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SPECIAL REPORT

Innovations in Storage and Retrieval Systems for Modern Oil and Gas Operations

Kardex Remstar Intralogistic Solutions for an Efficient Business Future in Oil and Gas Being Prepared For Efficiency Sponsored by

Getting Lifeblood to the Process Principles of Efficiency Nothing Stands Still

Published by Global Business Media


Only the best solution is the right one for your intralogistics

Individual intralogistics solutions to keep your drilling and manufacturing operations flowing The efficiency of any organisation is decisively controlled by optimum intralogistics. Safety and costeffectiveness are always of the highest importance when developing a customer-specific solution for the oil and gas industry. With our intensive guidance, you gain important competitive advantages regarding reliability and speed whilst also making significant space savings.

Find out more about your personal solution concept – we look forward to helping you!

www.kardex-remstar.co.uk

Tel. +44 (0)844-939-0800 Info.remstar.uk@kardex.com


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

SPECIAL REPORT

Innovations in Storage and Retrieval Systems for Modern Oil and Gas Operations

Contents Foreword 2 John Hancock, Editor

Kardex Remstar Intralogistic Solutions for an Efficient Business Future in Oil and Gas Kardex Remstar Intralogistic Solutions for an Efficient Business Future in Oil and Gas Being Prepared For Efficiency

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Kardex Remstar

Getting Lifeblood to the Process

Sponsored by

Principles of Efficiency Nothing Stands Still

Published by Global Business Media

Published by Global Business Media Global Business Media Limited 62 The Street Ashtead Surrey KT21 1AT United Kingdom Switchboard: +44 (0)1737 850 939 Fax: +44 (0)1737 851 952 Email: info@globalbusinessmedia.org Website: www.globalbusinessmedia.org

Less Space – Added Value Reference Case 1 - Cameron Organises Inventory to Keep Product Flowing Reference Case 2 - National Oilwell Varco: Oil & Gas Manufacturing Meet Kardex Remstar at SPE Offshore Europe 2015, Aberdeen, UK

Being Prepared For Efficiency John Hancock, Editor

Supplying the Needs of a Complex Process Long-Term Growth Needs Long-Term Thinking Changes in the Way the Sector is Structured

Publisher Kevin Bell

A Need for Efficiency

Editor John Hancock

Getting Lifeblood to the Process

Business Development Director Marie-Anne Brooks Senior Project Manager Steve Banks

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Peter Dunwell, Correspondent

Longer Lives Mean Extended Supply Chain Needs A Challenging Working Environment

Advertising Executives Michael McCarthy Abigail Coombes

Supporting Maintenance and Repair

Production Manager Paul Davies

Francis Slade, Staff Writer

For further information visit: www.globalbusinessmedia.org

Lean

The opinions and views expressed in the editorial content in this publication are those of the authors alone and do not necessarily represent the views of any organisation with which they may be associated.

Nothing Stands Still

Material in advertisements and promotional features may be considered to represent the views of the advertisers and promoters. The views and opinions expressed in this publication do not necessarily express the views of the Publishers or the Editor. While every care has been taken in the preparation of this publication, neither the Publishers nor the Editor are responsible for such opinions and views or for any inaccuracies in the articles.

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Principles of Efficiency

11

Just in Time (JIT)

13

John Hancock, Editor

Reaching the Parts that Operators Need Managing Inventory, Storage and Retrieval Time and Technology – Key Factors

References 15

© 2015. The entire contents of this publication are protected by copyright. Full details are available from the Publishers. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical photocopying, recording or otherwise, without the prior permission of the copyright owner. WWW.OFFSHORETECHNOLOGYREPORTS.COM | 1


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

Foreword F

ROM BATTLEFIELDS to motor manufacturing,

time in materials handling. This is especially relevant

in every area of human activity success

for oil and gas companies. The article gives two case

depends on the quality of supply chains. It would

studies illustrating the benefits of these systems.

simply make any process too cumbersome if all

In the second piece we consider the wider context

of the materials, parts and tools involved had to

in which storage and retrieval (and other processes)

be stored at the point of use. So, by and large,

operate and we look at the place of storage and

all of these things are kept in a warehouse, away

retrieval in the overall economy of the sector as well as

from the point of work. Then, matching ‘time until

the value of investment in the sector and how inventory

needed’ against ‘time required to move them

management can contribute to productivity. In the

from warehouse to point of use’, a supply chain is

following article, Peter Dunwell considers some of the

constructed to ensure that when the work is being

physical challenges faced by offshore installations and

done, the right materials and tools are available to

the importance of maintenance and repair functions

do it. The critical element in any supply chain is the

being properly and promptly supplied. Francis Slade

warehouse and a critical element in the operation

then expands on two business philosophies that have

of the warehouse is the system used for storage

had a strong bearing on storage and retrieval systems.

and retrieval of items in store. Nowhere is this

Finally we look at the ways in which storage and

more true than with offshore oil and gas operations

retrieval have developed to suit the business practices

where every minute of lost production time can be

of today and a major change in picking methodology

counted in thousands of dollars.

that has supported enormous improvements in

The opening article in this Special Report looks at

efficiency and effectiveness.

automated storage retrieval solutions supplied by Kardex Remstar, which are designed to eliminate wasted space and excess inventory as well as saving

John Hancock Editor

John Hancock joined as Editor of Offshore Reports in early 2012. A journalist for 25 years, John has written and edited articles and papers on a range of engineering, support services and technology topics as well as for key events in the sector. Subjects have included aeroengineering, auto-engineering and electronics, high value manufacturing, testing, aviation IT, materials engineering, weapons research, supply chain, logistics and naval engineering.

