Operational Management approaches by Shell Company

actional prudence approaches by thump let out CompanyThe chosen c some(prenominal)er-up to evaluate the operation management approaches employed in an heartiness friendship is Royal Dutch outwit Company. pound a British-Dutch participation that provides crude oil, gas, fossil oil mathematical crops and re recent up to(p) source of force to the world. This association is one of the largest companies just about the world that maintains and supplies the world with its evoke, oil and petro chemic proceedss.The Royal Dutch/Shell assort is the worlds biggest and oldest joint venture, formed in 1907 when the Royal Dutch gasoleneeum Company and the Shell Transport and business Company Ltd of the United Kingdom merged their operations. It operates in over 140 countries, providing fossil fuels and green fuels wish heat content fuel cells. Some of the facts re youngd to Shell are has 102,000 bod of employees ecumenical, provides 2% of oil worldwide and 3% of gas, has 45,000 service stations, 10 million customers worldwide and one of the crest fortune 500 companies.Shell has five core businesses geographic expedition and carrefourion, gas and power, refining and marketing, chemicals, and trading and shipping.Source http//www.annualreview.shell.com/2008/servicepages/downloads/files/entire_shell_review_08.pdf2Shells feat commission organisationOperation managementDefinitions direction Of the conversion ferment which transforms inputs such(prenominal) as raw materials and labor movement into outputs in the form of finished goods and services (Davis, Aquilano Chase, 1999).Schroder (2007) defined operation management as trading operations is responsible for(p) for supplying the mathematical crossing or service of the fundamental law. Operations coach-and-fours ease up closings regarding the operations function and its connection with some other functions. The operations managers plan and experience the employment address and it s interfaces within the organization and with the external environment (Schroder, 2007).Operation management (OM) is basic all in ally the set of activities that creates goods and services by transforming input into output. Activities creating goods and services take place in all organization. In manufacturing firms, the end product activities that create goods are usually quite obvious. In them we can absorb the creation of a tangible product such as Sony TV or a track Taurus.In organizations that do not create physical products, the production function whitethorn be little obvious. It whitethorn be hidden from the public and even from the customers. An example is the transformation that takes place at a bank, hospital, airline office, or college.Regardless of whether the end product is a good or service, the production activities that go on in the organization are often referred to as operations or operation management.Operation management is associated with number of areas l inked with an organization as how does the organization establish customers requirements, transformation of customers requirement in to product and services, what operations systems/ processes are in place to satisfy the product/services requirement of customer, close associated with capacity planning, parentage, quality of product etc All these decisions come under the umbrella of operation management.Identification of client RequirementsWe know that the basic existence of an organization depends upon the product or services it provides to the society. However, with the changing consumer taste and the hold lifecycle of products companies must be looking for rising product knowledge. It is a companys life blood. Both profits and suppuration are affected without aggressive product discipline. Operation managers lay out high value to the noticeable intercourse mingled with customers, product, processes and providers that result in a high success rate for their products.All companies get hold of to essay out their customers wants and requirements in order to fill any gaps in the market. A successful market explore for naked product development comes from knowing what customers value.3Shells Operation way corpseProduct decisionOne of the important decisions of operation management is the selection, definition, and program of products.Heizer and Render (2005, pp-132) discussed the product decision in their dissemble as it c at oncerned with the development and implementation of a product strategy that meets the demands of the marketplace with a competitive advantage that can be achieved via differentiation, clinical depression damage, rapid response, or a combination of these.Product development systemProduct development system may well determine not only product success but also the firms future. Product development goes by a series of spirits, starting with ideas that may come from either internal or external sources and ending with the ev aluation of new products. Heizer and Render (2005, pp-137) drives both tools that are jumpicularly jockstrapful in the early make ups of product development are (1) creativity and (2) identifying customer wants.The former can be addressed via creative, exculpated organizations and brain storming and the heartbeat with quality function development.Organizing for product developmentAccording Heizer and Render (2005, pp-141), There are different approaches to the product development.The traditional U.S approach to product development is an organization with distinct surgical incisions. These departments are First interrogation and development department to do the demand research then an engineering department to design the product then a manufacturing engineering department to design a product that can be produced and finally, a production department that produced the product.A second and popular approach is to assign a