Human Rights
Discuss about the Supply Chain Sustainability Related Problem.
In simpler words supply chain demonstrate a process involved in the production to the distribution of the commodity. However, Hofmann et al. (2014) illustrated that the activity of moving the services and products from the manufacturer to the supplier with the involvement of the people, organizations, resources and information is known as supply chain management process. Moreover, the increase in the carbon emission and global warning, organization in recent times are more concerned about adopting greener supply chain management. Jacobs, Chase and Lummus (2014) stated that some of the major risks in the supply chain management are cost and availability of materials, climate-related regulations and poor human resource system. Vendors have also emphasized on transparency and accountability and thus these vendors and other shareholders are more concerned about their corporation’s sustainability creditability. Seuring (2013) also depict that starting from the manufacturing system to the delivery process, sustainable supply chain procedure allows the company to establish an effective brand reputation and image. Organization need to focus on the aspects of human rights, fair labor practices, environmental protection and progress and anti-corruption measures.
Seuring (2013) highlight that the sustainability aspects of the supply chain management system does not only related with the environmental factors but it also focuses on the human rights. In some of the nation, maintaining the human rights in the business process is considered a “precondition” is an organization desires for a sustainable development. In addition to that, sustainability can be incorporated if the working personnel of the company are empowered with basic human rights. Beske and Seuring (2014) stated that a company can incorporate effective sustainable process if include gender and race equality, human trafficking and children’s rights.
According to the International Labour Organization (ILO), the total number of people associated with the supply chain-related jobs is 450 million people (Locke et al. 2013). In developing countries, people with low education and experience opted for supply chain jobs and thus the probability of doing the unjustified business things with them gets higher. Some of the risk that occurred in the supply chain processes are worker exploitation, poor working condition and environment, long working hours and poor pay structure (Turker and Altuntas 2014). Thus, company need to address all these aspects in order to develop a fair working condition all their employees.
Environmental protection is the first thing that organization considers in case of sustainable supply chain process. The prime reason for this perception is that environmental awareness is associated with short-term benefits that not only decrease the expenses but also offer effective brand appearance and tax benefits. Awudu and Zhang (2012) depict that in order to reduce the manufacturing cost; many companies opted for recycling and reusing of the products. This allows the company to save the natural resources for the future generation. Starting from the container company to automobile company, management people have taken initiative for reducing the use of paper, plastics and utilizing energy efficient appliances. Company like Apple Inc. reduces the packaging size.
Fair Labor Practices
Problem like bribery and extortion makes the supply chain process unsuitable to achieve sustainability. Some corrupted vendors charge more money from the company and also compromise the quality of the materials which represents the corrupted nature in the supply chain management process (Ashby, Leat and Hudson-Smith 2012). Kumar, Teichman and Timpernagel (2012) furthermore stated that it is difficult to identify the corrupted process as the procedure is associated with people having power. The major problems that can be occurred from corruption are increase in the total estimated expenses, slower growth and high rate of legal risks that furthermore decrease the sustainability of the supply chain process (Pishvaee and Razmi 2012). Gopalakrishnan et al. (2012) on the other hand argued that with the increase in the technology, all the business functions including the supply chain management has become transparent and visible to all the stakeholders. In addition to that, all the employees are also provided with power to speak concerning the problem and discrepancy.
The supply chain management process in oil and gas industry comprised of several different process- exploitation, oil refinery, oil deport, transport, gas station and retail (Yusuf et al. 2014).
Oil exploitation- Yue et al. (2014) stated that the process of recovery of undrained oil in the existing reservoir is known as oil exploitation process. The process of exploitation is similar to the process of manufacturing in other companies. In this case, the process of reservoir evaluations requires supply chain procedure for fluid flow reservoir engineering and detailed geological interpretation (Yusuf et al. 2013). Monczka et al. (2015) also stated that the seismic, geophysical and geological operations are also a part of the supply chain management.
Oil refining- Harms et al. (2013) stated that the process of oil refining comprised of three activities- upstream, midstream and downstream. Wood et al. (2012) furthermore stated that upstream activities refers to the process of exploring crude oil deposits and this involves in the provision of support services to the other organization and hence supplying of the required equipments and transport support is present. In addition to that, the midstream activities highlight distribution of crude oil to refiners in which the transportation of the oil is involved. Lastly, the downstream activity involves the retail sale of petroleum products.
Oil deport- The oil deport is the reservoir, where the oil are reserved after the refining and is a crucial part of the supply chain process in oil and gas sector. Yang et al. (2013) stated that this storage system in oil and gas industry is similar to the inventory management in other retail organizations. The organization need to maintain the inventory management in an efficient way so that no resource can be misused.