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SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

Kardex Remstar Intralogistic Solutions for an Efficient Business Future in Oil and Gas Kardex Remstar

T

O BECOME more globally competitive, manufacturers have widely adopted lean manufacturing methods that seek to manufacture goods on a just-in-time basis and eliminate waste, including wasted space, excess inventory, and wasted motion involved in assembly and materials handling. Similarly, spare parts storage and retrieval can benefit from these same principles. Dynamic storage solutions from Kardex Remstar allow oil and gas companies to make sure this lean approach is extended to their intralogistics operations. There is a significant reduction in wasted motion in the picking of parts, subassemblies, or finished goods, while reducing the overall physical footprint required to store goods is greatly reduced. There is the

additional benefit that the goods are stored safely and securely. While the size and features among different product families can vary greatly, there are always efficiencies to be gained by following a “goods to person” concept in which the dynamic storage quickly and accurately moves goods to an operator. This way of doing things eliminates waste associated with the traditional “person to goods” operation in the form of travel/motion, search time, and time spent verifying a pick. Additionally, ergonomic hoists and lifting devices can be integrated to speed up operations and eliminate the manual lifting of goods – an especially important consideration in the oil and gas industry where manufacturing

Keep your drilling and manufacturing operations flowing Automated storage and retrieval solutions from Kardex Remstar

From rig manufacturing to drilling productivity: having the right part at the right time in the right place is critical to operations. Kardex Remstar offers a broad selection of automated storage and retrieval systems to keep processes in oil and gas companies flowing smoothly. This includes organised and secure parts storage, maximum part availability, fast retrieval and just-in-time delivery. Find out more about your personal solution concept – we look forward to helping you!

www.kardex-remstar.co.uk KARDEX REMSTAR IS A LEADING TECHNICAL SUPPLIER OF DYNAMIC STORAGE SOLUTIONS. THIS PHOTO IS TAKEN FROM THE MANUFACTURING SITE AT NEUBURG, GERMANY.

Tel. +44 (0)844-939-0800 Info.remstar.uk@kardex.com

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SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

Any time a manufacturing or storage site can produce more with less – including less space – it becomes more cost competitive

work-in-process requires heavy parts to be moved.

Less Space – Added Value Oil and gas companies often work in special environments, where space is limited and costly. Any time a manufacturing or storage site can produce more with less—including less space—it becomes more cost competitive. When you create more useable space, it becomes possible to perform more value-added work out of the same facility. Kardex Remstar`s solutions have height detector sensors that measure the height profile of each storage tray’s content, and instantly determines the best storage location. This function permits storage trays to be placed within 1 inch of each other, providing up to an additional 50 percent storage capacity per unit. By comparison, traditional methods need “reach-in space” or empty space within each shelf to allow room to pick. With dynamic storage, reach-in space as well as aisle space is essentially eliminated. The following two customer reference cases illustrate the benefits, efficiency gains and cost savings that Kardex Remstar solutions can bring to organisations operating in the oil and gas industry.

1. Cameron Organises Inventory to Keep Product Flowing Three Shuttles increase productivity by 86%, improve inventory control and product organisation for oil and gas valve manufacturer Cameron is a leading provider of flow equipment products, systems and services to oil, gas and process industries. One of Cameron`s facilities in Oklahoma City, OK represents the Valves and Measurement group. Serving companies worldwide, Cameron – OKC manufactures approximately 800,000 valves per year. These valves are designed to control and direct the flow of oil and gas through many different channels. Cameron has high standards for its manufactured products; therefore, the equipment used in these industry environments has demanding standards as well. Due to the large volume of valves being manufactured on the production floor, the amount of tools, gauges and components used in the process can be overwhelming. “Tools were being stored in cabinets and drawers, but it wasn’t very organised. It slows production down when you can’t find the right tool,” says Bobby Maxwell, Senior - Tool & Die Maker. With demand always on the rise, improving inventory control would result in increased productivity; therefore this was a top priority for Cameron. 4 | WWW.OFFSHORETECHNOLOGYREPORTS.COM

KARDEX REMSTAR OFFERS A BROAD SELECTION OF AUTOMATED STORAGE AND RETRIEVAL SYSTEMS TO KEEP OPERATIONS IN OIL AND GAS COMPANIES FLOWING. THIS IS A SHUTTLE XP STORAGE LIFT.

Automation consolidates multiple storage locations Hundreds of cabinets and drawers were spread throughout the facility, storing both CNC tooling and gauges. Operators would utilise tooling or gauges without record resulting in lost equipment and excess inventory. The storage areas were not safe or secure and the inventory was extremely disorganised. Two Shuttle XPs integrated with inventory management software were installed to consolidate these storage locations. All inventories from the cabinets were moved into these two machines to create a more central and efficient work station. One Shuttle XP is used for CNC tooling and the other manages gauge inventory. Productivity is flowing Before automation, operators would walk and search through drawer cabinets throughout the facility for the required tools and gauges necessary for manufacturing. Without a database to track inventory, missing items were common requiring additional time to search for the lost inventory or the purchase of new inventory. With the new Shuttles, the operators now walk to one central location and, with the push of a button, the extractor brings the appropriate tray with the necessary tools directly to the operator at an ergonomic workstation. On average, an operator would spend 34 minutes per day picking tooling and gauges. In the Shuttle system, it only takes 5 minutes, to pick. With limited travel and no searching involved, Cameron has been able to reduce the time spent pulling tools and gauges and


