Supplier Chain: Harouge Oil Operations

Introduction

The term supply chain is usually viewed as expertise, information, income and population structures or mechanisms which are concerned with shipment of a product or service form the trader to the consumer. The activities that are fostered by the supply chain develop natural or raw resources into complete merchandise which later is presented to the end user (Chen & Paulraj, 2004). These mechanisms have complex supply system where usually there is injection of used merchandise into the supply chain in the cases where there is residual recyclable value; this is where value chain is linked up with supply chain.       

History

This assignment is going to evaluate the supply chain management of the Harouge Oil Operations which is an oil company in Libya. Veba Oil Operation is the name that this company was founded with in the years of 1955, this during the time that Mobil Oil commenced oil exploration in Libya, the name was later changed to Harouge Oil Operations. This renaming come about after Mobil Oil assign a German contracting company known as Gelsenberg AG that allowed then to equate production and exploration responsibility and rights due to the large capital that was required for this venture (Harouge Oil Operations, 2007).  

The joint operation of Veba Oil Operation which was executed through National Oil corporation which allowed exploration of new 8 concessions in the Libyan central in the basin of Sirte. Later in the year 2002 the new concession rights were acquired by a Canadian company known as Petrol Canada, this development later saw the renaming of Veba Oil Libya to Petrol Canada Oil Libya in the beginning of the year 2004 (Chen & Paulraj, 2004). And in the fall of the year 2008 Veba Oil Operation was officially renamed Harouge Oil Operations, this same year also saw the signing of both the National Oil Corporation and Petrol Canada exploration of 6 new concessions which oversaw a sharing agreement known as Exploration and Production Sharing Agreements (EPSA) on the old 8 concessions.

This agreement allowed the operation and exploration on the same concession of Harouge Oil Operations with the consent of the owners. However, all the new areas exploration were left signatory to Petro Canada obligations. Currently Harouge Oil Operations produces from more than 20 field’s petroleum that is within the five allowed areas in the contracts. The amount of oil generated from these fields is an accumulative of over one hundred thousand barrel on daily basis, this are pumped to various pipeline channelled for export through the terminal of Ras Lanuf Terminal where there is mass storage for the loading of the tankers for export and also local use. Harouge Oil Operations has the responsibility of also offering shipping services for other parties who are in the same line of business. The main office of this company is Tripoli and it employs more than 2,000 employees. The main corporate objective of this company is to connect in oil exploration and production safely, effectively, profitably and responsibly by injecting new innovation in exploration of the Libyan resources for the benefit of the nation and all the stakeholders (Nagurney, 2006).           

Supply Chain Optimization

All over the years from the time that Harouge Oil Operations was formulated they have been outsourcing for supply chain first tier in both the projects of facility management and construction. The signatory companies like Mobil oil, Petrol Canada and National Oil Corporation are the ones that would have the mandate of engaging all the supply routes. These operators were the one that would regulate all the suppliers channel and list for the petroleum explored in the areas that Harouge Oil Operations has mandate in regulation and controlling (Oliver & Webber, 1992).

According to Chen & Paulraj (2004) for Harouge Oil Operations to fully impact supply chain optimization they have to adapt the change perception that they have been trying to fully embark on. This they can do by identifying and also involving all the signatory company in integration of the supply chain for it to be secure so that the objectives may be reached. This will also be achieved through engaging suppliers in engineering and development programs that would improve the life cycle of supply chain and enhance proper way of engaging the associated providers and consumers.         

Alignment of Objectives

Harouge Oil Operations needs to fully impact on acknowledging and being aligned with objectives and goals for the success of the long term strategic relationship with the signatory companies that they partner with in commerce. The life cycle value is very essential to Harouge Oil Operations and its operators in the supply chain; if it is fully materialized then the abundance is felt with good supply and customers satisfaction as they will be getting the product effectively and efficiently. This alignment of objectives for them to be fully secured and productive it has to be through cost incentives that are fostered by the field and new concessions indentures (Hallikas Et al. 2005).     

Relationship Management & Collaboration

Harouge Oil Operations has to embark and mainly rely on construction contractors whom are usually very oriented on projects, however this has made major investment become very hard to fund and manage. They also put hurdles to the overhead cost of the supply chain in the long term. From the survey that has been conducted it has been revealed that Harouge Oil Operations does not choose contractors primarily on quoted value, past presentation and technical ability. Recently Harouge Oil Operations has embarked on enhancing good relationship with their providers through implementing and regulating responsiveness and value (Harouge Oil Operations, 2007). For them to fully impact good and long term relationship they were advised to foster value criteria that would court universal functional assessment and foster trust with the customers.

Majority of the customers that are associated with the products that are produced by Harouge Oil Operations actualized that the long term contractual basis that they harbor will eventually deteriorate if this company does no practice relation management. In the supply chain the provider relationship is considered to be very essential as this usually when it is good there is no difficulty in price identification however if it is not there the customer have a hard time identifying if the value of the products they are purchasing is of the right price. This relationship is the primary responsibility of any organization and although Harouge Oil Operations have been locally been appreciated they lack that much credit in the international market (Oliver & Webber, 1992).          

