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Key Topics
Requirement
You have been newly appointed as an Operations Manager for a global Oil and gas company manufacturing high-end petrochemical products and offering tailored services intended to its business customers in the mid- and downstream oil and gas sector. Your company is currently facing a number of challenges in both its manufacturing and service sectors, which have put downward pressure on its profit. Assignment Task
As the head of Operations and Logistics your company, your line manager has tasked you to write a report addressing the following:
1. To describe and discuss theoretical and practical issues and challenges facing your organization in terms of its logistics and operations management activities in both the manufacturing and service sectors. This section should start with a brief overview of your organization including its main product and service packages as well as its market (B2B and/or B2C).
2. Following your findings at point 1, you are required to examine and outline some of the main differences and similarities facing major oil and gas companies operating as manufacturing and service providers with regards to specific logistical and operations management challenges and solutions involved in their operations.
3. To analyze operations management specific tasks and issues pertaining to the Design, Planning and Control of an efficient and effective Supply Network in delivering the Product and Service Package identified and described in Point 1.
4. As a matter of ensuring that the planning runs smoothly and that the production targets are met, you are also required to identify and discuss potential issues arising from the human behavioral aspects of their chosen operations strategy The report should end with a conclusion summarizing the key findings. Relevant recommendations are to be provided where appropriate. Those recommendations should include methods of mitigating the discussed behavioral issues
Solution
Introduction
In this present paper, we will discuss the challenges and issues faced in the sector of manufacturing and service sector of Valero Energy Corporation. The paper also discusses the comparison of operation management challenges of the company with other competitors; potential issues arise from human behavior and recommendations.
The Valero energy corporation is in the international manufacturer and marketer of petrochemical products, transportation fuels, and others. Headquarter of the company is in San Antonio, United States and it lies in the Oil and Gas industry. The company operates sixteen refineries in the United Kingdom, the United States, Canada, and the Caribbean. The company is the largest retailer with nearly 6,800 retail and wholesale outlets in the United States, the United Kingdom, the Caribbean, and Canada. (Valero.com. et al., 2016)
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1. Theoretical and practical issues
The supply chain management is defined as the process of management supplies which helps to reduce the inefficiencies, excess inventories, cost and other factors. The functional areas of logistics include network design, transportation, information technology, inventory and storage, warehousing, handling of materials and packaging.
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Manufacturing sector: The integration challenges supply chain includes three areas business micro, business macro, and technical challenges.
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Business microenvironment: The various challenges are arises in the microenvironment which includes strategic flexibility management, customer order management, strategic planning management, logistics management, operation flexibility, procurement management, and enterprise integration (Mahadevan et al., 2015).
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Business macro environment: The various challenges are arises in the macro environment which include business process integration, culture and change supplier competence requirements, business transformation oriented to globalization and effect of globalization.
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Technical challenges: The technical challenges include data and information integration, extranet adoption and application integration.
Service sector
The challenge of implementing the information technology in the service sector is the biggest challenge faced by the company. The information technology serves multiple roles in the service delivery process. The implementation of self-service delivery is another challenge faced by the company. The expanding of service operation is also a challenge which is faced by the company (Heizer et al., 2016).
2. Comparison of operational management challenges faced by competitors
Upstream sector
It includes the processes which involve the finding and recovery of crude oil and its production. The intensive and extensive efforts are required for finding the actual place of crude oil. The different operations are involved in the upstream sector such as a finding of underwater oil, drilling of exploratory wells, and others. The various challenges are faced by the upstream sector which includes management and information, sources of crude oil, operational challenges, and others.
Downstream sector
It includes the refining of crude oil and raw materials which are taken from the upstream sector. The various products are derived from the refining process such as diesel oil, petroleum, and others.
Following are the operational changes faced by the companies with similar manufacturing companies:
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Cash constraint: The budget of operation and management is prepared on the basis of the forecast, but it slashes with the actual budget due to which major financial problems are faced by the company. It occurs due to improper analysis and forecasting by the financial analyst which impacts on the operations of the company. It is one of the biggest challenges faced by the manufacturing sector (Kadambur et al., 2016). The company is also facing the improper budget allocation which impacts on the management of operations by the company. The cash constraint factor is the similar challenge which is faced by the company and other company in the same field.