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

increase productivity by approximately 86% in both zones. In addition, a worker spent an average of 48 minutes per week searching for the lost items. The new Shuttle XPs have allowed Cameron to maintain better inventory control which has saved 42 hours per year of wasted search time. Improving inventory tracking and access Previously, access to tools and gauges was available to anyone, allowing for inventory to be lost or damaged. After installing the Shuttle XPs, the inventory management software tracks where tools and gauges are located within the unit. “The Shuttle in the gauge lab is in a controlled office, and users need a password to access the Shuttle,” says Arthur Wathan, Quality Inspector. Once an operator has access, they can store and retrieve inventory and the software will record each transaction. This added security allows for inventory to be accessible only to appropriate personnel. Organisation keeps inventory and staff safe Previously, tooling was not stored in a controlled environment. “Safety was at risk,” says Maxwell, “Tooling was lying around. This posed a safety hazard to our operators and a risk of damage to the inventory.” The Shuttle XPs provided a solution that would not only protect warehouse personnel but also the inventory being stored. A safety light curtain is located in the access opening of the Shuttle. While the machine is in motion, if the light barrier is broken, it will stop the machine to protect employees from injury. Products are safely stored in the machine, in a clean and organised environment. Keeping products in a controlled environment helps maintain the integrity of the stored goods. Spreading efficiencies With the improvements made in the CNC tooling zone and the gauge lab, Cameron decided to implement automation in the component parts zone. Previously stored on small racks, small component parts such as o-rings and gaskets, were taking up too much space. “There was no inventory control, so the inventory in this area was always off,” says Jose Alca, Manufacturing Engineer II. In the component parts zone, orders would come from SAP. The warehouse worker would walk from rack to rack, searching for the parts required to fill an order. Once the orders were picked, the warehouse worker would take the parts down to a kitting area for sub assembly, to later be sent to manufacturing assembly queues. “The racks were taking up too much space. We were wasting time walking around searching for parts,” says Alca.

Space savings After the successful implementation of the Shuttle XPs for storing tooling and the gauges, the component parts zone consolidated its inventory into one Shuttle as well. The implementation of the Shuttle was able to reduce allocated floor space from 294 sq ft to 91 sq ft, a 69% reduction in floor space. “Space is always a constraint in our facility. Freeing up floor space allows other processes around the Shuttles to become more efficient.” says Alca. Inventory is under control The component parts were previously stored on racks, and parts went missing all too often. On a yearly basis, the parts zone would misplace $83,000 in parts inventory. Now, the Shuttle requires inventory cycle counting, leading to increased accuracy. Misplaced inventory has been reduced by 70%, resulting in $58,000 savings annually.

For optimal processes Individual intralogistics solutions for an efficient business future

2. National Oilwell Varco: Oil & Gas Manufacturing Picking manufacturing orders 44% faster using less labour while recovering 70% of previously occupied space National Oilwell Varco pride themselves on delivering unlimited customer solutions by creating exactly what the customer needs when they need it. Along with custom jobs, comes custom parts, which would make a normal warehouse a pretty crowded place, but not at National Oilwell Varco’s Sam Houston Parkway Facility (SHP). National Oilwell Varco is a leading provider to the oil and gas industry and is dedicated to providing the highest quality oilfield products and services. For more than 140 years, National Oilwell Varco has been providing customers everything from spare parts to comprehensive drilling systems; including rig equipment, integrated systems, downhole tools and supply chain solutions. As plant capacity increased at the National Oilwell Varco-SHP Facility, so did the number of parts. Committed to continually improving their customer’s performance by implementing the Lean 5S program (Sort, Set in order, Shine, Standardize, and Sustain), the National Oilwell Varco-SHP Facility began to focus on improving their warehouse operations. The warehouse supplies parts to the manufacturing floor and keeping it organised and stocked with the right parts was becoming a challenge. The warehouse was redesigned to include three Shuttle vertical lifts from Kardex Remstar. The National Oilwell Varco-SHP Facility is now picking orders 44% faster using less labour while recovering 70% of previously occupied

Individual intralogistics solutions to keep your drilling and manufacturing operations flowing The dynamic storage solutions from Kardex Remstar are designed to meet the storage and retrieval requirements in maintenance and production. Due to their robustness, the storage units can not only be situated on a production site but also on a drilling platform. The combination of storage density, flexibility, and security makes this a unique storage solution for the oil and gas industry. Find out more about your personal solution concept – we look forward to helping you!

www.kardex-remstar.co.uk Tel. +44 (0)844-939-0800 Info.remstar.uk@kardex.com

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SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

With the rest of the recovered space, they were able to relocate the staging area into the warehouse area, making delivering completed orders from the shelving or Shuttle area much quicker

