Supply chain management is the network of the operations in which the raw material is purchased, transformed into the usable products and finally delivered to the end users by the distribution system. This report focuses on the analysis of upstream supply chain in the oil and gas company. The report focuses on the logistics and operational challenges faced by the company during the supply chain process (Cetinkaya, 2011). For the discussion, the company Perenco Ltd has taken. This is famous oil and Gas Company in the country UK an operating since 2003. The company Perenco Ltd. is the largest onshore in the Europe. It is important for the company to have effective logistics and supply chain management at the global level as it will be helpful in maintaining the competitive advantage in the operating market. The report includes the issues faced by the company in the logistical and transportation services. At last, report provides some recommendations to deal with those issues (PERENCO, 2017).
Oil and gas industry is massive industry. There are various operations which are performed to get oil and gas from under the ground to provide the customers. This massive industry is described based on three chronological sectors i.e. upstream, midstream and downstream. Each sector has its own set of challenges and opportunities. The Upstream supply chain of the company Perenco Ltd includes searching for, recovering, and producing the crude oil and natural gases from the underwater and underground field. The products in the company Perenco Ltd are the crude oil and natural gas strategy which are produced in the upstream supply chain. The supply chain relationship in the oil and gas industry is as follows:
Extraction activities manufacture of oil refining of oil promotion activities customer activities
The upstream sector of the company Perenco Ltd includes that area where the accessibility of crude oil occurs. The upstream supply chain of the company focuses on the exploration of the reserves i.e. crude oil and gas, storage of the extractions and transports to the storage facilities and sends it to refinery (Assey, 2012).
Figure 1: Supply Chain in Oil & Gas Company
(Source: Avata, 2017)
There are some challenges and difficulties involved in the upstream supply chain management of the company Perenco Ltd. there are some challenges implicated in the examination activities and diverse types of convolutions of implementing the technology which create supply chain supply chain risks. Due to various complexities of the supply chains, the company has to face many challenges. Some of the challenges are related to the shortage of accessibility of the potential underwater oil and gas fields. Along with this, the piercing activity of different examining wells is also very difficult process which creates challenges in upstream supply chain (Briggs, Tolliver, & Szmerekovsky, 2012). Some upstream challenges of supply chain in the company are as follows:
Sources of crude oil-
In current time, one of the main challenges in the oil supplies is the extensive use of oil and gas by the customers. This issue is increasing in some countries like Brazil, China, and India. So, it is the big challenge for the for the oil company to confine the extra use of the crude oil in these countries. It is important to deal with this problem by detection and examination of the optional source of the crude oil. There is the challenge in the supply chain i.e. source of the optional sources of the crude oil for the efficient distribution of the resources (Jedaie, 2014).
Operational inefficiencies in supply chain-
The main issue in the upstream supply chain can be seen in the integration and operational inefficiencies in the supply chain process of the company. It is the challenge for the company Perenco Ltd to maintain the efficiencies for giving usual evade, balance financial support and marketplace convenience. The main challenge in the supply chain is in the incorporation of the oil and gas in the upstream segment. This is the cause of hazard in the allocation of crude oil among the customers (Akli & Kim, 2014).
Environmental pollution-
The challenge in the supply chain is related to the environment in the upstream oil and gas sector. The reason of this issue is that the oil supply in the company is based on the pipeline transport and in many circumstances, it is analyzed that oil spills because of the perished pipeline and affect the environment negatively. In many pipeline, it is observed that they are corroded. So, the company Perenco Ltd has to face the challenge in the supply or distribution of crude oil and the cause of the environmental pollution by the oil spillage. Due to the oil spillage, company can face the legal issues also as the government of the country can reject the allegation of shells for causing the pollution in the environment. The spillage of oil can be the cause of industrial accidents and can harm human being (Energy & Addison, 2014).
