Posted: July 5th, 2015

Impact of social media in improving the castumer secvices department

1.1 – Aim and Objectives

 

The aim of this study is to explore, analyze in depth and evaluate the lean supply chain management of the oil industry in Saudi Arabia.

The objectives are to:

• I identify factors, processes and stages along lean supply chain of the oil industry.
• Explore the drives of lean supply chain in the oil industry.
• Explore the barriers of lean supply chain in the oil industry.
• Key performance indictor of lean supply chain.

 

2– Literature Review

CHAPTER TWO

LITERATURE REVIEW

 

2.1- Introduction

 

The oil and gas sector around the world involves a supply chain that incorporates transportation systems that are operate on a national and international level. As such, there is need to implement some models that would regulate such activities (Chima, 2007, p. 27). This section of the paper will involve an assessment of different secondary sources in order to provide a deeper insight into the concept of lean supply chain management. It will first explain what supply chain management means, while identifying its objectives, drivers, and cyclic view. After this clarification, the section will then explore the concept of lean supply chain management, its components, and principles. Furthermore, there will be an assessment of the key performance indicator of this concept, followed by a conclusion about the sources used in this section.

Different energy industry players undergo fluctuations in performance because of price inconsistencies for their products. The volatility of this industry makes the firms to opt for operating techniques that would ensure that they maintain their profitability and adapt to the changes. Some of the models that they can choose to use include lean supply chain management (Clyde, Cassidy, Click, and Singh, 2010, p. 1). The authors have argued that in the oil sector, the application of lean management is prevalent in unconventional projects. Concepts of lean supply chain cut on the costs and waste produced. Asbjørnslett explains that this concept involves reducing the number of supplier involved leading to reduced costs (2000, p.7).

2.2- Supply Chain Management

 

The aspect of lean supply management is important to ensure that the needs of the clients are met, hence the need to effectively develop a strategy that will be beneficial for the business. Jaklieet al., (2005, p.205) indicates that the management of the supply chain is an important factor in the evaluation and management of business processes. Additionally, the authors note that the aspect of supply chain management is important in the management of competition in the market. The various objectives of supply chain management are important in the evaluation of factors that affect the operations of a company.

WHAT IS SCM? YOU NEED TO EXPLAIN THE BASIC CONCEPT OF SCM

2.2.1- Objectives of Supply Chain Management

 

The supply chain management consists of different players in the environment. The various players involved in the fulfillment of the needs of the customer are important in the management of the resources involved in the fulfillment of the needs of the customers. Janvier-James (2012, p.195) notes that one of the main objectives of supply chain management is examining and controlling the chain of networks that are aimed at effectively delivering the goods and services to the client. Having a basic concept of the operations of the company is important in ensuring that the best means are used to create value for the customers. Slone, Dittmann and Mentzer (2013, p.152) adds that customer satisfaction is one of the main objectives of supply chain management. Balancing between the operations of the company and the objectives to satisfy the customers is another main goal that is associated with supply chain management.

Another aspect that can be noted as the objective of supply chain management is the growth of the revenues in the company. Coyle et al., (2008, p.672) indicate that the strategy that is applied by the company influences the success of the supply chain management. Managing the supply chain effectively is essential in growing revenues of the company and contain the costs incurred. Creating additional revenue for the company is important in the oil and gas industry because of the uncertainty of the supply of the products. Slone, Dittmann and Mentzer (2013, p.7) add that it is the duty of the supply chain professional to ensure that there is adequate revenue for the management of the products of the company. The management of the supply chain is important as the availability of the product is increased to the client that increases the level of satisfaction.

A main objective of supply chain management is the maximization of the value generated regarding the products. Basu and Wright (2010, p.15) note that the value of the products is generated by the value of the products, which affects the profits made. Additionally, the value of the products of the company is managed by the various activities that have been evaluated in the company, which also affect the value of the products of the company. Slone, Dittmann and Mentzer (2013, p.12) states that the management of the capital requirements and streamlining the networks of the business is important in the management of the supply chain.

2.2.2- Drivers of Supply Chain Management

 

The major drivers in the supply chain management include inventory, transportation, facilities and information. Jacoby (2012, p.220) indicates that the management of inventory is important in the operations of the oil and gas industry, which results to lower costs in the management of the factors in the company. Additionally, the author points out that in oil, gas and power generation, the management of inventory may be costly, but the factor eventually saves the cost to the company by decreasing the cost of the equipment if they are running sooner rather than later.Management Association and Information Resources (2012, p.606) indicate that the visibility in the inventory management is an important factor that helps turn better revenue for the business based on the lower opportunity loss and lower inventory and running costs. An advantage of inventory management can also be seen in the higher return investment that is derived from the proper articulation of the resources in the company.

