability of the company’s fleet is crucial for the business and also for customer satisfaction. Excess and obsolete inventory harm the supply chain’s efficiency and management. Also, the lack of inventory visibility was observed since no information was available about the precise inventory levels in any of the rigs or storage areas.
Inventory processes were not documented or well controlled. Again, this calls for the versatile yet effective application of Lean Six Sigma methodologies. All problems were identified, and the result was observed with increasing inventory visibility and control, requisitioning efficiency, and accuracy. Inventory management’s rollout provided increased inventory visibility with improved cycle counting of up to 50% over 2 years.
Lean Six Sigma offers many advantages and has widespread opportunities when applied thoroughly to a problem. Lean is not specific to any particular industry or process and can be used anywhere, like in operational, managerial, financial, logistical, or other sectors.
Many tools and concepts that are being used in Lean Six Sigma are not new to the Oil & Gas industry and thus have proven and successful implementations across the whole industry in organizations of varied sizes and niches. This proves the prowess of the Lean Six Sigma approach in providing efficient and effective results by leveraging existing knowledge and suitable statistical tools.
Oil and gas equipment producers have implemented Lean manufacturing and continuous improvement principles to reduce production costs and improve productivity. The sector is increasingly trusting value stream improvement by using process mapping to document existing product flows and design future state ideals. Visualization also plays a major role in controlling flow throughout the manufacturing process.
The use of Lean Six Sigma guarantees continuous improvement and defect reduction. This is a key factor for any business’s success, especially in a highly competitive sector such as oil and gas.
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