PICKING MANUFACTURING ORDERS AT NATIONAL OILWELL VARCO

shelving space. Since the project has been completed, Brenda Esman, Warehouse Manager, has taken the task of maintaining and implementing processes to ensure the warehouse maximises its new efficiencies. Timing is everything “Before installing the Shuttles, we did a time study. Workers were averaging 4.72 minutes per pick and we knew we needed to decrease that,” said Brenda Esman. Now, about half of the parts for an order are picked from the Shuttle vertical lifts and the other half from the shelving. The Shuttles average 1.85 minutes per pick, and because parts were able to be relocated to more accessible shelves, the shelving time has been reduced to 3.43 minutes per pick. Esman continues, “Our average picking time has been reduced to 2.64 minutes, that’s a 44% increase in productivity.” Flexibility in labour On average, the new system requires two people, one to pick from shelving and one to pick from the Shuttles. “When order volume is high, usually near the end of the month, we have the flexibility to add an additional person to the shelving area to keep up with the Shuttle area,” said Esman. With the previous system requiring eleven people being responsible for all transactions, SHP has cut their department labour requirements to eight people while remaining flexible to adjust labour to meet order volume. Increasing density The warehouse is responsible for about half of the 18,000 parts in National Oilwell Varco- SHP Facility. With about 3,000 of those parts in the 6 | WWW.OFFSHORETECHNOLOGYREPORTS.COM

Shuttle vertical lifts already, the goal is to get all of the high usage parts (about 5,000 parts) into the Shuttles. “As we move more parts into the Shuttles and a greater percentage of parts for an order are picked from the Shuttles, we expect to see the productivity numbers increase even more,” says Esman. The parts that have been relocated to the Shuttle vertical lifts occupied 2,654 square feet of floor space when previously stored in shelving. The new Shuttles occupy only 797 square feet; opening up 70% (or 1,857 square feet) of shelving space. “We chose to leave a portion of the shelving in place and were able to move parts that were previously stored outside and prone to damage onto shelving inside,” says Esman. With the rest of the recovered space, they were able to relocate the staging area into the warehouse area, making delivering completed orders from the shelving or Shuttle area much quicker. “The recovered space has allowed us to create a safer work environment for our employees, getting parts and trip hazards off the floor and clearing the remaining shelving aisles,” says Esman.

Meet Kardex Remstar at SPE Offshore Europe 2015, Aberdeen, UK Kardex Remstar is one of the world’s leading suppliers of automated storage and retrieval solutions. To find out more about our solutions for the oil and gas industry please visit our website www.kardex-remstar.com to find contact information for your nearest office. You are also welcome to visit us at SPE Offshore Europe 2015, 8-11 September in Aberdeen, UK. You can find us in Hall 4, stand 4D71.


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

Being Prepared For Efficiency

Efficient Intralogistics

John Hancock, Editor

Optimum results thanks to tailored solutions for oil and gas

An uncertain economic future demands that operators make their processes fit to face whatever that future might bring

Supplying the Needs of a Complex Process There is a large degree of complexity around exploration for and production of offshore oil and gas reserves. The whole process engages a wide range of engineering disciplines driving an array of specialist technology, equipment and operating methods. Offshore oil and gas exploitation is among the most demanding and costly commercial activities undertaken anywhere. The oceans are ‘last exploitable’ sources for oil and gas and are increasingly seen as possessing potential for renewable energy limited only by the technology available to realize that potential. However, concomitant with running a complex process using an array of technology and equipment is the need to be able to build a reliable supply chain to ensure that, when repairs and replacements are needed, the right materials, components and tools are quickly available without their storage necessarily taking valuable space on an expensive offshore platform.

Long-Term Growth Needs Long-Term Thinking That’s a real challenge but if Infield Systems’ research published in late February 20131 is correct, “… the subsea industry is amongst the most promising in the offshore oil and gas world, with subsea capital expenditure (Capex) set to grow at a staggering 14.8% CAGR (compound annual growth rate) to 2017.” Of course, we cannot ignore that there have been changes in the economic viability of the oil and gas sector since that report was published. Prices have fallen. Nevertheless, economic experience suggests that, in the medium to long term, energy demand will continue to grow. But there is no doubt that current conditions are a challenge. Since June 2014 prices have more than halved. The price of Brent crude oil went below $50 a barrel and US crude fell to below $48 a barrel in early 2015.

But this apparently gloomy picture does not tell the whole story. Writing about the North Sea in The Herald, Scotland, Mark Latham2 suggested that, “…the future for one of Scotland’s most important industries is far from as bleak as has been painted [and] the prospects for 2015 are looking decidedly better. The stark warning [has been] that the sector… could lose almost half of its 65,000-strong workforce…. [However] Sir Ian Wood… [said]… likely jobs losses over the next year to 18 months would be closer to 15,000. Although he concedes North Sea production could fall by 10% if prices continue to slide, Wood also predicted that conditions would begin to recover next year [2015]. A look at the price of benchmark Brent crude over the last three decades shows that prices have, from a historical perspective, been unusually high and stable in the last four years. So talks of a crash in prices are only relative. It could equally well be said that the oil price has corrected to somewhere closer to its historic average.” Jake Huneycutt writing in Seeking Alpha ‘How Low can Oil Fall?’3 is also more optimistic; “… there’s little evidence to suggest that break-even costs for the vast majority of producers are anywhere near the $90 - $100 per barrel prices that have been common over the past several years. Meanwhile, continued advances in technology could further reduce extraction costs …” Even when prices rise again, it might be some time before they reach recent high levels, so there will remain an imperative for producers to be as efficient as possible throughout the process. The introduction notes to 2014 PILOT Share Fair, Oil & Gas UK4 stated that, “The UK oil and gas industry’s urgent need to improve its efficiency and reduce costs will provide a key focus…” It isn’t only the growth of new fields but also the life extension of established fields will stretch oil and gas production life cycles to extents that were not previously envisaged and that will, in turn, require equipment to be used some way beyond

A competitive edge – no wasted space Our units are modular in their construction with the option to change height and the number of access openings pre- and post-construction. At least 85% of a conventional storage system’s occupied floor space can be recovered. Items of all sizes are stored in the least possible amount of space, saving money and time.

