QUALITY INSITES ISSUE 1 by Hector Montes

VO L U M E O N E

INTRODUCING THE

CULTURE OF QUALITY FEATURES Driving change End-to-End Stop work now! ISO 9001:2015 on the way Supply Chain success

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INTRO CULTURE OF QUALITY

INTRODUCING THE BAKER HUGHES CULTURE OF QUALITY PROGRAM SEVERAL MONTHS AGO, a Culture of Quality program was established at Baker Hughes with the full support of Baker Hughes leadership team. Our goal: It is essential that as an organization we create an atmosphere where we all ‘live’ quality in everything we do, every day, everywhere…where all are passionate about quality as a personal value rather than simply obeying an policy. A “true culture of quality” is an environment in which people not only follow quality policy but also consistently see others taking quality-focused actions, hear others talking about quality, and feel quality all around them. The core challenge facing us with our culture of quality… there is a gap between where our people are now and where they need to be. We need to engage self-empowerment, and the solutions to improve the quality of what we do, and how we do it. Simply put…WE need to become the best. The program is focused on creating far-reaching awareness, comprehensive strategy and definitive, conclusive action to close that gap. This magazine is the first of many communications elements we will be producing to accompany you all on this journey together. What can you do now…? Here are several simple thoughts to consider and to contemplate, and in beginning to make a difference… “THINQ”… Create time to think…Focus on creating awareness of what is possible. Too often we spend our time focused on what to do to improve something before we have considered the broad variety of options available to us. This is a time of no new input; instead, synthesize and make meaning from what you already know. Look forward to your goals without being constrained by the obstacles. Make time for Eureka! quality moments. AVOID ‘ABUNDANCE’… Have a clear framework for prioritization. Avoid the pitfall of ‘bright shiny objects’ that influence your logic and views, feelings and considerations. Abundance can be a distraction and avoiding the trap is about knowing what not to do. ALIGNMENT…Don’t just organize your resources. Create alignment between your strategic priorities and your resource application. Without it, we often work in silos, which maximize the individual without optimizing the ‘whole’. HOLD YOUR FEET TO THE FIRE… be conscious of the quality accountability gap, the gap between intention and behavior. There are three primary reasons why the gap occurs: no organizational discipline of accountability, no clear success criteria, and incorrect measurements and/or self-rewards. While we all have good intentions, this element reinforces our intention with responsibility for follow through. MASTER THE ART OF INFLUENCE… and learn to both debrief and to share, to and among your team. At your meetings ask yourself these two quality process (not content) questions: “What made this meeting effective? What would make it more effective?” Then ask your peers the same questions. “You can have it all, if you don’t do it all yourself.” Be a team player…and win.

KEN PRICE STRATEGIC QUALITY INITIATIVES & COMMUNICATIONS

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F EATURES

QualityInsites is a publication of Baker Hughes Quality Assurance organization.Please direct all correspondence to QualityInsites@bakerhughes.com. ©2014 Baker Hughes Incorporated. All rights reserved. No part of this publication may be reproduced without prior written permission of Baker Hughes Incorporated.

PUBLISHER/EXECUTIVE EDITOR Ken Price My sincere personal and professional thanks to all of the following people for their exceptional support, patience, knowledge and expertise without whom, this, our first edition of BHI QualityInsites would not exist:

CONTRIBUTORS Alex Baues Anthony Gaucher Bob Witten Chris Huynh Des Burnley Jonathan Price Keith Terhune Marilyn Blaschke Mike Gentry Natalia Pecora Phil Kurkoski Ricardo Scala Steve Ellison

CREATIVE TEAM Mary Kuna

SUPPLIER PROGRAM HITS NEW HIGH BHI teams reduce potential procurement problems by 63% to keep operations rolling smoothly.

LIVING THE CULTURE OF QUALITY Individual initiative and team collaboration help lift Bayport plant production.

ISO 9001:2015 COMPLIANCE STARTS EARLY ISO revision aims to drive quality compliance up to senior leadership and down throughout supply chains.

A GREAT CATCH! Alerted by a Receiving Inspector, Product Engineering team takes action to protect BHI precision tools.

E2E INITIATIVE ADDS BOLD DIMENSION New integrated approach reduces costs and improves productivity in Completions.

BHI HELPS DEVELOP NEW API STANDARD The spotlight’s now on oil service providers. Mission: safer practices, fewer operational disruptions, less risk.

CMP SCORES BIG GAINS IN BRAZIL In just eight months, management-led initiative more than triples competence certifications.

THE NEW POWER OF QUALITY New STOP Work program empowers BHI people to stop manufacturing operations – to help ensure quality.

QUALITY OF LIFE? COLOR IT PINK BHI teams up with the Komen® organization to help raise breast cancer awareness – and find a cure.

ON THE COVER: Quality is everyone’s business, and each person at Baker Hughes plays an important role – the key to BHI’s pervasive Culture of Quality.

