Preparing for Growth: S & B Engineers and Constructors’ Strategic Initiatives

S & B Engineers and Construc­tors Ltd. has spent the past three years preparing for the future of the oil and gas industry by improving its efficiencies in its logistics and procurement departments and opening two new divisions.

The Houston–based company specializes in engineering, procurement and construction for the refining, petrochemical, chemical, midstream, power, infrastructure and pulp and paper industries. S & B has recently doubled in size and has the leadership, processes and systems in place to be able to double in size again to respond to the growth in the petrochemical, refining and gas fractionation plants it sees coming over the next five years, Vice President of Procurement Kent Malone says.

The new S & B Plant Services Division provides in-plant maintenance and builds small capital projects for clients. “Over the next five to six years we see a lot of big construction projects where we will actively play, but we do see that cycle eventually coming to an end,” Malone says. “Once that ends, the oil and gas industry will need maintenance groups that are well founded and well-funded, with established customers to take them through the slower construction phase.”

S & B is also starting a new division to combat the expected shortage of 50,000 to 80,000 skilled workers in the Texas and Gulf Coast regions, who will be needed to build new plants for oil and gas companies, Malone says.

The company’s new module fabrication facility is expected to be completed in spring 2014 and will provide modularized equipment packages to improve the efficiency of construction and reduce the impact of the field labor shortfall.

Establishing Efficiency

The logistics and procurement departments of S & B have gone through significant changes in the three years since Malone came to the company. “I was brought in to effect change,” he says. “We didn’t have a traffic or logistics department and we created one, which has saved the company millions since we have had it in place.”

Transportation was running the “Prepay and Add” delivery method prior to Malone’s arrival, which means that S & B was paying for the transportation of the equipment and the supplier was not always interested in negotiating rates to the company’s advantage. “Now we use a third-party logistics provider for all of our LTL freight while also negotiating rates for full truckloads and heavy-haul deliveries so we are saving money every time a truck moves,” Malone explains.

Another major change was combining all fragmented departments together under one supply chain umbrella, which includes materials management, purchasing, expediting, source inspection, traffic and subcontracts. The “under one roof” model has significantly improved communication and alignment between the departments. “It’s amazing how much better everyone communicates when there is one boss,” Malone says.

The most improved supply chain strategy implemented was the move to all electronic document transmittals and approvals. The company continues to streamline its processes to be able to take advantage of the quantum leap in computer capabilities over the last decade. “S & B is fortunate to have the most fully integrated computer system in the industry,” Malone adds. “Our clients recognize the value of this system where all material and equipment items are tracked from design through material management, purchasing, expediting, inspection, traffic and receiving, all the way to the foundation for installation.” Every item of documentation identified in the engineering phase for material traceability and vendor-supplied data is physically tied to the individual item within the system. Over 25,000 documentation items are tracked on an average project, Malone says. “This is clearly a differentiator for S & B with our clients.”

The significant changes that have taken place in the company’s supply chain have allowed it to provide solutions to its customer, even in extreme circumstances. A new customer contacted S & B in August 2011 who had lost confidence in a competitor’s ability to have a gas fractionation plant designed, procured and constructed by December 2012. This was a new design capacity for the company, Malone says, and it had never completed a similar project in a short 16-month period. “The short story is that we did the project on a lump sum basis by fully utilizing the capabilities of our supplier partners and successfully started up the plant one day early,” he explains.

The company also had to devise an alternate shipping configuration for a job site in Scio, Ohio, this year to move three large towers from Texas to the site. The three large towers were fabricated in Freeport and Tomball, Texas, and the original plan involved barging them to Stubensville, Ohio, and transporting them over the road to the jobsite. Shipping these towers required an access road to be built to bypass the town of Scio, because it was physically impossible to move these pieces through town, Malone explains. “Within one week of our inquiry package being issued, we were advised by the client that the access road was not going to be built,” he adds. “We had originally been advised by the supplier that their conversations with various rail carriers led them to believe that shipment via rail was also not going to be possible. Needless to say, our client became very concerned.”

After numerous meetings with the various rail road lines, discussions with S & B’s engineers, numerous field checks and extra clearance improvement work, the company was able to deliver the vessels to the jobsite safely, Malone adds.

S & B believes a critical supply chain challenge is U.S. manufacturers’ lack of capacity to meet the rapidly escalating construction demand in the oil and gas industry. “We are looking internationally,” Malone adds. “We are going to be helping our U.S. manufacturers by starting to buy more from international firms. We are a big supporter of U.S. manufacturers and they have done us a great job. Our concern is keeping up with the demand we see coming that they haven’t seen before.” The company’s preference is to continue working with U.S. manufacturers, he says, but it will utilize international firms as needed to ensure it gets the job done.

Rapidly Growing

S & B grew rapidly over the past couple of years and needed to fill positions to handle the workload. Malone hired about 15 people over the age of 60 who had experience to run some of the operations. “I needed their project procurement experience and surrounded them with mid-level and less experienced folks,” he adds. The company also started a college graduate hiring and training program for entry-level employees. To teach inexperienced workers, the company created manuals that detail each step of a specific job. “Training the younger staff is moving so fast,” Malone says. “They have the technology expertise and aren’t scared of it, so they quickly learn the systems. It’s amazing to watch them grow.”

Upon his arrival three years ago, Malone interviewed employees to learn what they liked about the company and what they would change if they were in charge. “The people on the front lines know the problems,” he says. “Instead of top-down management it’s bottom-up for me. I go and seek people out to get their opinions.” The employees then helped create solutions for the problems they noted, which dramatically improved workflow, Malone adds. The input from employees was also used to create a Vision 2020 plan, which focuses on primary areas including global focus, market expertise, streamlining, technology, Alliance Suppliers and employee development.

Training and streamlining allow employees to meet the demands of every customer, which are focused on time-to-market and quality facilities. To meet these needs, Malone says S & B’s supply chain has to meet the demands of its internal customer: the construction department. “Construction schedules are directly impacted by the procurement, subcontracts and material management plans and execution in cooperation with our various suppliers,” he explains.

S & B doesn’t strive to be the largest company in the industry – it strives to be the best. “Excellence is something we focus on in everything we do,” Malone says. “We have never wanted to be the biggest company on the block. In our markets, we feel we are the best at meeting the needs of the clients we serve.” ­­­