Outsourcing: An Historical Perspective, Part Two of Two

Failures Lead to Testing Requirements

Larry Kirkland writes: “With the initial acceptance of these foreign products came failures. These failures became lessons learned. Most of these lessons lead to the test requirements for certain materials.

“Because of the shortage of scrap metal for foundries in Japan came the requirements for Positive Material Identification (PMI). Pipe primarily, but also for valve components. Valve bodies were x-rayed looking for porous spots in castings. Valve steam failures produced the requirements for the steam pull test, also the strength of the wedge and the stem T connection. Both tests were to prevent a catastrophic failure. Not that the stem wouldn’t fail but where it would fail and at what load. The disc to stem fit was critical to prevent the wedge from cocking to one side or the other preventing it from fully opening. Other problems were the use of screwed in seats, which allowed for backwash behind the seats that will lead to premature valve failures.”

Kirkland continues. “Other values were also added as the process continued to develop. 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.”

It’s All in a Name

Raoul Robert noted that the problems were not just from products with “foreign” names. When the domestic refineries officially quit using only domestic valves, eventually nearly all the valve manufacturing moved overseas. Part of that process involved the sale of names.

“For example,” Robert said, “there were a lot of old domestic manufacturers that had very good reputations for quality valves that exceeded the specs at that time. As they became unprofitable, companies bought the names and manufactured the valve under that name in other parts of the world, with virtually no correlation to the valve that had built the reputation for quality. But the names were still on the AML (approved manufacturers’ list) by most of the end users. That’s when people like Rudy McDonald and Ralph Rapp and several others in charge of specifications for valves began to qualify the manufacturer with visits to the foundries and factories and it became harder and harder to continue to bring valves into the U.S. and get acceptance without meeting at least minimum requirements.”

Engineering vs Cost

The Approved Manufacturers List

Kirkland writes, “Exxon needed a better way to communicate the acceptance of manufactures that had passed the test and were approved. The advent of the Approved Manufacturers List (AML) signaled a big change in purchasing.

He continues, “In 1982 Exxon did its first joint bid of its two largest refineries using the new AML as a basis for materials acceptance. While the reward was great savings, there were still lessons to be learned. The most important was that it should be a team doing the manufacturer approvals.

“With a perceived valve shortage, we assembled a joint team of engineers, procurement, and members of our supplier management team to go around the world on a fact finding and manufacturer approval trip. The positive results of this trip was the prevention of a valve shortage, shoring up manufacturing capabilities for our company, and price reductions tied to Yen/Dollar conversions rates.

“The initial list was predominately manufacturers in Japan and Europe. If you follow the changes on the AML every decade you find a shift to another country. Japan was followed by Korea, and now China.”

Modifications Needed

“Anything that made the valve special was done locally,” he continued. “Eventually, here in the U.S., the end user began getting involved in the modification. But when they first started sending valves out for modification, every shop set their own standard. At that point, no one in that process did any investigation of the selection process. There was no question of qualifying. It was just some inside salesperson at the supply house who developed a relationship with a valve shop.”

Specifications Begin for Valve Repair Shop Modifications

Over time, specifications began to develop to get some control over the quality of the process. Robert noted, “Slowly as problems emerged, the end users began to get more involved, and [repair shops] ended up being audited and subcontracted by a number of valve manufacturers as the end user demanded more accountability. That has continued today.” At the same time, end users began to qualify the shops that could do repair work on their valves. According to Robert, before the end users got involved in this qualification process, the manufacturers simply said they would not be involved in re-conditioned valves, and that end users ought not to buy them. “That was great for commodity valves, but didn’t work with the absolutely critical valves because there wasn’t much choice if there was such a critical, special valve, nobody kept them in stock. So recognition of the reconditioning became critical.”

Total Cost of Ownership

Once again, Rudy McDonald and Ralph Rapp became involved in the reconditioning programs and began to view their valve selection process as more of a total valve cost process as opposed to just buying a new valve. They were looking at how much to own it over the long term. So they began giving credit to those manufacturers who supported the reconditioned valve programs. It’s not surprising that the best quality products were the quickest to endorse that position, and now most of the majors have authorized repair facilities. “It’s considered almost a continuation of the valve manufacturing process, except they support it after it has left the factory,” said Robert.

Lessons from the Past for the Future

Kirkland pointed out that, while the lessons learned seem a long way in the past, the one thing that is true is that each time a new country comes on as the new manufacturing center for valves, the same problems reappear. Now China is the country. He writes, “In 2009 I made a trip to China to do an analysis of several major valve manufacturers there. The same problems exist there as in the past. One major foundry that does casting for most of the majors informed me that the quality in the product is only to the level the manufacturer pays for. At this one facility there were the marked differences between great castings and those that would not pass any approval.”

Kirkland closed with this advice: “The two things that every purchasing department should be aware of is that API only sets the minimum requirements for a valve. All of the majors require a super valve with more bells and whistles. Second and most important that lowest cost is not always the best value.”

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The Summer 2012 issue of Valve Magazine featured an article on the effects of globalization which grabbed the attention of George Reusch, a former long time buyer for Exxon’s Refinery and Chemical plants in Baton Rouge. Reusch, along with Larry Kirkland, another Exxon buyer, graciously offered their take on outsourcing as it affected the valve industry back in the 1980s and as it has affected the business to the present. Raoul Robert of Southern Valve also generously gave of his time to share his view from the valve repair side of the industry.

Kate Kunkel is Senior Editor of Valve Magazine. Contact her at kkunkel@vma.org