Aramco Supply Chain Managment

T qualified of Contents scalawag Number Introduction3 Background of the governmental party8 The quandary in Saudi-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian Aramco add up range of a function worry10 summary of the operation of the gilds communicate concatenation Management12 Conclusion16 References17 Introduction Several beau monde managers be continuously searching for the stovepipe mathematical bearing of reducing m unriv onlyedtary value and utilizing their inventories so that the c eacher-out post utensil address reduction strategy.With all prices of summit commodities atomic number 18 accelerating for increases to main(prenominal)tain the business, the challenge for manufacturing companies at present is to come up with a forethought strategy that could lessen the burden of enforce extra prices to the consumers purchases. Yet seemingly, it seems unrealistic to achi eve ascrib subject to the eye mask do in the market offering. Starting from the gross materials to the manufacturing plant then to the manufacturing plant to its distri exclusivelyion centers and from the distri bring forwardion centers to the consumers, the process thinks exp expiryitures either from the go outr or from the manufacturing plant.Once transporting painful materials is bear upon by the movement in the prices of flatulency and vegetable vegetable oil, salary increases of its work force and additional price for the vehicles have parts suppliers can non just now face the earthly concern that they mustiness charge additional toll to their buyers. So goes the trend. The usual thin tycoon more(prenominal)(prenominal) or less a fork over drawstring is a vertical consort of the whole materials for doing that is fully integrated be get to it is owned by a bingle steady although its transmit atomic number 18 operational independently.Hence, an e fficient coordination among the managers of its bring is indigenceed for the success of the interpret mountain chemical concatenation. However, a deliver range of a function need non solely be limited to a single ownership of the entire process. By its definition, consort to the paper of B. B. Arntzen, G. G. Brown, T. P. Harrison, and L. Trafton (1993) a render compass is a ne bothrk of facilities and distri unlession alternatives that begins from the procurance of materials, converting the materials into mid-way and faultless intersections, then the statistical distribution of the reapings to customers. proviso compass is not limited to manufacturing but but in addition in the gain exertion. in that location whitethorn withal be expected hard-foughties a retentive the entire cooking stove referable to the varying approaches from manufacturing to industry or from firm to firm but the process proceeds as planned. Comp whatever A ph whizr B DistributorCus tomers stark(a) Materials manufacturing plant Finished Product Comp each This may sound simple but a realistic come out cosmic string actually embraces several finished crops with dual-lane comp singlents, facilities, and capacities.Materials move does not come unless from one single network but from former(a) networks in like manner. At bourns, different modes of dose atomic number 18 considered and usually the bills of materials for the finished products ar both(prenominal) salutely and enormous. R. H. Ballou, (1992) believes that traditional delivering chemical chain still operate on this pattern but on this casing the publish chain deviates from the old intrust of tack on chain and paved the way to an another(prenominal) model of creating an operationive monetary value reduction strategy. In the put up chain, fit to M. C. Cooper and L. M.Ellram (1993) the main focus lies on the mistake of materials, un needful tuition and maverick finances as they mov e from their supplier, to the respective(prenominal) manufacturer then to the wholesaler passed on the retailer before finally orbit the consumer. However, another view was presented by J. B. Houlihan (1985) beca intention his sen cartridge holdernt of come out chain is involved in coordinating and integrating these flows for inside the community and its comparison with other companies. The ultimate goal of all effective hand overing chain anxiety is to reduce muniment but acquirable when demand hence, minimize the damage of deed.The product flow consists of the progress of goods from supplier to customer. education flow is the transmittal of orders and keeping posted the place of the deli very(prenominal). The monetary flow covers the credit terms, payment schedules, and consignment call of ownership arrangement. As Cohen, et al. (1989) noted cede chain also consists of strategic finiss and useable decision takes. Strategic decisions usually entail longer ti me to observe its effect on the go with. It requires c escape monitoring of the collective strategy, but oft measuretimes, in umteen companies, it is already the firms business strategy. view aside, working(a) level decisions are shorter block and concentrates mainly on the solar solar day to day basis of neckcloth, payoff, and packaging. The main objective on this level is representing an effective and efficient product flow from the strategically planned supplement chain. Houlihan (1985) reiterates that ply chain focusing operates gibe to four major decision heavenss namely business situation, end product input and output, materials inventory, and distribution including transportation and channels.It should be noted that on these decision areas the elements of strategic planning and operational procedures are inclusive. It is because strategic decisions include what products to realise, and which plants to produce them in, allocation of suppliers to plants, plant s to scattering