            Management of transportation facilities is another factor that is an important driving force in supply chain management. Bhatnager (2010, p.158) notes that transport operations in the management of supply chain processes is important in ensuring that the services of the company are well delivered. The financial investment involved in the management of transport is an important factor that needs to be considered when undertaking the inventory process as it affects the delivery of the services to the customers. Jacoby (2012, p.197) adds that the transportation facilities in the oil and gas industry is an important factor that needs to be managed based on the high costs associated with the operations.

Facilities that are used are another example of the drivers in supply chain management. Bhatnager (2010, p.12) indicates that the management of facilities can alter the rate of production if inventory management has flexible materials. Additionally, the supply chain facilities manage the aspects of costs and having flexible facilities may help in the alteration of the production lines. Jacoby (2012, p.221) notes that the investment in new technologies in the oil and gas production can lead to achievements in the business. Following the established international standards set by the World Bank can help in the management process of the facilities.

Information is also an important aspect in the management of supply chains in the oil and gas industry. Management Association and Information Resources (2012, p.554) indicate that the management of information can take up various forms of factors in the management process. Collecting information and developing an information system that is effective will help in the management of the resources that are at the disposal of the company. Storing and integrating the information accordingly will be helpful in the achievement of the facilities that are available in the company to ensure that effective management has taken place.

 

 

2.2.3- Cyclic View of Supply Chain Cycle

 

The cyclic view of the supply chain cycle is useful in making the operational decisions as the role of each supply chain process is defined. The figure below shows the supply chain link in the oil and gas industry.

Figure 2.1 1: Oil and Gas Supply Chain

(Source: Bojonko, 2010, p.2)

The supply chain link in the oil and gas industry is important in the management of the relationships with vendors and in ensuring there is the flow of materials through the supply chain. Chima (2007, p.28) states that each of the stages requires adequate planning and processes such as determining the geographical aspects in the exploration stage, drilling and reservoir in production. Additionally, the output of refinery is the input in marketing that includes factors such as a retail sale. The relationships between the various companies are important in the management of the process, and the frequency affects the end product to the consumer. Bojonko (2010, p.3) indicates that issues may arise in the delivery of the products to the consumer, especially in the oil and gas industry, which should be maintained by the various aspects of the supply chain.

2.3- Lean Supply Chain Management Overview

 

The global population has been a major influence in the demand of energy and projections of the demand rate over the years. With the fast rising rate of populace around the world, the security of energy production has become a global concern (Society of Petroleum Engineers, 2012, p. 1). The focus for most companies when considering competition is not just about rivals anymore, but more on the supply chains and their effectiveness (Jaklic, Trkman, Groznik and Stemberger, 2006, p. 205). The Society explains that the lean supply chain aims at improving the business performance by eliminating processes that are redundant and wastes that occur in the process.

WHAT IS LSCM? YOU NEED TO EXPLAIN THE BASIC CONCEPT OF LSCM

 

2.3.1 – Lean waste

 

The main purpose of lean management is to minimize the waste products in the process of production, enabling the products to reach the target market more efficiently. There are seven wastes in lean management including overproduction, motion, inventory, and waiting. Additionally, over processing, defects and transport are part of these wastes (El-Namrouty and AbuShaaban, 2013, p. 68). This waste management methodology has helped many companies in the oil sector to identify wastes that would otherwise go unnoticed. According to Oakdene Hollins Research and Consulting, the lean waste of overproduction means that there firm is producing commodities yet it has not received orders for them (2013, p. 12). Sakhardande explains that the management of this waste is among the most significant in the value stream. Overproduction leads more waste than just excess inventory and the money spend in the production of the excess. It results in lower flexibility and longer lead-time in the production process (El-Namrouty and AbuShaaban, 2013, p. 69).

Sakhardande explains motion in relation to the workers of the company. The waste occurs when the workers are more than needed at any given time, yet a lower number would not affect the output. Its poor ergonomics (El-Namrouty and AbuShaaban, 2013, p. 70). The reason for such waste is usually poor training of the employees, operating procedures that are not standardized, and poorly designed work processes (2011, p. 12). Oakdene Hollins Research and Consulting reports that these excess and unnecessary movements can lead to the workers feeling strained and losing momentum for the duties assigned (2013, p. 12).

