Outsourcing: An Historical Perspective, Part 1 of 2

In the mid to late 70’s, the (ExxonMobil) Baytown refinery in Texas, like most others, were into massive expansions. According to Larry Kirkland, because materials requirements were for domestic only, it put too large a strain on manufacturers’ capabilities to provide all of the products required, so they began experimentation with foreign manufacturers. “There were lots of distributors then, and the one that could come up with the materials first usually got the order. The acceptance of foreign material became a necessity,” he reports.

George Reusch writes: “Like virtually all end-users, Exxon bought valves through distributors, most through contractual agreements lasting 1 or 2 years. This was a time of radical change in the valve industry. Domestic brands that Exxon had used for over 50 years, like Powell, Crane and Walworth, were changing. The changes were in response to much cheaper, lighter valves coming from Japan and Europe. Early on, the quality was equal, but the foreign valves were cheaper and lighter.

“My feeling was that domestic valve manufacturers were in a state of panic and ran to the first Chinese or Korean foundry offering a cheap product. Little, if any, quality control was initiated and the product was substandard.”

Kirkland described some of the problems he saw. “One of the things that some of the original manufacturers tried was to reduce wall thickness. The reduction cut the weight and related to savings in shipping cost. It also reduced the life cycle of the valve, which greatly reduced the life of the valve and increased the total cost of these valves with mandatory premature replacements. Another problem was the use of inferior outsourced products. Initially this was packing, gaskets, and fasteners.”

There were other issues as well. Reusch referred to inferior casting and compared the surface of some of the valves as being as bad as “General Noriega's pock-marked cheeks”.

Raoul Robert addressed the quality issue in our conversation, but said that the problem with quality went back further than the building of the Baytown refinery. “The last grassroots refinery built in the U.S. was what turned into the Marathon refinery in Garyville, LA. Ingram built it. It was in the 1970s,” he said. There was a shortage of valves at that time, so they built it using a [European import valve]. When Exxon built Baytown and Baton Rouge, they ended up using the same valves because it was all they could get. But it turned out that Exxon had as much trouble with that same foreign valve as did Marathon.

Robert explained, “As a service company, repair facility doing work for the Marathon refinery, we had standing instructions to scrap every one of those valves. It was casting and every kind of problem you could imagine. That was the first example of major use of non-domestic valves that I can remember. But then they continued to use foreign valves even though many end users had stipulations that they would accept domestic only. The problem was, there just weren’t enough domestic valves. They (the manufacturers) couldn’t keep up with demand.”

When these European valves failed at the Baton Rouge refinery, Exxon began to rethink its commitment to the brand. Reusch continues. “Testing was done at Southern Valve Services, a long term Valve Repair Council member, with the owner, Raoul Robert supervising the testing. The valves failed during the tests, and because of this, the [European] valve was taken off Exxon’s approved list.”

Next week: How failures led to new and improved valve standards and a change in the way valves, especially from foreign manufacturers, were approved and purchased.

Note: While manufacturer “names were named” during the interviews, editorial policy at Valve Magazine precludes including them in the article. We have indicated our replacement of names with descriptors with [] brackets. -Ed

Kate Kunkel is Senior Editor of Valve Magazine. You may contact her at kkunkel@vma.org