product manager to champion the product through the produ ct development system and related organizationThe third and perhaps the best, product development approach use in the U.S. is the use of teams. Such teams are known variously as product development teams, design for manufacturability teams, and value engineering teams.The Japanese bypass the team issue by not subdividing organization into research and development, engineering, production and so forth. Consistent with the Japanese style of crowd effort and team work, these activities are all in one organization. gage ChangerShell spirited modifier is an internal shell organization which looks for new and innovative ideas that addresses a demand or significant problem in the energy industry. secret plan changer helps entrepreneurs to convert ideas into products by sponsoring them. Ideas can range from new oil exploration techniques to improved production tools, or even new form of energy. It provides a sheltered testing zone where an idea is developed, time-tested and true and im proved upon. It also helps to shoot it to market.4Shells Operation concern SystemAreas of focus are outgrowth energy productionCarbon managementEnergy conversion, storage and distributionFuelling transportationWorking of Game changerGame Changer screens the novel, early symbolize idea. If the idea has any effectiveness and game changer agree, it will take it through some important steps and provide the funding and support to get it to proof-of concept. Although game changer grew up on ideas from Shell employees, it also invests in those originating from beyond Shell such as from academics and other entrepreneurs.Game changer primary criteriaNovelty Is the idea truly and fundamentally new and different?Value Could the idea create substantial new value if it works?Credible protrude Is there a plan to manage primary risks prudently by qualified people?Game changer processThe first step in entering the GameChanger process is submission of a of a sudden description of the idea t hrough the shell website. A selection panel formed by a group of full- metre Shell professionals with diverse backgrounds in the energy industry carries out assessment of all proposals.They assess the proposal at deuce-ace different levels 7Pre-ScreeningIf a person is an entrepreneur from outside Shell then, after the initial assessment of the idea, a member of the panel will contact the entrepreneur to share a Shell technical counterpart to him. This person will then be entrepreneurs co-proponent of the idea and help him through the screening process.Screening impanelThe Screening Panel consists of (any) two members of the GameChanger team. They will listen to the presentment of inventors idea and ask questions in order to obtain a complete understanding of the proposal. The GameChanger panellists will consider the merits of the proposal and within 48 hours decide if the idea could potentially mature into a GameChanger project. If this is the result, the inventor will then be i nvited to prepare a more detailed presentation for the Extended Panel.Extended PanelThe Extended Panel consists of three members of the GameChanger team and at least three experts who are not members of the GameChanger team. This group will attend the presentation on the inventors proposal and work plan. The panellists will ask questions and the experts will give opinions on the merits of the proposal. The GameChanger panel will then come to a decision on whether to go in front and fund the development of the5Shells Operation Management Systemidea. Game changer will accomplish to communicate this decision to the inventor and the co-proponent within 48 hours.If funding is awarded, it is often with a time cut through of 2- 3 years. The inventor will then use the funds to develop the idea in conformance with an agreed plan. At agreed tollgates, progress and continuation are discussed with proponents and panel experts.Selection CriteriaGameChanger ideas have the potential to effect a significant improvement in the profitability of a business or open up opportunities for growth. The GameChanger panel funds these projects through to their proof-of-concept stage.The final step Going to the market placeIf proof-of-concept is r all(prenominal)ed successfully, GameChanger may also be able to help take the invention a further stage. There are three potential forward paths 7Proprietary -The idea is graduated into Shells internal RD funnel or some other Shell business for direct use by Shell.Licensing -The idea is licensed to an existing technology supplier other than Shell. This is usually applied when complementary capabilities are required to further develop and deploy the idea.Venturing -A new company might be set up to bring the idea to commercial market. In short, once an idea is considered a true GameChanger it will not be shelved and all options will be considered to manipulate the GameChanger idea stooles the marketplace. in the lead digging deep into the operation management system employed within Shell, we need to first understand the fol secondarying conceptsProcessProcess refers to the physical process or expertness apply to produce the product or service. It includes the type of equipment and technology, process f beginnings, layout of the facility, job design, and workforce policies.Process strategyA process or (transformation) strategy is an organizations approach to transform resources into goods and services. The objective of the process strategy is to find a way to produce goods and services that meet customers requirements and product specification within cost and other managerial constraints.Virtually any good or service is made by using some translation of one of the four process strategiesProcess focus A production facility organized somewhat processes to facilitate low volumes, high variety production.75% of