There is one thing which is certain i.e. all the transportation services are going away. The company Perenco Ltd uses the transportation services based on the based on the security, earnings and the effectiveness. The company believes that they should focus on all the available alternatives and make sure that they are providing safe and secure atmosphere to the society as much as possible. There are various transportation services which are used by the company to distribute the oil and gas among the people (Downey, 2016). The transportation system used by the company is as follows:
Pipeline-
Pipeline can be considered as the affordable way for moving the crude oil from one place to another. In the case of the company Perenco Ltd, pipeline is the speedy way to shift the crude oil in various countries. The company spends fewer amount of money on the pipeline as compared to other transportation modes. Based on the research, it is observed that pipeline transports around 3.4 billion of crude oil to the refineries (Furchtgott-Roth, 2013). Further, it is also analyzed that pipelines have less chances of accidents as compared to other transportation ways. So, the company y is thinking to spend more on the pipelines in future. In present time, 70% of crude oil in the company is shipped by the pipeline. This is the good way for the company to connect with many countries. Pipeline makes the process of moving crude oil cheaper and quicker. Along with this, for the society, this transportation system is safer as compared to others as they are built under the ground (Adelmann, 2014).
Train-
Another method of transportation used by the company Perenco Ltdis train. Although, pipeline is the effectual way for transporting but building of the pipeline sometimes can be the reason of political arguments. Further, there is one advantage for the company Perenco Ltd that company does not need to do construction of the railway track. For the oil transporting, there is no need to re-utilize the railway infrastructure. There are some contractors of the railroads who support the company in transporting the oil. The business of railway transport is growing continuously. In trains, there are lower chances of oil spillage as compared to other transportation methods. Along with this, the transportation of crude oil by the rail is speedier also. It takes around five to seven days to transport the oil from one place to another (Johnston, 2013).
Although the used transportation by the company is useful but there are some challenges which have to face by the company. There are some challenges in these transportation methods and those are as follows:
Logistics is the integrating function which manages and coordinates all the logistics activities and connects the logistics activities with the other functions in the company. In case of logistics, the continuous improvements are important to achieve the growth and success. For this, it is important to plan and organize the logistics process in the company Perenco Ltd. By adopting proper planning and methods, company will be able to improve overall quality of customer experience, and utilize the production capacity. There are four basic methods to manage the logistics efficiency.
Maximize storage:
By analyzing and implementing the warehouse procedures, company can store, move and ship the crude oil more effectively. This process requires enough and well-trained warehouse staff, strategic sequencing, and use of vertical storage to use the available space. Company should carefully examine the ordering patterns of crude oil to ensure the quick delivery of the oil.
Optimize transportation:
It is well known that the transportation cost is increasing continuously for the oil industry. The rising cost of the transportation is the big challenge for the company Perenco Ltd. To reduce the transportation cost; the company should focus on each and every factor that might decrease the expenses. This includes the extraction of the crude oil and packaging for the optimal size and weight, proper lead and delivery planning including efficient transport i.e. Pipeline and identify and utilize the most effective shipping methods for the products.
Automate communication technologies:
For the effective logistics in the business, it is important for the company to develop automate communication technologies. There should be logistics management software to communicate between the warehouse and accounting departments and allows the delivery of the oil and gas on the updated time. This will significantly update the whole process from the storage, shipment and the adequate minimal staffing.
Focusing on feedback:
The success of the company depends upon the positive feedbacks of the customers, employees, or teams regarding their role in the logistics process. Company Perenco Ltd should carefully consider the suggestions and feedback from the customers and staff related to the practices to further improve the logistics efficiency in business operations.
Logistics management is the complex process and by using the above described strategy will be helpful for the company Perenco Ltd in terms of staffing, warehousing, communication resources and transportation. The improvement in the logistics planning will result of the higher productivity, happier customers, and the more profitable company for the community.
Logistics management is very effective process for the oil and gas industries to manage the operations very effectively. But there are some challenges related to human behavior which have to face by the company Perenco Ltd. Some of the challenges are described below:
Safety issue-
The employees of the oil and gas have to deal with the complex and multiple systems such as store, retrieve, create and the communication information related to safety and health. So, company Perenco Ltd faces the issues in terms of providing safe culture to its employees. For high level of performance, the safe and secure environment is must within the company. Company Perenco Ltd has to understand the thinking of the individuals to provide healthy and safe environment with the positive culture to the employees and workers (Nnadi et al, 2014).
