Business Case for Reliability Improvement Process Transformation
In the previous sections we listed the most common issues occurring during the reliability improvement process. Though the extent of impact of these issues may vary, all of them can severely hamper efficiency and effectiveness of reliability improvement initiatives that ultimately results in late restoration of equipment or recurrence of the defect with associated financial and regulatory cost.
Based on our experience with several large business process transformation initiatives, we believe large gains in process efficiency and effectiveness of RIP can be realized through a transformation initiative that systematically identifies and eliminates these issues.
However this would require a credible business case to convince the management to sponsor a RIP transformation program which could be a significant undertaking involving multiple complex work streams and critical organization resources.
Below we present an approach to develop a business case to communicate the business value of including RIP in an organizations’ transformation agenda. We have used our hypothetical scenario presented in the beginning for illustration.
An illustrative business case
An efficiency gain in RIP would mean early restoration of equipment to its original throughput, thus saving on deferment due to removal of constrained production. An effectiveness gain is reduction in failure frequency (e.g. increased MTBF) of equipment leading to reduced immediate deferment and costs of repair or replacement.
Working example: In our hypothetical case, deferment due to equipment breakdown and constrained production is 15000 barrels and 3000 barrels per day respectively. With respect to that, we have assumed the following:
- Three days for equipment repair
- USD 100,000 for replacement cost of faulty seal
- 50 days for completion of equipment reliability improvement initiative
- 100 USD per barrel as crude oil price
Based on the above, a modest 10% (five days) improvement in RIP efficiency would result in a one-time saving of USD 1.5 million due to early removal of constrained production.
In addition to that cost of one time failure is USD 4.7 million which could have been potentially saved assuming that a highly effective RIP would prevent recurrence of similar failure within MTBF.
In this case, a total one-time value for single equipment is approximately USD 6 million which does not include man power cost and HSE implications.
E&P organizations possess a large number of critical equipment across their assets. Based on our experience with similar process improvement initiatives, the potential efficiency gains could be as high as 30-50% due to process standardization and automation.
If we consider these two factors we believe that actual gains could be higher by many orders of magnitude. Efficiency gain would require lesser resources to conduct reliability improvement activities thus freeing up critical staff time to focus on other value generating activities.
Overall we believe that there is a significant business case for RIP transformation.
Key Principles to Achieving Successful RIP transformation
Once a business case is established, a formal charter for the transformation program should be established with complete support from the management. Here we list some key principles that seem common to successful business process transformation programs we have been involved in. We believe these will help E&P organizations achieve the maximum value from their RIP transformation initiatives as well.
a. Adopt a program centric approach to ensure alignment with business goals
RIP transformation contains multiple work streams related to workflow standardization, collaboration, information and knowledge management. Addressing each work stream as a separate project would entail the risk of misalignment with larger business goal apart from wastage of synergy between different projects. RIP transformation should adopt a program-centric approach that bundles various work streams into self-contained packages with common governance and a shared pool of critical resources to achieve synergy and alignment with business goal. Program governance should be similar to what is followed for any other successful business process transformation initiative with a balanced mix of representation from various key functions.
b. Formulate an implementation staircase to address program complexity
Given the unclear scope and high complexity of work streams, the business should develop an implementation staircase that delivers well defined business outcomes in a phase wise manner. This will help gain clarity and build confidence in the early phases of the program and secure buy-in from the end-user community.
c. Identify synergies with existing operational
Improvement programs to optimize program execution The implementation staircase can be optimized by seeking potential synergies with ongoing transformation initiatives elsewhere in the organization. For example many E&P organizations have advanced collaborative center programs that include business process standardization and IT enablement as key components. By extending the scope of such programs to include reliability improvement process, a lot of cost and time can be saved by realizing economies of scale.
d. Identify quick-win opportunities to accelerate the program timeline
The business should look for opportunities in the ongoing projects to accelerate some of the components in the implementation staircase. This would work best in the cases where trials are being conducted for a new system in the organization. For example if there is a workflow automation solution being proposed, a proof of concept could include reliability improvement process to assess technology feasibility and save future efforts on technology selection and pilots.
e. Identify key IT enablers and appropriately address them in Enterprise IT Architecture
Given diverse information sources (both structured and unstructured), seamless integration of information and knowledge into reliability improvement process could be a complex IT undertaking. Many local IT projects initiated to address these issues could not sustain themselves due to lack of enterprise support, inconsistent design and high maintenance cost.
Organizations should build an appropriate level of flexibility in the enterprise information architecture design itself to address unique information requirements for RIP with guidelines for fit-for-purpose standards and technologies. This could be ensured by including RIP in the business capability blueprint that information architecture seeks alignment with. Architecture governance should also address other program IT enablers related to collaboration, workflow management and knowledge management in a similar manner. This would help the program team save time and effort in assessing and selecting technical solutions for key IT enablers of the program.
f. Secure right skill set for program to build credibility
Any business improvement initiative requires the right skill sets to deliver various stages of program such as assessment, blueprinting and implementation. The program should be staffed with resources with a strong background in program management, business process consulting, IT architecture design, data management and change management.
Based on our experience having a strong team helps build credibility of such program in the organization and brings quality and best practices to program deliverables. If required, business should seek outside help to augment their in-house team.
The paper talks about the importance of Reliability Improvement Process (RIP) and common issues that hamper efficiency and effectiveness of RIP. We also presented value potential of RIP transformation using an illustrative business case. We believe that a transformed RIP can consistently provide the following business benefits:
- Reduce cycle time of equipment reliability improvement initiatives
- Early or accurate identification of opportunities for reliability improvement
- Improved reliability of equipment by improving MTBF (mean time between failures) of components
- Improving the performance of the overall asset by optimizing surrounding equipment that may provide benefits in the form of reduced fuel consumption, waste recycling etc.
A good starting point for organizations should be to conduct a feasibility study to understand the maturity of their existing RIP and potential gains from achieving target transformed state of RIP. A feasibility study should review previous reliability improvement initiatives and their outcomes. Once a business case is established, the senior leadership should commit necessary organization resources and provide their full support for the transformation program. With that, organizations would do well to observe some of the key principles listed by us to avoid pitfalls and maximize value from the transformation program.