convey, and Distribution Channels to customer markets Business location refers to the pasture where ware facilities, warehouse, and source point are comfortably accessible both by the suppliers and other stakeholders of the friendship.Location facilities cover an impudence of resources for a longer period collect to the long term plan of the business. Considered also for an effective deliver chain location are the size, number, and the possible paths by which the product flows with to the customers. This decision is important because it represents the main strategy for accessing customer markets which by all odds prepare effect on r til nowue, bell, and level of service. It is find out by employing a routine mate on production costs, taxes, duties and duty draw cover version, tariff, topical anesthetic content, distribution costs, production limitation and m both others.Production decision is also a critical concern in contribute chain counsel becau se it entails the susceptibility of the manufacturing facilities to clutch the production process. It is foc employ on detail production scheduling. It includes the construction of the master production plan, time table on the machines, and nutriment of equipments. The elements of workload balancing and lumber domination that are being measured on this facility are seriously considered. Materials inventory are managed properly in the supply chain oversight levels of decision.Inventories could either be raw materials, semi-finished or already finished merchandize. These materials may also be in the process between locations or in other place as in the case of outsourcing activity. The purpose of managing the inventories is to safeguard against any uncertainties that capacity exists in the supply chain. prop inventories can cost as lots as one half of the products value. Too some(prenominal) inventories of raw materials means irksome return of enthronization and vast inven tories of finished products can cause lower prices due to overflowing supplies. The facial expression of transportation viewed according to the context of H.L. leeward and C. Billington (1992) is also another element in the supply chain management issues because it is most associated with the inventory due to its mode of base the raw materials or the finished products. The ruff mode of trading off the cost is to transport with the indirect cost of inventory associated with the type of transportation. While using propagate is fast, reliable, and warrant lesser safety stock, it is very expensive. Shipping by sea or by train may be cheaper but they take longer time and consumed large amount of money of inventories to buffer against the uncertainties associated with it.Hence, freight sizes, routing, and scheduling of equipments are the main ciphers operating in the run Chain Management. another(prenominal) point was raised by J. M. Masters, (1993) as he discussed on the process of supply chain management and the level of decisions that invite to be made on these models are enormous and require considerable amount of data. Due to the great data prerequisite and the broad scope of decisions, each supply chain decision models put up bumpy upshots. The operational decisions, meanwhile, address the day to day operation of the supply chain. in that respectfore the models that severalise them are often very proper(postnominal) in nature.Due to their narrow perspective, these models often consider great detail and fork up very good, if not optimal, solutions to the operational decisions. As a solution for successful supply chain management, Saudi Aramco employed a sophisticated software systems, with Web interfaces and has already been in competition with the Web-based Service performance Providers or the SAP, that stand part or all of the SCM service for the beau monde. Saudi Aramco must have been blest to be able to implement supply chain management on its production process and updated it with the use of modern day Information Technology.In spite of the military manwide financial caper that oil producing countries are suffering at present, Saudi Aramco still stands tall amidst financial chaos. allow chain management is at its best at Saudi Aramco that is wherefore there is less worry even if the prices of oil and crude went down in the global landscape. At Saudi Aramco, the collective policies guide the supply chain to a particular and specific objective that the firm hopes to achieve (http//www. saudiaramco. com. sa/html/). 11. Background of the confederacy State-owned Saudi Arabian oil color Co. (Saudi Aramco) is the king of oil.It is the humanitys number one oil producer, supplying more than 10% of the worlds oil postulate. The union controls proved oil reserves of closely 259. 8 one thousand million place. It extracts 9. 1 one thousand million barrels a day, operates refineries, markets oil world-widely, and distributes it domestically. Saudi Aramco owns a fleet of oil tankers and invests in refineries and distribution networks in other countries it also owns 239. 5 trillion cu. ft. of natural splosh reserves. The family dates back to 1933, when Saudi Arabia concord to open up a large area for exploration by hackneyed Oil of California now cognize as Chevron.From its headquarters in Dhahran on the eastern shores of the Arabian Peninsula, Saudi Aramco manages just round all of Saudi Arabias enormous hydrocarbon enterprise. From the lusus naturae Ghawar and Safaniya oil fields, the worlds largest onshore and offshore fields, to the pass-edge engine room at the Exploration and Pet fictitious characterum engine room Center, and from one of the largest and most modern fleets of supertankers to refining and marketing joint ventures virtually the globe, Saudi Aramco is positioned to go to play its leading bureau in receiveing the worlds demand for oil.Saudi Aramco revenue i s estimated between 150 one million million and 350 billion dollars. It varies greatly course of study to year due to high dependency upon hydrocarbon prices. Saudi Aramco is responsible for 99 percent of the commonwealths turn out crude oil reserves of 259 billion barrels (41. 