The demand for competent supply chain management (SCM) practitioners has been increasing globally in virtually all branches of commerce and industry. This increase has been driven by globalization as well as the espousal of information and communication technologies. In the present business climate, the market has become small and very competitive, thereby compelling organizations to expand their operations to other locations. Some industries have required players to launch global operations in order to take advantage of a larger market. In the same breath, the contemporary business climate has meant that sustainable business performance and customer satisfaction are both contingent on having the right product/service at the right location and at the right time. For organizations, this cannot be achieved without a proper comprehension of supply chain management principles in their entirety. Consequently, supply chain and logistics management has emerged as an important business competency. The effectiveness with which an organization manages its supply chain will determine its ability to reduce costs, add value to its customers and attain profitability (Boyer & Verma, 2009).
The oil and gas industry demands the utmost standards of supply chain and logistics management. The intricacy and scope of the projects requires reliable expertise and total reliability, especially since these companies have to operate in some of the world’s most remote locations and difficult terrains. Over the past four years, I have been sharpening my understanding of supply chain and logistics management and I feel that I am fully prepared for my future endeavors as a professional in the oil and gas industry. The company that I am working for is Saudi Aramco, which is the largest oil company in the world. In this paper, I report on how I plan to apply the concepts that I have learnt during the course of my study in this company.
Application of Supply Chain and Logistics Concepts
Presently, I am working in a department called the Supply Chain Management Department (SCMD). In essence, I have been employed in a field that I understand very well since it was the area of my specialization in college. Therefore, I will have a great opportunity to apply all that I have learnt. At Saudi Aramco, the SCMD focuses on all issues that are related to supply chain and logistics. This includes, but not limited to, shipments, warehousing, materials’ management and transportation. Specifically, I am employed as a materials planner in the maintenance section of a Gas Plant. My responsibilities include placing materials order, expediting, tracking and issuing monthly and annual reports. Since the company has an extensive overseas market, it has since developed branches in the United States, Europe, India and Japan.
In my capacity, I will play a central role in inventory control and management. In a company as big as Saudi Aramco, it is essential that inventories are maintained at an optimal level so that to ensure that customer demand is met while there is no overload of surplus goods, which would represent an additional, unnecessary cost. In this course, I have learnt some important inventory control tools that I will plan in using to managing inventories under my jurisdiction. The two most applicable approaches to inventory control in my case would be Just-In-Time (JIT) and Materials Requirement Planning (MRP). The JIT system entails receiving and producing goods at the right time in order to meet the requirements of the production process (Pride, Hughes & Kapoor, 2012). This would avoid delay in production, thereby ensuring that the company can meet the demands of its customers. Moreover, it would save the company money.
As a material planner, I will use JIT techniques to make certain that the production process is smooth. Currently, Saudi Aramco has a daily production goal. Therefore, my goal will be to plan materials in such a way that it will not disrupt or compromise the achievement of the daily production target. I will do this by ensuring that we have the necessary materials in time. For instance, I will develop a daily schedule of when to request for new materials, how we will be receiving materials, what quantity we will be receiving and how often we will be receiving them. I will also develop a schedule of how I will be availing the materials to the necessary personnel. In this way, the production team will have a constant supply of materials. More importantly, this approach will enable us to have an optimal inventory level.
Since the JIT technique has some limitations, I will also try to incorporate concepts of MRP in the schedule. MRP and JIT are similar in many ways since they help manage the flow of materials and components of production. The key difference is that MRP takes into account future demand of a product (Axster, 2006). Saudi Aramco, by virtue of its many years of experience in the industry, has mechanisms of predicting future demand of its gas products. Therefore, I will interact with the strategic team to identify expected demand. I will then use this information to compute the amount of raw materials that might be required to meet this demand. In this case also, I will come up with a schedule of when to request for new materials, how we will be receiving materials, what quantity we will be receiving and how often we will be receiving them. With these two approaches, I would be able to control inventory in my section.
Saudi Aramco has outsourced logistics and transportation services from other companies. For example, Aramco Overseas Company handles its international logistics system. Locally, it has contracted DHL to manage its logistics infrastructure in a long term deal. Under this agreement, DHL manages and operates its material distribution centers, fleet of vehicles, transportation personnel as well as its material service centers. Furthermore, DHL has also set up a system that allows customers of Saudi Aramco to track their orders in real time as they are being transported (Oil & Gas News, 2007).
These contractual arrangements with external entities imply that individual employees of Saudi Aramco have little influence over the logistics and transportation systems of the company. In this regard, I will likely use my logistics expertise internally. As a material planner, my duty is to ensure that materials are available and are provided to the right recipients in time. However, I also have a responsibility of ensuring that the associated costs are as low as possible. I will analyze how often materials are required by our section and how often they need to be replenished. From this information, I will be able to determine the amount of time the section has to wait before it requires new materials. This will enable me to develop an effective transportation schedule that will take into account the number of trips to be made in a specified period and quantity of materials to be transported. An effective schedule is one in which few trips are made and materials are carried in bulk.
As an essential member of the maintenance section of a Gas Plant, I would be required to make sure that the company’s machines are functioning well at all times. However, this can only be done if they are checked and maintained regularly. For a big company such as Saudi Aramco, any disruptions in production can lead to millions of losses. Consequently, I will have to ensure that machine repairs are timely. In this course, I have come to understand that the cost of not having a part to repair a particular machine is much greater than both the cost of the item and the holding costs. Therefore, I will encourage the finance department to give us funds so that we buy and keep machines parts in inventory. These parts will be used to repair machines in case of breakdowns. This will ensure that there is continued production.