all global production is devoted to making low volumes, high variety products in places called job shops. Such facilities are organized around performing processes. In factory, these processes might be departments devoted to welding, grinding, and painting. In office, the processes might be account payable,6Shells Operation Management Systemsales and payroll. Such facilities are process focused in terms of equipment, layout and supervision repetitious focus A product-oriented production process that uses modules (parts orcomponents of a product previously prepared, often in a straight process.It falls between the product and process focuses.The repetitive process line is the unadulterated assembly line. Widely used in the assembly ofvirtually all automobiles and household appliances.Fast food firms are an example of a repetitive process using modulesProduct focus a facility organized around products a product oriented, high volume, low variety process.They are also called continuous process, because they have long continues production runs. Shell uses product focused approach for its oil refinery processes.Mass customization rapid, low cost production that caters to constantly changing unique customers desires.Mass customization brings us the variety of products traditionally provided by low volume manufacturer (a process focused) at the cost of standardized high volume (product focused) production.Operational Systems and Processes at ShellShell is involved in production of more products and services. It claims thatWe provide transport fuel to around 10 million customers each day through our 45,000 service stations worldwide. We are working to deport cleaner burning and more efficient fuels. Our products and services are also designed to meet the inevitably of businesses from the construction industry to aviation, chemicals to shipping. 1 (Shell.com)Shell is best known for its service stations and for exploring and producing oil gas on land and at sea. Shell delivers a vast range of energy solutions and petrochemicals to customers produce and sell petroche mical make blocks to industrial customers on a global scale invest in making renewable and lower-carbon energy sources involved in transporting and trading oil and gas marketing natural gas producing and selling fuel for ships and planes and generating electricity and providing energy efficiency advice.As mentioned earlier, shell is involved in five core businesses and each business involves number of processes within. To define our scope, we will discuss the oil gas exploration and production business. embrocate Gas exploration and production cycle involves oil exploration, boring, refining and production of petroleum products. inunct exploration processIn this phase, the initial step is to find the oil. This is of huge importance and Shell invests a broadcast of money to use statistical outline to determine the location of oil. This survey process is known as Seismic Surveying. There are three components in Seismic Surveying7Shells Operation Management SystemA seismic source SensorsRecording equipmentDuring this survey, the scientists create a picture of the rock mold structure on a lower floor the earth and the data collected is carefully examined and interpreted to decide whether to further analysis would be need or to start the exploration process.Once the location of oil is determined, Shell spue up exploration contracts with the countries within whose boundaries the oil was first established. Once the contracts have been approved and negotiations agreed the company can then start its drilling process.Drilling processOnce the oils location is identified, the attached step is to drill. Well play fundamental role in get oil and gas. With the advancement of technology, new drilling techniques and technology has been developed that helped Shell in drilling surface from few metres to more than 10 kilometers. well are not only drilled vertically but also horizontally, can turn corners and snake in the grass from one pocket of oil to another.Souce htt p//www.shell.com/home/content/innovation/meeting_demand/getting_more/smartfields/smartfields.htmlAs drilling is vital part during oil extraction process, however the issue of planning and operating of well is of greater importance. Shell realizes that as part of its operations it needs to research into whether a well would produce oil, gas or both. During the late 90s Shell introduced Drilling the Limit methodology which allowed the company to focus attention on how efficiently wells are planned, drilled and managed as a process. The main reason for introducing such a scheme was to limit be and reduced to time it take to drill.Shell also have introduced a Smart palm program providing both the knowledge and the control by integrating digital information technology with the in vogue(p) drilling, seismic and reservoir observe techniques.8Shells Operation Management SystemFurthermore, Shell has introduced the Enhanced Oil Recovery (EOR) technology to squeeze out the extra oil that w ould have been left behind in the oil fields due limited access and hard to get them out. Estimation aims that by recovering just 1% extra throughout the world would equate to 20-30 billion barrels of oil oil that may have been left behind. 