Environmental Protection
Transport- Awudu and Zhang (2012) highlight that this process is a part of the distribution planning and can be done through different means like rails, trucks, ship containers and cargo. Lee (2012) also stated that oil and gas companies invested a huge capital resource in selecting the suitable transport media for the company.
Gas station and retail- Giunipero et al. (2012) depicted that prior to making the delivery to the end-user; the refined oil and petroleum are transported to the retail and gas station. This is mainly done through oil trucks.
Muduli et al. (2013) portrays that oil and gas supply chain process are integration optimization, production and distribution, impact on the market, mode of transport, quality of the oil, worker exploitation, optimizing from the oil depot to the gas station and optimization process from refinery to the oil depot. Schaltegger and Burritt (2014) on the other hand stated that the main problem faced by the concerned sector are health and safety issue, fragmented supply chains, complex operations with multiple stakeholders, adoption of greener technology and sustainable procedure.
Heath and safety of people- Oil and gas refinery sector suffers from the problem of worker’s death and problem of chronicle disease of the working personnel (Gao and You 2015). Some of the people also injured due to slips and explosion.
Fragmented supply chains- Guang Shi et al. (2012) stated that this problem occurs when the retail shop of the oil is in distant place from the refinery. This fragmented supply chain process involves in greater chances of disconnects, delays, plan changing in the actual delivery methods and unclear accountability. This problem occurs due to the absence of a single enterprise planning sources.
Complex operations with multiple stakeholders- Ford et al. (2014) stated that the major business function of the upstream oil and Gas Company is to provide the solution and transport to the other extracting companies. However, if these companies intended to supply the oil and petroleum to the users also, they need the involvement of the other shareholders as they do not have the capability of transporting different form of oil to retail and manage their need according to the demand. Thus, the more involvement of the supplier incorporated, the more the delay in the oil delivery to the retail occurs along with the misalignment of the organizational objectives.
Adoption of greener technology and sustainable procedure- Sarkis (2012) depict that most of the organization refrain to use the greener technology as it require change in the entire business procedure which initially hampers the productivity of the organization. Moreover, some of companies lack the research and development technology through which greener supply chain management process can be developed. In addition to that, adoption of greener technology also involves great investment which might resulted in lesser annual profitability. The management of the company also needs to address which product-service need to e handled in the supply chain procedure, which part of the system should be developed in-house and for which portion third party need to be hired (Stindt and Sahamie 2014). The greener facility capacity, energy efficient location of the facility, technology adopted for more efficiency and effective communication media chosen between suppliers and customers are all required for overcoming the issue of the supply chain.
Value of BHP Billiton
Progress and Anti-Corruption Measures
The value of BHP Billiton is to put the health and safety of the employees first and making the business process environmentally responsible along with supporting the community (Bhp.com 2018). Their process of integrity also refers doing right thing with everyone and follows ethical procedure. In terms of ‘respect; the concerned organization embraces openness, teamwork, diversity and mutually beneficial relationships (Bhp.com 2018). The aspects of ‘performances’ also refers to achieve superior business results; whereas ‘simplicity’ focuses on the efforts on the things that is mostly matter for the organization in terms of satisfying the need of the consumers. The value of BHP Billiton also showcases the ‘accountability’ aspect that refers to defining and accepting responsibility (Bhp.com 2018).
Capacity/resource availability
BHP Billiton faces the problem in replacing the older equipment with that of the new one, which is necessary to make more exploitation of the oil and then refine maximum amount of the oil from the extracted resources. Tonge et al. (2013) also stated that this problem arise due to lack of expertise and financial resources. Genovese et al. (2017) highlight another problem that is the technology is changing at a faster rate and this is the reason when organization intends to bring a technological change, another upgrade of the system is developed.
Talent- The supply chain workers are less knowledgeable and have low competency to adopt new technology (Kajaste 2014). This is the problem that is present in the BHP Billiton where supply chain worker are unable to comply with the new and green technology. This resulted in greater challenge in enhancing the organization performance. Wagner et al. (2012) stated that in the change management process, the managing authority of the company need to be helpful and supportive towards the working personnel. However, in BHP Billiton, workers are forced to adopt new technology without the training. This leads to the reach of the code of conduct for the company.
Greater waste products- In usual supply chain process; the amount of waste extracts is greater (Hsu et al. 2013). In case of BHP Billiton, the problem arises as they are involved in the process of developing non-renewable products. Awudu and Zhang (2012) stated that oily rugs, contaminated soil, contaminated water, sludge and sour water are the waste products of the oil and gas refining process. BHP Billiton faces the problem of reducing the waste and utilizing the same in the next process. The adverse effect that is caused in this process are depletion of the marine wildlife, death of the natural habitats and poor soil condition.
