The anatomy of operational excellence

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Where operational excellence has been highly successful, inside and outside the oil and gas industry, companies reaping the benefits share many key characteristics and attributes. Below is an outline of OE and the components that drive continued and sustainable results.

Key operational excellence components

EY - Key operational excellence components

Causes of inefficient operating performance

While many organizations are succeeding in some critical operational areas of focus, few, if any, are effectively managing them all. Industry analysis suggests operational performance gaps begin at the strategic level and carry through to a specific process breakdown within assets. In addition, operations functions often lack continuous improvement efforts targeting these inefficiencies and failure modes.

Below, we outline the most common key factors behind operational inefficiencies.

Strategic factors

EY - Non-integrated business and activity planning

Non-integrated business and activity planning

  • Lack of leadership sponsorship and maturity
  • Ineffective strategy and framework
  • Difficulties translating strategy into operations
EY - Lacking an effective operating model

Lacking an effective operating model

  • Siloed design architecture
  • Unclear decision governance
  • Insufficient performance management
  • lack of standardization, policy and enforcement

Strategic decision-making

Better question

A NOC sought to improve the way its top management was making key strategic decisions. An organization with multiple subsidiaries, the NOC faced a challenge to assess the impact of major strategic decisions, M&A activity and other large investment projects it was making on key financial metrics of its entities and at the consolidated level. The NOC had to answer the question: “Can re-evaluating our decision-making strategy help us develop the most optimal combination of investment decisions?”

Better answer

  • Our team identified revenue and cost drivers relevant to each part of the business.
  • We created a flexible, transparent and robust decision-making model that enables better business performance, calculates KPIs, and identifies and quantifies the key risks for better risk management and mitigation.
  • We designed a documented process, held trainings for all stakeholders and ensured our model would be subject to continuous development to make it sustainable in a change-driven environment.

Better outcome

Our strategic decision-making model empowered the NOC to make better informed strategic decisions. The top decision-makers now work with more transparent information, enabling them to more clearly analyze the impact of their strategic decisions on both the consolidated group’s and its individual subsidiaries’ financial performance. Our model has boosted the NOC’s analytical capability and consistency in performance management across subsidiaries.

Tactical factors

EY - Mismanaged supplier and contractor relationships

Mismanaged supplier and contractor relationships

  • Prequalification and contract execution not robust
  • Limited visibility to contractor and supplier risks
  • Poor field management and performance analysis
  • Assumption of project uniqueness
EY - Poor asset reliability and integrity

Poor asset reliability and integrity

  • Discounting predictive maintenance for scheduled maintenance
  • Poor shutdown and turnaround management
  • Ineffective operational readiness planning
  • Over-abundant maintenance activities
  • Insufficient data analytics
EY - Inefficient cost management

Inefficient cost management

  • Unaware of cost drivers across value chain and interdependency
  • Lack of production management optimization
  • Inadequate business component modeling

Tactical decision-making

Better question

An organization was struggling to keep its assets intact while continuing to be a leading service provider and juggling significant internal spend. The organization had to answer the question: “Will performance improvement help identify significant cost savings?”

Better answer

  • We analyzed and evaluated the maintenance team’s work procedures and the critical performance elements they struggled with daily.
  • We redesigned the maintenance team’s processes, streamlining their work routines to more effectively link to one another and scale up the impact of single maintenance efforts.
  • We introduced a leading-practice staff performance assessment to make successes measurable, ensure continuous improvement and spread top performance in the long run.

Better outcome

Our client’s annual costs for internal maintenance services decreased by roughly 15% of total internal maintenance costs. In addition to the financial impact opportunities, our client benefited from higher performance of its maintenance teams, which are now better organized and more motivated.