5 (Shell.com)Scouce http//www.shell.com/home/content/innovation/meeting_demand/getting_more/eor_ccs/eor.htmlShell is using three techniques injecting move into reservoirs to heat and make the oil more fluid, and ease its flow injecting gas to push oil out or to thin it, or injecting chemicals that free trapped oil.Refining processRefining is the manufacture of petroleum products from crude oil extracted in the drilling process. Refining process can be classified into three major processes separation processes, conversion processes and the chemical treatment processes. Refining involves separating crude oil into the desired components depending on the final processes chosen and the available crude oil selected.Separation ProcessesIts the first stage of petroleum refining. During this process the crude oil is separated into some of its fractions. This stage involves three separation processesFractional DistillationIn the process, the crude oil, which is a mixture of many an(prenominal) types of hydrocarbons, is boiled and re-condensed to separate the crude oil into components based on ranges of boiling points. The components with low boiling point are evaporated and collected in the upper part of the house known as Distillation column, age the component with higher boiling points are heavier and collected in the9Shells Operation Management Systemlower part of the distillation column. The components collected at the top of the chamber are known as Liquefied Petroleum Gas (LPG).Solvent ExtractionThis process involves the separation of oil into parts by adding chemicals to dissolve the unwanted substances to the crude oil. The main solvents used in this process are furfural, phenol and benzene. Refineries use this method t o improve the quality of lubricating oils.CrystallizationThis method is in general used to remove wax and other semi-solid substances from heavy fractions or components. The components are cooled to a temperature at which them constitute solidify or crystal. They are then put through a filter that separates the solid.Conversion ProcessesPetrol is obtained through this process. Conversion process involves to processes Cracking process and combining process.Cracking ProcessIt involves breaking up of large hydrocarbon molecules into smaller molecules using a combination of heat and catalytic action. These processes not only increase the production of petrol but also improve its quality and results in products like Cat check Gasoline (CCG) etc.Combining ProcessThis process is the opposite of cracking. It combines simple hydrocarbons to form more intricate fractions. This process results in different products like LPG, Coke (used to generate steam and electricity).Chemical Treatment ProcessesHydrogen TreatmentThis process is used to remove the impurities like sulphur compounds by mixing the components with hydrogen.BlendingThis is the operate stage of refining process. This stage dealt with the mixing of various hydrocarbons, formed in the refining processes, together to make the final product as required by the customer. The final product is tested before exchange to the consumer.Capacity Planning and Inventory Management SystemInventory represents a major investment for many firms. Inventories are of four types (Heizer, Render 2005)Raw material and purchased componentsWork-in-process (WIP)Maintenance, repair, and operating (MRO)Finished goods10Shells Operation Management SystemAll organizations have some type of blood planning and control system. In eluding of physical products, the organization must determine whether to produce goods or purchase them. Once the decision is made, the next step is to forecast demand. Then operation managers determine the in ventory necessary to service that demand. Operation manager establish systems for managing inventory.Vendor Managed InventoryVMI is an abbreviation of vendor- managed inventory. Shell offer VMI. Vendor-managed inventory (VMI) is more beneficial for the chemical buyers. In this system supplier warehouses the product till customer uses it. In this way Buyers are able to reduce a large portion of inventory from their books. They also benefit from the reduced paperwork, phoning in product orders and following up to see that they are delivered where and when theyre needed. VMI often results in the development of more efficient inventory and supply management, which can shave significant savings off the total cost. VMI takes inventory out of the production equation for buyers. Buyers no longer have to worry about tank levels or when to schedule new shipments. The supplier handles that. By monitoring the customers tank (often using sophisticated telemetry equipment), suppliers know when in ventory levels are low. When they reach a certain point, usually agreed upon with the customer, the supplier schedules a delivery and the truck shows up at the customers site to replenish the tank.In November of last year, Shell Chemical Corp., Herndon, Va., went into an agreement with ControlSAT, under which ControlSAT would be Shells max telemetry supplier. The agreement has helped the shell a lot because of the compatibility of ControlSATs technology to Shells Supplier Inventory Management Order intercommunicate (SIMON), which was developed by Shell Services, the technology arm of Shell Corp. (Reilly, 2000)ControlSAT Telemetry systemControlSAT, is a technology company that manufactures and markets satellite -based inventory monitoring telemetry systems (system based on cellular and radio wave transmission).Working of ControlSATs SystemOrbocomm global, L.P., ControlSATs parent company, owns a network of 36 del fluorocarbon satellites orbiting the Earth. The satellites are space d to orbit the polar planes, tropical planes, equatorial plane and about 45 degrees in between, providing total coverage of the Earth. (Reilly, 2000)ControlSAT installs hardware on customers tanks designed to pass on inventory data to those satellites. Then, once per day, data is sent via the satellite network to a central monitoring computer, then on to the supplier through a secure Internet link. Data that suppliers receive show their customers inventory levels in tanks around the world.When product inventory levels fall below a certain point, the supplier receives notification to replenish the material in the tanks. In this way, the supplier can proactively11Shells Operation Management Systemschedule its own deliveries. With its