Benefits of Expanding into Gas Refinery
Discuss about the Project Management Challenges Faced By Businesses.
The use of supply chains in the distribution of goods and services is frequent in modern day society. Additionally, businesses are expanding their markets to regions with a low supply of their products to escape the high competition in their countries. The expansion into the international market has necessitated the establishment of distribution channels that provide the highest returns at the lowest cost and guarantee minimal risk. Therefore, the supply chain management approach was established to overlook the entire process. The supply chain management has also incorporated the use of technological innovations to simplify the distribution process. This essay explores the development of a supply chain for an organization (Royal Dutch Shell) that targets the international market and the impact of technology on the behavior of its employees.
The Royal Dutch Shell company can benefit from expanding into the gas processing retail and marketing business within the international market. One of the benefits of entering into an international market is the diversification of risk. Diversification of risk occurs because the firm will acquire multiple income channels, which protects it from the loss of income if one of the channels fails. In this case, the expansion allows the firm to earn revenue from gas refinery too.
One of the benefits it will accrue is the increased market share (Wolters Kluwer, 2016). Venturing into the gas refinery market allows the Shell company to acquire a broader market, which results in increased revenue. The firm will also gain a broader customer base (Wolters Kluwer, 2016). The large customer base allows it to develop a level of expertise in customer service. The increased expertise gives the firm a competitive advantage due to its ability to better handle its clients.
The Royal Dutch Shell Company would also benefit from the increased revenue from applying the law of demand and supply. The business can move the products in its country of origin where supply and competition are high and take them to the target country where demand is high, and supply is low. Due to the low supply and high demand, the law of demand and supply would increase the price of the commodities. Ultimately, the company would sell at a high profit.
Quality management is an area that could pose a problem for the Royal Dutch Shell company. According to Brand (2017), the expansion into the international market creates new supply chains that may make it difficult to manage quality especially if they are complicated. The new supply chains emerge due to the need to penetrate new markets by attracting new customers (Brand, 2017). Additionally, such chains make logistics complicated since it is difficult to track the flow of products. In such cases, companies should learn to adapt to change to develop new techniques to manage quality.
Challenges of the Logistics and Supply Management
Another challenge that the Royal Dutch Shell firm may face is the layout and design of the facilities used in the distribution. Since the company is participating in the international market, it needs to store its refined gas products in storage facilities frequently. According to Amri, Darmoul, Hajri-Gabouj, and Pierreval (2016), the storage facilities are supposed to be designed in a way that they mitigate against risks involving quality. The challenge occurs due to the different requirements on the layout design due to the government regulations of the destination country.
The challenges involved in project management may affect the expansion of the Royal Dutch Shell into the international market. According to Bennett (2017), project management is affected by the use of teams in the different geographical area. This challenge affects communication among the team members, which may lead to conflict. As a result, the conflict makes it difficult to carry out the project as required. Another challenge that the firm may face is difficulty in resource allocation (Bennett, 2017). This is because more resources are being used due to the expansion of the international market.
The last challenge the Royal Dutch Shell may face is one concerning planning and control in the warehouse and capacity management. According to Siebrecht (2015), this problem arises due to lack of certainty of the success of the new product in the new market. Therefore, the warehouse may be too small or may be available seasonally depending on the needs of the firm. Additionally, the product may require extra space during the promotion periods. In such cases, if the warehouse had not planned for excess demand a problem arises.
The Royal Dutch Shell has a supply chain that is product-based and destined for Kenya. The supply chain will entail the Shell firm as the extractor of the gas, the suppliers who will distribute the finished products to various distribution points, and retailers who ensure the products reach the end consumer. The supply chain will include one international supplier connected to local suppliers who are linked to local retailers.
The configuration of the supply chain mentioned earlier depends on the coordination of decisions concerning the refined gas products, logistics, and processes about orders placed by customers. According to Zhang, You, Jiao, and Helo (2009), supply chains should provide the most value to the consumers rather than the owners. Additionally, the supply chain should mainly consider the number of suppliers and allocation of resources (Zhang et al., 2009). The configuration will be applied in the following ways.
