32nd International Conference of the

TOC Practitioners Alliance - TOCPA

www.tocpractice.com 23 March, 2017 Milan, Italy

INTRODUCING A SYSTEMIC APPROACH TO ASSET

(MAINTENANCE AND INVESTMENT) MANAGEMENT
THROUGH THEORY OF CONSTRAINTS IN A MEDIUM
SIZE OIL&GAS COMPANY
Claudio Vettor, winwin consulting, Italy
23 March, 2017
 Claudio Vettor
Claudio Vettor has dedicated his career - first as manager and then as management
consultant - to topics such as innovation, the competitiveness of organizations and
organizational improvement, using systemic methods and approaches including primarily
the TOC - Theory of Constraints. In the nearly twenty years of field work he has started and
followed a hundred TOC projects.
He had two significant experiences of temporary management in industry and services.
Claudio Vettor was a partner and founding member of several management consulting
companies (winwin consulting, Assetwork, MST-Methods for Systems Thinking).
Even before he served (1993-1999) as Director of the planning and management control of
CEDCAMERA (company information services of the Milan Chamber of Commerce).
Between 2001 and 2003, Vettor was also Professor of Programming and Production Control
at the Faculty of Mechanical Engineering of the University of Brescia.
Claudio Vettor is married and has a degree in Electronic Engineering, Computer Science at
the Politecnico di Milano. Vettor also has a Masters in Economics and Business
Administration degree from SDA Bocconi and is author of the books: "A Decalogue for
Vision 2000" (Franco Angeli, 2001), "Making system in SMEs - the Theory of Constraints"
(Franco Angeli , 2005), "Creating value in the territory - the case Cassa Padana (Franco
Angeli, 2006) and" beyond any expectation of success TOC method and 7 companies that
have applied the "(Franco Angeli, 2008), as well as a large series of articles published in Claudio.vettor@winwin-
specialized magazines. consulting.biz

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 Topics

THE COMPANY

GOAL OF ASSET MANAGEMENT

UDEs AND OBSTACLES

CONFLICT AND INJECTION

PROOF OF CONCEPTS THROUGH SEVEN PILOT PROJECTS

DETAILS ABOUT TWO OF THESE PILOTS:

INVESTMENT PLANNING

WORK PERMITS FLOW

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 THE SYSTEM

Refinery with integrated liquid fuel gasification (IGCC)

A lot of different crudes processed in 2015, from a wide range of grades

High complexity SITE

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 ASSET MANAGEMENT

KEY NUMBERS

PEOPLE > 250

OUTSOURCERS > 1.000
BUDGET > HUNDRED MILLION EURO
INVESTMENT PROJECT SIMULTANEOUSLY RUNNING > 100
MAINTENANCE REQUEST > 10,000 PER YEAR

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 ASSET MANAGEMENT

GOAL OF ASSET MANAGEMENT

TO COMPLETE AGGRESSIVE INVESTMENT PLAN, REDUCING

SIMULTANEOUSLY PROJECTS LEAD TIME . AGGRESSIVE MEANS THE
BUDGET OF INVESTMENT INCREASE BY 50% IN 2 YEARS
PLUS

TO IMPROVE MAINTENANCE PROCESSES

REDUCING UNPLANNED BUDGET BY 10%
REDUCING UNPLANNED ACTIVITIES (NOT PRESENT IN WEEKLY
SCHEDULING) BY 10%

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 ASSET MANAGEMENT

In a typical oil&gas company the role of asset management is substantially to complete

aggressive investment plans and improve maintenance processes.
When the pressure for better results increase year by year the functional - hierarchical
organization becomes a major obstacle in order to syncronize the whole system
around the capacity of critical resources. However, this type of organization is needed
to ensure high technical levels.
They tried to address and evaporate this conflict introducing a systemic approach to
asset management through TOC.
Maintain
Ensure high
Functional
technical
hierarchical
skills/levels
organization
Asset
management
achieve goals
Remove
Increase asset
Functional
management
hierarchical
performances
organization

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 CUSTOMER TAILORED IMPROVEMENT CYCLE

THREE PILLARS USED:

CONSTRAINT MANAGEMENT,
VARIABILITY REDUCTION AND
WINWIN SOLUTIONS,

CONNECTED IN A CUSTOMER TAILORED IMPROVEMENT CYCLE

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 CUSTOMER TAILORED IMPROVEMENT CYCLE

Deployment
Flow Chart
KPI,
UDEs MUDA

SPC (Xr
control
chart)
Stable
process
Instable
process

NEW WAY OF Identify Variabilitys

PLANNING special reduction
SCHEDULING causes

FIVE
FOCUSING CCR or not
STEPS phisical
constraints

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 UDEs AND OBSTACLES

UDEs and
Obstacles

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 UDEs AND OBSTACLES

UDEs AND OBSTACLES final short list

UDEs causing gaps in performance

PROJECTS LEAD TIME LONGER THAN DESIRED
UNPLANNED ACTIVITIES MORE THAN 10% OF THE BUDGET

Obstacles blocking improvements:

A-SYSTEMIC APPROACH TO THE OPERATIONS (SILOS ARE NORMALITY)
LACK OF TIME AND FLOW ORIENTED KPI
LACK OF KNOWLEDGE OF THE SYSTEM AS A WHOLE (interdependencies are
not well defined and managed)

