A Factual Case Study By KINDUZ Consulting – Oil & Gas Sector

 

1. Introduction

Petrocham Refineries Limited (name changed), with it’s headquarter in India is a Fortune 200 Oil & Gas Company.Since its inception in 1964, the company has grown in operation from a crude processing capacity of 4 million metric tonnes per year to 21 million metric tonnes per year.
This summary report was prepared after completion of first wave of Lean Six Sigma projects at PRL. The Lean Six Sigma initiative was driven as strategic initiatives of PRL in the Financial Year 2013-14.
Following points summarizes the milestones and key points of this initiative:

  • Initiative started: January 2014
  • Lean Six Sigma projects started: March 2014
  • Number of Lean Six Sigma projects: 12
  • Number of participants: 26
  • Average experience of the participants (estimated): 9 years
  • Time for Sign-off of all projects: 5 months
  • Total financial benefit (estimated): INR 71 Crores

PRL is one of the refinery of Petromax Group (name changed). Petromax has a total of four refineries under it. PRL merged with Petromax some 10 years ago. It was KRL, another refinery of Petromax that started with Lean Six Sigma initiatives in its operations. Over a period of 6 years, KRL delivered value of more than INR 500 crores through its Lean Six Sigma initiative. Though, in the initial years, the focus of the initiative was on refining operations, slowly support functions like HR, Procurement and Financial processes started to deliver higher business value. And naturally, this attracted attention from senior leaders of PRL.

2. Strategic Objectives of Lean Six Sigma Implementation

PRL is one of the refinery of Petromax Group (name changed). Petromax has a total of four refineries under it. PRL merged with Petromax some 10 years ago. It was KRL, another refinery of Petromax that started with Lean Six Sigma initiatives in its operations. Over a period of 6 years, KRL delivered value of more than INR 500 crores through its Lean Six Sigma initiative. Though, in the initial years, the focus of the initiative was on refining operations, slowly support functions like HR, Procurement and Financial processes started to deliver higher business value. And naturally, this attracted attention from senior leaders of PRL.
When PRL started with Lean Six Sigma initiative, the leadership of PRL first decided to define the short term and long term objectives of this initiative. The LASSIB Society Team, having institutionalized Lean Six Sigma at KRL in the last 3 years, had inherent understanding of the strategy of Petromax Group and the refining operations. The leadership of PRL and the LASSIB Society Team then worked together to define the objectives of the Lean Six Sigma initiatives at PRL.

    • Profitability Excellence.

The leadership wanted to communicate the importance of both increase in revenue and decrease in cost, thereby leading to an excellence in profitability

    • Customer focus and orientation.

The message here, to every function of PRL, was to align goals of a function to that of its customers, both internal and external. And as a long term outcome of this objective, every employee be oriented to his/her customer.

  • Data driven Decisions.

Through this objective, the leadership wanted to convey the power and benefit of data driven decision making and thereby institutionalize it as a culture in PRL

With the objectives of the initiatives in place, PRL then geared up to deliver outcomes aligned to the objectives.

3. Parivarthan – A Positive Change

When the first wave of Lean Six Sigma projects started, the core team felt the need to convey to each and every employee that this was their initiative, and that this initiative will help each one of them to excel. The core team decided to name this initiative and not resort to an unemotional name like “Business Excellence Initiative”. When looking for the right name, the core team also wanted to communicate the importance and outcome of this initiative to all the relevant stakeholders. The core team decided to leave it to the 26 participants (participants from the first batch of Lean Six Sigma projects) to find the right name. After a brainstorming of approximately half an hour, the team came up with the name “Parivarthan”
butterfly
“Parivarthan” is a Sanskrit word and means “positive change”, a name truly reminiscent of this initiative. It was decided that the first wave be named as Parivarthan-I and subsequent waves will be named as Parivarthan-II, Parivarthan-III and so on.

4. Executive Summary

The figure below summarizes Parivarthan-I, summarizing the initiative, its outcomes and the recommended approach for subsequent Parivarthans

Summary of Parivarthan-I Phase 1:

  • Champion Training and Certification for a batch of 20 participants
  • 12 Lean Six Sigma Green Belt Project Selection

Phase 2:

  • 11 days Lean Six Sigma Green Belt simulation based workshops, with Minitab
  • Project Coaching, Reviews and Completion

Phase 3:

  • 26 Certified Lean Six Sigma Green Belts
  • 12 Lean Six Sigma Green belt project completed
Benefits from Parivarthan I Annualized financial benefit of INR 71 crores, both in terms of reduced cost and increased revenue