FEATURE SOFT WARNINGS

CHOOSING A QUALITY SUPPLIER GETS QUICKER, EASIER In 2014, Baker Hughes teams reduced potential procurement problems by 63% to keep operations rolling smoothly.

not getting complacent. In fact, just the opposite. We are redoubling our efforts toward achieving one hundred percent voluntary cooperation with our Approved Supplier program.” As her team continues to disseminate their message worldwide and deliver training, Richmond notes, even more purchasers are participating. “We find that once people understand the need, and know the simple steps to comply, they do their part to help maintain quality by using the Approved Supplier List.” Baker Hughes recently took another important step toward ensuring the use of approved quality suppliers. Starting November 2014, the Baker Hughes’ SAP system generates Vendor Numbers to enable purchase orders only after suppliers have been vetted and approved. “With system changes like this one, plus the outstanding cooperation we’re seeing from people who initiate purchases,” Richmond says, “we are well on our way toward a more comprehensive Culture of Quality – and a global organization that competes even more effectively for quality-focused customer contracts.” Like any business, Baker Hughes doesn’t stand on its own. We rely on a vast web of suppliers – thousands worldwide – and spend billions of dollars a year to purchase materials, parts, equipment and services. What’s more, the quality of all these items affects the

quality of Baker Hughes products and services we deliver to our customers. The safety, performance and durability of everything we make or sell relies to some degree on our suppliers. While we strive to ensure quality practices throughout Baker Hughes operations, what about our suppliers’ quality? A bad part in even the best production system can result in tremendous costs and destroy the trust that customers place in the Baker Hughes brand. This sobering truth, in turn, places supplier quality at the center of Baker Hughes’ constant quality-improvement initiatives. It’s why we carefully maintain the Approved Supplier List (ASL). Dedicated Baker Hughes teams scrutinize and evaluate suppliers, studying their quality practices and performance, and document them. An approval means purchasers within Baker Hughes can be “quality confident” when ordering from the approved supplier – a vital step in ensuring Baker Hughes quality. Q

FROM

4,000 1,500 S O F T WA R N I N G S TO

63%

DECLINE

WHEN SOMEONE AT BAKER HUGHES needs to procure something and specifies a supplier that’s not on the BHI Approved Supplier List (ASL), a warning pops up on their computer screen. It urges the user to name an approved supplier or nominate their supplier to join the list. These so-called “soft warnings” have been tracked by Laurese Richmond, External Supplier List Manager, Procurement, since 2011, when the alerts were instituted. “When we see a lot of warnings triggered by a particular BHI team or business unit, we reach out to them,” Richmond says. “We offer training and support. We encourage them to use the Approved Supplier List and to add their suppliers to the list. In other words, we show them how easy it can be.” This approach has worked beyond her team’s wildest expectations. In the first and second quarter of 2013, Baker Hughes people initiating purchases generated some 4,000 soft warnings, meaning they initially specified non-approved suppliers for purchase requests. Richmond’s team aimed to cut this total by 30 percent. However, in the first and second quarter of 2014, Baker Hughes purchasers activated only about 1,500 warnings – a 63% year-over-year decline, more than double Richmond’s improvement target. “It’s a significant and important milestone,” she says, “but we’re

ASL: KEY ROLE IN QUALITY Mike Gentry, Director, Supplier Quality explains why and how the Approved Supplier List plays a key role in ensuring the quality of Baker Hughes products and services.

QUALITY INSITES

“...we are well on our way toward a more comprehensive Culture of Quality...”

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FEATURE CHEMICAL & INDUSTRIAL

BHI CHEMICAL & INDUSTRIAL SERVICES: LIVING THE CULTURE OF QUALITY Individual initiative and team collaboration help drive Bayport plant production to new highs

LOREM IPSUM DOLOR SIT AMET, cibo nihil pertinax ad pri, ius rationibus ullamcorper ad! Quas affert sea cu. Eam primis option no. Oporteat reprimique pri ea? Patrioque incorrupte his ei, cum quem senserit conceptam ea. Mucius laoreet senserit eos in, vix id noster definitionem? Numquam epicurei ne sed, ne duo fugit munere iriure. Ne eos dolore volumus vivendum, ex dicit dicant est. Blandit qualisque vel an, has tantas denique et! Nisl recusabo deseruisse an vel? Malis movet dicit et est, per te quod nullam, eu case dicit dignissim nam. Id has graeci labores phaedrum, soluta maluisset eu ius? Pro eu nullam facete consulatu, ius gloriatur temporibus conclusionemque et. Qui id esse necessitatibus, porro evertitur referrentur quo id, porro animal nec ne. Nec ipsum delicatissimi eu, ei ius porro labore! Ius ad partem fabellas moderatius, no vidit deserunt disputationi pro, at esse dolorem disputando eam. Id suas paulo utroque vim! Ea quem constituto duo, in qui sonet legere nusquam. Vel appareat inciderint comprehensam ne? Ut fastidii reprehendunt nam! Nec iudicabit principes quaerendum ei, id malorum insolens mea! Quod dolore euismod ne his. His munere ubique virtute et? Ut probo veniam vix? Sit at oratio exerci constituto, maiestatis definiebas appellantur no his! Ad quo vide voluptua, facilis repudiare usu in! Oratio latine at per. Cibo dissentias ut mel, mel choro platonem ut? Eum feugait vivendo vivendum ex. Enim indoctum qualisque ea pro, pro an putent quaerendum, his an partem albucius iracundia! Eos ex aperiri