Find out more about your personal solution concept – we look forward to helping you!

www.kardex-remstar.co.uk Tel. +44 (0)844-939-0800 Info.remstar.uk@kardex.com

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SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

The price of Brent crude oil went below $50 a barrel and US crude fell to below $48 a barrel in early 2015

its designed working life. The need for a reliable supply chain supporting the supply, maintenance and repair of platforms will be vital.

Changes in the Way the Sector is Structured All of the above will require significant investment up-front in order to secure the level of supply chain and process efficiency that can be profitable and that might be a challenge for even some large players, let alone the smaller businesses in the sector. As a result, a round of mergers and acquisition activity has been predicted and, perhaps, the starting gun on this was fired when Shell made its April 2015 £47bn bid for BG to create a £200bn oil and gas giant. Although, as Guy Chazan, Claer Barrett and David Oakley in the Financial Times5 explained, “Since the price of crude began to slide last year, expectations have been high that the oil sector could see a repetition of the mergers and acquisitions fever that reconfigured the industry in the late 1990s – another period of low oil prices – and led to the creation of the current crop of supermajors... Some significant deals have already materialized since oil prices began to drop. Halliburton, the oil services group, unveiled plans last November to buy rival Baker Hughes. Repsol of Spain in December proposed a takeover of Talisman Energy of Canada. Rex Tillerson, chief executive of ExxonMobil, said last month [March 2015] the company could be open to a large deal.” Mergers and acquisitions deliver a number of benefits to businesses but, in the context of this paper, probably the most important are to reduce

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the unit cost of capital (which will make the cost of investments in the latest systems more feasible) and to generate cost efficiency (which, again, will make the operation of state-of-the-art systems more productive). What is certain is that, in order to remain competitive in whatever economic conditions might prevail in the future, offshore operators will need to find ways of making every part of their business more efficient and that will include the supply chain, and storage and retrieval systems within that process.

A Need for Efficiency In order to ensure a viable operation in current conditions, economies can and must be found across the enterprise. A good starting place for this would be Inventory and logistics (both key supply chain functions). In his paper, ’25 Ways to Lower Inventory Costs’6 Ralph Cox cautions; “while total logistics costs as a percent of sales are falling and most individual companies have succeeded in reducing inventory levels, total logistics costs per hundredweight are increasing, and inventory costs as a percent of total logistics cost are increasing. In many organizations, however, the opportunities to reduce inventory costs are often not addressed at all or are not completely exploited.” Even though inventory and stores might not rank up there with other offshore engineering achievements for excitement, they are, nonetheless, critical components in the process, ensuring that the supply chain is able to get the right materials, components and tools to the right place when they are needed to avoid lengthy shut-downs or failures.


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

Getting Lifeblood to the Process

Experience the revolution

Peter Dunwell, Correspondent

Whatever the conditions or challenges, offshore installations must be kept supplied

K

EEPING ANY industrial installation running smoothly is a process and logistical challenge. However, when that installation is located more than 100 miles from the nearest land in conditions that vary from demanding to threatening and with a cost base that demands almost continuous operations, the challenge becomes formidable. And not least among the formidable tasks is to ensure that the installation receives the supplies, materials, components and tools needed to keep it working. It’s called a supply chain and, at the heart of it, is a store. The efficiency and effectiveness with which that store operates will contribute significantly to the productivity and profitability of the whole operation.

Longer Lives Mean Extended Supply Chain Needs As well as the challenges referred to above, there is a further and growing challenge for those charged with the task of keeping supplies flowing to the offshore oil and gas market. The Journal of Petroleum Technology, February 2012 edition7 explained, “To keep capital and operational expenditures at a minimum, there is an increasing requirement from operators to use existing infrastructure... Therefore, platforms become ‘hubs’ and often their operational life [and reach] is extended.” Stephen Pullinger’s article in EDP24, ‘Ageing North Sea oil and gas platforms in the spotlight’8 clarified the position; “About 70pc of installations and equipment in the Southern North Sea are older than their expected 25-year lifespan. The oldest has been standing for 48 years – 23 years longer than it was built to do – as demands have grown to extend their use.” In his review of future economic recovery from the UK Continental Shelf for the UK Department of Energy and Climate Change, Sir Ian Wood highlighted actions that would make a real difference to improving economic recovery including optimizing use of and extending life of infrastructure,

Decisive competitive advantages from innovative intralogistics

production efficiency and maximizing the use of key technologies. Aging infrastructure, while it might well save massive amounts of investment in new installations, does increasingly rely on there being a reliable and well-managed supply chain with access to all the supplies, materials, components and tools required to maintain its productive capacity.

