Business Excellence in Downstream Industries
Business Excellence is a phrase that is often used in the Downstream Refining and Petrochemical business, and has a very broad meaning to this industry.
Generally, it refers to how to best operate a plant to its full capacity. Despite the name, it is not the sole responsibility of the operations group, but rather is the result of the combined efforts of all the groups and departments that exist within the downstream area, as well as others who support that part of the business. While each group should have a good idea as to what good performance means to them in terms of metrics that provide direction and feedback, the concept of Business Excellence is much broader. It encompasses not only individual group performance, but more importantly, how those groups interact and support each other towards achieving the overall objectives and metrics that direct and support those objectives.
An example of how critical this is can be described as follows:
The maintenance and reliability (M&R) department is tracking to be 98% compliant with its PM schedule. The Production Planning team has an expectation to deliver 90% OTIF on its plans. However, this particular week, this OTIF will be impacted due to a misalignment in terms of priorities and expectations. The M&R team, in seeking to keep their 98% PM compliance, will bring down a production unit to perform a routine PM. In doing so, the M&R team takes longer than planned as there was a “found work” condition that the M&R team felt they needed to address to prevent a potential corrective trigger in the future. The ripple effect to the process is that the Production Planning team will take a hit on their OTIF as a result… Now we have a resulting condition were Planning and Operations failed to meet their targets, but M&R exceeded theirs (they prevented a potential failure).
In a coordinated and aligned operation there are parameters and thresholds established by which these decisions and actions can occur. We call this Management System integrity and the four critical elements of this are: Data ⇒ Analysis ⇒ Decisions ⇒ Actions. In a high performing organization, this cycle occurs hourly, by shift, daily, weekly, monthly, quarterly and yearly – at different levels and involving a cross-functional set of leaders who are ultimately responsible for fulfillment of orders.
A Business Excellence initiative starts by having a clear and consistent set of goals or objectives, and an organizational structure that includes line-of-sight metrics for each of the groups or departments within the downstream organization (like the example above). It also involves engagement of everyone in the organization by recognizing the value and uniqueness of local and specific knowledge that exists at all levels within the organization. Finally a robust feedback loop allows the organization to learn and continually improve – from data, to analysis to decision to action, and back to data, etc.
Generally, people want to do the right thing, be productive and be part of a successful organization. Many times when an organization faces difficulties or has trouble achieving objectives, it is not due to having bad people, but more likely it starts with the overall goals for the entire organization:
– Are they clear, concise, and measureable?
– Are they well understood and accepted by the entire organization – not just the leaders?
– Do employees understand the impact they can personally have on those goals?
– Do they have line-of-sight from the overall objectives to their departmental and individual goals and metrics?
An organization that has high reliability will also have a good safety record, a low frequency of events that have a negative impact outside of the refinery fence line, and sharp cost control. Boring is good… the more the operation becomes predictable (a condition characterized by low execution variance), the more this begets reliable and sustainable performance. While a low frequency of abnormal operation helps achieve this level of performance, the same systems and processes that result in high reliability will also have a positive impact on the morale, skills and capabilities of the organization.
In summary, while Business Excellence is a key element of good financial and operational performance in Downstream Refining and Petrochemicals, it also acts as the series of metrics most visible and important to your local community, regulators and external stakeholders as they continue to grant you your license to operate.
Evolve Partners Advisory Board Member Bob Kent brings more than 34 years of refining leadership experience to our board. As President of Corpus Christi, Texas-based REK Energy, Bob helps downstream companies worldwide reduce operating cost, improve reliability and increase gross margins.