Expectations are justifiably high for major oil and gas operators, who demand innovative and forward thinking solutions from their suppliers. The reality today is that no facet of the drilling process is immune from the need to have continuous improvement applied extensively. Newpark Drilling Fluids’ initiative, to deliver value to operators relying on Lean methodologies, centred on key facility investments and included optimising the way that drilling, completion and stimulation products were to be developed.
In spite of the challenging market conditions of 2015 and 2016 (Figures 1 and 2), the company invested in critical infrastructure and product development projects such as the Kronos deepwater synthetic-based fluid system. Lean Six-Sigma Design for Manufacturing techniques were employed in the design of the Newpark Manufacturing and Distribution (M&D) Center and Port Fourchon deepwater drilling fluids facility. Newpark’s second facility in Port Fourchon was recommissioned as a completion fluids plant.
Figure 1. Source: Baker Hughes, http://phx.corporate-ir.net
Newpark designed the M&D Center for operational efficiency by following Lean methodologies to eliminate waste of all forms. Lean considers potentials for waste in over-processing, over-production, delays, people motion, unnecessary transportation, excessive inventory and rework or scrap. The minimisation of all types of waste decreases the cost of manufacturing and distribution to both Newpark and operators.
Figure 2. Challenging market conditions coincided with Newpark's investment in infrastructure and new technology.
Sources of waste in technology and manufacturing
The Newpark Technology Center and the Manufacturing Center collaborate in the product development process to minimise production time, steps, materials consumed, and speed to market. This collaboration not only reduces waste through over-processing, it also lowers the cost of the product without sacrificing performance, by reducing variation around critical-to-quality and critical-to-performance product characteristics.
Newpark has implemented a Kanban replenishment system (Figure 3) to facilitate pull directly from the customer. As a rig orders product, it creates an instant demand on a regional warehouse. The regional warehouse then places an electronic order to the Newpark Distribution Center, which creates a Manufacturing Work Order. As a result, manufacturing is only producing just enough to meet demand. This eliminates excess product. The key element that makes this system work is instant information visibility throughout the supply chain, which Newpark calls the ‘Connected Supply-Chain’. The connected supply-chain features a paperless documentation system and barcodes to track product movements and inventories at its various locations.
Figure 3. The Kanban methodology uses 'pull' methodology to trigger product manufacturing and distribution.
For each stock point, supply chain calculates an ideal inventory for each product based on historic and forecasted consumption. When inventory levels at the stock point fall below that minimum, the M&D Center triggers the replacement of product using ‘pull’ methodology. At the M&D Center, product and raw materials inventories also have minimum stock levels that trigger replenishment in the same manner.
Newpark’s Manufacturing Center has automation and highly flexible proprietary blending technology that allows them to quickly produce many small batches of different products on the same equipment or the same products on different equipment simultaneously. This versatility and speed enables the manufacturing centre to respond with on-demand production without the need to build up unnecessary inventories of finished goods.
The Kanban methodology is designed to be a ‘just-in-time’ inventory management system. At any point in time, the M&D Center can manufacture the product or order any raw material that falls below minimum stock levels. These automated production triggers are integrated in the notion of pervasive visual management. Visual management techniques ensure that each and every employee involved is aware of the current plan and is able to react quickly when something unexpected occurs, reducing costly consequences and corrective efforts.
Delays also occur during the commercialisation of new proprietary products. Working closely with the Newpark Technology Center, the M&D Center follows a formal management of change process to capture lessons learned and develop best practices on the manufacturing of the new product. This knowledge-capturing tool increases the speed to market of new technology.
The M&D Center strives to reduce wasted people motion in receiving raw materials and packaging, manufacturing product, packaging product, storage of product, picking product and loading product for shipment. The Kanban methodology allows the M&D Center to maintain desired product inventories. ABC inventory prioritisation and high-density (vertical) storage strategies (Figure 4) have helped to radically reduce the overall footprint of the distribution centre and minimise the travel of product throughout.
Figure 4. A warehouseman travels the isle of the high-density storage units on a rising forklift.
The M&D Center is strategically located in Conroe, Texas, just north of Houston. It is within close proximity to the Port of Houston for conveniently receiving raw material and commodity product and for shipping proprietary product internationally. It is within two days of any of the 48 contiguous US locations, allowing easy and economical access to US stock points and domestically-sourced product and raw materials. To further reduce transportation costs to US stock points, the Distribution Center consolidates loads of different products into full truckloads regularly.
