05.23.2010

By Ken Boyer, Fisher College of Business and Rohit Verma, Cornell University

Authors: Operations and Supply Chain Management for the 21st Century, 2009, Southwestern Cengage Publishing

Its hard to turn on the TV or access the internet right now without hearing something about the huge oil spill from the Deepwater Horizon oil rig in the Gulf of Mexico.  On April 20, 2010 the rig had a huge blowout, blew up, caught on fire and sank.  The blowout killed 11 workers, will cost several billion dollars to stop and clean up, and is leaking between 10,000 and 250,000 barrels of oil per day into the Gulf, depending on which estimates you believe.  No matter your point of view, this is a disaster of tremendous magnitude.  But what does it have to do with operations management?  Read on to see a few linkages:

Quality Management: One of the central pieces of equipment in the disaster is the Blowout Preventer (BOP).  Essentially a very expensive Poke yoke or mistake proofer, the blowout preventer did not work.  For more information on how blowout preventers are supposed to work, go to the following link:

 

Project Management: A useful rule of thumb for major projects is that “anything that can go wrong, will go wrong” or “expect the unexpected.  According to a 60 Minutes interview with Mike Williams aired on May 16,   the initial estimate to drill the well, 5000 feet underwater and then 13,000 feet below the bottom of the ocean, was 21 days – at 1 $million a day.  But the well took twice that – 42 days.  With the schedule slipping, the BP manager ordered the drilling speed to increase.  Thousands or millions of project managers over the years have “crashed a project” – speeding up the pace or spending more money to finish earlier, yet often this comes with an increase in the risk of quality problems.  In this case, the Williams says “ going faster caused the bottom of the well to split open, swallowing tools and that drilling fluid called “mud.”  The original well had to be abandoned and a new one started.

Supply Chain Conflict: BP was the customer of a company named Transocean, which contracted to drill the well.  When things get outsourced, there is often tension and competing objectives.  According to Mike Williams and CBS:

“In the hours before the disaster, Deepwater Horizon’s work was nearly done. All that was left was to seal the well closed. The oil would be pumped out by another rig later. Williams says, that during a safety meeting, the manager for the rig owner, Transocean, was explaining how they were going to close the well when the manager from BP interrupted.

“I had the BP company man sitting directly beside me. And he literally perked up and said ‘Well my process is different. And I think we’re gonna do it this way.’ And they kind of lined out how he thought it should go that day. So there was short of a chest-bumping kind of deal. The communication seemed to break down as to who was ultimately in charge,” Williams said.”

To see the entire 60 minutes interview, click on the following link.  See how many operational challenges can be seen.  Clearly, in hindsight, there were numerous decisions that should have been made differently.  Unfortunately, hindsight is 20/20 – in oil rig drilling it is hard to determine the proper course of action in the moment.

 

 

 

Sources:

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