BPR, BPI, and BPM at Chevron
Chevron, one of the world's largest oil and gas companies, and its subsidiaries are involved in exploration and production of oil and natural gas, as well as in manufacturing, transporting, and distributing petrochemical products, including gasoline and refined products. In 2013, Chevron employed more than 60,000 people worldwide, produced the equivalent of more than 2.6 million barrels of oil every day, and reported more than $230 billion in sales. Chevron has been involved in several process-reengineering and improvement efforts over the years, evolving from BPR to BPI and eventually to BPM, as described below.
In 1995, Chevron was less than half of its current size today, producing roughly 1 million barrels of oil per day across six plants. The company was divided into three major departments: Refining, Marketing, and Supply and Distribution (S&D). Management decided that they needed to improve their supply chain (see Chapter 11) to better integrate their multiple internal processes. A key figure in decision making concerning process management was Vice President Peter McCrea. McCrea was convinced that the best strategy to dramatically improve performance at Chevron was to reengineer its end-to-end core processes, from the acquisition of crude oil crude through distribution offinal products to Chevron customers.
To accomplish this task, the Chevron team collaborated with a consultant company to create a model of the existing processes. The objective was to radically improve the existing processes to reflect Chevron's business goals. In other words, Chevron's strategy was not to analyze the existing processes to identify specific areas to improve. Rather, the project identified the desired outputs and then examined the supporting processes, utilizing BPR. As an added benefit, this holistic approach led the company to examine the interdependencies between processes executed in different business units. Adopting this holistic perspective ultimately improved the company's overall performance. In a 1996 report, Chevron claimed that the BPR project saved the company $50 million. This complex BPR effort was initially followed by several smaller, employee-driven BPI initiatives. For example, in 1998, six Chevron employees initiated a project to improve water treatment processes at a company plant in California.
Their efforts generated a 30 percent reduction in operating costs. Their success inspired other employees to initiate BPI projects in Indonesia, Angola, and other locations around the globe by employing Six Sigma improvement techniques. Although some managers were able to demonstrate benefits of BPI at the local level, BPI did not achieve companywide recognition and corporate backing until 2006, when Lean Six Sigma, a methodology that combines statistical process analysis with techniques to eliminate waste and improve process flow, became the preferred improvement methodology at Chevron. Since then, hundreds of BPI projects have been executed worldwide, resulting in signifi cant fi nancial benefits.
For example, from 2008 to 2010 Chevron reported more than $1 billion in BPI benefits. To support these internal improvement efforts, Chevron engaged its suppliers in BPI initiatives as well. To coordinate these various BPI efforts, Chevron has adopted a unified BPM approach that involves standardizing processes across the entire company and consolidating process information within a central repository. Chevron estimates that only 20 percent of its processes can be fully automated-the rest involve a combination of manual and automated steps. Thus, process standardization involves not only supporting processes through integrated information systems, but also ensuring that relevant employees are familiar with the standards for manual activities. To facilitate this task, Chevron implemented Nimbus (nimbus.tibco.com), a BPMS that acts as an intelligent repository of standard, companywide business rules and procedures. In addition, Nimbus can provide employees with detailed work instructions.
Consider, for example, Chevron's shipping process, which experienced efficiency and risk problems due to its different execution in locations throughout Asia, Europe, and the United States. To establish uniform company standards, Chevron employed a BPI approach. The company analyzed "as is" operations across different geographical locations, identifi ed best practices, and combined them into a common "to be" process. It then created documents that detailed these policies and procedures and distributed them to managers through the Webbased BPMS. Chevron's BPM strategy is part of a larger companywide management system that focuses on operational excellence. The program requires all Chevron operating companies and business units to adopt a continuous improvement perspective, directed by guidelines, metrics, and targets that are reviewed and adapted every year. Apart from process efficiency, Chevron focuses on metrics related to safety, risk, and the environment.
All employees participate in operational excellence activities, and managers receive specific operational excellence training to support the continuous improvement culture. Sources: Compiled from "Operational Excellence," chevron.com, March, 2012; "Chevron-using Nimbus Control software to manage processes," Finding FindingPetroleum.com, September 23, 2010; "Chevron Wins Boston Strategies International's 2010 Award for Lean Six Sigma Implementation in Oil and Gas Operations," www.bostonstrategies.com, September 22, 2010; "From the Bottom Up: Grassroots Effort Finds Footing at Chevron," isixsigma.com, March 1, 2010; "Business Process Improvement: A Talk With Chevron's Jim Boots," Ebizq.net, August 26, 2009; P. Harmon, Business Process Management, Elsevier, Burlington, MA, 2007; www.chevron.com, accessed May 14, 2013.
Questions
1. What was one of the main advantages of BPR at Chevron
2. Why did Chevron adopt BPI?
3. How does Chevron apply BPM in its operations today?