Supply Chain Design
Firstly, the number of suppliers is supposed to be determined. For the Shell company, the suppliers required are the international supplier, the local wholesaler, and the retailer. The resources that will be applied in the implementation of the suppliers are the human capital, the warehouses, and the transport means. The company will cater for the initial cost of implementation then the cost will be transferred to the employee. However, the firm must make sure that the price does not exceed the average rate due to the extra cost.
The coordination process employed in the design of the supply chain of Royal Dutch Shell integrates the parties involved in the supply chain. For instance, a clear plan needs to outline the logistics process of the refined gas products. The logistics process entails the distribution and storage of the products until they reach the consumer. For instance, the logistics plan can indicate that the method of transport is using ships. This process needs to be coordinated with the other processes such as warehouse storage. For example, warehouses may be located in Kenya to cater for storage needs required due to changes in demand.
Various similarities exist between the service supply chains and product supply chains. One of the similarities between these two supply chains is the use of information sharing to enhance distribution. According to Zhou, Park, and Yi (2009), information sharing within the product supply chain increases performance because it equips suppliers with knowledge on how to sell the products. Additionally, manufacturers acquire first-hand information on the customer preferences through their interaction with the suppliers. These benefits are also applicable to service supply chains. Thus the similarities mentioned above are evident.
Another similarity between the service and product supply chains is concerning the bullwhip effect. In both cases, the bullwhip effect is reduced by the sharing information (Zhou et al., 2009). In the supply chain mentioned earlier, the bullwhip effect, may reduce when manufacturers have informed the reason for increased demand rather than just responding to the demand changes. This action may also cut the losses that the business may incur. Additionally, the use of promotional campaigns affects the service supply chains by increasing the bullwhip effect.
The service and product supply chains also have the following differences. The first difference is about the market demand where the demand for product supply chains takes time while for the service one is rapid (Digabit, 2015). In the case of the supply chain provided earlier, the supply chain is product-based hence the company may take a long time to respond to market demand. The second difference is that similar types of products exist in the product supply chain while the service supply chain has unique services that can be personalized (Digabit, 2015). In the supply chain used for Royal Dutch Shell, the refined gas products are similar and produced in large quantities.
Similarities and Differences between the Service and Product Supply Chains
The last difference between the service and product supply chains is about the relationship with the customer. The service supply chains have a more prolonged relationship, but the product supply relationship is shorter because the transaction ends when the good is sold. In the supply chain mentioned earlier, the length of the relationship with the consumer is short.
Staff members from the Royal Dutch Shell firm are using the internet to advertise the gas refinery products. The use of the internet in advertising is making it easier for the consumers to get what they what conveniently. It has also allowed the staff to gather information that may be used to enhance the experience of the consumer through personalization. In addition, the information can be used to inform the staff members about the products that customers prefer so they can adjust demand accordingly.
The staff members can also interact with e-commerce to avail the products to the consumers. Presently, the use of e-commerce has allowed customers to purchase goods online. In this case, the Royal Dutch company can start an online store online and eliminate the middlemen. The customers can buy the products online and have them shipped to the desired country. In such a case, the company will benefit because the cost incurred in transportation is passed on to the consumer in the form of increased prices.
In addition, the staff members’ participation in social media can generate more sales for the Royal Dutch Shell. For example, when the employees engage in a conversation involving a gas refinery product in Instagram piques the interest of some customers. These customers may use the information gathered to gain access to the company’s online store and buy products. Moreover, social media sites usually have analytical tools that the employees can use to evaluate the impact of the business. This information reveals whether the company has significant reach within the market.
Lastly, employees can use the internet to learn about trends in the market and use them to advance their skills in the distribution process. In this case, the employees can study conventional methods used in the distribution process and apply the ones that fit their requirements. Additionally, they can use the internet to search for common mistakes in the distribution process and come up with strategies to avoid them.