euismod fastidii. Eu harum scripta menandri quo, ei quas aperiam quo, an praesent contentiones vix. His quodsi ornatus definitiones cu. Pro elit posse aperiri ex, facete interpretaris an nec, everti mandamus mea ad. Ea noster molestie antiopam per. Eum in saepe explicari reprimique, cu unum noster legimus cum? Et vidit consequat incorrupte sit, ei eum pertinax consectetuer. No ius senserit suavitate, pro modus inciderint ex. Postulant suavitate sea an, usu noluisse dignissim voluptatum et, ei eos illud persequeris! Facer timeam ornatus eam te! Iudico iisque regione te usu, no nam mutat idque. Vis ex volumus appetere efficiendi. Nam vocibus phaedrum in, per veniam munere iudicabit ex! Iusto dicam ne has, mea at case nonumes, eos cu delenit corrumpit! At iudico sanctus eum. An nihil invidunt deseruisse mei, mel soluta persequeris cu. Scaevola consequuntur ne pro, mei accumsan dissentiet eu! Ex has eius detraxit iracundia! Sint expetendis no his, facilis eligendi ad eam? Et eos virtute probatus, an meis movet est? No ius accusata voluptatum disputando, pro veri utinam eu. Q

QUALITY INSITES

OUTPUT

TEAMWORK

RETROFIT

COST SAVINGS 45% REDUCTION

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FEATURE ISO 9001:2015

ISO 9001:2015 COMPLIANCE STARTS EARLY AT BAKER HUGHES ISO revision aims to drive quality compliance up to senior leadership and down throughout Supply Chains.

ISO 9001 is the leading global standard for quality operations, with more than one million organizations certified. The International Standards Organization (ISO) published its detailed quality specification in 2008, but since then the world has been evolving – fast. That’s why, after years of intensive study and collaboration, the organization is replacing ISO 9001:2008 with new, even more robust and far-reaching standards. Welcome ISO 9001:2015. The new specification is now in the review stage, and ISO will finalize its publication in September 2015. “By becoming an ISO 9001:2015 early adopter, we give our customers greater confidence that we consistently deliver products and services with higher-than-ever customer satisfaction,” says Ricardo Scala, Director, Manufacturing Quality. ISO crafted its original ISO 9001 standard to help organizations assure themselves and each other that they each have a quality management system (QMS) that operates well, and with high standards. ISO 9001 laid out fundamentals, including the principles that underlie a solid QMS. Then came ISO 9001:2008, specifying detailed requirements for organizations to better meet their customers’ needs by ensuring more efficient, less error-prone operations.

ADDRESSING REALITIES ISO 9001:2015 builds on these prior standards, extending them to address today’s ‘realities’ and, ISO believes, those of the next ten years. What realities? In many jurisdictions, laws and regulations affecting the energy industry have changed. For example, they’ve been strengthened to help protect the environment. New monitoring and reporting requirements continue to emerge, along with more stringent rules for everything from fluid injection to well plugging. ISO 9001:2015 addresses this new statutory and regulatory environment. That’s not all. Supply Chains have grown more complex as suppliers outsource parts and assemblies to sub-suppliers, and in turn they rely on sub-sub-suppliers. Because ‘chains can fail at their weakest point’, a single non-compliant supplier in the chain increases quality risk. ISO 9001:2015 extends quality certification outward and downward throughout Supply Chains, making a more robust ecosystem by bringing potential weak links up to standard. DRIVING CHANGE ISO 9001:2015 doesn’t stop there. The new standard requires that senior management be accountable for an organization’s quality management system and results. Further, management

must actively participate to ensure that the organization achieves its quality objectives. It’s a tough requirement, designed to ensure that senior leaders focus on quality initiatives driven from the top of the organization. “Baker Hughes’ uppermost management is giving ISO 9001:2015 implementation top priority and unwavering support,” says Steve Ellison, VP Quality. “We’ll be working closely with all management levels to make sure every Baker Hughes employee and supplier understands ISO 9001:2015 and honors the spirit and letter of this important new industry standard.” Another substantial change in ISO 9001:2015: a stronger emphasis on risk management by identifying, assessing, mitigating and avoiding risk. This risk based approach, Scala says, “offers new opportunities to benefit customers as well as ourselves by helping to prevent unwanted outcomes, such as injuries and disrupted operations.” Top down and bottom up, ISO 9001:2015 will be setting the new standard for quality operations and customer satisfaction. And Baker Hughes is out in front. Q

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“By becoming an ISO 9001:2015 early adopter, we give our customers greater confidence that we consistently deliver products and services with higher-than-ever customer satisfaction,” says Ricardo Scala, Director, Manufacturing Quality.