daily running inventory and materials needs forecast it can streamline supply.SIMONSIMON is a Lotus Notes-based software program that provides process industry suppliers with information and analysis tools. SIMON monitors and tracks inventory and use of goods and services and then generates demand forecasts, minimum inventory requirements and re-supplies schedules. As a result, suppliers benefit from an improved ability to control facility and warehouse costs, increased inventory turns, streamlined administrative processes, and better focus on production capabilities.Through ControlSATs tank telemetry service, the SIMON database automatically incorporates timely, accurate and reliable inventory data without the need for manual intervention.Before SIMON and the telemetry supplied by ControlSAT, Shells inventory monitoring used to require a lot of phone calls, faxes and interaction between the customer and Shell. Any Information related to the customers inventory position would be initiated by the customer. Automating the process allowed the supplier to be more proactive in meeting the customers needs (in terms of getting the right product in the right location at the right time) and eliminate the need for time spent faxing and phon ing in orders, etc.Shell actually provides the service only to customers that are sole-supplied by Shell, where a very strong business relationship has been developed and where there is a strong, demonstrated opportunity for cost savings through inventory monitoring.One of Shells customers currently using the program agrees that it can save a lot of time in product procurement. Balmoral Marine Inc., a petroleum and industrial gas drilling company based in Houston, Texas, is supplied by Shell and is currently using Shells SIMON and ControlSATs inventory management systems for supply of a particular resin product. (Reilly, 2000)Feature of the new systemThrough SIMON, Shell Chemical keeps vital inventory customers pay upon use for what is consumed.Shell Chemical is the sole source supplier, tied to a supplier/customer business model.Customers reduce safety stocks to bare minimums.Lotus-based SIMONExtracts data on amount of product consumed in ancient 24 hours.Determines the amount of new product that arrived and was unloaded in same period.Draws information on current and anticipated product schedules.Compares data against known changes to schedules.Data is replicated back to central customer service centerfield for automatic reconciliation with SAP/MRP systems, generating an automatic re-supply plan.12Shells Operation Management SystemSIMON Features When plan indicates a stocking level below accepted minimum, electronic purchase order and shipment is initiated.All information pertaining to attitude is accessible to customers.Invoices are issued monthly, based on consumption, not shipments.Introduced to 23 of the most strategic customers.Short-term (12 months) results were prescribed $20 million in product sales.Customer BenefitsEliminates excess safety stock, reducing working upper-case letter and carrying costs.Facilitates timely, low-cost re-synchronization of supply chain.Ensures product is on site when needed.Creates shorter response time to changing c onditions.Reduces transaction costs data entry, invoicing, payables, etc.Smoothes erratic order patterns.Reduces order management costs.Streamlines financial accounting.Monitoring and Evaluation of Operations at ShellShell has heavily invested in monitoring and evaluation of each of its processes and operations because every process in this business is very much crucial and need careful attention. During the initial stage of oil exploration and production cycle, Shell conducts Seismic Surveying to confirm the presence of oil beds beneath the earth. Otherwise drilling is very much cost intensive process and failure to the initial stage may results in heavy lose to the organization. To determine whether the well would produce oil, gas or both Shell introduced Drilling the Limit methodology which allowed the company to focus attention on how efficiently wells are planned, drilled and managed as a process. Significant reduction both in drilling cost and drilling time has been seen over the decades with the introduction of Drilling the Limit methodology.Shell has introduced a Smart national program which controls the ongoing drilling, seismic and reservoir monitoring from the separate place equipped with information technology. have with the experience of geologists, engineers and others, Smart Fields can help increase the total amount of oil healed from a field by 10 per cent and gas recovery by 5 per cent, while also boosting the rate of production. 4 (Shell.com)Furthermore, Shell has formed a department under the name Shell Global Solution. Shell Global Solution provide business and operational consultancy, technical services, catalyst and research development expertise to its global customers as well as provide its assistance to Shell in many operational areas such as exploration and production, refining, gas and LNG etc.13Shells Operation Management SystemConclusionShell is one of the largest companies around the world that maintains and supplies the world with its fuel, oil and petrochemical products. In this report we tried to explain how Shell establish its customer requirements, its product development decisions, different operational systems involved in oil and gas exploration and production, inventory management systems and monitoring and evaluation strategy by Shell. As Shell is involved in number of businesses (exploration and production, gas and power, refining and marketing, chemicals, and trading and shipping) and each business has number of operations and processes that need to be maintained. To limit the scope of this report, we only focused our study on the oil exploration and production business.