Lean processes are lifting oil and gas leader UECompression to greater heights.
As the global oil and gas industry begins a languid progression toward recovery and the power sector scrambles to harness ever-rising costs, many of the equipment packagers serving those industries are struggling to find and keep their balance.
With a significant increase in spending by customers, their volumes have rebounded nicely from the bottom of the downturn. The Colorado-based UECompression (UEC) is turning that struggle on its head.
We sat down with UEC’s newly-minted CEO, Jack Maley, to learn how the global supplier of compression packages for the industrial air, oil and gas, power, and process industries is avoiding the innovation-stifling pressures of such uncertain times.
Beating Cyclical Highs and Lows in Oil and Gas
Founded in 1983, UEC began as an oil and gas-focused business. Over the years, the firm built a significant customer base in the power and process industry.
“Not just grid power, but combined heat and power,” Maley clarified. “That allows us diversification that our competitors don’t enjoy.”
The development of future plans across a range of different markets is allowing UEC to escape the tough market cycles faced by many of their competitors: downsizing followed by a frenzied search for expertise when fortunes rebound.
“We retained all senior sales talent so as the market strengthened we had the relationships in place to be able to capitalize on the work,” he explained. “During the downturn there was a deliberate process to keep key talent, so a decision was made to keep our engineering talent and resources to be able to support our customers as the market came back.”
Maley views the move as a type of talent retaining strategy, as well as a diversification strategy that enables the company to leverage similar technical expertise across different markets. Achieving these strategies in Denver, CO where the current unemployment rate is 2.5 percent, is no small feat.
“We’ve done it by keeping highly seasoned people. We’ve been able to leverage that knowledge and bring in the skilled workforce in the manufacturing plant to get up to speed quicker,” he added.
Senior leadership keeps a presence on the production floor to direct daily efforts and serve as mentors to new hires.
“We had the right mentorship to bring in new people, acclimate them, allow them to get their productivity up to manage the work,” he noted. “Ironically enough, you’d expect it to be pretty chaotic, but it’s not.”
This is also a tribute to UEC’s supportive skilled workforce.
“When I first got here I sat down either in groups or individually with everyone in the business and one of the things I found unique is that our people have a strong desire to help each other and work as a team.”
On the production floor, leads not only guide the daily work but also serve as mentors to their coworkers.
“They enjoy the employee development, even though in their minds they’re probably not thinking of it as employee development,” Maley mused. “They’re just working with the person next to them and they really care about seeing them succeed. Our skilled workforce is very connected in terms of how they overcome challenges and finding creative solutions to make things work.
“If someone on the production floor has a problem they’re welcome to talk to the engineers directly. Product engineers come to the floor generally on a daily basis just to check in on them and see how they’re doing. It’s a very collaborative work force.”
Bringing Lean to the Ops Scene
On the operations side, UEC is using lean manufacturing concepts—which are still fairly uncommon in engineering-heavy businesses—to trim costs as well as lead and cycle times.
“We are a very heavy industrial-type business that’s not generally treated like a manufacturing company, so we’re trying to use standard manufacturing processes across the business to help us improve quality and reduce cycle time.
“We’re bringing in continuous improvement, Lean, Six Sigma thinking to the entire business so we can take our new facility to the next level and maximize the velocity of the work we accomplish there,” said Maley.
That facility, completed in 2013, is one of the newest, most modern facilities of its kind in the country. Helping to orchestrate the implementation of the concepts that will keep the facility powering forward is COO Mark Vitale. Vitale, late of Dresser-Rand, brings a valuable knowledge of scale to play for UEC.
“He’s seen the differences in a very large company, where you start deploying continuous improvement, 5-S, Six Sigma and all the available tools, and he knows where it works and doesn’t in a larger company,” Maley explained. “He’s able to apply a much higher and sophisticated level of thinking to the size of business that we currently are.”
Additionally, UEC is moving towards a digital manufacturing-style process that will keep projects moving at pace, and are deploying an ERP system that pushes a digital workflow to the shop floor. Maley expects the next 12 to 18 months to bring a flood of tech advances to the facility.
“Technology is so critical for us because unemployment is so low here, we have to utilize it to be able to support the growth we believe we can get.”
Playing in the Niches
Niche development, another savvy way to shield the business from cyclical fluctuations, is proving beneficial for UEC. The company recently designed a custom compressor package for use in frigid climates, and is one of the few compression packagers in the U.S. to do so.
Eliminating the need for powering massive industrial compressors with natural gas is creating another lucrative focus: the use of electric drive motors to drive gas compressors.
“That’s another niche because we play in the power markets, but when customers in any segment have grid power available, we can provide that as a secondary option to having an industrial large horsepower natural gas engine,” he stated.
Perhaps their best niche play is a deep understanding of the problems their customers face.
“We are exceptionally good at working with customers to solve very complex problems,” Maley concluded. “When we engage with a customer we understand their business. From the upfront sales process to the service side of the business, when we go to a customer, we’re talking to them about the problem, not the product.”
UECompression is a diversified packager of air and gas compression equipment with locations in Henderson, CO, Billings, MT and Casper, WY. UECompression specializes in air and gas compression packages for oil and gas, power generation, and process applications and was previously part of Kirby Corporation before being acquired by Lion Equity Partners in November 2015.