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Making Pipeline Manufacturing More Profitable with ERP Software
Manufacturing and/or repairing oil and gas pipeline equipment is one of the most challenging sectors in all of manufacturing. Finished products range in size from small precision bearings to large multi-ton pipeline segments, and often require extremely fine tolerances in order to withstand extraordinarily high pressures. Oil and gas pipeline customers demand fast response times, especially when faced with equipment breakdowns in the field. And as with all manufacturers these days, pipeline manufacturers have to offer reliable equipment and competitive prices in order to compete.
Using the latest in high-tech equipment and tooling, skilled production workers can handle the demands of building and repairing precision pipeline equipment. However, responding to short-turnaround times and constantly shifting production schedules requires a different kind of tool altogether. Which is why more and more pipeline manufacturing and repair companies are turning to Enterprise Resource Planning (ERP) software to improve response times, lean operations, and control costs.
Originally designed to streamline operations on the shop floor, ERP software has evolved into a highly sophisticated business management tool that gives manufacturers unprecedented control over virtually every aspect of the business. From shop floor management to inventory, payroll, financials, and customer relationship management, ERP helps manufacturers cut costs and streamline operations while improving key business metrics such as quality, on-time deliveries and more.
For oil and gas pipeline companies, ERP is especially helpful in the following areas.
- Scheduling. Oil and gas pipeline manufacturers tend to have very fluid production schedules, making it difficult to complete jobs on time. With features like forward and backward scheduling and the ability to determine and include machine workloads and labor capacities, ERP makes it easy to reschedule jobs or implement routing changes to get jobs out the door on time.
- Job costing. ERP accurately captures time and labor costs while tracking all expenses through every step of the production process. Pipeline manufacturers can determine the true costs of each job as soon as it’s finished – and use the data to facilitate more accurate estimating and quoting on upcoming jobs, ultimately resulting in better margins, profit, and customer satisfaction.
- Inventory management. ERP’s superb inventory management capabilities enable pipeline manufacturers to buy raw materials to the job rather than maintaining large and costly inventories. More important, they help to eliminate bottlenecks and job delays by always having parts on hand. New mobile technologies enable faster and more efficient inventory transactions, such as wirelessly receiving materials and conducting bin-to-bin transfers, to speed production on the shop floor.
- Purchasing. ERP streamlines the purchasing process, enabling manufacturers to save money by aggregating purchases and buying in bulk. The system automatically orders materials when inventory falls below preset levels.
- On-time delivery. Flexible scheduling, availability of parts, and efficient use of labor and machinery enable pipeline manufacturers to respond to sudden changes in due dates, part quantities or other customer demands. The result is remarkably high on-time delivery rates that keep customers coming back.
- Customer relationship management. ERP provides instant access to every aspect of a job or customer. Workers can give fast quotes and answer customer questions about jobs, shipments, invoices and more without having to call the customer back. Happier customers are return customers.
Case Study: Prime Machine
Headquartered in Salt Lake City, Prime Machine is a large industrial equipment manufacturing and repair facility serving the oil and gas, mining, power generation, aerospace and other industries. Oil and pipeline customers include some of the biggest names in the oil pipeline industry, including M.I. Swaco, Schlumberber, and G.E.
A versatile job shop, Prime Machine works on machinery ranging from industrial engines to pressure vessels, kilns and dryers, turbines, gearboxes, compressors, bearings, and more. They also offer on-site inspection, fabrication, welding, composite machining, equipment design, and millwright services. To help manage its complex manufacturing environment while meeting the ever-changing needs of its customers, Prime Machine uses ERP software from Global Shop Solutions.
“The two biggest challenges with our oil and gas pipeline business are the complexity of the jobs and the fact that these customers generally want things done yesterday,” says Clint Murray, vice president of Prime Machine. “Global Shop Solutions ERP software enables us to meet both challenges in a timely and cost-effective manner.
“For example, without ERP, scheduling can be a nightmare, especially with last-minute jobs or changes to work in progress. Global Shop Solutions gives us complete visibility into labor and machine capacity, allowing us to determine how quickly we can complete specific jobs and schedule accordingly. The forward and backward scheduling features enable us to see the impact on other jobs when we insert a new one into the schedule. And no matter how complex the job, the system enables us to put detailed description into each work order, outlining what needs to be done and how, when it needs to arrive at the customer’s site, and the quality requirements of the job.”