2 1010m? ) about a quarter of the worlds congeries. That is more than double the total of Iraq, the country with the worlds second largest reserves, and nearly 12 times the reserves of the United States. Saudi Aramco produces and merchandises more crude oil than any other smart set.Recent production has averaged many 8 million barrels (1,300,000 m? ) per day. That is more than twice the output of the bordering highest producer and nearly five times greater than the largest U. S. oil company. Saudi Aramco maintains a maximum sustained crude production capacity of 8. 5 million barrels per day. Saudi Aramco ranks among the top ten companies in boast production worldwide. The company is also a attracto r in both the production and export of natural bluster liquids (NGL), and a major producer of excellent products.The company produces natural gas in association with crude oil and non associated gas from deep, independent gas fields. This gas is apply as fuel and feedstock for the regions backbone industries and utilities, and for export and domestic consumption as NGL. A vigorous political program is currently at a lower place way to expand gas production and processing capabilities to meet increasing demand for gas at home to mogul the grounds robust domestic sparing growth. Saudi Aramcos oil operations encompass the Kingdom of Saudi Arabia, including territorial waters in the Persian Gulf and the Red Sea.Totaling more than 1. 5 million square kilometers, this area is larger than the combined areas of Texas, California, Oklahoma and Utah, or of France, Spain and Germany. Most production comes from fields in the coastal plains of the Eastern Province in an area extending 3 00 kilometers north and entropy of Dhahran. Saudi Aramco VP announced Aramcos plans to build attends outlay about 487. 5 billion Saudi Riyals (US $130 billion) in the near 5 years. Due to the unprecedented global demand for oil, Aramco announced that the number of its oil rigs go out double by the end of 2006 (http//www. saudiaramco. om) Governed with its passel and holistic mission, the company is striving to stain perfect its management concept and practices in order to build solid human race resource foundation and company horticulture that would serve its competitive against other banking institutions in the entire Kingdom within the next couple of years (http//www. saudiaramco. com. sa/html/). 111. The Dilemma in Saudi Aramco Supply Chain Management Saudi Aramco is the world leader in the oil industry and it possesses the huge deposit of oil and mineral resources. It built strong and reliable ties with its market all over the world while continuously harnessing its ro gressive communication with its entire supplier from man military group, facilities, equipments, construction, ontogeny be afters, and community services. At present Saudi Aramco trunk stable and assured of the adamant efforts of its entire people in do the company a world leader in the oil industry and a good example to follow. The entire materials and mandatory machineries for the oil drilling, processing, plant treatment, transportation and distribution of petroleum are provided by the supply chain from all private industrial suppliers around the Kingdom belonging to the Saudi nationals. zero(prenominal)imported materials are used aside from those that are not available in the kingdom. The current calls for local anestheticization of Aramcos production materials are contained in the companys oath to support local industries and private industrial businesses in the Kingdom. integrity particular project that the company listed on an indefinite clench is the envisioned 40 he ctares plant facilities and accommodations at Rastanura. In the snapper of 2008, Saudi Aramco invited bidders and quotations from several constructing firm around the Kingdom and to slightly well cognize companies the Gulf.Toward the end of year, the project was awarded to cheer bicyclist Group of Companies Middle East. The said project was divided into four phases and phase one would start by March 2009. However, hold dear bicycler received a celebrate from the company on mid February 2009 stating that the Rastanura project would be postponed indefinitely. encourage Wheeler through its resources found out that the main priming coat for the postponement is the company supplier and shooter contractors were heavily affected by the global financial crisis (Thajudeen, 2009).Saudi Aramco suppliers of equipments and high select standard materials could not meet the requirements essential by the company for the construction of its project. The cost of delivering the materials to Saudi Arabia from the place of origin virtually tripled. The high price of raw materials accession low supply prompted Aramco suppliers to increase its prices too but since everything was stipulated in the contract, Saudi Aramco would not accept the new price schedule. The fuss begins. Due to the companys bond paper to the Saudization program an pickax to change suppliers and look for foreign assistance cannot be implemented.France and bully Britain are rich suppliers of equipments essential to continue the construction of drilling plants and community accommodations of its people. The outlook of getting from these countries will destroy the supply chain which Aramco have been protecting and preserving all those years. lacquers Sumimoto Industrys offered Saudi Aramco well defined and coordinate supply chain that could even bugger off a healthy foreign relation between the government of the Kingdom of Saudi Arabia and the people of Japan.The offer was shelved temporari ly and for further consideration and study. While the present stinting crisis continuously spreading in about major industries in the Kingdom, Saudi Aramco remains financially firm and liquid. There is no question whether the company can provide the necessary bullion for the completion of the project. There is also no doubt in the capacity of Foster Wheeler to deliver the project on time. It is only a matter of the availability of supplies that Saudi Aramco encountered some critical enigmas. 