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Insufficient Performance management: The performance of the resources is not managed by the company effectively which impacts on the overall performance of the company. The managing of performance is a challenge in itself because it is tough to manage the performance of all the resources in the most efficient and effective management. The performance of various resources is managed by the company, but other companies are facing the problem of managing the performance of resources. So it is the difference between the operational challenge faced by the company and other manufacturing companies.
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Quality management: The management of the quality of a product is one of the major challenges which is faced by the manufacturing companies because the directly impacts on the sales volume of the company. The quality management can be done by applying various types of techniques which help to manage the quality in the most efficient and effective manner. The quality management is the challenge faced by the company which impacts on the profitability of the company. It is a similar problem which is faced by the company and other manufacturing companies.
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Operating model: The operating model is the main element which helps to manage the operation successfully in a most efficient and effective manner. The operational model of the company is not appropriate due to which the company is unable to manage its operational activities which impacts on the profitability of the company (Boukouvala et al., 2016). It is the similar challenge which is faced by the company and other manufacturing companies.
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Poor asset reliability and integrity: The asset reliability and integrity impact on the quality management of the products. It includes the poor shut down, ineffective operational planning, overabundant maintenance activities and insufficient activities. The company is also facing the similar problem which impacts on the quality management of products and influences the sales volume of the company. The poor quality of goods is one of the reasons for the low profitability of the company. It is the similar challenge which is faced by the company and other manufacturing companies.
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Inefficient cost management: The inefficient cost management is another challenge which is faced by the manufacturing countries. It arises due to unawareness about the cost drivers across the value chain, lack of optimization of production management, and inadequate business component modeling. The inefficient cost management is another challenge which is faced by the company which reduces the profit margin of the company. The cost management is very important because it impacts on the profitability of the company. It is the similar challenge which is faced by the company and other manufacturing companies.
Challenges faced by the service factor:
The challenge faced by the service provider companies include implementation of information technology, implementation of self-service delivery, expanding of services and others. The company is facing the challenge of implementing self-service which is faced by other service provider companies. It is the similar challenge which is faced by the company and other service provider companies. The company does not face a major challenge in implementing the information technology which is faced by other service provider companies. It is the different challenge which is not faced by the company, but other service providers are facing the problem.
3. Analysis of operations management
Design
The manufacturing of petrochemical products is very difficult because it petrochemical products is produced from the petroleum, natural gas, coal, and others which are very difficult to procure due to the scarcity of natural resources which impacts on the production of petrochemical products. Another basis of petrochemical products includes fossil fuels which are prepared from the anaerobic decomposition of plants and animals, and it is very difficult to procure fossil fuels (Maity et al., 2015). Another challenge is to design the product according to the consumer’s demands and preference because it impacts on the sales volume of the company. Another issue is to design the product by concerning the environmental and health factors. The advance research is required in order to identify the impact of petrochemical products on the environment and health which helps to design the product accordingly. The various health issues can be generated from the use of petrochemical products such as hormonal disorder, cancer, liver damage, and others. Continues innovation is required in the designing of petrochemical products which helps to satisfy the consumer demands in order to sustain in the market. Another challenge is to design the product within the allocated cost in another challenge for the company in order to generate high revenue within the particular period of time.
Planning
The planning is defined as the blueprint which helps to reach the ultimate goal and objective within the specific time period. The planning includes various activities in order to maximize the profitability of the company. The various factors are considered at the time of planning such as forecasting of future price, procurement of raw material, marketing activities, risk, budget, profit margin, environmental factors, sales, technology and others (Portos et al., 2015). The success of the company depends on the planning which requires critical thinking in order to achieve the goals and objective of the company. The various challenges came at the time of planning such as business process integration, supplier competence requirement, procurement management, flexibility management, technologic challenges, research and development and others. The research and development help to plan according to the consumer taste and preference which helps to satisfy the current market demand and it impacts on the sales volume of the company. The major challenge is to develop the plan in a most efficient and effective manner which executes successfully. Another challenge is to develop the plan in order to overcome all the obstacles which come in the business process.
Control
It is the most important element of management which helps to execute the plan successfully through checking the errors in a regular interval. The controlling enable to determine the errors in order to take corrective actions which help to reduce the risk and stated goals are achieved in a most efficient and effective manner. The various issues arise at the time of controlling such as control of supply chain, inventories, process, control of pollution, performance control, and others. The challenges faced in controlling the service sector include controlling of service operation, controlling the delivery process and others.