Inventory is considered any work in progress, raw materials or finished products that do not seem to be adding any value to the firm, thereby leading to the categorization of such as waste (El-Namrouty and AbuShaaban, 2013, p. 68). The waste may be because of unlevelled production schedules, forecasts that are inaccurate, machines breaking down or inefficient delivery by suppliers. Sakhardande explains that inventory in excess necessitates more space for storage and management resources (2011, p. 12). Oakdene Hollins Research and Consulting explains that these additional process needed to maintain the extra inventory results in additional costs for the firm (2013, p. 12).

Sometimes companies, even those in the oil industry can experience delays in production process the products (Oakdene Hollins Research and Consulting, 2013, p. 12). This waste can also be referred to as idle time. El-Namrouty and AbuShaaban indicate that some parts of the machines used for production may be experiencing blockages among others leading to queues (2013, p. 71). If not solved fast the wait may lead to work flow imbalance, bottlenecks, and the firm not honouring its delivery dates (Sakhardande, 2011, p. 13).

Defects may occur leading to products that do not meet the specifications of the customers. In the oil industry, it may occur in the form of process getting out control and producing petroleum that is not the desired quality. Sakhardande indicates that the quality may be unacceptable to most customers. Defects are caused by inadequate worker training, lack of skills, and machinery inadequacy among others (2011, p. 14).

Sakhardande explains the last form of lean waste, transportation, as routings that are complex leading that do not add any value to the products while they are being moved from one place to another (2011, p. 13). El-Namrouty and AbuShaaban state that this waste prolongs the production process and less use of the labour intended (2013, p. 71).

2.3.2- Lean Tools and Methods

 

These techniques have been known to take different forms, depending in the goals of the organization. The first tool is cellular manufacturing, which involves arrangement of the workforce into cells workstations determined by a logical sequence (Sakhardande, 2011, p. 31). The strategic arrangement helps in achieving goals because of minimal interruptions, inventory reduction, and space utilization. Additionally, the tool ensures improved productivity (Abdullah, 2003, p. 10).

The other tool is continuous improvement, also referred to as Kaizen. It is a systematic approach of gradual improvement through models such as the 5S (Abdullah, 2003, p. 11). Sakhardande however reveals that this tool demands everyone’s participation in order to be successful (2011, p. 35). The 5Ss are Japanese words consisting of Seietsu or Systemize, Seiso or Sweep Clean, Seiton, which means Straighten, Shitsuke meaning Standardize, and Seiri, which translates to Sort (Abdullah, 2003, p. 11).

Just in Time in Japanese terms is Kanban and involves minimization of defects and poor scheduling. It factors in the processes of production, distribution and purchase. Sakhardande explains that this tool restricts repetitions in the production process, although application in oil industry is challenging because of the dynamics in demand (2011, p. 32). Abdullah adds that Kanban allows for early detection of quality problems (2003, p. 19).

Production smoothing is a key tool in lean systems, also called Heinjuka. It involves ensuring that the production process from day to day remains constant (Abdullah, 2003, p. 19). Lack of consistency would lead to waste on some days. Poke-Yoke is another method of lean that acts as a system for defect controls. Sakhardande simplifies this tool to mean that it’s a mistake proofing tool because it corrects, warns, and alerts the concerned operators (2011, p. 33).

Total Productive Maintenance (TPM) is the final tool to be discussed in this section and involves maintenance prevention, improvement of equipment and corrective maintenance (Sakhardande, 2011, p. 34). The oil industry needs such a tool because of the high rate of machine breakdown that the workers can experience at times (Abdullah, 2003, p. 20).

2.3.3- Lean Benefits

The adoption of lean practices has led to the realization of both environmental and economic benefits. Most of these benefits are sometimes not measured because they are usually anticipated, especially for the environmental ones (Clyde et al.2010, p. 1). Additionally, the economic benefits are sometimes realized but considered commercially sensitive leading to inadequate communication of such, especially through supply chains.

Oakdene Hollins Research and Consulting indicates that they key benefits of the lean philosophy are reduced costs, improved quality, development of processes that are more efficient, and reduction in variation (2012, p. 45). The system benefits the company economically by reducing operating expenses and maximizing on the human effort put in the process (Wilson and Farley, 2010, p. 2). Ranganathan and Premkumar add that lean supply chain enhance customer satisfaction, and higher stock turnovers, which are economically beneficial to the company (2012, p. 38).

2.3.4- Lean System Model

Different companies have chosen to adopt lean management in order to realize better efficiency, reduce overall costs and time taken to deliver the products to the customers (Bergmiller and McCright, 2009, p. 1). The authors argue that the application of the lean system models have led to companies improving their results in operations. The models include a 4P framework involving philosophy, process, people and problem solving.