FEATURE A GOOD CATCH

NOT JUST A GOOD ‘CATCH’, BUT A GREAT CATCH Alerted by a Receiving Inspector, Product Engineering team takes action to protect precision tools throughout their lifecycle.

IT STARTED WHEN A BAKER HUGHES INSPECTOR in Germany spotted a couple of bubble-wrapped devices sitting on a pallet at his receiving dock. The accompanying documentation identified them as “force testing devices”. As far as he could tell, they appeared to be scientific instruments. Yet the logistics paperwork didn’t specify any particular specialized packaging. The inspector could have shrugged, scanned his checklist and checked off the items as meeting the necessities specified in the documentation, just following procedure and doing his job. That’s not what happened. The inspector picked up the telephone and called a Baker Hughes Supplier Quality Engineer. He told the engineer what he saw. “Should they have boxed it up?,” he asked. The engineer hung up and came over immediately. The inspector was right. Turns out these testing devices were sensitive instruments costing $50,000 USD apiece. So here was $100,000 of precision gear sitting on a makeshift plywood frame. They were just off a delivery truck from the supplier that built them to custom specifications for Baker Hughes and, except for a few layers of bubble wrap and some plastic tape, exposed to potentially rough handling. The Quality Engineer contacted the Baker Hughes Drilling and Evaluation Product Line Engineering team that managed the development of the testing devices. Once they saw the problem,

“the fix was relatively quick and easy,” recalls a team member. The Product Engineering team designed a hardshell polyurethane case lined with cushioning dense foam, custom die-cut to precisely fit the device’s size and shape – similar to ‘clamshell’ cases that protect delicate musical instruments, video camera equipment and laboratory gear. Further, the team updated the testing device’s bill of materials in Baker Hughes’ SAP Resource Management System, as well as the corresponding Quality checklists used by all personnel who handle the devices. In this way, the protective case was integrated into the Baker Hughes Operating System (BHOS) that helps safeguard and maintain every Baker Hughes process. This customized case does more than protect the testing device as it travels between the manufacturer and Baker Hughes. The case will accompany this device throughout its lifecycle. Also, whenever the testing device is shipped between Baker Hughes sites worldwide, it will be shipped in this same case. And, between tool maintenance cycles – when the device isn’t used and in storage – the case will protect it from dust, moisture and physical shock. “Additionally,” says Alex Baues, Director Quality Manufacturing, “the case itself serves as a signal to all BHI people who handle this type of device for years to come that it’s an instrument whose sensitivity must be respected. In this sense, the mere existence of this case acts like a flashing sign that says, Handle With Care.” By safeguarding the testing device, the case also helps ensure that post-maintenance precise, extremely sensitive tests Baker Hughes

performs on the downhole tool are accurate and reliable and, by extension, helps ensure that the tool itself will perform perfectly and reliably as expected downhole. In all these respects, the case comprises a new addition to the vast quality management environment that pervades Baker Hughes operations worldwide. And it started on a Baker Hughes receiving dock, with an alert inspector who took the Quality initiative and self-empowerment seriously when a couple of bubble-wrapped items on a pallet just didn’t look ‘quite right’. . . Q

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“The mere existence of this case acts like a flashing sign that says, Handle With Care.”

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FEATURE E2E INITIATIVE

END-TO-END INITIATIVE ADDS BOLD DIMENSION TO COMPLETIONS & WBI BUSINESS Integrated approach improves lead time reliability, reduces inventory and product costs In 2014, Baker Hughes Completions & Wellbore Intervention (WBI) Product Line and Global Supply Chain together introduced an initiative called End-to-End (E2E). “Its aim is to fundamentally transform the way we do business by improving how we market, sell, manufacture, distribute and deliver Completions products to our customers,” says E2E Senior Director Jonathan Price. The E2E initiative is reducing Completions’ operating costs, streamlining select inventories, shortening lead times, reducing product failure risk and increasing customer satisfaction – a remarkable set of improvements, based on a brilliant concept.

