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A Case Study on British Petroleum

A Case Study on British Petroleum

1. Introduction

British Petroleum (BP) has a Procurement and Supply Chain Management team for closing deals with the suppliers that maximise the value of the third party. PSCM works with the internal stakeholders to do so. Goods and service acquisitions are made through either one of the two processes – Tender or Single Source Award. The tender process starts with a public announcement (bp.com, 2016). Pre-qualifications such as HSSE, sustainability and finance are stated afterwards. PSCM then approves the bidder’s list from some pre-established factors. Bids are evaluated after they are received from the bidders. Suitable contracts are approved and awarded finally. The single Source Award process is preferred when there are technical and safety issues and a limited number of suppliers in the market. In such a case, the proposals are evaluated thoroughly by the PSCM team, and applicable contracts are approved and awarded afterwards.

The Oil and Pipeline Agency uses competitive bidding for procurement and closing deals with the suppliers. Representatives of the purchasing department are engaged in promoting competition. An advantageous pricing policy is ensured by soliciting bids from a minimum of three vendors. The board accepts only the lowest responsible offer. The board has the authority to refuse all the requests if none is satisfactory. The board cannot divide the contract equally among two bidders if the bids are equal. General ability, promptness, equipment, and capacity are considered while determining the lowest responsible bidder (gov.uk.com, 2016). The quotations are written in order of a significant amount. Bidders are advised to retain the documents for audit purposes (Gov.uk, 2015).

In both the procurement processes followed by BP and OAP, bid-rigging may deny the public’s fair price. Therefore, an effective public procurement program is necessary to inhibit such malpractice. This can be achieved by encouraging high participation by the bidders and having precise requirements (Andronikidis, 2009). Communications among the bidders must also be limited. Finally, procurement staff should be trained in bid-rigging practice.

 

2. The management system in BP

British Petroleum has been one of the major players in the oil and gas industry globally, and its management system has been designed to procure the best in the industry, though, in recent times, the company has been facing some challenges. The company has been applying several organisational systems at the same time. BP is quite famous for its six sigma practice; however, it has taken other management types. The company has focused on different management types like TQM (bp.com, 2016).

2.1 Benefits of the management systems used in BP

2.1.1 Six Sigma

The six sigma management systems help the manager define a procedure or a problem, and the management decides in a rigorous methodological way (Smallbusiness.chron.com, 2013). The main benefit of using this management system is that it drives the direction through a continuous process that is very handy for better results. BP PLC has been practising this management system for quite a long time.  It is a consumer-driven management system where a management system accepts only 3.4 defects in processing a million products or services. However, since the system is a continuous one, it demands lots of investment in employee training to reduce wastage.

2.1.2 Total Quality Management

Like many other MNCs, BP has applied different management systems at the same time. The total quality management system has driven the management of BP for higher quality in their products. Goods or services can be more customised with the help of comprehensive quality management. The response time is fast, and the actions are taken by concrete evidence in this management system (Mukherjee, 2010).

2.2. Disadvantages in these systems

All of these systems come up with some individual barriers either in operation or applicability. The six sigma can introduce rigidity and red-tapism in the organisation. Moreover, the six sigma system can reject a project with a bit of wastage but can still be proven profitable (Smallbusiness.chron.com, 2013). The total quality management system is not a very easy one to apply practically. The continuous improvement system demands lots of investment in human resources; however, growth in human resources can prove to be subjective. The departments active in a total quality management culture may become dependent on the results, and the product or service development process gets impeded.

2.3. The current system in BP

In reality, situations appear in ways that the business organisations need to adapt to the conditions, and British Petroleum has been quite phenomenal in this course. The company has been able to utilise the TQM and Six Sigma method at the same time.

Six Sigma starts with defining a future process, and British Petroleum has done it repeatedly as the operation of British Petroleum related to the deep understanding of the characteristics of the business surroundings (SixSigma.us, 2010). Measuring a future oil rig or gas mining is one of the essential jobs for BP as profitability hugely hinges upon it. The analysis is the second step. The industry in which BP operates research is an excellent tool to build a firm understanding of the market since the sector is very competitive. Any lapse can cost millions of dollars. Overall, BP has taken itself to the next level by improving its operations. The company has been quite active in controlling its functions and human resources to be one of the leaders in the market (Isixsigma.com, 2016). 

Back in 1994, when the company was not performing at its expected level, under the supervision of the CEO- John Browne at that time, with the help of a team, I learned that lack of innovation is the main reason behind the underperformance. In this case, a first high-yield technique was introduced; however, it did not pay off. Later, the management tried employee training which enabled the workers to perceive the need for change and this time, the answer was correct. All of this happened for a continuous process driven by six sigma, where the problem was defined, measured, analysed, improved, and controlled to procure the expected results.