Planning & Forecasting

The amount of operators global capital spending in the year 1999 on mostly the oil product was on average of 20% this is because some of the major market players were cutting their budgets. Harouge Oil Operations global competitive grounds on the terms of investment returns, there has been fear that this company is bound to observe similar cuts. This is from the report that 40% of the major projects of Harouge Oil Operations are going to be reduced to 20% due to the economic climate that this company is facing (Nagurney, 2006). The problem lies with the oil prices that have been recently flaunted by some operators who have been constrained in the flow of cash. This and the temperature at the competitive market have even threatened to further reduce the number of the projects that most Libyan Oil Companies are going to implement.

However analyst have concluded that lack of proper and robust planning by major oil generating companies has fuelled and affected the ability of major organizations form pulling out of the muddle that deters effectual corporation resource planning. Acquisition with National Oil for exploration of more areas and new concession would be deterred if the company does not materialize on industrial managed tie backs. Another issues of fragmented demand y the customers can be addressed using a probable batch of work designed to counter attack planning and forecast on drives that would generate and improve resources (Chen & Paulraj, 2004).          

Supply chain sustainability

This link of sustainability in Harouge Oil Operations has been affecting the supply chain which is usually amended with the rating of SECH. Usually the SECH rating is distinct to be social, ethical, culture and health link. This is usually important as customers has recently become acknowledged and acquainted with their purchaser’s impact on environment. Sanctions that are put by most of the doctors in the cosmetic arena on petroleum cosmetic products and the recent oil spills by BP has brought about bad relation with most oil companies not only in the western civilization but also in Africa (Harouge Oil Operations, 2007).

Harouge Oil Operations has been fighting ways on how to improve their SECH rating and the effort has been viewed in their mission statement that considers environment as a major responsibility (Hallikas Et al. 2005). This will enhance good relation with the associate population that are residing in the areas that this company has concessions fields. This company has embarked on mounting on campaign that would regulate the emission of green house gases, minimize oils spills during shipment and also create environmental accountability on the safety of their supply chain and products.    

Lack of Global Optimization

Harouge Oil Operations is in the market that is usually described for the high demand of various services, the major one is the shipping and conveying vessels of the precious commodity, and then there is other like seismic, exploration and drilling. However, global optimization laxity by majority of the oil operators are the catalyst for high cost which in the seismic operation case hike up to about more 12%. However, if companies like Harouge Oil Operations are able to better work out global basis then there shall be recorded a probable advantage in the supply chain (Harouge Oil Operations, 2007).     

Supplier List Control

There has been gathered that there is bound to be substantial evidence that would be generated which states that Harouge Oil Operations still have a huge amount of power over their contractor. This is mostly so because of the hostile political atmosphere in Libya, however this has been viewed as an aspect that reduces contractor ability to increase their suppliers in the long term.

However, because there has been limitation also for Harouge Oil Operations this has also not favoured them in increasing the relationship with the supplier. Harouge Oil Operations has the advantage of home ground and also because they are the major supplier and exporter of oil offering shipment services and pipeline terminals and has a storage that is capable of holding large amount of gallons of oil than other storages. This has forged the relationship with most suppliers to be transactional due to the above facts. National Oil operations controls most of the proceedings and the concessions zones which Harouge Oil Operations uses, this is the best angle that this company should use to challenge supplier list constraint with innovative ideas that would help mend the relationship with their supplier and gain more ground in the oil industry (Chen & Paulraj, 2004).    

Supply Base Management

There has been a claim that Harouge Oil Operations has no effective mechanism that addresses supply bases. However, the company’s executive have denied this fact and articulated that with an excess of over 6000 providers in the global market t5hen there are bound to be confusion on which supply base to utilize. However, most short term contractors have been viewed to create little threats to major companies like Harouge Oil Operations (Hallikas Et al. 2005). The major component should be assessing customer’s base as the first priority, this would enhance recital feedback that would allow the provider to get acquainted with the demands of the customers and base them on the supply chain management strategy. Making the feed back two ways would also help point out areas that need attention and remedies.

 Supply Chain Diagram at Harouge Oil Operations

Provider Confederations

For proper success of alliance application extension which is essential for the success of the supply chain, Harouge Oil Operations need to create more confederations that are independent providers. This is usually viewed as an improvement route and usually applies to sea corrosion monitoring and control, drivers and pump/compressors and termination head and umbilicals (Nagurney, 2006). Research that has been conveyed articulates that 67% of major oil operator’s company’s uses confederations as a medium which prioritizes on higher returns the rest are still harboring old implementation of kicking it solo (they have not accomplished innovations).    

Long-Term Contractual Relationships

There are credible amount of benefit that are gained from long term relationship with customers in supply chain. This good relationship with providers usually oversees frequent retendering and this reduces the cost that would have been incurred and loss of income during that period. There are many benefit associated with long term contractual relationship and this has been one of the major growth aspect for Harouge Oil Operations for they have been in the contractual basis with National Oil Operators and Mobil Oil operators for a long time and this has helped reduce discontinuity in the supply chain and has generated for the company synergy and relationship creation, easy management of the objectives, streamlining of the labor processes and generation of rapid cash flow. The competitive pressure is put at ease, however customers have complained that this usually affects the quality of services provided as the company becomes reluctant because of lack of competitive pressures in the market due to long term contractual relationship (Harouge Oil Operations, 2007).    

Conclusion

Supply chain in most of the companies that deals with products like oil, there is dire need for investing on supply chain smooth flow. Harouge Oil Operations needs to reduce design complexity and also work toward achieving good customer interface. This company stands in a position where radical changes would mean more resources and this has to be through the channel of chain supply.