QUALITY AND RISK MANAGEMENT, COMPLEMENTARY MANAGEMENT TECHNIQUES TO ASSIST PIPELINE LIFE CYCLE INTEGRITY

Transcription

1 International Pipeline Conference Volume 1 ASME 1996 IPC QUALITY AND RISK MANAGEMENT, COMPLEMENTARY MANAGEMENT TECHNIQUES TO ASSIST PIPELINE LIFE CYCLE INTEGRITY Bruce E. Fowlie Nu-Trac Management Consulting Ltd. Calgary, Alberta, Canada (403) ABSTRACT In recent years, num erous m anagem ent techniques have com e forward. M any o f these techniques are perceived as independent and not com plem entary to each other. This may have led many people to suggest that the various techniques are nothing m ore than buzzw ords and flavor o f the m onth philosophies. U nderstanding the various techniques and their com plem entary aspects is perhaps the greatest tool for the m anagem ent o f a pipeline system throughout its life cycle This paper discusses the main features o f quality m anagem ent and risk management. It also dem onstrates the advantage o f m erging these tw o techniques thereby causing the organization to better m anage life cycle design, operation and cost. Lastly, this paper illustrates that external com m unications can be im proved by com m unicating b oth the quality and risk m anagem ent aspects o f the work. INTRODUCTION O ver the years many m anagem ent approaches have developed. F o r example, quality management, continuous im provem ent, ISO 9000, team building, bench marking, re-engineering and risk management are popular approaches. M any com panies have bought into these approaches, w ith mixed results The corporate interest in these tools and philosophies w as based on various needs such as bottom line im provem ent, productivity gains, safety, custom er requirem ents and even increased legal costs. W hen th e em ployee experienced another "flavor o f the month" philosophy, the supervisor o r m anager experienced adm inistrative headaches as a result o f the new requirem ents. In the end, th e shareholder may have seen considerable expense in the implementation o f the procedural, adm inistrative or structural changes w ithout p ro o f o f accom plishm ent or value Copyright 1996 by ASME

2 Many o f these previously mentioned approaches genuinely present great value The people who determine how these approaches fit together will gain the greatest benefits The purpose o f this paper is to show how quality management and risk management fit together and that they are similar and compatible. Such philosophies are powerful when fully understood and used together appropriately. There are a number o f important words that are closely associated with both quality management and risk management and can be used to tie the approaches together. These w ords are: prevention integrity safety reliability These words cover everything that contributes to the retention o f the commodity within the pipeline system and everything that supports the prevention and minimization o f the impact o f the release from the system. Order of the Presentation The main features and similarities o f both quality and risk management will be discussed. Finally, suggestions for merging the tw o techniques will be presented. QUALITY MANAGEMENT Definitions Quality has many "official" definitions, for example: fitness for use conform ance to custom er requirements. Quality management is: effective planning, prevention o f error and the measurement o f progress toward agreed improvement goals. doing the right things, the important and critical things, correctly the first time. Quality management, and risk management, offer us the means o f identifying: where things go wrong where things are being reworked areas where preventative strategies can be applied.

3 Evidence o f the need and benefits o f quality management is dem onstrated in a 1989 Construction Industry Institute report1 which stated "a study determined that the average costs o f deviations on nine projects was 12 percent o f the total installed project costs." There is every reason to believe that this is a conservative estimate o f losses that can be reduced by quality management initiatives in any industry, including the pipeline industry. For example, the 1992 annual report on pipeline safely, prepared by the U S. Department o f Transportation2, stated that the property damage attributed to construction and material defects on natural gas transmission and gathering lines was approximately 20 percent o f the total property damage. It appears there is never time to conduct the w ork correctly the first time but there is always time to do it over and over. An employer may reward us on how well problems are solved rather than on how well problems are prevented. Problems are tangible, pressing and become mini projects o f their own. Prevention requires a shift in approach to enlist resources to combat problems that are presently perceived as being non-existent All w ork is a "process" as shown in Fig. 1 standards, procedures, equipment and know ledge The w ork process has inputs and outputs related to performance opportunities performance procedures equipment facilities knowledge training Figure 1 The Work Process There are internal and external custom ers who must be identified. In addition, their requirements should be recognized and satisfied at the beginning o f the activity The customers may be the home owner adjacent to the pipeline right-of-way, the consumer o f the product being transported, or an employee in term s o f safe work requirements. Although organizations are usually organized in a vertical direction, the actual work process flows across the organization, from group to group, from person to person and to the customer. This is why management have to be highly involved in improvement initiatives such as quality and risk management. The opportunities are cross-functional and all functions must be involved

4 The w ork process in many organizations never becomes stable enough so that it is understood, measured and improved. The intent is to improve the work process itself, particularly the processes which relate to high risk critical equipment and procedures. Improvements can be related to machinery, labor, materials and methods A cause and effect diagram highlights the relationship between an "effect" and all the possible "causes", (Fig. 2). causes and effect causes Figure 2 Example Cause and Effect Diagram Quality management training enables a work process to be made visible by flowcharting. Quality management training also enables the effective use of' statistical tools for the purpose o f generating information to be used to reduce variation, improve the process and to stimulate engineering knowledge. Tools include Pareto Charts that are useful both in raising awareness and in facilitating communication, (Fig. 3).