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FROM A STAGGERING

600,000

TOOL ITERATIONS

1,600

FEATURE E2E INITIATIVE

E2E brings together senior management, Engineering, Product Line, Supply Chain, Quality and Reliability, IT and Field Operations in a major collaboration to drive change in the Completions business. “We are halfway there and are already beginning to see significant results,” says Price. “Once completed, the combined impact of reduced lead times, cost savings, inventory reductions, revenue increases and operational efficiencies should total several hundred million dollars a year.” ADDRESSING CHALLENGES, END TO END Price and his E2E team receive active support from senior management in Completions and Global Supply Chain, and from cross-functional groups. The team devoted months to intensive study. They found a staggering 600,000 tool iterations within the Baker Hughes Completions & Wellbore Intervention portfolio. Numerous combinations of product type, metallurgy, elastomers, sizes and thread differences contributed to a complex array of unique configurations, all stemming from customer needs. The E2E team probed questions such as: What are Completions’ top-selling products, options and configurations? Could a standardized tool body support multiple options and functions? What would that look like? How would it affect Supply Chain, Engineering, IT, Manufacturing, Sales, inventories, lead times, field training and customer relationships? What about forecasting and budgeting? Could such a delivery model actually work? E2E’s pivotal concept – standardizing on a few core designs – isn’t new. Auto makers and other manufacturers use it. “Your car’s chassis is likely standardized across several models,” Price explains. “Factories assemble different combinations of components on top of a chassis to create entire product lines. We’re now doing essentially the same with Completions and Wellbore Intervention equipment.” The E2E Initiative team conducted comprehensive data analysis across the Product Line and Supply Chain. “We needed to understand operational spending,” Price says, “so we could attempt a better sourcing strategy.” That also meant understanding how Completions managed materials, parts, components and finished products. E2E divided the sales portfolio into four “natural supply chains” – product categories based on product lead times and related factors (Table 2).

RATIONALIZE AND STANDARDIZE Collaborating with Engineering and Product Line, the E2E team studied various products’ function and design, noting redundancies and complementary patterns. They “rationalized” some product lines, standardizing on a few core designs. Engineers could then equip these core designs (“platforms”) with an array of select component options, many of which could also be standardized. Completions can now fill orders using the new, efficient rationalize-and-standardize paradigm. “All processes are interdependent; everything’s connected with everything else,” Price observes. “Each piece affects the whole. In the E2E approach there are no silos, no islands.” Because of this, rationalized designs make an impact only when Supply Chain works differently with suppliers. This change, in turn, works only when Completions can better forecast its need for materials, parts and components – requiring close collaboration with Sales and with customers themselves – and can commit to this forecast with designated suppliers. Entwined with all these changes is IT, the foundation supporting virtually all business processes throughout Baker Hughes. Deploying the E2E approach meant transforming the foundation. “As a consequence,” notes Price, “the IT workload for E2E has been a massive undertaking. But it’s yielding major results for the long term.” ECONOMIES OF SCALE The integrated E2E approach saves costs numerous ways, says E2E Project Manager Natalia Pecora. “Consolidation allows Global Supply Chain to leverage repeat purchases of raw materials and work with suppliers on outsourcing, lot sizes and setup times, all of which drive cost reductions.” It requires understanding, for instance, how many of a given item are normally purchased companywide, and whether this level of demand is likely to continue, based on current and pending projects and industry trends. “Combining these factors enables us to forecast our need for the item months in advance or longer,” Pecora says. “With this knowledge in hand, we’re able to negotiate better prices for higher quantities with strategic quality approved suppliers, and schedule deliveries farther in advance.” By giving vendors a more predictable flow of orders, they can better plan their own sourcing needs, production and cash flow – a significant

E2E: KEY OBJECTIVES

TABLE 1

REDUCE LEAD TIMES INCREASE DELIVERY RELIABILITY INCREASE PRODUCTIVITY REDUCE INVENTORY & COST

VISIT THE NEW E2E WEBSITE (GO/E2E) to view information and documentation explaining each process of the End-to-End strategy. The site displays the latest list of made-to-stock (MTS) materials and configure-to-order (CTO) platform availability, with material number matrix, supply strategy for each offering, and key contacts for E2E team members.

QUALITY INSITES

business advantage for them. “As a result,” Pecora adds, “we’ve also been able to cultivate better relationships with these suppliers while leveraging economies of scale.” SHORTENING LEAD TIMES AND REDUCING RISK The new core-based design approach is enabling Completions to reduce average lead times, speeding delivery to customers. Engineering and Manufacturing are able to accelerate design and production because they’re working with a core body and component options, rather than building from scratch. Further, these changes enable the organization to reorganize the way made-to-stock (MTS) and configure-to-order (CTO) products are made. Select items can now be outsourced to free up more manufacturing capacity for complex made-to-order (MTO) and engineer-to-order (ETO) products, shortening lead times on MTO and ETO orders. Because certain parts are now standardized, parts inventory turnover is higher, so keeping these parts in stock becomes more affordable. The organization no longer faces the dilemma of keeping costly but slow-moving parts on hand or doing without – which meant some parts had to be special-ordered, adding weeks to product lead times. That’s not all. Having fewer unique designs makes standardized products more reliable, offering reduced risk of product failures in the field – a quality enhancement that Operators understand and appreciate. Standardization also reduces the number of product variations that Baker Hughes field hands must learn to operate and maintain, simplifying training and reducing risk associated with human error. “Our customers increasingly focus on risk reduction, especially with the new API Specification Q2 and ISO 9001:2015 coming soon,” Jonathan Price says. “Risk-reducing changes like ours command Operators’ attention and put us in a stronger competitive position.” With initial and prospective results like these, Price says the E2E Initiative is already a success. “While every product line is different,” he adds, “other Baker Hughes business units are now evaluating the potential of similar strategies.” END-TO-END SUCCESS The End-to-End Initiative’s success comes partly from the principles E2E applies, but also from the