4. Potential issues arise from human behavior
Issues
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Poor Management: The management of resources is the main element which helps to achieve the organizational goals in a most efficient and effective manner. The lack of management capabilities of the human behavior impacts on the overall performance of the company. It is the main issue which arises due to human behavior.
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Poor quality: The quality of a product and services needs to be excellent because it directly impacts on the brand image in the eyes of the consumers, but due to lack of skills, it impacts on the sales volume of the company which is a major concern for any organization.
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Security issues: The issue of security arises due to lack of responsibility and accountability of human resource which leads to the high loss for the company. The security issues can be tangible and intangible. The tangible includes robbery of goods, and intangible goods include threat related to computer security. The issues related to computer security is a major threat which arises due to human behavior such as confidential information leaked by the employee to the competitors of the company which impacts on the overall growth of the company (Reason et al., 2016).
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High cost: The inefficient use of resources leads to the high-cost issue which directly impacts on the profit margin of the company. The high cost is a major concern which arises due to inability to manage the resource by the employees.
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Poor decision-making: The lack of critical thinking and analytical skills at the top level management impacts on the overall performance of the company because one wrong decision may lead to the insolvency of the company. It is the issue which arises due to human behavior.
Recommendation
The issues related to human behavior can be mitigated through proper training and development which helps to educate the employee through investing in the human capital which improves the decision making, high cost, and poor management issues. Secondly, the company must use high security which helps to mitigate the risk of leaking the confidential information of the company. The high-security network must be implemented in the company which helps to detect any issue related to the security of information technology (Leveson et al., 2015). The investment in human capital is very necessary because all other activities of the company are directly related to the human resource. It helps to built competitive advantage for the company which enables the company to distinct among the competitors within the same industry. The company must hire human capital with the high skills and knowledge which helps the company to manage its resources in a most efficient and effective manner.
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The Valero energy corporation is the international manufacture of petrochemical products. The company operates sixteen refineries in the Unites States. The company is facing various theoretical and practical operational issues in the manufacturing and service sector. The manufacturing issues include business macro environment, business microenvironment, and technical challenges. In the service sector, the various challenge is faced by the company such as the implementation of self-service, expanding of service operation and others. The similar issues faced by the company as the competitors includes cash constraint, quality management, operating model, poor asset reliability and integrity and ineffective cost management. The different challenge faced by the competitor is insufficient performance management because the performance of the company is managed appropriately. In the designing of petrochemical products the various challenges are faced by the manufacturing sector which includes meeting the demand of consumers, continues innovation of product, cost allocation and others. The various issues faced by the company at the time of planning such as building the viable plan, concerning various factors such as cost effective budget, technical challenges, and others. The controlling is the vital element of management which helps to execute the plan successfully. The issues related to the controlling include performance management, inventory management, and control of supply and others which help the company to manage its resources appropriately. The potential issues arise which arise from the human behavior includes security issues, poor management, poor quality of products, and poor decision making. These issues can be mitigated through investing in the human capital which helps to improve the skills and knowledge of human capital.
References
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Heizer, J., Render, B. and Munson, C., 2016. Principles of operations management: sustainability and supply chain management. Pearson Higher Ed.
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Mahadevan, B., 2015. Operations management: Theory and practice. Pearson Education India.
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Kadambur, R. and Kotecha, P., 2016. Optimal production planning in a petrochemical industry using multiple levels. Computers & Industrial Engineering, 100, pp.133-143.
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Boukouvala, F., Li, J., Xiao, X. and Floudas, C.A., 2016, July. Data-driven modeling and global optimization of industrial-scale petrochemical planning operations. In American Control Conference (ACC), 2016 (pp. 3340-3345). American Automatic Control Council (AACC).
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Maity, S.K., 2015. Opportunities, recent trends and challenges of integrated biorefinery: Part I. Renewable and Sustainable Energy Reviews, 43, pp.1427-1445.
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Portos, J., Garner, K.D., Parker, B. and Cannon, J., 2015, October. Most common mechanisms and reasons for electric motor failures in petrochemical industry. In 2015 IEEE Petroleum and Chemical Industry Committee Conference (PCIC) (pp. 1-11). IEEE.
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Reason, J., 2016. Managing the risks of organizational accidents. Routledge.
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Leveson, N., 2015. A systems approach to risk management through leading safety indicators. Reliability Engineering & System Safety, 136, pp.17-34.
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Valero.com. (2016). English (United States) Home. [online] Available at: https://www.valero.com/en-us [Accessed 17 Nov. 2016].
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