According to the lean philosophy, anything that is not adding value to the supply chain is considered waste and should be removed from the process and distribution process. The company can make the process more effective by identifying them through value stream mapping. The philosophy operates under the mantra that an ideal system of lean needs to be perfect in the production and supply process without any wastes being generated at any point (Sakhardande, 2011, p. 8).

The process entails the company ensuring that the process of supply has a continuous flow and the workload involved is adequate, without any waste. Despite waste minimization, the quality offered has to be high, tasks must be standardize, and the controls used are effective. The models concept of people means that the lean application must involve management team that shares the philosophy and employees that live by it as they work for the oil company. If the people operate by the philosophy, the suppliers will realize that and improve their offers to the firm.

2.4- Principles of Lean Supply Chain

 

2.4.1- Lean Paradigms

 

            The lean paradigms are used in the management of the resources and waste in the oil and gas industry depending on the exploration of the various factors that affect production. The manufacturing practices in the oil and gas industry has affected the perception of the people towards the industry hence the need to focus on the lean paradigms to streamline the operations. Anderson, Boulanger and Johnson (2010, p.200) state that the adaptation of lean paradigms in the oil and gas industry is being transformed by the use of computer-aided systems that affect the cash flow and profitability of the energy development projects in the oil and gas industry. The management of the flow of energy in the oil and gas sector is affected by the management of the technologies that affect the operations of lean management.

The lean outcomes in the management of operations in the oil and gas industry are affected by the endeavors associated with the industry. Baridu and Osisanya (2013, p.178) indicate that the management of the supply of oil and gas is affected by the analytical tools associated with the production. The designing of various steps in the industry has helped foster lean management in various contexts. Anderson, Boulanger and Johnson (2008, p.200) add that the investment in technology is a factor that has helped in fostering the models that are used in controlling the waste in the industry. Controlling the resources used is a mechanism that the oil and gas industry explores in the business management.

2.4.2- Implementation of Lean Supply Chain Strategies

 

            The implementation of lean supply chain strategies is dependent on the industry and how decisions are integrated into the organization. Chima (2007, p.31) states that the strategy applied depends on the relationship management by the company and the relations between the consumer and supplier are important in the coordination in the supply chain. The strategies applied in relation to lean in the oil industry depends on the interaction of the suppliers and their customers and the compliance in the management is mandatory. Manzouriet al., (2014, p.9181) state that the lean production philosophy and the management of the concept has become superior in managing costs, flexibility and quality in various industries. Additionally, the authors point out the effectiveness by maintaining production in the sector is important in exercising control in the industry.

The designing of the lean supply implementation is an aspect that takes several consultations and steps of the key players in the industry. Chopra and Sodhi (2014, para.2) state that the implementation of the lean management in the oil industry is done to reduce the risks in the industry. In the implementation of lean management, managers design the supply chain to ensure that the risk does not spread through the entire supply chain. Asefeso (2012, p.98) indicates that the implementation of lean management has become prevalent because of the aspect of globalization. According to the author, one aspect that can be noted is the specialization in the supply chain as outsourcing is becoming a trend in the lean management processes.

Manufacturing and distribution can be noted as the most important supply chain process. Asefeso. Myerson (2012, p.3) states that the implementation of the lean practices requires that the management is committed to participating and implement the ideas. Additionally, the author notes that the most effective way of implementing lean is by notifying the employees on the tools that are required in the management of the process. Having basic knowledge and tools is important in the implementation of lean management.

2.4.3- Drivers of Lean Supply Chain

 

The benefits derived from application of lean supply are achievable in both conventional and unconventional projects because of the drivers that facilitate the process. These factors include repeatability, intensity, and capital requirements (Clyde et al. 2007, p. 3).

 

2.4.3.1       Repeatability

Some of the processes used by oil manufacturers, particularly unconventional projects, tend to be homogenous in nature. Most firms cannot afford to customize their equipment for each stage of production, even if it means more output, because they are usually costly and hardly profitable for the companies (Clyde et al. 2007,p. 3). Adopting lean supply chain management would be more profitable because such repetitive process are easier to align with this concept. Failure to do so will result in higher costs of development, and the constraints the efforts put in the entire production process. This philosophy ensures process optimization and capacity of production (Ranganathan and Premkumar, 2012, p. 58).

Intensity of the Supply Chain

The massive drilling and fracturing incorporated in the oil industry sometimes leads to choke points, long lead times, and reschedules. As such, these processes have to be changed or monitored triggering the need for lean supply chains to minimize the wastes (Clyde et al. 2007, p. 3). Ranganathan and Premkumar explain that the need for waste minimization and cost reduction are the key drivers of the philosophy (2012, p. 58).