  • 5 out of 12 projects have positive impact on Safety
  • 5 out of 12 projects have positive impact on Process Reliability
  • 7 out of 12 projects have positive impact on Ease of doing business
  • 3 out of 12 projects have positive impact on Customer orientation

26 Certified Lean Six Sigma Green Belt associates to drive excellence in operations of refinery

Approach for next waves of Parivarthan Parivarthan II

  • Green Belt workshops for a batch of 25 participantswith 12 Green Belt projects

Parivarthan III

  • Black Belt workshop for a batch of 20 participants with 10 Black belt projects

Parivarthan IV

  • A batch of 05 Master Black Belts
  • A Green belt batch of 25 participants with 12 projects

Parivarthan V

  • 2 batches of Green belt (Training and coaching by dedicated teams of the company (Black/Master Black belt)
  • Root cause analysis workshop for a batch of 30 non-management participants by dedicated teams of the company Black/Master Black belt

Parivarthan VI

  • 2 batches of Lean Six Sigma Green belt (Training and coaching by dedicated teams of the company (Black/Master Black belt)
  • Root cause analysis workshop for a batch of 30 non-management participants by dedicated teams of the company (Black/Master Black belt)

5. Lean Six Sigma Implementation: Parivarthan I

In the initial one month of the initiative, the focus was on setting up our office and guest house in the city of PORL Refinery.
Our team believes in delivering business and customer value through dedicated effort and focus. Therefore across all our engagements we have our key team members focus full time on the project.

5.1 Planning

The detailed roadmap indicating the entire implementation process of Lean Six Sigma project in PORL including training of Green Belts with timeframe for Phase wise implementation was submitted to PORL.
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5.2 Champions training

A one day Lean Six Sigma Champions program was conducted for senior management of PORL on 12th Feb, 2014. Relevant General Managers (GMs), Deputy General Managers (DGMs) and Chief Managers (CMs) of PORL attended the workshop. LASSIB Society team presented the approach and timelines for Parivarthan I.
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5.3 Steering committee

Steering committee was formed to provide strategic guidance to the participants and this entire initiative. This committee would also review the Lean Six Sigma projects at pre-defined intervals.

5.4 The Core team

The Core team was formed for an effective implementation and ownership of the initiative. The team was formed to resolve any operational risks and issues. The LASSIB Society Team, along with support from the core team, took care of day-to-day challenges, risks and issues.

5.5 Project and team selection for Green Belt projects

26 associates of PORL were selected to be trained and coached as Lean Six Sigma Green belt. The associate selection was done by the Steering Committee. For all the 26 associates, a one day program was conducted to help them to identify improvement areas in their workplace. Some probable projects were also recommended by different functions of PORL. A total of 50 projects were identified to be taken up as Lean Six Sigma Green belt project. Out of 50, 12 projects were selected for Parivarthan-I after detailed discussion with the participants. The projects were prioritized based on the 5 strategic priorities of PORL: Safety, Ease of doing business, Reliability, Margin and Cost reduction.

The Lean Six Sigma Green Belt projects and respective team members are as listed below:

S. No. Project Title
1 Reduction of number of Motor Spirit (Petrol / Gasoline) tanks not okay on first sample
2 Improve the reliability of Gas Turbine 2
3 Reduce Energy consumption of Force Draft fan in CDUII (Crude Distillation Unit 2) heater
4 Increasing margin of Catalytic Cracking Reformate
5 Operating Efficiency improvement in Amine regeneration system
6 Reduce cycle time for scrap disposal
7 Product interface management
8 Decrease cycle time for Visitor’s Gate Entry
9 Improve Canteen Services
10 Reduce the sales Loss of HSD (High Speed Diesel) on Pipeline Transfer
11 Decrease inventory holding cost of Unique spares
12 Decrease earth resistance in tank earthing and improve lightening protection

5.6 Lean Six Sigma Green Belt Workshops

A total of 11 days of Lean Six Sigma Green belts simulation based workshops were conducted at PORL city office, stretched over a period 3 months. The breakup of the 11 days is as follows: 1 day of Recognize phase, 2 days for each of the five phases of Lean Six Sigma viz., Define, Measure, Analyze, Improve and Control. The training was planned to cover all aspects of Lean Six Sigma Green Belt as per the Book of Knowledge of Lean Six Sigma International Board and ASQ. The Workshops were full of case studies, games and simulations for better understanding of the concepts. Training material and templates were provided to all participants by LASSIB Society. Minitab training was also given to all participants for better analysis of collected data.

Let’s look at each of the six phases.