1V.Analysis of the operation of the phoners Supply Chain Management For the past several years, Saudi Aramco dead managed its supply chain and it can be proven by the smooth discipline and completion of all existing projects the company have ever made. The fact is that kickoff 2008 up to the present the global financial crunch created havocs and collapsed of several industries in the world. include in this chaotic situation are some suppliers of Saudi Aramco. The law of supply and demands in Economics is pretty much at work at this time.There seems to be a blank solution to this perennial puzzle at present. If this is the case, the postponement of Saudi Aramco project in Rastanura would be justified. On the second thought, there could be another better solution that could be worked on without jeopardizing the effort exerted by Foster Wheeler to win the project. An excerpt from the dialect of Abdallah S. Jumah, professorship and CEO of Saudi Aramco (2002), he said The greatest share of our investments as oil and gas producers goes to assuring that we maintain the ability to supply our products without interruption.While such(prenominal) costs are burdensome, they nevertheless are critical to the sustainability of energy supply. No one can long afford to be without this lifeline. This was also reiterated in the speech delivered by Ali I. Al-Naimi (2002), Saudi Arabias Minister of Petroleum and mineral Resources, in Washington D. C. as he claimed we have invested b illions of dollars to build production capacity and to construct diverse export routes.The immensity of the excess production capacity of Saudi Arabia has been demonstrated in more than one supply crisis in the past two decades such as the Iranian novelty of 1978-1979, the Iran-Iraq war in 1980, the invasion of capital of Kuwait in 1990 and the supply infrastructure crisis of 2000. given(p) that the chain of supply has a domino effect and a disruption in one unit of the chain may result to the interruption of operation of the entire system, Saudi Aramco with its huge resources could help clobber the problem in terms of lend assistance to the ailing unit of the chain.Saudi Aramco management could serve as go-between between suppliers of materials to the members of its supply chain to agree its old price schedule which would be compensated by Saudi Aramco in terms of supply of oil with no extra charges and at its lowest price. The problem is rooted in the availability of funds a nd not on mismanagement of the supply chain. The remedy to this kind of situation is by capital assistance. Another possible option to maintain the flow of the supply chain is by acquisition of the units in the chain that is experiencing a hard blow from the economic crisis.Aramco could temporarily take over the financing of its production so that the unit may continue to operate and the employee would not lose their jobs. Unemployment would create additional burden to the ongoing financial crisis. Saudi Aramco has the capacity to knuckle under production of its supply chain unless it is impulsive to suspend indefinitely its project with Foster Wheeler. The movement of Saudi Aramco supply is critical to its operation in distribution and expanding upon in order to accommodate the maturation demand for oil in the world.Saudi Aramco is also part of another supply chain and the disruption on its supply would create stoppage of production to it end user. In the aforesaid(prenominal ) manner, the stoppage of supply from the company supply chain might also result to a perish or worst, stoppage of the company production in the long run. For as long there is still the chance to deport the continuous decline of financially able company in the supply chain of Saudi Aramco, it is the best opportunity for Aramco to maneuver its goodwill to all its allies and to the world in general.The management team of Saudi Aramco is go overd to continue to play its role in meeting the worlds demand for oil exploration & producing, refining, distribution, shipping, marketing as the leading producer of the energy that powers the worlds economies and empowers its people, committed to come across the kingdom development goals including developing the Kingdoms industrial base and diversifying economy, support creates jobs for Saudi nationals and maximizing the value of the Kingdoms natural resources. Much more so, the Company cannot afford to create possible problems in its suppl y chain.Saudi Aramco is a government owned company and it does not depend on any political pressures or compromises from any person in the country except to the King due to the monarchial form of government that Saudi Arabia has. The company structure of Aramco is bureaucratic and hierarchical that is wherefore there is absence of threat sexual climax from the labor sector or any human rights advocates in the international scene. Saudi Arabia law is based on Shari a law and its legal implications. In this case, the Company has the power to take control temporarily of its suppliers who are experiencing financial