A Challenging Working Environment Let’s just revert to those underlying challenges of working in an offshore environment. Because of the exceptionally arduous conditions (weather, movement, hazardous materials and substances) in which most platforms operate, they are subject to considerable levels of wear and tear. Their condition, performance and safety can be compromised as, structures and systems that worked well at the outset, become progressively more worn and less effective. Added to that, new operations are often reaching out into ever more challenging locations. Many as yet unexploited oil and gas reserves are in inaccessible or inhospitable environments… or both. Nowhere is that more true than in the oceans where significant reserves of oil and gas are to be found at ever increasing distances from land, far beneath sea-beds themselves deep below the ocean’s surface. It’s a significant engineering challenge that generates significant supply challenges. But there’s no avoiding it. “Deepwater and ultra-deepwater oil and gas production began in the early 1990s, reaching approximately 1.5 million barrels per day (BPD) in 2000, and now exceeds 7.2 million barrels of oil equivalent per day (BOED).” According to Plant Engineering, ‘Challenges of Offshore oil and gas production.’9 That kind of growth requires ever more complex engineering installations and construction programs to be deployed across an infrastructure

Individual intralogistics solutions to keep your drilling and manufacturing operations flowing Process optimisation starts for us where others finish. We develop long-term solutions for the exploration, manufacturing, and transport of oil and gas. With these you gain long-term, significant competitive advantages.

Find out more about your personal solution concept – we look forward to helping you!

www.kardex-remstar.co.uk Tel. +44 (0)844-939-0800 Info.remstar.uk@kardex.com

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SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

The supply challenge is massive and it will be very important that operators get the right systems to cope with storage and retrieval needs that are at once more demanding and less able to tolerate error than ever before that itself is growing. Energy industry analysts at Douglas-Westwood10 believe there will be more than 7,000 fixed and more than 200 floating platforms, in addition to 190,000 km of pipeline currently installed plus a number of major modification programs to push growth in offshore operations and maintenance in the next couple of years. The supply challenge is massive and it will be very important that operators get the right systems to cope with storage and retrieval needs that are at once more demanding and less able to tolerate error than ever before.

Supporting Maintenance and Repair One critical area where supply will tell is maintenance and repair – activities that can halt production and that, therefore, need to have the right materials, components and tools accessible when they are required. As well as the repairs which might be regarded as exceptional, although not infrequent in offshore conditions, there is also routine maintenance. This can range from replacement of life expired or worn parts to quite significant installation programs. Maintenance cannot be neglected but must be reliably supplied if it is to fit into a working schedule.

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Offshore oil and gas installations represent costly investments and so owners and operators will not wish them to not be working any more than is absolutely necessary. A well run supply chain supported by a store with architecture designed to meet the most demanding of needs will go a long way towards ensuring this is the case. In short, the store is just as much a part of the technology ensuring that an offshore installation functions properly as any other piece of engineering. A properly structured store can ensure that the timely and accurate production of parts is an integrated element in any maintenance program and that, when a repair is called for, the right parts can be on-site with the minimum delay. The last word in this article should go to Phillip Slater writing in Maintenance Online ‘Six Tips to Improve Spare Parts Management’11 explained; “Spare parts form the bedrock on which operational reliability is built and this requires appropriate storage, treatment of, and timely access to the required parts. Yet, spare parts are also the most overlooked contributor to reliability outcomes… many companies routinely operate without properly implementing even the most fundamental aspects of spare parts management at their sites. [They] have storerooms with neat shelves and clear labels but this is not enough…”


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

Principles of Efficiency Francis Slade, Staff Writer Lean and Just in Time are now established business philosophies that can add value to the work of any business unit, especially the warehouse and supply chain

Experience the revolution Decisive competitive advantages from innovative intralogistics

J

OHN AND Peter have already covered the conditions and environments – economic and operational – within which any storage and retrieval system as well as the broader supply chain will have to operate when serving offshore oil and gas. For this article, I want to look at two business systems that have revolutionized processes and, in particular, supply chains and storage philosophies. They are Lean processes and Just in Time deliveries.

Lean According to Lean Enterprise Institute12, “The term ‘lean’ was coined to describe Toyota’s business during the late 1980s by a research team headed by Jim Womack, Ph.D., at MIT’s International Motor Vehicle Program.” But while Lean might have originated in a motor manufacturer’s processes, it can be applied throughout any organization because it is not a tactic or cost reduction program but a way of thinking and acting across the enterprise. What it really addresses is how to maximize value creation while minimizing waste in the process – getting more done and getting it done well but with the use of fewer resources. This is not the paper in which to offer a masterclass on Lean working but it will make it easier to understand the thinking if we can at least identify the principles on which it is built. Cardiff University13 has come up with five overriding principles which define and govern the implementation of a Lean business. For our purposes, the term ‘customer’ would refer to the offshore installation being served from a warehouse. 1. Identify Customers and Specify Value – recognize that only a small fraction of the total time and effort [expended] in any organization actually adds value for the end customer. By clearly defining Value for a specific product or service from the end customer’s perspective, all the non-value activities can be targeted for removal.

2. Identify and Map the Value Stream – [refers to] the entire set of activities across all parts of the organization involved in jointly delivering the product or service. This represents the end-to-end process that delivers the value to the customer. Once you understand what your customer wants the next step is to identify how you are delivering (or not) that to them. 3. Create Flow by Eliminating Waste – Typically, only 5% of activities add value – this can rise to 45% in a service environment. Eliminating waste ensures the product or service ‘flows’ to the customer without interruption, detour or waiting. 4. Respond to Customer Pull – understand the customer demand on your service and then create a process to respond to this to produce only what the customer wants when the customer wants it. 5. Pursue Perfection – Creating flow and pull starts with radically reorganizing individual process steps, but the gains become truly significant as the steps link together. As this happens, more layers of waste become visible and the process continues towards the theoretical end point of perfection, where every asset and every action adds value for the end customer. What will interest readers will be the application of Lean principles to a warehouse culture. Essentially, a Lean warehouse has the same jobs to do as any warehouse, such as receiving, putting away, storing, picking, and shipping but will seek ways to facilitate continuous movement with ideas such as, say, relocating a banding machine to avoid packaged assemblies having to leave the delivery line for banding.

