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ciples results in a comprehensive design of value stream flow from end-to-end in all areas of the business. Te eight principles of operational excellence are: 1. Design lean value streams. 2. Make lean value streams flow. 3. Make flow visual. 4. Create standard work for flow. 5. Make abnormal flow visual. 6. Create standard work for abnormal flow. 7. Have employees in the flow improve the flow. 8. Perform offense activities.


In the oil and gas equipment industry, the basic principles are


simply too basic, especially the first one. More advanced lean con- cepts such as mixed model production, creating flow (not pull) through shared resources, and designing flow for the office (put- ting flow into high-tech engineering departments) are needed. And flow in the supply chain is always needed, too (see sidebar).


Achieving operational excellence in the oil and gas equipment industry happens by following a specific set of principles and guidelines.


Te key point here is that for lean to achieve operational


excellence, a company must design value stream flow. It is not accomplished through meetings, brainstorming sessions, or kaizens, but rather by using design guidelines.


Case in Point: FMC Technologies FMC Technologies has 30 production facilities in 17


countries and “provides technology solutions for the en- ergy industry” via products such as “subsea production and processing systems, surface wellhead systems, high-pressure fluid control equipment, measurement solutions, and marine loading systems for the oil and gas industry.” FMC Technologies’ division in Norway produces high-tech


controllers for wells on the ocean floor. By setting a destina- tion of operational excellence and designing value streams us- ing guidelines, not brainstorming, FMC Technologies’ Norway division was able to achieve tremendous results. In less than eight months, the division created true end-to-end self-heal- ing value stream flow and reduced lead time by 30%. Addi- tionally, each operator can now visually distinguish normal flow from abnormal flow and knows what to do when flow is beginning to break down. Te amount of time management needs to spend handling production issues has been greatly reduced, which allows company leadership to instead work with Engineering to improve future design variations.


Designing Value Stream Flow


In their book, Learning to See (The Lean Enterprise Institute. Cambridge, MA. 2003), Mike Rother and John Shook list these guidelines for designing value stream flow:


1. Takt – The rate of customer demand.


2. Finished goods strategy – How the factory will know what to build next for a given value stream.


3. Continuous flow – A method of production that produces parts in make one, move one fashion.


4. FIFO – A method of production between discon- nected processes that produces parts first in, first out.


5. Pull – A method of production between discon- nected processes where a fixed amount of inventory is held and consumed on an as-needed basis.


6. Single point scheduling – The one process in the value stream to which the production schedule is issued, identified as where flow stops and pull begins.


7. Interval – How long it takes the pacemaker process to cycle through each part in a given product family.


8. Pitch – Our management timeframe, or how often completed parts are taken away from the pacemaker process.


At FMC Technologies, the principles of operational excellence


are being applied in the office, too. By designing flow through Engineering using lean guidelines, teams now meet their commit- ments 96% of the time versus the previous 61% a year ago. Even global organizations like FMC Technologies that


produce complex oil and gas equipment in challenging pro- duction environments can apply the principles of Operational Excellence and create self-healing flow to deliver significant top- and bottom-line results—a great advantage in a complex, demanding, and innovative industry.


Kevin J. Duggan is noted for applying advanced lean tech- niques to achieve operational excellence. He is the author of three books on the subject: Design for Operational Excellence: A Breakthrough Strategy for Business Growth, (from which the eight principles of operational excellence listed in the article are taken); Creating Mixed Model Value Streams; and The Office That Grows Your Business – Achieving Operational Excellence in Your Business Processes. Duggan is founder of the Institute for Operational Excellence and Duggan Associates, an international training and advisory firm.


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