5.6.1 Recognize phase

  • Steering committee met all the participants and inaugurated the initiative on Lean Six Sigma Implementation at PORL
  • A one –day training on recognize phase was given to all the participants
  • Different tools and techniques were introduced to identify improvements areas in the refinery
  • Introduced Lean Six Sigma by a simulation
  • Identified more than 50 projects across different functions of refinery and prioritized 12 projects based on 5 business strategy of PORL which were safety, ease of doing business, reliability, margin and cost reduction

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5.6.2 Define Phase

  • A two day simulation based workshop for better understanding of how to understand customer requirement, define problems and set goals
  • General Manager, Projects was present at the start of Define phase workshop to meet all the participants and share his thoughts on the importance and benefit of Lean Six Sigma
  • A case study from Oil and Gas industry on define phase was given to all participants to work on it. All the participants formed teams and collectively worked on the case study
  • All teams then presented their case study solutions and discussed with other teams as well

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5.6.3 Measure Phase

  • A two day simulation based workshop for better understanding of data collection
  • Like Define phase, General Manager, Operations shared his thoughts on benefits of Lean Six Sigma with all the participants
  • Data collection and analysis tools and techniques were introduced using a case study. The associates worked in teams and presented their solutions also
  • All teams were requested to choose a daily life problem and asked to prepare a fishbone diagram. Teams presented their fish bone diagrams to rest of the teams

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5.6.4 Analyse Phase

  • A two day simulation based workshop on how to identify probable root causes and prioritize the probable root causes
  • In this phase, GM, Finance was requested to address the participants and share his thoughts on how PORL would gain from this initiative on Lean Six Sigma
  • All teams are requested to choose a daily life problem and asked to conduct a FMEA analysis. Teams presented their solutions also
  • Different lean tools were introduced by a “Dot-plane company” game in which participants simulated a paper aeroplane manufacturing setup
  • Minitab training was given to all participants to analyse the data

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5.6.5 Improve Phase

  • A two day simulation based workshop for better understanding of hypothesis test and pilot implementation
  • A one day catapult simulation was conducted to help the participants understand corelation and regression
  • Minitab training was given to all participants to validate improvements through Hypothesis Tests

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5.6.6 Control Phase

  • A two day simulation based workshop for better understanding of control plan creation to ensure sustainability of the improvements
  • A case was given to all the teams and asked to prepare a control plan
  • Different tools and techniques were introduced to prioritize the recommendations

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Workshops feedback were captured from all participants after every workshops.

5.7 Sample Weekly Report on Parivarthan-I

Weekly report was submitted every week by the LASSIB Society team. The weekly report consisted of records of meeting with Lean Six Sigma participants during the project coaching, follow up with Lean Six Sigma participants and status of each project. A snapshot of the status report is shown below:
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5.8 Green Belt Projects Review

The Steering Committee, including the Executive director, GMs and DGMs, was formed to oversee the progress of the entire initiative and help addressing any risks, issue and constraints. They also conducted periodic review of all the 12 Lean Six Sigma projects. A total of 3 reviews were conducted. After every review, action items from the review were circulated to all the participants.
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5.9 Green Belt Examination

Lean Six Sigma Green belt examination was conducted by Lean Six Sigma International Board, an initiative of LASSIB Society, from 19th June to 23rd June. All participants cleared the examination.

5.10 Green Belt and Lean Six Sigma Champions Certification

All Green belt participants were certified by Lean Six Sigma International Board after successful completion of their Lean Six Sigma Green Belt projects. Champions were also certified as Lean Six Sigma Champions by the Lean Six Sigma International Board.

5.11 Green Belt Project Final Submission

Teams were requested to submit their final project presentation and recommendation approval by process owner in a given format provided by LASSIB Society Team.
In order to ensure that projects recommendations are owned by the process owner, a process of formal sign-off of the recommendations was put in place. Project team members were requested to submit the signed-off recommendations sheet for a successful closure of the projects.