Total quality management is also one of the management systems of BP. There are quite a several instances where the company has identified the importance of TQM. First of all, BP focuses on consumer needs. Targeting the customer’s needs is the first element of the TQM process. Then, the overall planning and the management of BP are handled in the context of the TQM. This practice has been observed in the case of Hurricane problem solution in BP. From June to December, hurricanes threaten the operations of BP a great deal. To handle the problem with more efficiency, the company has made a team that examines the weather and reports accordingly. If the hurricane hits hard on the offshore mining rigs of BP, the customers of BP may suffer a lot as the production gets hampered. Another instance of TQM in BP is brainstorming to have more ideas on new processes and production (the Guardian, 2014).

 

3. Recommendations

The price of oil got lower in 2016 than at any time in the last decade. This is quite a big concern for the companies as the investment in the sector is relatively high. With the falling prices, it has been quite clear for the businesses to shut down many rigs to lower the amount of loss. The situation calls for emergency action. The oil and gas industry participants have to invest a lot in storage and fixed assets. However, it is a time when the mining sector participants look into their inventory management. In this case, the JIT system can be beneficial as this system lowers the investment in the stocks as much as possible. Moreover, the six sigma process also needs to be modified as the company faces issues like platform disasters. In this case, the DFSS (Design for Six Sigma) and FMEA (Failure Mode Effect Analysis) can be very helpful as these methods help the managers to analyse different factors related to disaster management (Tale, 2013).

 

 

 

 

 

 

 

References

bp.com. (2016). [online] Available at: http://bp.com [Accessed 14 May 2016].Desai, D. (2010), Six sigma. Mumbai [India]: Himalaya Pub. House.

Isixsigma (2016), Introducing Rath and Strong’s new GE Work-Out for Six Sigma Pocket Guide – or “Duct Tape” for Process Improvement, available online at https://www.isixsigma.com/press-releases/introducing-rath-strongs-new-ge-work-out-six-sigma-pocket-guide-or-duct-tape-process-improvement/, accessed 11 May 2016.

Mukherjee, P. (2010). Total quality management. New Delhi: PHI Learning.

Processexcellencenetwork.com. (2014). Big Six Sigma Challenge: Collaborating with Internal Training Organizations to Assist in the Transfer of Best Practices | BPM, Lean Six Sigma & Continuous Process Improvement | Process Excellence Network. [online] Available at: http://www.processexcellencenetwork.com/lean-six-sigma-business-transformation/articles/big-six-sigma-challenge-collaborating-with-interna [Accessed 26 May 2016].

SixSigma.us (2010), Shedding off the Fat with Lean Six Sigma, available online at http://www.6sigma.us/lean-six-sigma-articles/shedding-off-the-fat/ [Accessed 10 May 2016].

Smallbusiness.chron.com. (2013). Advantages & Disadvantages of Six Sigma. [online] Available at: http://smallbusiness.chron.com/advantages-amp-disadvantages-six-sigma-43963.html [Accessed 8 May 2016].

Supplychainquarterly.com. (2015). Leveraging private sector practices in the public sector – Procurement – CSCMP’s Supply Chain Quarterly. [online] Available at: http://www.supplychainquarterly.com/topics/Procurement/201103public/ [Accessed 26 May 2016].

Tale, R. (2013). Another take on the BP Oil Spill. [online] Risk & Decision Analysis News. Available at: https://blog.palisade.com/2010/05/28/another-take-on-the-bp-oil-spill/ [Accessed 8 May 2016].

the Guardian. (2014). News, sport and opinion from the Guardian’s US edition | The Guardian. [online] Available at: http://theguardian.com [Accessed 12 May 2016].

Andronikidis, A. (2009). Linking dimensions of perceived service quality to actual purchase behaviour.EuroMed Journal of Business, 4(1), pp.4-20.

Gov.uk. (2016). The Oil and Pipelines Agency – GOV.UK. [online] Available at: https://www.gov.uk/government/organisations/oil-and-pipelines-agency [Accessed 14 May 2016].

Gov.uk. (2015). 2010 to 2015 government policy: government buying – GOV.UK. [online] Available at: https://www.gov.uk/government/publications/2010-to-2015-government-policy-government-buying/2010-to-2015-government-policy-government-buying [Accessed 10 May 2016].

gov.uk.com, (2016). Public and Private Sector Purchasing: One Purchaser’s Perspective. [online] Americancityandcounty.com. Available at: http://americancityandcounty.com/issue20021101/public-and-private-sector-purchasing-one-purchasers-perspective [Accessed 11 May 2016].

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