I will maintain data of the frequency with which particular parts are used for repair purposes. This will enable me to develop a schedule of a replacing a part in anticipation of an impending machine failure. In this way, our section will have functioning equipment at all times. As a result, the plant will experience very few disruptions in production, thereby enabling it to meet customer demand. Moreover, it will not incur losses due to nonproduction.
Oil and gas companies face financial, operational and regulatory processes that are very complicated in nature. Such companies have to face challenges that are unmatched when compared to other industries. Hence, they need real world solutions to be able to navigate these challenges. These solutions must not only be affordable but also flexible. Many of these companies have since embraced Enterprise Resource Planning (ERP) systems. Saudi Aramco also adopted this system more than ten years ago. Since this adoption it has been using the services of SAP, the leading ERP provider in the world. Considering its long term use of SAP ERP system, it can be concluded that Saudi Aramco has a strong understanding of the forces and requirements, which shape the industry, that are prerequisites for an effective ERP implementation (Bartridge, 2006). In fact, it is now regarded as one of the largest implementers of SAP ERP system in the world. For the past few years, the company has been praised for its dedication to this system.
Saudi Aramco’s SAP solutions envelop a wide range of business functions including the critical areas of drilling, materials management, supply chain management, warehouse management, hydrocarbon management, plant maintenance, warehouse management. In general, it covers all information that will help in strategic business planning. SAP solutions also cover human resources, performance management, quality management, payroll and benefits, projects and capital planning, finance, transportation and fleet management, e-training, strategic enterprise management, aviation, medical, and professional certification. This implies that I will be joining a company that has a far reaching ERP system already in place (Bartridge, 2006). Even my department- supply chain management- and section –maintenance- have their own ERP systems in place.
Even though Saudi Aramco has an extensive and reliable ERP system in place, I believe that having a single operating system is risky for such a big company. In the event of an unexpected failure, the whole company might be ground to a halt. From the knowledge I have gained from this program, I think that the company needs to integrate a parallel system of SAP that would help to distribute the workload of the company’s many departments with their own ERP systems. This new system will incorporate all their key functions to ensure efficiency and effectiveness of task completion. The integrated system should then be linked with the main operating SAP. As it stands, this is what is missing in the company’s SAP ERP system. Consequently, I would recommend to the company’s leadership hierarchy to institute this parallel system.
By virtue of its size, years of existence and international status, Saudi Aramco has signed many agreements with external vendors and contractors. For example, its logistics framework is serviced by companies such as DHL, Aramco Overseas Company, Quintiq while its refining process is carried out in partnership with TOTAL Raffinage. Its ERP system is maintained by SAP AG. Personally, I am more interested in the company’s supply chain partners. I will approach the head of the supply chain management department and request that he gives me copies of all agreements with external entities. I will study these contracts keenly so that I know their terms and conditions. With this insight, I will examine if these vendors and contractors are fulfilling their end of the bargain. For instance, I will analyze if they are supplying their goods and services on a timely manner. Since I am dealing with materials, I will investigate whether the material that we are being supplied is at the right quality, just as it had been agreed in the contracts. In this way, I will ensure that the company meets its production objectives. In case of any emerging issues, such as a realization that a suppler is not providing quality products, I will inform the head of the SCMD. This might lead to a review of the contract.
The modern climate is characterized by stiff competition. This simply means that our vendors and contractors have rivals that might offer alternatives to Saudi Aramco. Therefore, after finding the names of our vendors and contractors (and after examining the nature of the agreement) I will compare them to their rivals to determine if they offer better value for money. For instance, I may compare the quality of products that rivals manufacture as well as their pricing. Through this comparison, I will be able to know if the company is presently getting the maximum benefits from its contracts. If I realize that an un-contracted company is offering a better deal than a contracted supplier, I will inform the head of my department. Depending on the nature of the agreement, he may decide to carry out his investigation further. This might probably lead to a renegotiation or a cancellation of a non-beneficial partnership.
In the present competitive business climate it is essential that all organizations produce goods and services that will meet the expectations of the market. Successful businesses understand that customer satisfaction is a vital factor in the attainment of profits. Customer satisfaction depends on the quality of goods and services, price of the good/service, and the experience of purchase (Hill, Roche & Allen, 2007). Even though Saudi Aramco is the largest company in the oil industry and faces little competition, it is essential that it strives to satisfy its customers at all times. Even though I will not be dealing directly with customers, I believe that I can play an essential role in meeting their product demands. As a material officer, I will be inspecting the quality of materials that we use for production are of the highest quality. This will translate to the production of quality goods, which would lead to customer satisfaction.
The oil and gas industry demands the utmost standards of supply chain and logistics management. The intricacy and scope of the projects requires reliable expertise and total reliability, especially since these companies have to operate in some of the world’s most remote locations and difficult terrains. Owing to the vast oil reserves that it can explore, Saudi Aramco has emerged as the biggest oil company in the world. Even though it operates primarily from Saudi Arabia, it has subsidiaries in the United States, Europe, India and Japan. Joining this company as a material officer was a dream that came true for me. I also feel privileged to be part of the supply chain management department, since this is the area that I have attained my academic qualifications. With the knowledge that I have attained from this course, I hope to play a central role in managing the company’s internal inventory and logistics framework.
Axsater, S. (2006). Inventory control. New York, NY: Springer.
Boyer, K. K., & Verma, R. (2009). Operations & supply chain management for the 21st century. Mason, Ohio: South-Western/Cengage Learning.
Hill, N., Roche, G., & Allen, R. (2007). Customer satisfaction: The customer experience through the customer’s eyes. London: Cogent.
Oil & Gas News, OGN. (2007). DHL venture offers on-time services to Saudi oil giant.
Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2012). Business. Mason, OH: South-Western Cengage Learning.