If you don’t know really know what you’re about to buy, conversations with clients and suppliers gets very frustrating.
“There are things we do out of habit that are not always good for us. Break the bad habits and develop some good ones.” – David Kirsch
Exhilarating to some and terrifying to most, change is one of the greatest challenges that we must face. The business world is an environment where the conflict related to change occurs on a daily basis. A conservative outlook on things is to protect the current ways of operating (BTTWADI, anyone?) or revert back to traditional methods. Heavily conservative, the Oil & Gas industry and the Engineering, Procurement, and Construction (EPC) firms that support them, are steeped in habits that restrict their efficiency and hinder not only their timelines, but also their profit margins. I have personally experienced being part of the destruction of a once mighty firm because change was not embraced.
Silos are a popular business management concept. While the goal is to remove as many barriers as we can, for an EPC firm, that is almost impossible. The very acronym suggests that there will always be compartmentalization that is unavoidable. Here is a cynical and tragically relatable cartoon that demonstrates the dangers of poor communication and collaboration:
Silos, anyone?
From Business Development to Engineering to Construction, all divisions of a company will gleefully point fingers at the other departments for the difficulties, cost overruns, and customer complaints that arise on major projects. The company I worked for had over 55,000 employees and a huge number were black-belt certified in finger-pointing. This is a human condition, not a unique feature to that company. After all, that organization gave someone with no experience a chance at a critically important position, for which I will always be eternally grateful! One of the advantages that I had is that my role actually had components of every single department, which gave me enormous insight to the challenges and perspectives each group had. I managed a group called Aftermarket Products, but the nickname for it was Spare Parts. Basically, any project in the past that we ever worked on, when something broke or needed to be replaced or upgraded, I was the person that was contacted. I believe it was, by far, the absolute coolest job in the entire company. I was responsible for receiving the inquiry, deciding if we were going to quote it, consulted with engineering about the best option, priced it out, sold it, project managed the order, bought all the components, logistically got it to the location, and then billed for it. Our department was essentially a mini-EPC firm in a giant one. If you think Spare Parts is replacing some nuts and bolts, you are very sorely mistaken (although we actually did that too, for an unbelievable profit!). Spare Parts consisted of replacing Claus Combustors® on Sulphur Recovery Units, Sulfseps®, tubesheet insulation boards, transformers for desalters, catalyst tubes and outlet headers for steam methane reformers, slag grinders on gasification units, transfer lines, pumps and motors, and well, you get the idea. Basically we touched the entire refining process from the very beginning steps of storage (double deck floating roof tanks) all the way to petcoke gasification. What all this exposure taught me was that particularly in Procurement, people had no clue what they were buying.
It’s not as simple as just buying stuff…
Procurement is a fascinating discipline. A finished project, whether it is a new refinery, a nuclear power plant, or an aircraft carrier, consists of hundreds of thousands or millions of smaller components, all of which had to be purchased. At an EPC firm, procurement is separated into categories, because the complexities of the parts are just too overwhelming for one person to handle them all. Even one particular category, let’s say valves, opens up an entire universe that is staggering in variety. Ball valves, globe valves, butterfly valves, knife gate valves, pressure release valves, pig valves, the list goes on and on. And every single one of them comes in different sizes, different seat materials, different connections, different actuators. Go into a procurement office at Valero or KP and ask someone how much a 6″ ball valve weighs. I bet you that they won’t know. And that is a big problem.
Part 2 completes this discussion!
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