Inventory represents capital invested in tangible goods; this carries risk and requires ongoing management. Reducing Newpark’s risk exposure and carrying costs lowers the overall cost of doing business. Inventory reduction increases turns, allowing cash to be put to more effective use, decreases the likelihood of damage and requires less space and resources to maintain. The Kanban system uses historical demand, projected rig count and reliability of supply to establish ideal inventories, which are re-evaluated each quarter or as needed. Newpark measures its adherence to the ideal inventory with a metric that is continually evaluated.
The biggest impact on inventories is at the domestic regional warehouses. The ability to maintain ideal stock levels equates to considerable cost savings. Over the past several years, inventory turns have increased four times.
Rework or scrap
A significant achievement of the M&D Center is its near-zero environmental footprint. Overage during production is minimised, collected, and then reprocessed in subsequent batches of the same product. Production planning includes consideration of chemistry compatibility to reduce cleaning delays and disposal between batches. When cleaning takes place, material reuse or sale helps to minimise scrap waste. At the Newpark Technology Center, considerable importance is placed on the safety and environmental aspects of Newpark’s proprietary technology. The Technology Center follows product development processes that challenge each new product on compatibility with existing products, the disposal or alternate use of left-over materials, the ease of handling as well as the impact on health, safety and the environment at the rig site.
The Newpark M&D Center minimises drum disposal costs by ordering raw materials in bulk quantities or totes. A single tote holds the equivalent of five drums while only occupying the space of four drums. It takes less time to setup one tote compared to five drums. When the tote is empty, Newpark returns it to the manufacturer for recycling, usually for a credit. These waste minimisation practices also reduce waste at the company’s warehouses and at the rigs Newpark services.
Contrary to what might be considered possible, the Newpark M&D Center in Conroe earned a Texas Storm Water No-Exposure Certificate and the City of Conroe granted the facility a zero-discharge Process Water Permit.
For the past two years, Newpark Manufacturing has produced and delivered on-time and in-full. First, the facility uses a paper-free manufacturing control system that employs high performance Coriolis meters, calibrated weigh scales, bar codes and human-machine interfaces. Additionally, a close partnership with raw material suppliers ensures the delivery of raw materials that conform to Newpark’s quality assurance specifications.
The development of proprietary solutions
New proprietary solutions drive efficiency for operators, and an understanding of their needs is critical. During the ideation phase of the new product development process, questions may include: What customer needs are addressed by this product? What are the most important aspects of this product in the eyes of the customer? Is this product replacing an existing one to lower cost or improve performance?
Product components selection must consider a new product’s health, safety and environmental impact. This includes acute or chronic health effects, an individual’s safety and ease of use, and environmental toxicity. For instance, products used in cold environments may require additives to reduce the pour point of the final blend. Flammable or combustible products may require additives to increase the flash point, not only improving safety but also decreasing transportation costs. Toxic products often require alternative formulations.
The Newpark Technology Center compiles all the criteria as gates that reduce the number of materials available for consideration for a new product. Laboratory investigations compare potential product formulations. When a formulation meets all the criteria, it is recommended for further scale up including small-batch, bulk-scale manufacturing and controlled field trial evaluations. Once an experimental product has performed satisfactorily in several field trials, it is approved for commercialisation and full production.
A particular legacy product in Newpark’s portfolio is limited geographically because of varying global environmental regulations. As a result, several less effective chemistries provide similar functionality in different global markets. In order to reduce waste and improve environmental stewardship, Newpark sought to develop an equal or more effective product with global compliance. Additional requirements, in comparison to the legacy product, were similar or improved economics, a lower pour point and a similar or higher flash point.
The product development team tested and evaluated potential chemistries before creating a product that met all of the requirements. The product is currently being prepared for field trials. Lab testing indicates that the trial product may require as little as one-third of the concentration to be equally effective.
Because of the high expectations of major oil and gas operators, there is a need to be innovative while simultaneously increasing efficiency and reducing costs. Newpark accomplished this by designing an M&D center using Lean Six Sigma Design for Manufacturing techniques and incorporating Lean principles into its supply chain. The minimisation of waste of all types reduced the cost of manufacturing and distribution for Newpark and its customers.
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/31102019/optimising-full-cycle-production/