Just in Time (JIT) Just in Time, according to Investopedia14, is, “An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the

Individual intralogistics solutions to keep your drilling and manufacturing operations flowing Process optimisation starts for us where others finish. We develop long-term solutions for the exploration, manufacturing, and transport of oil and gas. With these you gain long-term, significant competitive advantages.

Find out more about your personal solution concept – we look forward to helping you!

www.kardex-remstar.co.uk Tel. +44 (0)844-939-0800 Info.remstar.uk@kardex.com

WWW.OFFSHORETECHNOLOGYREPORTS.COM | 11


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

JIT offers an efficient and cost effective alternative to the traditional ‘Just in Case’ strategy, which built large and costly inventories

production process, thereby reducing inventory costs.” The Business Dictionary adds to that definition, explaining that JIT is a ‘Pull’ (demand) driven inventory system in which materials, parts, sub-assemblies, and support items are delivered just when needed and neither sooner nor later. Its objective is to eliminate product inventories from the supply chain.” The method requires that producers are able to accurately forecast demand and/or there is a good system with which the user of materials, components or tools can communicate their requirements to the store plus a fast picking and delivery system. JIT offers an efficient and cost effective alternative to the traditional ‘Just in Case’ strategy, which built large and costly inventories. Looking at both sides of the case, Rita Logistics Blog15 summarises… The main benefits of JIT: 1. Funds that were tied up in inventories can be used elsewhere. 2. Areas previously used to store inventories can be used for more productive uses. 3. Throughput time is reduced, resulting in greater potential output and quicker response to customers. 4. Defect rates are reduced, resulting in less waste and greater customer satisfaction.

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… and the disadvantages: Implementing thorough JIT procedures can involve a major overhaul of business systems – it may be difficult and expensive to introduce. JIT also opens businesses to a number of risks, notably those associated with the supply chain. With no stocks to fall back on, a minor disruption in supplies to the business from just one supplier could force production to cease at very short notice. Some JIT systems actually extend beyond the company to suppliers so that the business itself can pare warehousing space and costs to a minimum. The in-house warehouse then becomes a near ‘virtual facility’ which simply bundles and transships consignments to meet the requirements of production areas. This requires a very good supply chain management system and excellent supplier relationships if it is to succeed. But, of course, the reduced costs from not having to maintain large areas to simply store materials, components, spare parts or tools that ‘might’ be needed will generate many positive opportunities in the business. Lean and Just in Time will work best when the warehouse store and retrieval system is designed with the principles of both systems in mind.


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

Nothing Stands Still John Hancock, Editor

Keep your drilling and manufacturing operations flowing

A well organized and properly equipped storage and retrieval system is much more than just a warehouse

Automated storage and retrieval solutions from Kardex Remstar

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CCORDING TO the Institute for Supply Management16, “Inventory ties up cash, takes up space, requires handling, deteriorates and is sometimes lost or stolen.” Intergraph17 estimates that, “… surplus materials caused by ineffective materials management, even to levels of only five per cent, can result in the loss of millions of dollars on an average capital project.” This puts some proportion on the importance of a sound supply chain served by a well-managed warehouse using state-ofthe-art storage and retrieval technology.

Reaching the Parts that Operators Need Looking at a topic of close interest for those servicing offshore installations, Phillip Slater writing for Maintenance Online18 suggests that, “Spare parts are the lifeblood of operational reliability and plant capacity… [forming] the bedrock on which operational reliability is built and this requires appropriate storage, treatment of, and timely access to the required parts.” He also offers six ‘tips’ to improve parts management – only the headers are listed here but full details can be on the website. 1. Develop Clear Spare Parts Stocking Criteria 2. Provide Clear Guidelines on How Many Parts to Stock

3. Accept that Some Stock Outs are OK 4. Review the Holdings of Critical Spare Parts 5. Identify the Causes of Excess Spare Parts Inventory 6. Review Your Storeroom Security

Managing Inventory, Storage and Retrieval Inventory management is very important for any operation that requires delivery of materials, parts or tools in order to keep the operation running. This time pressure is what drives a great deal of inventory management because the only way that big and expensive warehouses can be eliminated is by a system that offers the same levels of assurance on availability as the philosophy of keeping one of everything ‘just in case’. At the heart of every storage and retrieval system is the process of retrieval, ‘picking’. Picking is a fundamental part of warehousing and a main determinant of productivity in a supply chain. As a result, a lot of management thinking has been invested in methodologies to improve this stage of the supply process. Critical to any picking system is the way in which the items to be picked are arranged. The more logical their storage arrangements and the more they conform to likely priorities in demand, the more efficient the picking process will be.