Supply Chain Process of BHP Billiton
High accident rates- BHP Billiton has to face £30bn compensation web the dam in Brazil burst and the adverse result of releasing torrent of toxic mud occurs that furthermore leads to death of 19 people and make other 700 people homeless (Theguardian.com 2018). The mining operation then advised to keep on suspended and hampers Brazilian community, which resulted in loss of the life and their annual profitability (Theguardian.com 2018). As per as the statement of the environment minister, Izabella Teixeira, it would take decade to recover the loss naturally.
Poor treatment with employees- BHP Billiton faces several issues with their technology and maintenance of the business procedure. As a result the company does not only have to face several accidents but the impact of such incident also has to face by the employees. This can be witnessed through the incident when the chief executive of BHP Billiton declared that for the year 2016 there is no bonus to the employee as the company faced loss in their business (News.sky.com 2018). BHP Billiton faces the loss of $6.4 billion (£4.9 billion). This incidence leads to dissatisfaction among the employees which moreover proves that the organization does not respect their employees and breaches the code of conduct.
Lack of incorporation of social and environmental aspects of supply chain- Green management is the main reason through which the organization can attain more benefit. However, BHP Billiton does not adopt the green management in their business operations. The equipments that are used are also not energy efficient which results in more carbon emission that furthermore resulted in poor environmental effects.
Developing leadership style- This is necessary when the organization adopts for change in their workplace. Schaltegger and Burritt (2014) stated that this chance can be in terms of technology or in the form of business procedure. Thus, leaders of the company need to be more supportive and shows transformational skills so that the employee also gets the motivation to adopt the change and outperform with the utilization of the newly introduced system.
Training regarding the changed system- Giunipero et al. (2012) stated that training is not only needed for making the employee aware about the implemented change but it also allow the employee to enhance their knowledge and competency to use the changes system for accomplishing the business goals. Gao and You (2015) furthermore depict that training also helps the organization to fulfill their code of conduct for respecting their employee by training them in their company.
Problematic Areas in Oil and Gas Supply Chain Process
Replacing the old equipment- BHP Billion faces several issue of accident and the main reason fir the same in the lack of efficient equipment which resulted in breaking of their damns, oil spillage in the oil rigs and transportation accidents (Ford, Steen and Verreynne 2014). This can be overcome if the old system will be replaced by new and improved equipment. These equipment need to incorporate with modern technology that can resist new needs of the business.
Introducing greener supply chain management- BHP Billiton can implement green supply chain approaches for overcoming the problem of reducing carbon emission. Stindt and Sahamie (2014) suggest that oil and gas company should be aligned their investments with the Paris Agreement and should also aims for greater transparency. BHP Billiton can also develop effective partnership with sustainable suppliers and government so that the company can maintain their business creditability.
Tong et al. (2013) stated that sustainable supply chain management is not only to protect the environment but also to increase the efficiency of the supply chain procedure for the company.
Satisfied employees- It can be said that if BHP Billiton provides their employees with proper benefits and salary irrespective of the loss that the business incurs, the employee become more satisfied and remain to associate with the organization. In addition to that, these satisfied employees intend to adopt the implemented change and also desire to perform with proficiency in order to accomplish the business objectives. BHP Billiton on introducing more safety legislations and compensation makes the employee to realize that he company is following the business ethics properly and they intends to remain the company for longer time. Moreover, BHP Billiton can also gain effective brand reputation if they include policies and disciplinary action towards the discrimination occurred in the organization.
Lesser accidents- Changes in the technology and the equipments not only enhance the business operation but also allow the organization to face lesser number of accidents. BHP Billiton on replacing their older equipment by newer one can attain more productivity with greater accuracy. The integrated system of the IT in the business procedure allows the organization to keep track about the business procedure though a single system. This can be done through in-house experts or hiring third party for developing a customized system so that they can manage their business operation. The lesser accidents also allow the company to save maximum of their cost related to the compensation that the employee claim after getting affected in accidents.
Effective business creditability- BHP Billiton on adopting the greener supply chain management technology is that greener technology increases the energy costs. BHP Billiton can make should implement more cost effective green alternative by implementing low power consuming IT technology. This will help the concerned organization to develop the bottom line in their business financial sheets. In addition to that adopting greener solution for the supply chain management, BHP Billiton can obtain effective response for greenhouse gas emission. BHP can get effective brand reputation if the company lowers their carbon footprints. Moreover, the concerned organization can take effective benefits on getting approval from ‘Government and Environmental Protection Agency regulations’ for getting energy star rating and certification on environment protection. Another benefit of the greener supply chain management is generating improved environmental awareness among the community. BHP Billiton can make the people of the community more aware regarding the greenhouse gas and the adverse impact of the carbon emission. This will generate the sense of care towards the environment which furthermore resulted in greater customer base.
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