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Operations Management in Oil and Gas Sectors Report (Assessment)

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Updated: Jun 24th, 2019

Introduction

Operational management focuses on the administration of processes that involve the production and distribution of goods and services. Various activities in operational management include the design, development, production, and distribution of products.

Activities that are in tandem with this aspect of management include inventory and quality control, logistics, storage, and evaluation. Efficiency is an aspect of operations management that guarantees the lowest costs in production. It brings about effectiveness in the production process; hence, it fosters value creation.

Leadership is critical in operations management due to various critical decisions that align with the company’s ethics and culture. The essay explores the aspects of operational management that are carried out by the oil and gas sector in modern markets that are highly competitive.

Integration of Systems and Techniques in Operations Management

Operational management in the oil and gas sector has been significantly influenced by the tremendous increase in commoditisation and globalisation. The integration of modern systems into operations management has enabled many managers to emerge as winners amidst stiff competition.

This situation is evident in the oil and gas sector where companies have gained a tremendous competitive advantage (Campbell, Jardine, & McGlynn 2011). The bottom line of the sector has increasingly improved owing to the operational efficiency that has been heightened by the ever-advancing technology.

Many enterprises in this industry are implementing operational management techniques to ensure the integration of assets and processes into their production processes. This strategy is accomplished to increase the operational efficiency while reducing the accompanying costs (Campbell, Jardine, & McGlynn 2011).

Underperforming businesses in these sectors do not effectively implement the strategies in the management of their operations. Working strategies should incorporate designs and networks that feature both high-quality physical and service outputs to seize the interests of the consumers.

The combinations of operational methods that align the values, attitudes, skills, and preferences of employees in the organisational processes result in effective management (Correa et al. 2007). Operational managers in the oil and gas sector are conversant with the systems that have been put in place for improvement.

For instance, when there is an increase in production, a need to adjust the size of the workforce can arise. This situation can also be influenced by increased demand for products (Jung et al. 2008). For example, the integration of operations and assets into the oil and gas sector is currently on the rise.

The program initially commenced with Process Safety Management (PSM) in the healthcare systems. In the context of the oil and gas sector, the operations pose health risks to employees who are prone to accidents among other issues (Campbell, Jardine, & McGlynn 2011).

The oil and gas sector recently included new initiative-based operational techniques whereby assets are integrated based on the stipulated policies, foundations, standardisation, and practice.

This approach is critically implemented to bring about effective management safety, efficiency in production, and cost effectiveness in the areas of operation (Coughlan & Coghlan 2002).

This process is deemed cheaper as compared to operational management that conducted independently at the separate sites.

A holistic inclusion of the HSE and PSM in all aspects of operational management and standardisation of business processes such as technical operations, asset management, and supply chains among others has ensured an effective means of improving continuity, and reducing costs of production in an attempt to increase returns (Coughlan & Coghlan 2002).

Managing up and downstream operational activities such as exploration and production are hectic. First, there is a need to encourage operations, maintenance, and safety experts to work together with a view of ensuring a standardised technique of operations management.

A common culture that ensures the integration of operations into management must exist (Coughlan & Coghlan 2002). A standardised operation that leads to the success of operational management entails a culture that embraces the performance of the right activities.

Training of employees is not enough in accomplishing sound operational activities if the culture of excellence and standardisation is not implemented. Most oil and gas companies include the behaviours of employees in the operations management in every step of their operations.

This practice is accomplished with a view of implementing good practices that in turn becomes a culture of excellence. Such companies embark on continuous improvement that is built on the operating techniques and full employee engagement (Coughlan & Coghlan 2002).

Design

The operational management of oil and gas sectors currently put emphasis on designs that focus on the needs of consumers and control procedures that pertain to the quality of performance. They embrace collective work and responsibility.

A well design in oil and gas production leads to high-quality results. The designs are also used when the sectors are determining the relevant costs of the products in the market.

Good designs of the performance operations have ensured effective time management; hence they improve productivity (Campbell, Jardine & McGlynn 2011).

The oil and gas sector also implement process design to elaborate the complexity or simplicity of a given product that is produced. The design includes the selection of equipment and procedures to be used in the production processes (Campbell, Jardine, & McGlynn, 2011).

The design of the products and services in the oil and gas sector is factored in the overall facility. Factors that are considered in this design component include the premise location, orientation, layout, and capacity among others.

The operation managers properly plan the capacity that incorporates all activities to enable the required quantity to be produced as per the demands.

Other important factors that the operational managers consider in the oil and gas sector to design their locations include operational expenses, initial capital infrastructure, and workforce availability among others (Campbell, Jardine, & McGlynn 2011).

Key Success Factors in Operational Management

The operational success of any organisation is based on the nature of operations, the impact of technology on performance, and competition exhibited in the global marketplace among others. Most of the enterprises in the oil and gas sector achieve competitive advantage by ensuring efficient operations (Kruger 2001).

Factors such as prices, quality, product performance, and variety among others increase with time; hence, thus most enterprises devise their methods to beat their competitors.

Such factors are directly affected by operational management practices such as the increase in productivity with a decline in product costs and prices of commodities. Most operating managers in the oil and gas sector link the achievement of an objective with the facilities, personnel training, and equipment of the organisation.

