Background
The client is a company with 2,300 employees working at two locations. Both plants produce a total annual volume of about 12m tons of petrochemical products, primarily fuels, heating oils and olefins. Both plants must be shut down at regular intervals in order to meet the requirements of the operating concession and to ensure that the plants continue to operate safely. During these downtimes, legally required inspections, necessary maintenance and cleaning procedures are carried out. Managing these downtimes or shutdowns as they are also known has become increasingly difficult and complex due to the growing integration of assets as well as the optimisation of plant down-times.
The client's budget for shutdowns has risen excessively over the previous few years, and on occasion was exceeded by up to 65%. As the company could not identify the reasons for this cost development, it commissioned T.A. Cook to conduct a cost analysis.
The challenge
In order to achieve greater transparency in costs, accounting, budget, it was necessary to
1. discover the main reasons for the increase in costs
2. evaluate the effect of influence factors in monetary terms and
3. to find ways and means to reverse the cost development.
The solution
To determine the reasons for the cost increases, T.A. Cook carried out a comparative cost analysis of a selection of previous shutdowns. The analysis was based on data recorded in SAP and other internal systems. Through interviews with staff, the consultants were able to confirm the validity of the data and make necessary corrections facilitating a comparison of the downtimes included in the analysis.
In addition, T.A. Cook compiled a comprehensive list of influence factors that had been identified in talks with the client as significant cost drivers. Subsequently, T.A. Cook evaluated individual influence factors and compared the costs of the respective downtimes. The results of the analysis, however, failed to fully explain why the costs were rising from shutdown to shutdown. In total, it was not possible to identify the reasons for up to 50% of the overall increase in costs.
After the completion of the cost analysis, the client decided it was necessary to assess whether these unexplained costs were caused by inefficiency and commissioned T.A. Cook to analyse the processes and organisation of a specific shutdown.
The organisation and process analysis was divided into three core sections:
1. Analysis of current downtime processes: the shutdown process was visualised in detail using the 'brown-paper' technique and analysed to determine faults in systems and processes. Finally a list of all identified weaknesses was put together.
2. Measurement of staff productivity in partner companies: through on site observation it was revealed that at times only 58% of the hours worked at partner firms were actually productive. The remaining time was often wasted due to delays and unnecessary procedures.
3. Assessment of management behaviour:
In-house observations revealed that process managers (e.g. Coordinators) often spent only 22% of their time with active management. Rather than taking action to prevent problems, they tended to react to situations as they arose (passive management) and spent much of their time on problem solving.
Two main causes for the lack of efficiency were identified: on the one hand, inadequately defined scope of work, on the other, insufficient and late planning at the preparation stage (Front End Loading). All opportunities for improvement identified in the analysis were compiled in a central register and evaluated by T.A. Cook.
To assess the overall improvement potential, the identified opportunities were clustered in three sections and weighted. This revealed that the category Front End Loading, which included the important factor 'delays in project planning' was responsible for 50% of the unexplained increase in costs.
Benefits
The four-week cost analysis facilitated a systematic breakdown of shutdown costs and the evaluation of important influence factors. By categorising these factors according to their level of influence, it was possible to define and evaluate key levers to reduce costs.
The process analysis revealed other weaknesses in organisation structures and processes that were responsible for the remaining share of the cost increases.
According to the analyses, the cost savings potential amounted to 20%-30% of the total costs.
During the analysis phase, the client asked T.A. Cook to design a project to optimise the shutdown process with the aim of developing and implementing lasting solutions.
For more information contact:
Rupert Clark
Marketing Manager
Direct: +44 (0) 1183 260 229
Mobile: +44 (0) 7792 926 696
r.clark@tacook.com |
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