The use of ERP systems can help smooth the interaction between human beings and machines. According to Srinivasan (2016), ERPs assist in automating some of the processes in the supply chain management. This automation helps to reduce some of the errors associated with employees such as errors related to order tracking. This functionality ensures that firms can be able to interact with many suppliers concurrently. Another advantage of using these systems is that they reduce the cost of running the business by minimizing the errors involved and automating some of the processes that would require employees.
The use of the Internet of Things is beneficial to the business because of the following. To start with, it allows information to be collected during the whole supply chain management processes (Cortés, Boza, Pérez, and Cuenca, 2015). This information can be used to improve the work of the employees by evaluating the coordination of activities and identifying where improvements should be made. After the identification process, the company can offer training to the employees to enhance performance. Additionally, this technology can be used to track the products as they are distributed through the supply chain. Overall, the Internet of Things makes the supply chain management process more manageable.
The digital technology can also be applied in the implementation of supply chain management. The use of artificial intelligence in the supply process has made decision making less complicated. This approach also minimizes human errors since they prevent employees from making the wrong choices when it comes to choosing supply routes. Another digital technology that is used is analytical tools using big data. This form of data analysis assists in projecting future scenarios, which also helps in decision making. Lastly, the technology has provided weighing options that are not prone to human errors. This form of measurement is ideal for the international market since refunds would be very costly for the company. Overall, the use of digital technology has simplified the complicated process for the employees.
Conclusion
The findings from this analysis are about the use of technology in the supply chain management. The first finding is that companies should implement digital technology to minimize human errors. The second finding is that the use of ERPs is required to automate the process and track the orders through the distribution chain. The third finding is that employees have a role to play in the distribution process through their interactions in social media. The recommendations are that companies should study the use of technology in distribution and integrate their systems with modern systems that ease the process. The behavior that was evident in the analysis was the human errors involved in the distribution process. The use of technology can minimize such mistakes.
Reference list
Amri, S.K., Darmoul, S., Hajri-Gabouj, S. and Pierreval, H. (2016) Risk issues in facility layout design.
Bennett, H. (2017) 10 typical project management challenges faced by businesses. KeyedIn Projects [online]. Available from: https://www.keyedin.com/uk/keyedinprojects/article/10-typical-project-management-challenges-faced-by-businesses/ [Accessed 23 Apr. 2018].
Brand, S. (2017) The 4 quality management issues on every manufacturer’s mind. California’s Manufacturing Network [online]. Available from: https://www.cmtc.com/blog/the-4-quality-management-issues-on-every-manufacturers-mind [Accessed 23 Apr. 2018].
Cortés, B., Boza, A., Pérez, D. and Cuenca, L. (2015) Internet of Things Applications on Supply Chain Management. World Academy of Science, Engineering and Technology, International Journal of Computer and Information Engineering, 2(12).
Digabit (2015). 10 Differences Between Manufacturing and Service Supply Chains. [online] Available from: https://digabit.com/10-differences-manufacturing-service-supply-chains/ [Accessed 24 Apr. 2018].
Siebrecht, K. (2015) Warehouse capacity management: product, promotion, peak and predicament. Flexe [online]. Available from: https://www.flexe.com/blog/warehouse-capacity-management-product-promotion-peak-and-predicament/ [Accessed 23 Apr. 2018].
Srinivasan, M. (2016) Role of ERP in supply chain management. LinkedIn [online]. Available from: https://www.linkedin.com/pulse/role-erp-supply-chain-management-mohanapriya-srinivasan/ [Accessed 24 Apr. 2018].
Wolters Kluwer (2016) Top Reasons for Corporate Global Expansion. [online] Available from: https://ct.wolterskluwer.com/sites/default/files/Top_Drivers_for_International_Expansion.pdf [Accessed 23 Apr. 2018].
Zhang, L., You, X., Jiao, J. and Helo, P. (2009) Supply chain configuration with co-ordinated product, process and logistics decisions: an approach based on Petri nets. International Journal of Production Research, 47(23), pp.6681-6706.
Zhou, M., Park, T. and Yi, J. (2009) Commonalities and differences between service and manufacturing supply chains: Combining operations management studies with supply chain management. California Journal of Operations Management, 7(1), p.136.
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