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 SEVEN PILOT PROJECTS

PROOF OF CONCEPTS THROUGH SEVEN PILOT PROJECTS

Gruppo A- Attivazione Permessi Di Lavoro (PDL) WORK PERMITS FLOW

Gruppo B - Programmazione Investimenti INVESTMENT PLANNING
Gruppo D Processo Investimento - Flusso Acquisti PROCUREMENT FLOW
Gruppo E- Miglioramento affidabilit - RELIABILITY OF FACILITIES
Gruppo M- Target Eseguito MAINTENANCES REQUEST FLOW
Gruppo R - Processo Investimento INVESTMENT REALIZATION FLOW
Gruppo S - Variazioni scopo del lavoro fermate e annuale INVESTMENT SCOPE OF
WORK FLOW

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 SEVEN PILOT PROJECTS

PROOF OF CONCEPTS THROUGH SEVEN PILOT PROJECTS

DETAILS ABOUT

PROJECT D DETAILS : INVESTMENT PLANNING

DFC (see figure 1)
UDEs (see figure 1)
EXAMPLE OF CLOUD (see figure 2)

PROJECT A DETAILS : WORK PERMITS FLOW

DFC
SPC (IN ORDER TO SHOW THE VALUE OF THE UDEs)
INJECTIONS AND SAVING ACHIEVED

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 PROJECT A WORK PERMITS FLOW

PROJECT A DETAILS : WORK PERMITS FLOW

DFC
SPC (IN ORDER TO SHOW / QUANTIFY THE VALUE OF THE UDEs)
INJECTIONS AND SAVING ACHIEVED

UDEs RECOGNIZED BY THE COMPANY :

1. A significant amount of paid contractors time is wasted
2. There are significant amount of delays in the approval of work permits

Every single maintenance or investment activity can be executed ONLY there

is a work permit valid , the work permit MUST be renewed every 8 hours.

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 PROJECT A WORK PERMITS FLOW

WP flow

Performed by
external
Performed by internal resources resources

Activity Opening Approving Executing

planning WP WP Activity

This is
the
CCR
There is only one person per shift dedicated to activate work permits (WP) in each of the eight areas of plant.
The number of WPs is huge (> 30 per day)
Each activity produces more than one WP
WPs activation often require inspection on the field
Priority of WPs activation is not assigned according with the value (cost and time) of the activity
Validity of WP is one shift (if a workdoes not end inside of the shift must to be activated again)

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 Exploit the constraint and Subordinate

Improvement proposal (zero cost) - December 2015

The proposals do not affect the organization
a) operations people should prepare equipment in the night shift, leaving written record to
the upright shift
b) night shift should be responsible of pre activation of work permits
c) improve daily scheduling in order to reduce the number of work permits.

Percentuale Permessi
120% In late March, the
dati dal 01/09/2015 al 30/09/2015 dati dal 01/03/2016 al 15/04/2016
percentage of non-
100%
Media dal 21 marzo al 31
activated PDL decreases
80% marzo on average from 39% to
21th march
60%
LS 24%
Subcontractors wasted
40% LI
and paid time decrease by
20% 11.000 Euro per month
0%
1 April (referred to one of eight
1 3 5 7 9 11131517192123252729313335373941434547495153 plants areas)

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 Elevate the constraint

Organizational changes (august 2016)

Once the capacity of the system is exhausted, it must be expanded by

investing in additional equipment/land, hiring people, or the like.

The subcontractors wasted time has been reduced by increasing of the

staff responsible of work permits authorization (only for projects with huge
ROI)

The production organizational structure has been modified by adding the

figure of the chief responsible for new achievements in a number of plants

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 PROJECT D

PROJECT D DETAILS : INVESTMENT PLANNING

DFC (see figure 1)
UDEs (see figure 1)
EXAMPLE OF CLOUD (see figure 2)

UDE lead time of the investment is longer than planned (> 24 months)

AND
ROI of the investment is smaller than planned
Often there are budget overruns
Priorities are often changed
Etc.

They decided to focus on interdependencies between investment and procurement

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 Identify constraint not yet a core
cloud
The tendency of the procurement department is accept bids that are low in price while risking quality and on time delivery. (D)

The want of the technical department (asset management) is accept bids that are high in quality and on time delivery. (D)

The procurement people try to satisfy the need : to be compliant with the KPI (% of bids delivered within 60 days). (B)

The technical people try to satisfy the need: to be compliant with delivery date of the whole project. ( C )

The common goal (A) achieve the objectives set by the organization

Technical and procurement people working togheter (first time) :

have revised the whole flow (using DFC)

have decided how to measure the performances (KPI)
have decides a lot af actions in order to mitigate UDE and overcome obstacles
have released work instructions in order to stabilize flow

RESULTS: reduced WIP (in this case WIP is open RFP) , reduced LT of RFP

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 Lesson learned

In medium large size company POC (proof of concept) is mandatory in order to

introduce systemic approach
As the number of people involved is high (>30 in this case) you must use few simple tools
DFC (Deployment Flow Chart) is a useful tool to see interdependencies and allow
everyone to talk about UDEs instead of fight
SPC is needed (in a hyper technical organization) in order to gain consensus about UDEs
The conflict cloud even as an self standing tool is able to lead people to local
improvement
Five focusing step are sufficient to lead people towards direction of the solution (finding
injections/actions)

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