6. Outcomes of Lean Six Sigma Implementation – Parivathan I

6.1 Expected Outcomes to PORL

Tangible Outcomes: Following are tentative tangible outcomes from Parivarthan I

  • An expected annual benefits of more than INR 71 Crores. The benefits include both cost savings and extra revenue. Some of the outcomes like reduction in cycle time of scrap disposal could not be quantified monetarily
  • 26 Certified Lean Six Sigma Green Belt associates to drive excellence in operations of refinery
  • Impact of every project on key strategy of PORL is shown below in table
Strategic Priorities of PORL
S.No: Project Title Cost Reduction Increase in Revenue Safety Reliability Ease of doing Business Customer Orientation
1 Reduction of number of Motor Spirit (Petrol / Gasoline) tanks not okay on first sample
2 Improve the reliability of Gas Turbine 2
3 Reduce Energy consumption of Force Draft fan in CDUII (Crude Distillation Unit 2) heater
4 Increasing margin of Catalytic Cracking Reformate
5 Operating Efficiency improvement in Amine regeneration system
6 Reduce cycle time for scrap disposal
7 Product interface management
8 Decrease cycle time for Visitor’s Gate Entry
9 Improve Canteen Services
10 Reduce the sales Loss of HSD (High Speed Diesel) on Pipeline Transfer
11 Decrease inventory holding cost of Unique spares
12 Decrease earth resistance in tank earthing and improve lightening protection

Intangible Outcomes: Following are tentative intangible outcomes from Parivarthan I

  • A culture of continuous improvements within the teams of the 26 participants
  • A culture of Innovation, and the delivery of Return on Investment (ROI) for the Organization and the Customers
  • Improvement in doing business internally and with the customers
  • Better safety across all processes and working locations
  • High reliability of processes
  • Cost reduction
  • Margin increment

6.2 Outcomes Delivered to Participants

  • All participants were certified as Lean Six Sigma Green Belt by the Lean Six Sigma International Board
  • A detailed understanding of the Lean principles and the Lean Six Sigma methodology
  • Facilitate the implementation of such changes by using effective advanced tools and techniques
  • Develop and lead teams of people to carry out the identified improvement initiatives
  • Learnt to reduce waste in processes
  • A good understanding of a variety of graphical and team based problem solving tools
  • A good understanding of basic statistical concepts
  • The ability to apply technical and creative tools to find solutions to not-so-well defined problems and narrowly scoped problems
  • The ability to employ an investigative and data driven approach to analyze problems and identify root causes
  • The ability to work effectively as a leader of a cross functional problem solving team, taking responsibility for the work of team members
  • An enhanced professional profile to take on cross functional projects of strategic importance

7. Approach to take the initiative forward

LASSIB Society will be initiating the second wave (Parivarthan II) of Lean Six Sigma implementation in Sept, 2014. The goal of this approach is to ensure that PORL is self-sufficient to drive the initiative going forward. This could be achieved by systemically develop the capability of PORL human resources and ensuring right controls and systems in places.
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7.1 LEAN SIX SIGMA IMPLEMENTATION

Parivanthan
I II III IV V VI Total
Green Belt Projects 12 12 0 12 24 24 84
Black Belt Projects 0 0 10 0 0 0 10
Green Belt Certified Associates 26 25 0 25 50 50 176
Black Belt Certified Associates 0 0 20 0 0 0 20
Master Black Belt Certified Associates 0 0 0 5 0 0 5
Trained non – management Associates 0 0 0 0 30 30 60

7.2 Parivarthan II (Sept 14 – Mar 15)

Parivarthan II will start from Sept 14 and is targeted to be completed in a period of 6 months. In this phase, a batch of 25 associates will be trained and certified as Lean Six Sigma Green Belt. A total 12 Lean Six Sigma Green Belt project will be completed by these 25 associates.
Team selection for the projects to be such that at least one of the team member is from the process. For example, for a Lean Six Sigma project on HR function, at least one team member should be from HR function. The other team member(s) can be from HR function or other functions of the refinery. A project team should consists of minimum 2 member and maximum 3 member.
Project selection should be based on business outcomes from the projects. Prioritization of project should be done with help of finance department. Recognize phase of Lean Six Sigma Methodology could be used for the support functions like HR, P&CS, and Finance etc. It is recommended that every department sends its own set of prioritized projects along with team members to the Steering Committee for final decision.

7.3 Parivarthan III (Apr 15 – Sept 15)

Parivarthan III will start from Apr 15. It will be also for a period of 6 months. A batch of 20 associates will be trained and certified as Black Belt. A total 10 Lean Six Sigma Black Belt project will be selected by the core team for these associates.
A team of 2 certified Green belt is recommended to take a Black Belt project. At the end of Parivarthan-II, PORL will have total 50 Green belt certified associates. The Core team and Steering Committee will select 20 associates, for Black Belt, from the pool of 50 Green belts.
Project selection and prioritization can be done by the selected Green belt certified associates by using Recognize phase of Lean Six Sigma.

7.4 Parivarthan IV (Oct 15 – Mar 16)

Parivarthan IV will start from OCT 15. This phase will have 2 batches.