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CATEGORY

LEAD TIME

CHARACTERISTICS

Make to Stock (MTS)

Up to 2 weeks

Ordered from catalog Shipped from Distribution Centers inventory Made in high volume plants Large batches, long runs

TABLE 2

QRD (Quality Requirement Designators: GT1*1, ST1*2, T00*3)

Configure to Order (CTO)

Up to 8 weeks

QRD (Quality Requirement Designators: GT1*1, ST1*2, T00*3)

Semi-finished inventory Listed in “Product Modification Matrix” Use postponement strategy Distributed final processing at 4R centers

Make to Order (MTO)

Up to 15 weeks

Made in –high end plants All available quality plans supported Third Party Inspection (TPI) scheduled as needed

Engineer to Order (ETO)

Over 15 weeks

Front-end work required Highest technology plants Small batch sizes Lower utilization with flexible surge capability All available quality plans supported

GT1*1 – Global Tier 1 ST1*2 – Standard Tool 1 T00*3 – Traceability on critical components

E2E RESULTS AT A GLANCE AVERAGE

TABLE 3

20% $10.2 60%

FIELD INVENTORY DRAWDOWN (YTD)

AVERAGE

team’s bold vision, intensive collaboration and tight focus on integration. “Our secret sauce is that there is no secret sauce,” admits Price. “It’s simply implementing what many other industries have already done and leveraging the full breadth of the organization to deliver an end-to-end solution that involves everyone.” Price recalls, “At the outset, no one could be certain E2E would work. But we are thrilled with the initial results.”

REDUCTION IN COST OF GOODS

MILLION USD

REDUCTION IN COST OF GOODS

FEATURE API/Q2

BAKER HUGHES HELPS DEVELOP NEW API STANDARD API Specification Q2 shines a spotlight on quality standards for oil service providers. Mission: safer practices, fewer operational disruptions, reduced risk.

THE AMERICAN PETROLEUM INSTITUTE (API) sets the oil and gas industry’s quality standards used by governments, commercial and private organizations worldwide. Years in the making, a new, more challenging API specification for oil service quality is emerging, and Baker Hughes is participating in this collaborative development. The new standard for service supply organizations, API Specification Q2 – “API/Q2” for short – represents a major departure from the widely used API Specification Q1 written mainly for manufacturing. In fact, API/Q2 is based on an entirely different philosophy. While API/Q1 focuses on ensuring quality processes, like those in manufacturing, API/Q2 aims to ensure quality services based on identifying and managing risks – an approach prompted by the 2010 Deepwater Horizon disaster. Baker Hughes serves as a member on the API/ Q2 team that developed the new specification, and is conducting some of API/Q2’s first beta tests. “API/Q2 establishes Quality Management System (QMS) standards,” says Ricardo Scala, Director, Manufacturing Quality. “Organizations like Baker Hughes will increasingly comply with the new standards to meet customer, legal and other requirements, and to deliver consistent, reliable services by reducing the risk of service failures.” (See Table 1.) Scala expects designated Baker Hughes sites in the Gulf of Mexico and the Middle East to be API/ Q2 certified by the end of the first quarter 2015. “They will be among the oil industry’s first sites to achieve this distinction,” he says.

Major customers indicate they will require API/Q2 compliance or certification particularly for high-risk projects within specific geographic regions. These may include areas known for drilling risk, stringent regulation and/or environmental sensitivity — areas such as the North Sea, deepwater Gulf of Mexico, offshore West Africa, and the Arctic. As the new specification becomes widely adopted, more conventional projects may require API/Q2 compliance as well. Meanwhile, notes Scala, becoming an API Q2 early adopter will help strengthen Baker Hughes’ reputation as a leader in quality service delivery. “It can help us win business, enhance the Baker Hughes brand and continue to extend our Culture of Quality.” Q

MACO Table 1. API SPECIFICATION Q2: WHAT IT COVERS

ELEMENT Risk Assessment and Management Contingency Planning Service Design Purchasing Control Service Quality Plans Service Performance Validation Management of Change

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ONDO The Deepwater Horizon oil spill (the Macondo blowout) began in April 2010 in the Gulf of Mexico,

ACTION (REQUIREMENT) Identify and mitigate risks

claimed eleven lives and is considered the largest accidental marine oil spill in the history of the petroleum industry, an estimated 31% larger in volume than the previously largest oil spill. Following the explosion and sinking of the Deepwater Horizon oil rig, a sea-floor oil gusher flowed for 87 days until it was capped. The US Government estimated the total discharge at 4.9 million barrels or 210 million US gallons. According to the satellite images, the spill sludge directly impacted 68,000 square miles of

Prevent service disruptions

ocean, comparable to the size of Oklahoma. A total of 1,074 miles of coastline in the states on the Gulf of Mexico coast had an economic impact for commercial fishing causing $2.5 billion cost for the fishing

Plan, determine inputs and outputs, verify, review, and validate the service design

industry, an impact on tourism exceeding $23 billion, and on travel industry jobs generating $34 billion in revenue annually.

