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A Refinery Reinvents Itself Through a Continuous Improvement Program

A company’s culture becomes focused on enhanced accountability and continuous improvement.

After several years of historically high margins, the financial performance of a company's refinery fleet stalled in the midst of a widespread industry downturn. The organization's return on capital employed (ROCE) was below targets, and it recorded significant cost performance gaps compared with Solomon Associates’ rankings of industry peers. It was clear that the company needed to adapt to the new environment and improve performance, but achieving these results would be difficult. The company didn’t operate a culture of continuous improvement and results of previous one-off improvement efforts were not sustained. 

With help from BCG, the company leaders took action to achieve lasting change. BCG helped leaders set downstream goals to close the gap with peers and to generate a 15% ROCE, with an emphasis on sustainable benefits. BCG worked closely with the the company to generate the best ideas for improving performance, using a tool kit of more than 1,200 refinery ideas and best practices that affect commercial performance, operations, and maintenance. BCG also performed an economic and risk evaluation for each initiative. To sustain the results, BCG helped establish an implementation tracking progress. The company conducted health checks 3, 6, and 12 months after execution and outlined change management activities to drive a culture of continuous improvement.

The results have been striking. The project delivered more than $850 million in annual pretax earnings improvements across seven refineries. In addition, gross margins rose about 15%, while energy costs improved by 5-10%, maintenance productivity rose 25%, and the company logged a reduction in other operating expenses from 5-10%. This is a substantial impact in a business with a large cost base and thin margins. Overall, approximately 75% of identified value of the program was realized within 12 months, including many quick wins.

The company’s culture has become one focused on enhanced accountability and continuous improvement. An internal process is in place to regularly refresh the list of ideas for further improvements and guide their implementation.

“There is a much greater awareness for continual improvement. Employees are more responsive to acknowledge opportunities when they arise and take appropriate action.... The sustainability of the process has been maintained.”

 —An executive with a large refining company

Energy & Environment
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