Precision Job Costing
In the oil and pipeline repair business, no two jobs are exactly alike. According to Murray, ERP software enables Prime Machine to manage complex repair jobs while accurately capturing costs at every step of the process.
On the labor side, the software’s excellent time keeping system enables Prime Machine to accurately determine who worked on the job, on which days, and how many hours. It records all this data electronically, streamlining the data capture process and eliminating the human errors that often occur with manual data entry. On the materials side, the software makes it easy to issue purchase orders and manage outside purchases. Plus, all the information automatically integrates with accounts payable and receivable, so there’s no need for double entry of the data. With ERP, Prime Machine managers no longer have to guesstimate; they know exactly what each job costs as soon as it is complete.
This ability to accurately track job costs has contributed to significant improvements in two other key areas for Prime Machine – creating routers and estimating/quoting new jobs.
Whenever a new job comes in the door, project managers immediately use the software to preplan the project. They estimate the amount of hours it will take, identify the tools, equipment and manpower it will require, and create a router for the job. This enables them to generate a quote based on real data rather than a rough estimate. As a result, they can get quotes out faster and more accurately. It also enables management to easily compare estimates against actual performance.
“Once a job is complete, the project manager pulls the time and material report and the work order comparison report,” adds Murray. “These allow us to see how well we estimated the job by comparing actual versus estimated costs.”
Managing Outside Processes
Every pipeline manufacturing company knows the difficulty involved in managing offsite repair or installation jobs, and Prime Machine is no exception.
For example, the company recently went offsite to help a customer repair an in-ground pump. The pump’s flange wasn’t set perpendicular to gravity, and the customer feared the pump might pull to one side and wear out the bearings. Using specialized laser equipment, Prime Machine technicians dialed into the flange, set it up perpendicular to gravity, and re-machined the flange face, allowing them to get the pump back up and running in good order.
The project required a considerable amount of manpower and field machining equipment, including portable flange facers and milling machines. Prime Machine tracks and manages the kinds of jobs by assigning each piece of equipment to a work order or workcenter in their ERP software, which has the flexibility to handle offsite jobs. This enables managers to track how much a workcenter gets used on the project and what rate to charge the customer. It also tracks all labor hours and the rates of each technician involved on the project.
Global Shop Solutions ERP also helps Prime Machine manage outside processes on the pipeline equipment it makes. For example, if a product needs a special coating or some other type of process, the software will automatically schedule the process and adjust the production schedule accordingly. The software even allows managers to insert “hold points” into the production process when necessary.
“Some of our jobs require the use of a high-velocity, oxygen-fueled (HVOP) spray system,” explains Murray. “We pre-machine the part, and then use HVOP to spray the stainless steel and tungsten carbide. Then we put a hold point into the production schedule to double-check the dimensions and ensure we will have enough material when we get to the machining process. Without ERP, that would be a very difficult and time-consuming process that could easily throw off the production schedule.”
A Complete Business Management Tool
In the oil and gas pipeline industry, providing a high level of customer service is just as important as making a quality product and getting it there on time. Here again, ERP software lends a hand.
Using the customer relationship management (CRM) module in Global Shop Solutions, Prime Machine sales and customer support personnel can quickly respond to customer inquiries about any job. With just a few clicks of the mouse, they can determine the status of all jobs, open or closed. They can access sales, financial, and other customer-related data. And they can instantly access this information, which eliminates frustrating call-backs to customers because the data can’t be located.
“With CRM, we can view the entire history of any customer and drill down to any level of detail from one easy-to-use screen,” says Murray. “This ability to respond in the moment to customer inquiries gives us a real advantage over competitors who can’t. It makes us more efficient while giving customers the responsive service they need.”
The many dashboards built into Global Shop Solutions ERP provide quick access to high-level information from all areas of the business – giving senior management the data needed to make informed business decisions that improve productivity and profitability.
Prime Machine managers regularly use these dashboards for tracking margins, profitability by customer, on-time delivery rates, and other key financial metrics. They also use the data to improve various aspects of their business model. For example, jobs frequently increase in size and scope while in production, and Prime Machine doesn’t always change their due dates in those situations, which can impact the company’s on-time delivery rate. Data from the dashboards enables managers to identify the deficiency and take steps to improve it.
“Global Shop Solutions ERP software helps us make a better product and get it there on time, most of the time – a difficult job in a complex business,” concludes Murray. “It allows us to compete more effectively because by providing superb visibility of data throughout the business and allowing us to understand our true costs. Virtually everything we do in our business, ERP allows us to do it faster and more efficiently.”