Therefore, the operations of the sector are viewed in terms of performance measurement, especially the performance, variety, quality, time for delivery, and flexibility among others (Kruger 2001). Operational management in the oil and gas sector are based on the following key success factors.

Urge for Provision of Quality Results

Most oil and gas based companies view improved productivity and sales based on the quality of the products introduced to the market. Companies such as the Tullow Oil in the UK, Cairn, and JKX are embracing customer needs as their priorities for production.

They have realised that the improved performance of businesses is based on the quality of operations management and service delivery that are based on the customer needs. Currently, the companies are gaining market stability due to quality delivery that surpasses expectations of customers (Kruger 2001).

Service delivery is a critical aspect in operations management since it ensures a repeat business of an entity. The oil and gas sector is concerned with service delivery in terms of transportation and distribution, especially in circumstances that involve long distant customers.

The operations manager must ensure that problems that arise such as delayed delivery and poor quality service among others are minimised (Heiser & Render 2004).

Service delivery goes together with quality. Most consumers are aware of environmental conservations. With respect to such factors, the oil and gas sector is striving to deliver products such as the unleaded fossil fuels that are healthy to the consumers.

The conformity of products with what the majority of customers require is also factored to maintain quality. Such aspects ensure competitive advantage over various enterprises in the oil and gas sector (Heiser & Render 2004).

Leadership and Management

Effective leadership and management strategies that are currently embraced in the oil and gas sector involve active participation of the staff in teamwork. For instance, the leaders of the Tullow Oil Company have improved employee motivation by taking account of their ideas.

Jung et al. (2008) attest that the participation of employees in operational management, the discovery of talents, and skills that are beneficial to the organisations is vital to the accomplishment of organisational goals.

Processes and Product Development

The oil and gas sector is currently implementing effective processing of products by embracing process selection that is in tandem with the customers’ expectations, experience, and convenience.

The managers take note of effective market timing where the products are delivered to the market to avoid deteriorating sales of their products (Correa et al. 2007).

Flexibility

The oil and gas sector is striving to provide varieties of petroleum products in the market. Correa et al. (2007) reveal that flexibility is significantly high in the sector; hence, investors can introduce a vast range of differentiated products and services.

The products are also designed for convenient use by transforming them in that suits the consumer needs. The services rendered to the customers are also flexible. Such services include the transportation and distribution of products to local retail stores by exporting the products to countries where oil and gas resources are limited.

Flexibility in the oil and gas sector has also ensured the proper management of inventories and adequacy of products (Correa et al. 2007).

The oil and gas sector has also embraced flexibility in terms of technological knowledge. The advancement in technology has ensured improved quality of products and services.

This situation has led to the design, production, and distribution of products that are highly differentiated to the petroleum industry. This situation has also been coupled with increased competition that is exhibited in the market places (Correa et al. 2007).

Prices of Goods

There has been a market shift in the oil and gas sector that has resulted in the shrinking of budgets in a scenario where expectations constantly rise. Various organisations are striving to improve the delivery of products and services.

Some challenges such as the inadequacy of skills, growing international interests in oil and gas, threats to lower their demands, and uncertainty have significantly affecting the operation budgets.

Furthermore, the prices of petroleum products are constantly fluctuating. Such challenges have been experienced by companies such as the Deloitte Inc. in Canada (Correa et al. 2007).

The market economy is also driven by a greater percentage of oil prices that keep on shifting. Operational managers strive to reduce the production costs by integrating various operations with a view of ensuring that the end products are sold at fairly lower prices.

The overall reductions in the operational costs result in improved productivity that ensures capacity expansion. Most oil and gas companies register improved economies of scale to ensure the effective management of product costs (Correa et al. 2007).

Conclusion

The essay has elaborated various aspects of operations management that pertain to the integration of assets and activities into single units to ensure cost reduction and efficiency in the oil and gas sector. It has further discussed several key success factors that are paramount to operations management.

It can be deduced that sound leadership, management, and centrality of operations are some of the best means by which operation managers in the oil and gas companies successfully reduce the costs of production by encouraging efficiency to ensure long operations.

References

Campbell, J, Jardine, A & McGlynn, J 2011, Asset management excellence: optimising equipment life-cycle decisions, CRC Press, Boca Raton, FL.

Correa, H, Ellram, L, Scavarda, A & Cooper, M 2007, ‘An operations management view of the services and goods mix’, International Journal of operations and production Management, vol. 27 no. 5, pp. 444-463.

Coughlan, P & Coghlan, D 2002, ‘Action research for operations management’, International journal of operations & production management, vol. 22 no. 2, pp. 220-240.

Heiser, J & Render, B 2008, Operations Management, Prentice-Hall, New Jersey, NY.

Jung, J, Su, X, Baeza, M & Hong, S 2008, ‘The effect of organisational culture stemming from national culture towards quality management deployment’, The Total Quality Management Journal, vol. 20 no. 6, pp. 622-635.

Krüger, V 2001, ‘Main schools of TQM: the big five’, The TQM Magazine, vol. 13 no. 3, pp. 146-155.

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