(10b) Adding Value to the Energy Industry by Delivering Projects Predictably

Material Description ? The implementation of a stage gate process at an oil field supplier yields substantial business results.

A division of NATCO Group, an engineered equipment oil field supplier, like many of its peers was working in a challenging economic environment. The firm had a robust order backlog, customers were asking for compressed delivery times, qualified personnel were in short supply and suppliers were extending their lead times. As a result of these factors profit margins were under pressure, delivery dates were not always met and the firm was having difficulty hiring and retaining staff.

The firm embarked on implementing a process to manage the engineering, procurement, and fabrication of customized oil field equipment. This division of NATCO Group builds to order so each piece of equipment is unique. With the assistance of an outside consultant NATCO proceeded to implement a project delivery system that would facilitate the delivery of projects predictability with respect to schedule, quality and cost. The three components of the project delivery system are governance, a stage gate approach and an integrated team.

Two key challenges to implementing change system wide are measuring the effectiveness of the change and getting the organization to embrace change.

NATCO's approach was to establish a system to measure solution effectiveness via impact on margins and delivery times. Further, a large implementation team was formed and an incentive pay plan was developed funded entirely by incremental cash flow from increased margins. Hence, the two major stumbling blocks to enterprise wide change were addressed: measuring the effectiveness of change and supporting change within the organization.

Nine months after implementation of the new project delivery system gross margins for the division increased by 45% and project on time delivery increased by approximately 25%. Further, fully 90% of the incentive pay, based on the aforementioned metrics, was paid out to the implementation team.

Significance ? The methodology for achieving this success in such a short time period will be addressed in the full length paper.