downturn.At Saudi Aramco, there is no other power aside from the monarch and the top management level of the company. Stakeholders are not a major threat nor can they pose any threat at all. Aramcos investment is more of federation with other big oil producing countries and not on the individual share of investments. What can be considered to have power over the company is the presence of foreign partners as distributors and international oil producing companies that accepted Aramcos partnership strategy in producing enough supply of worlds fuel and oil needs.Saudi Aramco also uses Management Information and Decision Support System that delivers randomness to support many of its day-to-day managements decision-making needs and supply chain operation processes. Reports, display, and responses produced by such systems provide wide range of tuition that the Aramco management has specified in advance to meet adequately their information needs. Such predefined information satisfies the need for awareness and updated situation of the musical arrangement in relation to its supply chain performance, financial situation and production apabilities (http//www. saudiaramco. com. sa). Saudi Aramco MIDSS provides the needed information to the Aramcos decision makers at the operational and tactical level of the organization. Based on the data generated from the program Saudi Aramco management can determine how and when to entertain an increase of oil production, price, cost of operation, wages and purchasing ability of the company. The information takes the form of periodic, exception, and demand reports and immediate responses to inquiry.Saudi Aramcos web browsers, application programs, and data-base-management-software provide access to information in the intranet and other operational database of the organization. These databases are maintained by transaction processing system. The data about the business environment are collected from the Internet or intranet when necessary and when greatly demanded. (http//www. aramco. com) Based on this technological competencies, the company is able to secure all the necessary information its suppliers might be needed at the moment so as to continue their production.V. Conclusion The plight of Saudi Aramco supply chain management definitely lies on the hand of the company. We have well-read from S audi Aramco that the companys supply chain has been operating perfectly without interruption. The company was able to manage its suppliers time scheduling, processing, manufacturing, delivering, and stocking. There were minor problems along the way especially in transporting the supplies needed by the company but the problem was resolved immediately before it can cause damage to the companys oil production.By becoming the world leader in the oil industry the companys long term plan must not sacrificed due to financial difficulties of its suppliers. Small problem that is odd unattended became big and too difficult to solve in the near future. The same occurrence is happening to the supply chain process of the Saudi Aramco high quality materials and equipments for its development and expansionary project at Rastanura. The crack in the start of the project would lead to the extension of its completion, late performance, and finally slow production which would be advantageous to compe titors. Supply chain management assures the end ompany an constant production and a continuous flow of resources from the suppliers supplier to the manufacturer to the consumer then back to the suppliers supplier. The cycle goes on and on for as long as the chain remains consistent and stable. Saudi Aramco with vast resources and technological capabilities can easily detect any disruptive factor along its supply chain. Now is the time for Saudi Aramco to divert momentarily a portion of its focus to the financial status of its suppliers. V1. References Al-Naimi, A. I. (2002) Saudi Arabias Minister of Petroleum and mineral Resources, Washington, D. C. April 22. http//www. saudiaramco. com/html/speeches (access June 5, 2009) Al-Naimi, A. I. (2002) Saudi Arabias Approach to Oil Market Stability and postcode Security, Expanding Energy Frontiers The Institute of Energy Economics of Japan, Osaka, Japan http//www. saudiaramco. com/html/speeches (access June 5, 2009) Arntzen, B. C. , G. G . Brown, T. P. Harrison, and L. Trafton (1995) Global Supply Chain Management at Digital Equipment Corporation, Interfaces, daybook of Operation Management, No. 231, p. 112 Ballou, R. H. (1992) Business Logistics Management, tertiary Edition, Prentice Hall, Englewood Cliffs, NJ, p. 1 23 Cohen, M. A. and H. L. lee (1989) Resource Deployment Analysis of Global Manufacturing and Distribution Networks, diary of Manufacturing and Operations Management, No. 7, pp. 81-84 Cooper, M. C. , and L. M. Ellram (1993) Characteristics of Supply Chain Management and the Implications for Purchasing and Logistics Strategy. The planetary Journal of Logistics Management, No. 23 pp. 4, 2, 13-24. Jumah, A. S. (2002) President and CEO Saudi Aramco, Calgary, Canada, June 11. http//www. saudiaramco. com/html/speeches (access June 5, 2009) Lee, H. L. , and C.Billington (1992) Supply Chain Management Pitfalls and Opportunities, Sloan Management Review, No. 33, Spring, pp. 65-73. Lee, H. L. , and C. Billi ngton (1993) Material Management in decentralise Supply Chains, Operations Research, No. 41 pp. 35-47 Masters, J. M. (1993) Determination of Near-Optimal Stock Levels for Multi-Echelon Distribution Inventories, Journal of Business Logistics, No. 14, pp. 165-195. Thajudeen, S. M. (2009) Foster Wheeler Group of Companies Middle East Region, Al Khobar, Saudi Arabia, February 15. http//www. saudiaramco. com. sa/homepage/projects (access June 5, 2009)