Measuring the Agility Level in Petroleum Companies - Thesis Example

Measuring the Agility Level in Petroleum Companies Introduction In the later part of the twentieth century, there emerged concepts in manufacturing and project management and such ideas were on ‘lean production’ or ‘lean design’, continuous improvement, value management and value engineering, etc. These were introduced in manufacturing and later in construction projects. The main purpose for all these concepts is to ‘cut costs’ (reduce) and minimize unnecessary cost in production or in the course of the project construction. Agility in manufacturing system is perceived the new industrial revolution. There are many concepts interlinked with agility although there has not been enough empirical study on the subject. This can be because agility is still new in the world of manufacturing. Nevertheless, it has existed since the 1980s (Garbie, Parsaei, and Leep 2) and has been practiced by manufacturing firms. Agile manufacturing system is similar to value management in the context of concept and purpose. Agile focuses on decreasing time, achieving customer’s satisfaction through fast and quick delivery of products and services, and minimizing surplus inventory. Businesses and organizations of the age of globalization employ many strategies to improve their agility level. Improving organizational strategies, business concepts and innovations, value management and value engineering in construction, are just a few of these innovations. Value management addresses problems which are still unknown but can be addressed to properly when the time comes. It is being conducted by a value management team composed of the stakeholders of the project who use materials and procedures that would provide optimum benefits. All stakeholders have to work together as a team to enforce the necessary measures to minimize unnecessary cost and optimize value for the project. Literature Review Petroleum companies need innovations as the industry is labor-intensive and requires a great amount of capital in running the business. Reducing operating costs is one of the strategies of petroleum companies. In the corporate world, they have almost the same concept of agility, which is cutting costs and then lowering the operating expenses, and adding the saved money to expenses for the sales force and research and development, or for other important activities in the business. (Graham, Ware, and Williamson 31) Humans create knowledge in social interactions. Petroleum companies create knowledge structures, places and mechanisms for the creation of knowledge, whether this is through the interaction of employees and managers, and the vast physical structures created by the great wealth from a precious element called oil. Through the networks that people and organizations create, oil companies maintain a product-development process unique from each other. Its wealth of knowledge-based system is a product of its own organizational knowledge and experience. Before explorations, most oil companies enter into joint ventures to be financially strong. Oil explorations however involve a considerable amount of risks, with only 20-30 percent success rate which amounts to hundreds of millions of dollars. These companies conduct a lot of studies and surveys regarding their product, service, and the business environment to remain competitive and to stay in the business. Petroleum companies include diversification in their agility requirements. Diversifying their products allow petroleum companies to maximize the use of their resources and increase profits. An example is Saudi Aramco. This company has not only a monopoly of oil producing, refining and marketing in Saudi Arabia but has diversified its products to include agricultural products. Saudi Aramco conducts periodic market research coupled with market intelligence. Market intelligence refers to the broad spectrum about the market. It refers to a lot of topic which may include the organization and its products, prices, macro-environment, competition, and so on. For Saudi Arabia and the local market of oil, market research includes the study on the existing business environment of the country, the price of oil in the local market, the oil companies and the competitors, and the assets of those companies. (Saudi Aramco website) A definition of market research by the American Marketing Association goes: “Marketing research is the function which links the consumer, customer, and public to the marketer through information – information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. “Marketing research specifies the information required to address these issues; designs the method for collecting information; manages and implements the data collection process; analyzes the results; and communicates the findings and their implications.” (Wrenn, Stevens, and Loudon 2) Market research is a broad subject and encompasses many aspects of business and marketing. It includes information about the product and customer, opportunities and problems, performance and activities, the interaction of salespeople and customers, and many other activities involving the transfer and buying of products from the company to the customer. The definition of market research connects research and decision making, or in other words, decisions