Proper measurements-
Sometimes, there is the risk of accident during the extraction and refining of crude oil within the business operations. This is the major issue for the company. Several sites have suffered from the major accidents and those needs good management in terms of prevention of accidents. Accidents are the cause of serious injury and ill-health for the workers. So there is the need of proper management and strategies to deal with these issues (Parry, Davidson and Clark, 2009).
To deal with the human behavioral issues, there are some recommendations which have to follow by the company Perenco Ltd. those recommendations are as follows:
Conclusion
From the above discussion, it can be said that company Perenco Ltd is doing well in the oil and gas industry. From the analysis, it is clear that logistics and supply chain is the most important part of the business operations in oil and gas industry. Although, there are some challenges in the logistics of the company but by the proper strategies and measures, the company Perenco Ltd will be able to achieve strong position in the operating market.
References
Adelmann, B., (2014), Safety Records Show Pipelines Best Method for Transporting Oil, , accessed on 7th August 2017 from https://www.thenewamerican.com/economy/sectors/item/19334-safety-records-show-pipelines-best-method-for-transporting-oil
Akli, A., & Kim, Y., (2014), Analysis on gas and oil export intensity changes of mena countries: recent changes and drivers: Geosystem engineering, 17(1), pp.69-77
Assey, J.J.M., (2012), A New Introduction to Supply Chains and Supply Chain Management: Definitions and Theories Perspective, Journal of Business and Economics, 5 (1), pp. 194-207.
Briggs, C.A., Tolliver, D. and Szmerekovsky, J., (2012), Managing and mitigating the upstream petroleum industry supply chain risks: Leveraging analytic hierarchy process: International Journal of Business & Economics Perspectives, 7(1), pp.1-20
Cetinkaya, B., (2011), Sustainable Supply Chain Management: Practical Ideas for Moving Towards Best Practice, Springer Science & Business Media
Downey, K., (2016), What’s the Best Way to Transport Crude Oil, accessed on 7th August 2017 from https://lawstreetmedia.com/issues/energy-and-environment/different-methods-crude-oil-transportation/
Energy, H., & Addison, V., (2014), Oil, Gas Industry Faces Supply Chain Issues, accessed on 7th August 2017 from https://www.epmag.com/oil-gas-industry-faces-supply-chain-issues-760126
Furchtgott-Roth, D., (2013), Pipelines Are Safest For Transportation of Oil and Gas, accessed on 7th August 2017 from https://www.manhattan-institute.org/html/pipelines-are-safest-transportation-oil-and-gas-5716.html
Ghadge, A., Dani, S., and Kalawsky, R., (2012), Supply chain risk management: present and future scope: The International Journal of Logistics Management, 23(3), pp.313-339
Jedaie, S. H., (2014), INVENTORY POOLING IN PETROLEUM UPSTREAM LOGISTICS NETWORK: STOCHASTIC LEAD TIME AS DECISION FACTOR, accessed on 7th August 2017 from https://uta-ir.tdl.org/uta-ir/bitstream/handle/10106/24418/AlJedaie_uta_2502D_12683.pdf?sequence=1
Johnston, R., (2013), Train vs. pipeline: What’s the safest way to transport oil? accessed on 7th August 2017 from https://www.csmonitor.com/Environment/Energy-Voices/2013/1022/Train-vs.-pipeline-What-s-the-safest-way-to-transport-oil
Molinski, D., (2015), How to Transport Oil More Safely, accessed on 7th August 2017 from https://www.wsj.com/articles/how-to-transport-oil-more-safely-1442197722
Nnadi, U., El-Hassan, Z., Smyth, D. and Mooney, J., (2014), Lack of proper safety management systems in Nigeria oil and gas pipelines: Loss Prevention Bulletin, (237)
Parry, P., Davidson, V., and Clark, A., (2009), Crisis in the Oil and Gas Industry, accessed on 7th August 2017 from https://www.strategy-business.com/li/leadingideas/li00003
PERENCO, (2017), PERENCO, A PARTNER IN SUSTAINABLE DEVELOPMENT, on 7th August 2017 from https://www.perenco.com/
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