Identify and qualify mission-critical suppliers Build plans specific to the customer and the service; identify risks; and determine competencies of people delivering the services Define specific Key Performance Indicators by which to measure success Manage change based on risk factors

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FEATURE BHI COMPETENCE

BHI COMPETENCE MANAGEMENT PROGRAM SCORES BIG GAINS IN BRAZIL In just eight months, management-led initiative more than triples competence certifications.

THE BAKER HUGHES COMPETENCE MANAGEMENT PROGRAM (CMP) helps BHI people gain skills and knowledge they need to perform at their best. Through CMP, they can also document these competencies, a step toward career advancement. That’s not all. By sifting through competence records on file, managers can more readily find high quality workforce resources for their teams. More and better competencies also enable safer, more reliable and more competitive field operations. That makes CMP an important part of Baker Hughes’ Culture of Quality. BHI senior management in Brazil saw the value of knowledge and skills training and documenting competencies through CMP. “But we discovered that many more of our people could benefit from the program than were actually using it,” recalls Anthony Gaucher, Director Training & Competency. Management tackled the challenge of substantially increasing CMP participation throughout Baker Hughes’ Brazil operations. As 2013 drew to a close, only half of eligible BHI Brazil people were enrolled in CMP, and even they weren’t making full use of the program. Only 20 percent of ‘assigned qualifications’ (i.e., competencies to be documented) were listed as “Acquired”. “There was plenty of room for improvement,” says Gaucher. “We saw this not just as a challenge, but an opportunity.” Senior management played an active part, championing the Competence Management Program, spotlighting its benefits, and urging participation. In just eight months, this visible

commitment helped transform participation levels. This was done by engaging the management team, identifying and training CMP Champions, and supporting the effort on the ground. Jose Luis Marquez, the region CAM (Competence Assurance Manager) was instrumental in channeling the management drive into concrete action. By the end of August 2014, nearly nine out of ten eligible people (88 percent) were enrolled in CMP. Better yet, more than seven out of ten competency qualifications (72 percent) were now “Acquired” — a remarkable increase in program performance. BHI Brazil now leads the region in these staff quality metrics. This story demonstrates the impact that management’s active engagement can make on achieving organization-wide quality objectives. “Setting the goals, rallying everyone to the cause, demonstrating persistence, offering day to day encouragement and recognition – all this sustained activity played a role in getting there,” Gaucher says. Monthly review meetings, recommendations for updating workplace assessment and relentless commitment all contributed to program performance. “The results,” says Gaucher, “speak for themselves.” Q

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FEATURE STOP WORK

PLACING THE POWER OF QUALITY IN MORE HANDS New STOP Work program empowers Baker Hughes manufacturing people to stop operations – and praises them for doing so.

BAKER HUGHES’ CULTURE OF QUALITY program expresses itself in numerous ways. One of the most important: giving every person at every level at BHI the power to prevent and correct a problem as it arises. Sometimes that means stopping operations in progress. The new Manufacturing Quality STOP Work program in Baker Hughes aims to do just that. “STOP Work empowers any of our people at any level to suspend a single work task or group operation,” explains Ricardo Scala, Director, Manufacturing Quality, “when he or she believes a situation could result in a defective product being delivered to a Baker Hughes customer, whether external or internal.” Manufacturing personnel all receive a laminated Quality STOP Work card. One side displays a bright red STOP sign; the other, the Baker Hughes Quality Statement. It’s a reminder and a signal that every person has “unquestioned authority to stop any manufacturing process at any time for any quality-related reason,” says Scala. Scala and his team adapted the Manufacuring Quality STOP Work Program from a similar program used by Baker Hughes’ Health/Safety/ Environment (HSE) organization. Scala tested STOP Work for a year and a half at BHI Navigation Boulevard and at Emmott Road, two Baker Hughes manufacturing facilities in Houston, Texas. Following a string of successes, Manufacturing Quality is rolling out the program to BHI manufacturing facilities worldwide. In one instance, an assembly technician used STOP Work to prevent a non-compliant Baker