2.4.4- Barriers of TO Lean Supply Chain

 

Transformational programs such as lean applications are prone to challenges when being implemented in different industries around the world (KPMG International, 2013, p. 11). One of the major challenges is transparency. Many companies, some in the oil industry, have experienced challenges in establishing clear baselines in terms of organizational and financial performance before starting the lean process. This challenge has led to many companies failing to point out the financial drivers in the supply process and processes that would determine the benefits from its adoption.

Hard economics is another challenge that the companies in the oil sector can face . Firms need to rely more on fact-based analysis to ensure development (KPMG International, 2013, p. 11). Additionally, the use of financial views has stagnated the performance of some firms in the oil sector leading to the failure in identification of lean waste in supply chain process.

Some companies fail to apply the comparison technique to determine the mechanisms that can favor the company. While benchmarking internally may be a good indicator of the oil company’s performance, it fails to portray the extensions that the company can overcome in the lean process (KPMG International, 2013, p. 11). Comparing the techniques used by other companies in the same sector can become a useful tool because it will guide the firm on the technique to use to succeed in the application of the waste-minimizing methodology.

Lack of speedy delivery can be a challenge in the lean supply chain management. Firms have repeatedly lacked the momentum that they need to transform their supply processes (KPMG International, 2013, p. 11). The involvement of a third party sometimes becomes inevitable and raises the overall costs incurred in the distribution process. The speed in such phases is crucial if the firm is to realize success in future.

The introduction of a new program that is as transformational as lean, often affects other company operations. Such challenges have been reported to affect the implementation of the concept. The reason for the implication is that there arises collisions between the company’s future needs and the current norms and legacy of the oil firm. As such, the company has to ensure that there is high level of engagement, which can sometimes be lacking (Abdullah, 2003, p. 154). Many companies have faced the challenge of low engagement, especially from management, yet they are needed to facilitate the change program. Smooth operation of the lean process is a crucial facet of the firm’s success (KPMG International, 2013, p. 11).

New processes have the challenge of sustainability. The process of lean supply chain might take a long time to assess the accurate benefits derived from the process. It has been proven that lean process can reduce costs; however, the uncertainty may result in controlled implementations leading to inadequate application. The reluctance may lead to low realization of the benefits that can be realized from the application of lean supply chain management.

2.5- Key Performance Indicator for Lean Supply Chain

 

The measurement of the effectiveness of the lean supply chain can be measured through the analysis of the effects of the supply chain. Jaklicet al., (2006, p.207) state that the measurement of the total costs, lead times and quality are the key performance indicators of a lean supply chain in the oil and gas industry. Additionally, a survey of the performance measures is important in the evaluation of the indication that lean management is performing. The authors note that the costs and the responsiveness of the customers are important in the measurement of the lean measures. Anderson, Boulanger and Johnson (2008, p.191) state that the key performance indicators are important in the recording of the actions taken in the company and future decisions that need to be made with regards to the company.

The assessment of the total costs of production and the responsiveness of the consumer to the brand is important to ensure that the application of lean management is working. . Anderson, Boulanger and Johnson (2008, p.193) add that the management of the performance can be articulated if the tools are used effectively. Jaklic et al., (2006, p.218) add that the performance indicators can be articulated by the use analysis of the weak points and what needs to be changed to ensure that the lean management process is working. If there is no indication of improvement based on the analysis of the key concepts, it is important to alter the strategy used in the measurement of lean management processes.

 

 

 

 

 

 

 

3- Methodology

 

3.1- Research methodology

The methodology for this research will be that of a case study. A case study will enable the researcher to use a wide variety of source and tools. This enables the researcher to a have a broader data sources which also enhances accuracy of the research.

3.2- Data collection

This research will utilize both primary and secondary sources of data. Data from primary sources will be collected through interviews. While data from secondary sources will include publications such as reports and journals.This will enable to researcher to enhance accuracy and reliability of the data presented.

 

 

 

 

Appendices

Appendix 1: Sample Interview Questions

1. What are some of the lean strategies and processes that your company has incorporated in the oil production process?
2. Please explain the lean supply chain processes incorporated in your company and some of the inefficiencies associated with the processes.
3. What are some of the factors that are used in the maintenance of the costs and processes in your industry?
4. How effective is the lean process in managing the resources used in the oil and gas industry?
5. What are some of the constraints and regulations in the management of lean production?
6. What are some of the shortcomings in application of lean in the satisfaction of the demands by the customers?
7. What are some of the recommendations in the improvement of lean in the company and the industry?

 

References

 

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