5 Incidents by Cause Gas Transmission & Gathering Pipelines o'side force other int. corrosion defects ext. corrosion l~! number of incidents Figure 3 Example of a Pareto Chart Data From the U.S. Department of Transport, 1992 Annual Report Some o f the detailed steps o f quality management are: identify the cost o f deficiencies in the work processes - and the risk created by the deficiencies quantify the customer's needs and expectations and express them clearly establish the capability to measure these expectations on an ongoing basis clearly define the w ork process direct continuous improvement initiatives at closing the gap between the output and expectations, and certainly focus on the things that are critical and provide risk to the organization rem ove redundancies, streamline and improve the w ork process, eliminate unnecessary steps. Quality management is a never ending cycle o f organizing, measuring, prioritizing, improving, recognizing improvement and doing it all over again. M ost importantly strategies for improvement should never be compromised or jeopardized or they will become the flavor o f the month. One o f the ways that the oil and gas industry uses the principles o f quality management is to improve safety Ten years ago a lost time accident frequency goal o f one lost time accident for 200,000 work hours may have been laughed at. Today some have achieved that goal through the application o f the same quality management principles using tools such as data collection and increased awareness.

6 RISK MANAGEMENT Definitions Risk is the possibility o f injury, loss or environmental incident created by a hazard. Note that risk involves losses o f all types, including financial. Poor quality certainly presents financial risk. The significance o f the risk is determined by the probability o f an unwanted incident and the severity o f its consequences, (consequences x probability = risk) Risk management can be defined as "the systematic application o f management policies, procedures, resources and practices to the task o f controlling risk. The intent is not to avoid risk - but to be able to recognize, assess and manage it. The term "risk management" implies control o f events when in fact risk management can be seen as preventing events; or if they cannot be prevented, preparing for them in advance. Certainly one o f the goals o f risk management is to enable managers to be able to focus on the areas o f their business that have the greatest risk, whether it be a safety, financial (including quality), or environmental risk. Another goal o f risk management is to effectively prioritize the use o f resources to reduce risk. Again, this is a preventative technique. Applications of Risk Management Included in risk management are: identifying what can go wrong identifying the likelihood establishing the consequences mitigation - which may include altering the w ork process monitoring - which includes data collection and use o f statistical tools. Many people think o f risk management only in the context o f existing facilities. However, like quality management, risk management techniques can and should be used everywhere in the organization to evaluate: new projects - from a project management perspective new designs - from a conceptual (high level) design perspective new designs - from a detailed design perspective existing facilities - from a high level area wide perspective existing facilities - from a detailed examination o f equipment, site to site modifications to existing facilities. Risk assessments conducted at existing facilities frequently find opportunities for improved efficiency and quality. An effective risk assessment program will enable identification o f some o f the (quality) activities that an organization M UST do in a value added fashion Risk assessment tools have been successfully used to identify high risk vendors and suppliers. This initiative identified the vendors who would present risk by compromising the corporation's safety or profits, if the products supplied were not meeting the quality requirements. This was a successful merging o f quality and risk related initiatives.

7 THE COMBINATION OF QUALITY MANAGEMENT AND RISK MANAGEMENT ELEMENTS Society does not understand risk concepts particularly well. One challenge that the pipeline industry faces is to enable the public to understand the concepts and accept that risk assessments are beneficial in terms o f their requirements such as safety, the environment and product and service reliability. This communication can be done better by explaining both the quality and risk management aspects o f the pipeline industry's work, as the public may be able to relate better to the quality concepts. The public must have some knowledge base in order to have a positive and helpful view o f the pipeline industry. W hen risk management procedures identify critical equipment and procedures, the owner should then be able to dem onstrate to the public that quality methods ensure conformance to requirements. The industry should be able to dem onstrate that it is able to reduce risk through quality (effective) procedures and processes within all aspects o f the business. The external custom er (for example, the public) must be able to see that: all employees in the company recognize that their individual commitment to integrity o f requirem ents is what makes the company sound all employees in the company have a common language o f quality and risk management each person in the company can communicate with management on the topics o f quality and risk suppliers o f goods and services to the pipeline operator are also well educated in the topics of quality and risk procedures, products and systems are known, understood, qualified and proven quality and risk management training is routine throughout the organization. W hen conducting a risk assessment o f a pipeline system include the following actions: Ensure the risk assessment team is a cross-functional team. Establish an auditable and structured process for conducting a risk assessment, with rules and structure that can be dem onstrated to the public. Identify all o f the custom ers o f the products and services and their requirements. Clearly define the work processes that reduce risk. Improve and stabilize the work processes, including the risk management process itself Identify and evaluate critical machines, labor, materials and m ethods during risk assessments Identify the cost and risk incurred by not meeting requirements whether they are related to safety, environment, operability or product and service reliability. Consider using quality management tools when conducting risk assessments For example, flow chart the work processes, collect and use statistics effectively. Never com prom ise or jeopardize quality and risk improvement plans.

8 CONCLUSION Quality and risk management can be used together as good business planning techniques, as both are customer focused and involve measuring, prioritizing and improving. Both involve w ork processes, data collection and performance standards. Both pertain to, and interact with, all activities in a company. Both are structured and place emphasis on prevention more than detection after occurrence. External communications can be improved by communicating both the quality and risk management aspects o f the work because the public may be able to relate better to the quality concepts Management must fully understand the relationship between quality and risk and expect all employees to apply these principles throughout the organization. REFERENCES 1 - The Construction Industry Institute, Source Docum ent 51, 1989, "Quality M anagement Organizations and Techniques," p U S. Department o f Transportation, "1992 Annual Report on Pipeline Safety," p Fowlie, B. E, 1992, "Total Quality M anagement, M eeting the Customer's Requirements," Construction Canada Magazine, Volume 43, Num bers 1 & 2.