From rig manufacturing to drilling productivity: having the right part at the right time in the right place is critical to operations. Kardex Remstar offers a broad selection of automated storage and retrieval systems to keep processes in oil and gas companies flowing smoothly. This includes organised and secure parts storage, maximum part availability, fast retrieval and just-in-time delivery. Find out more about your personal solution concept – we look forward to helping you!

www.kardex-remstar.co.uk Tel. +44 (0)844-939-0800 Info.remstar.uk@kardex.com

WWW.OFFSHORETECHNOLOGYREPORTS.COM | 13


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

Goods-to-person is more amenable to automation and, because there is no need to make room for pickers to wheel carts around the warehouse, storage can be denser so less need for space. Yet worker safety levels are higher. And it’s not such a new idea: Henry Ford first implemented goods-toperson when he revolutionized the assembly process with a line where the workers maintained position and the work pieces moved between them.

It is also true that the less frequently an item is handled, the less likely it is to sustain damage

Traditionally, pickers moved around the warehouse with their carts and a picking list to check off each listed item as they removed the requested object from stock. However, apart from the time and travel element integral to such an approach, this system also carries with it a level of risk of inaccuracy. As supply chain methods improved, so the picking process also had to change to keep abreast of the latest methodologies. Material Handling and Logistics19 (MH&L) explains that, “Distribution centers have used this mainstay person-to-goods order picking scenario for decades. But as the number of SKUs [Stock Keeping Units] grows, fuelled by market shifts such as e-commerce growth and the rising demand for just-in-time ordering, workforce consistency and availability have become less predictable. These factors have challenged the traditional person-to-goods fulfilment model. It was once acceptable for a picker to spend 60 percent of the time traveling and 40 percent of the time picking. However, distribution executives are increasingly looking for more efficient solutions to minimize wasted time between picks and increase the number of orders processed per person. That’s why many of them are embracing a goods-to-person fulfilment approach using advanced technology for inventory storage and movement.” The article concludes that, “A properly applied goods-to-person system can double or triple picking activity. Although the biggest challenge to justification is the initial capital investment, the long-term benefits can outweigh that.”

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Time and Technology – Key Factors All of this is particularly relevant to the spare parts inventories that keep offshore installations functioning. Whereas it is of less concern to a consumer or even a retail unit whether an item takes one or five days to arrive (online fulfilment businesses offer choice of delivery times according to how much the customer wants to pay) for a maintenance manager responsible for an offshore production platform, time is everything. Plus, the increasing complexity of parts used in the process makes the lower error rate associated with minimizing human involvement a very attractive reason for considering a different system. It is also true that the less frequently an item is handled, the less likely it is to sustain damage. The implementation of a system that moves goods to the picker will also open up a range of further opportunities for automation using the latest IT and technology applications. Falling under the general acronym of CNC (computer numerical control) are a raft of technologies that can assist with stock control. Just to cite the two most commonly available, barcoding has been with us for many years and allows a machine to instantly identify an item passing a scanner. More sophisticated, RFID (radio frequency identification) will even carry useful information about the item – valuable if a part has been refurbished for re-use. There are numerous methods available to improve the workings of warehouses and stores but the first step is to consider a system that will use the latest methodologies and make possible the application of the latest technologies.


SPECIAL REPORT: INNOVATIONS IN STORAGE AND RETRIEVAL SYSTEMS FOR MODERN OIL AND GAS OPERATIONS

References: Infield Systems, ‘Subsea Oil and Gas Sector Set For 14.8% CAGR Growth To 2017’ http://www.infield.com/news/subsea-oil-gas-sector-growth-2017/62

1

Herald Scotland http://www.heraldscotland.com/business/markets-economy/how-downturn-in-oil-price-could-benefit-scotlands-offshore-sector.26155579

2

3

Seeking Alpha, ’How Low Can Oil Fall?’ (free register to read the whole article) http://seekingalpha.com/article/2835936-how-low-can-oil-fall

4

Oil & Gas UK http://www.oilandgasuk.co.uk/news/news.cfm/newsid/1088

5

FT http://www.ft.com/cms/s/2/140c4f2e-ddb7-11e4-8d14-00144feab7de.html#ixzz3X616hYdY

6

Supply Chain Management Review http://www.scmr.com/article/25_ways_to_lower_inventory_costs

The Journal of Petroleum Technology http://www.mydigitalpublication.com/article/Offshore+Oil+and+Gas+Installation%E2%80%94Aging+and+Life+Extension/951953/0/article.html

7

8

EDP 24 http://www.edp24.co.uk/business/ageing_north_sea_oil_and_gas_platforms_in_the_spotlight_1_3877450

9

Infield Systems http://www.infield.com/news/subsea-oil-gas-sector-growth-2017

10

Jason Waldie at the ‘Subsea Asia Conference’, Kuala Lumpur

http://www.subseauk.com/documents/subsea%20asia%20-%20jason%20waldie.pdf 11

Maintenance online http://www.maintenanceonline.co.uk/article.asp?id=5812

12

Lean Enterprise Institute http://www.lean.org/WhatsLean/

13

Cardiff University http://www.cardiff.ac.uk/lean/principles/

14

Investopedia http://www.investopedia.com/terms/j/jit.asp

Rita Logistics Blog https://ritalogisticsblog.wordpress.com/2010/04/12/advantages-and-disadvantages-of-just-in-time-jit-manufacturing-and-inventory-control-system/

15

16

Institute for Supply Management http://www.ism.ws/pubs/proceedings/confproceedingsdetail.cfm?ItemNumber=11540

17

Intergraph http://www.intergraph.com/oilgas/default.aspx

18

Maintenance online http://www.maintenanceonline.co.uk/article.asp?id=5812

19

Material Handling & Logistics http://mhlnews.com/technology-automation/what-should-know-goods-to-person-0501

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