Hughes product from reaching the customer – an hour after it had left the plant for delivery! Here’s what happened. . . The manufacturing team assembled and tested a large, complex tool a customer had ordered. The tool passed all its tests; the team crated and loaded it on a waiting truck, and off it went. An hour later, an alert technician noticed a part in the assembly area. It didn’t belong there. It was supposed to be inside the tool they’d just built – yet the tool had functioned properly in all its tests. The assembly team immediately telephoned the truck driver, now an hour away. They called him immediately back to the plant and then apprised the customer. By the time the truck arrived back at the plant, the assembly team understood what had gone wrong. There were two parts, physically identical in every respect. However, one was accompanied by complete quality documentation, tracing that part’s materials sourcing and fabrication at every step. The other, identical part had no paperwork specifying its history. The customer required that all materials and parts in its tools be fully documented. If a field failure were to occur weeks, months or even years in the future, the source of failure could be traced back through all the materials, parts and processes related to this one particular tool. That’s why such fine-grained documentation is a vital part of integrated quality systems: it provides the “breadcrumbs” needed for traceability, to learn and improve from every failure, anytime it occurs, anywhere in the world. In this sense, the documentation accompanying a tool is equally as

important to quality operations as the performance and reliability of the tool itself. It took a few hours for the Baker Hughes assembly team to strip and carefully reassemble the complex tool, this time with the fully documented part in place. Again they crated it, and shipped it off to the customer – now confident it complied with all quality requirements. “We had many meetings afterward, some attended by our Vice President of Manufacturing Quality,” Ricardo Scala recalls. “We changed our assembly processes, inserting new steps to ensure that this can never happen again.” And the technician who halted a manufacturing process even after the delivery truck had left the plant? He received special recognition through BHI Energize – and grateful thanks from managers and co-workers. “Absolute authority to Stop Work comes with responsibility,” Scala says. “Our people don’t just have the right to cease production. When something seems wrong, they have the obligation. STOP Work helps ensure that everyone honors this Quality core principle.” Q

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FEATURE SUSAN G. KOMEN

QUALITY OF LIFE? COLOR IT PINK Baker Hughes teams up with the Susan G. Komen® organization to help raise breast cancer awareness—and find a cure.

QUALITY IS ABOUT PRODUCTS AND PROCESSES, but that’s not all. At Baker Hughes, it’s also about quality of life, and quality relationships with communities we’re part of. That’s why this October, we furthered our commitment to a high-stakes mission: the battle against breast cancer, a disease that kills more people in the US than Parkinson’s, viral hepatitis and HIV combined.* October is Breast Cancer Awareness Month. In October 2013, Baker Hughes launched “Doing Our Bit for the Cure”, partnering with the Susan G. Komen® organization to distribute 500 pink Talon™ PDC and Kymera™ hybrid drill bits worldwide. Our eye-popping hardware showed up on drillsites from Anchorage to Adelaide – a pervasive reminder for women to get breast cancer screenings, and for people to contribute toward finding a cure. This October we doubled our distribution, shipping 1,000 pink-painted drill bits worldwide and, like last year, donating $100,000 USD to Komen to help fund breast cancer research. We also sponsored ‘Survivor’ pins to breast cancer survivors handed out by Baker Hughes volunteers at Komen’s annual “Race for the Cure®” awareness and fundraising event in Houston, Texas. Distributing breast cancer Survivor pins has been a Baker Hughes Community tradition since 2006.

“This campaign made a powerful impact on Baker Hughes employees and customers around the world,” said Robin Robinson, Vice President, Drill Bits. “We are proud to continue supporting research to end breast cancer.” Over a span of more than 30 years, the Komen organization has invested over $2.5 billion USD to raise breast cancer awareness, fund research toward a cure and support related work in thousands of local communities. These investments, combined with others, are paying off. Over the past 20 years, breast cancer death rates have declined by more than a third – a solid improvement, but there’s still a long way to go. Q

“We are proud to continue supporting research to end breast cancer forever,” said Robin Robinson, Vice President, Drill Bits. “This year, we are excited to increase the number of drill bits being painted pink as part of the “Doing Our BIT for the Cure” campaign, which had a powerful impact on employees and customers around the world.”

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AWARENESS: IT’S LIFE-ANDDEATH “Raising awareness is crucial because breast cancer can be successfully treated if caught early,” says Steve Ellison, Vice President, Quality. At its earliest stage, breast cancer is virtually 100% treatable. At Stage II, more than nine of ten people survive. If the disease is allowed to progress unchecked, though, survival rates decline. At Stage III, seven out of ten patients still make it through.** But if not detected until Stage IV, the most progressed stage, only about two of ten people survive. That’s why breast cancer awareness and recommended screenings are literally a matter of

life and death, and why Baker Hughes is gratified to be part of this effort. “Doing Our Bit for the Cure” is just one example of an important truth: while quality is all about Baker Hughes products, services, processes and performance, it’s also about what 65,000 of us do to make the world a better place.

* Centers for Disease Control (US) data. Disease mortality varies by country. ** National Cancer Institute (US) data.

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