  • A batch of 05 associates will be trained and certified as Master Black Belt
  • A batch of 25 Lean Six Sigma Green Belt participants with 12 Lean Six Sigma Projects

Total 05 associates from 20 Black Belt certified associates will be selected to be trained as Master Black Belt. A fresh batch of Green belt participants will be selected by the Core team and Steering Committee.
Project selection will also be done by the selected Black belts by using Recognize phase of Lean Six Sigma.

7.5 Parivarthan V (Apr 16 – Sept 16)

We envisage that Parivarthan V will be driven in-house by PORL. A dedicated team to drive the Lean Six Sigma implementation will need to be formed. This team will consists of the master black belts who were certified in Parivarthan IV. In Parivarthan V, entire set of activities including, selection of projects, workshops for management and non-management employees and project coaching will be driven by the Master Black Belts.
Two batches, with a total 50 participants, will be trained and coached as Green Belt by the Master Black Belts of PORL. The 50 participants will own a minimum of 25 Green belt projects. It is recommended that some of key Chief Managers and Senior Managers be part of the Green Belt batch of Parivarthan V. The Chief Managers and Senior Managers would become Master Black Belt in subsequent batches.
A root cause analysis workshop or workshop on Lean tools, for a batch of 30 non-management associates, will be conducted by the team of Master Black Belt.

7.6 Parivarthan VI (Oct 16 – Mar 17)

Parivarthan VI will be same as Parivarthan V and it will also be driven by PORL

7.7 Lean Six Sigma Project Documents

In its existing format, Parivarthan is focused on Lean Six Sigma projects. The project reports also have the rigor of a Lean Six Sigma project. In subsequent Parivarthans, when non- management employees of PORL become part of this excellence initiative, then the report submitted by the non-management associates need not be in a Lean Six Sigma project format. It can even be a simple one page document highlighting the problem, the solution and the outcome after implementation. For simplicity, both these project reports have been mentioned as improvement project report henceforth.

  • All Lean Six Sigma projects should be documented and shared with rest of the PORL family
  • All Lean Six Sigma project should be uploaded on the PORL server for easy access to all the associates
  • It is recommended that all non-management associates should present their improvement in a formal report. This report could then be uploaded on PORL server for easy access by other employees
  • All department should submit a detailed report learning and outcomes of all improvement projects after every batch (or Parivarthan)

7.8 Lean Six Sigma Project Review

  • Review of Lean Six Sigma Green Belt and Black belt project should be done by Steering Committee
  • Minimum 3 review should be done for a batch by Steering Committee
  • Review of all improvement projects should be done by respective Heads of Department

7.9 Best Practices For Effective Implementation From Parivarthan I

      • Steering Committee review
          In our opinion a maximum of 1 review per month and a minimum 1 review in 2 months is effective in brining relevant and quick outcomes from the Lean Six Sigma projects
      • The Core Team driving the initiative should also review the projects at least once in a month
      • Members of Steering Committee should be invited to Lean Six Sigma workshops so that they can share their thoughts on Lean Six Sigma and its importance in personal and professional life
      • A key challenge in such initiatives is to ensure continued focus from senior and middle management of the organization. A best practice which has evolved at PORL is that the leaders who drive the initiative (any of the Parivarthans) as part of the core team should own only one Parivarthan. For the next Parivarthan, ownership could be transferred to another set of identified leaders at PORL
      • Weekly tracking of projects should be done by the core team and the same should be shared with all the stakeholders
      • Every meeting and follow up should be logged diligently by the core team
      • For an effective implementation of Lean Six Sigma in the refinery, we recommend that in later waves of Parivarthan, the focus should be on ensuring implementation of Lean Six Sigma tools and techniques in the daily work life of associates. For example, if a Chief Manager wants to understand that the trend of expenditure in the last one year, then he / she can ask his / her team to present the trend in a control chart. The control chart will further highlight points of special cause(s), if any. Application of Lean Six Sigma tools in one’s daily life will ensure sustenance of this initiative in the years to come.

7.10 Lean Six Sigma Branding at PORL

    • Use multiple channels to spread awareness about Lean Six Sigma and its importance
      • Publish monthly articles in PORL magzine
      • Distribute Lean Six Sigma leaflet to spread awareness about Lean Six Sigma implementation across the refinery
      • Send periodic newsletter to all PORL participants. Newsletter can contain
        • Case studies
        • Use and / or insight into Lean Six Sigma tools
    • Use multiple other channels, like emails, events, notice boards, informal gatherings, characters to effectively brand the excellence initiative at PORL

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