in the company are made in accordance with the results of the research. Business organizations do regard market research as very important factor in formulating policies and deciding which plans and moves to implement for their business. On the other hand, value management has the same purpose with improving the agility level of petroleum companies, i.e. to save costs, save time in delivering the product to the customer, and to satisfy the customer. Value management originally was intended for manufacturing. It started in the United States after the Second World War when raw materials in manufacturing were scarce and expensive. Operations managers hired by manufacturers were looking for ways to reduce costs of manufacturing and minimize unnecessary costs. It was later introduced in engineering projects. Value management is to construction projects as agility is to manufacturing. These are all business strategies that aim success of the organization’s objectives. New Business Processes Petroleum companies have their own way of measuring agility level. Technology plays a role in the promotion of agility. One example is the application of Information System. Through the GIS using ‘Google Map’ and ‘Google earth’, a petroleum company can provide a detailed plot of the gas stations that the company serves. The map has coordinates and significant information for the gas stations, which appears with the clicking of the station. The clickable information in the map includes gas station consumption of every type of fuel, capacity, contact and bulk plant information. The map is a very important feature that can contribute to the agile level of the company whereupon it can provide data, statistics and findings for analysis and decision making for the particular department of the petroleum company. The map can be shared online among the different departments of the company, along with a link that provides vital information. There are other technology applications that can be used by petroleum companies. One example is the sales-force automation system (SFAS). This enables a company to be more responsive to the needs of its customers and provide systematic flow of communication within the company, to the stakeholders and the company clientele. The SFAS includes marketing, customer service, product processing and order-taking. Applications also involve contact managers, which means the automation of calendar and address book programs, databases, and workflow engines. (Boehm and Jain, 2007, p. 777) The applications can be connected, web-enabled products connecting mobile workforce, composed of marketing analysts and customer sales representatives who can provide information about the customers, products and competitors. (Baran et al., 2008, p. 304) Automation will minimize paperwork-intensive processes, for instance recording and logging of sales and service, or placing orders by customers. As a result, automation can enhance targeted marketing, minimize costs, and enhance sales. SFAS can minimize the use of tiresome paperwork or loads of paper ledgers and brochures. Moreover, this will provide the use of PCs and laptops and mobile communication, and the use of the latest technology. Sales people can have close interactions with customers. They can record customer interactions and input all the needed information to the system. Advantages for the firm using SFAS range from cost-savings to advantages like more customers for the firm. Avenues in agility in petroleum companies include production support, production planning and control, quality assurance, purchasing, maintenance, marketing, engineering, human resources, finance, and accounting. (Garbie, Parsaei, and Leep 2) Conclusion The age of globalization has produced new concepts in the agility level of industries, particularly the oil industry. Petroleum companies have to adopt various means to improve their business. The industry is labor-intensive and it depends much on the workforce and the knowledge that its people possess. This framework is the focus of improving the agility level of petroleum companies, i.e. improving the knowledge that people possess. The company’s important assets are the human resource, and the vast resources composed of natural resource. Works Cited Baran, R. J, Galka, R. J. and Strunk, D. P., 2008. Customer relationship management. Mason, OH: Thomson South-Western, 2008. Print. Boehm, Barry W. and Apurva Jain. An initial theory of value-based software engineering (2005). In: Richard Selby (ed.), Software engineering: Barry W. Boehm’s lifetime contributions to software development, management, and research. New Jersey: John Wiley & Sons, Inc., 2007. Print. Garbie, Ibrahim H., Hamid R. Parsaei, and Herman R. Leep. A Novel Approach for Measuring Agility in Manufacturing Firms. Int. J. Computer Applications in Technology, Vol. x, No. x, 2008. Web. Graham, Charles E., James P. Ware, and Cory Williamson. Corporate Agility: A Revolutionary New Model for Competing in a Flat World. United States of America: AMACOM Books, 2007. Print. Oxford Business Group. The Report: Taiwan 2007. UK: Oxford Business Group, 2007. Print. Saudi Aramco. Company’s story. Web. 11 January 2011. Web. Wrenn, W. Bruce, Robert E. Stevens, and David L. Loudon. Marketing research: text and cases. New York: The Haworth Press, Inc., 2002. Print. Read More