Logistics and Supply Chain Management
UFMFRQ-15-M
Component B (coursework)
Critical Analytical Individual Report
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Student ID
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Harvard
2600 Words
Executive Summary
The concerned report tackles the consideration of Royal Dutch Shell for the analysis of the Supply chain management (SCM) process. The report identifies the specific operational technique of Dutch Shell in terms of SCM. Further, the report clarifies the four components of the supply chain, where the planning, sources, manufacturing, and delivery are identified as the elements of the SCM. Moreover, the report identifies the network structure of the supply chain (SC) of the Dutch shell with the identification of nodes in the SC network of the Dutch shell. Buyer, manufacturer, seller, and retailers are taken as the nodes of operation of SCM of Dutch shells. Quality and cost requirements of dutch shells are identified along with the illustrious explanation of operation and management of the SCM process. Analysis of SC cost through the pecking order theory along with managerial strategies and Decision Support System, the effectiveness of the SCof Dutch Shells have been identified. The major focus is given to the environmental impact and sustainable operation of SCM in Royal Dutch Shells. Focuses on climate change, United Nations sustainability goals, managerial practices along with green initiatives, Dutch shells archives the environmental sustainability. NGL recovery and context of combustion performance are taken to understand the technical strength of SCM. Aforesaid discussion leads to recommending Dutch shells to focus on data mining, big data technology, along with climate change issues for better management of the Supply chain.
Table of Contents
2. Findings and Critical Analysis 4
2.2.1 Network and Nodes of Supply Chain 6
2.2.4 Quality and Cost Requirements 7
2.3 Operations and Management 8
2.4 Environmental Impact and Green practices 9
2.5 New technologies and Digitization 11
1. Introduction
1.1 Background
A product can be reached to the customers through different channels and networks, which start from the producer and ends at the buyer. This process of handling the flow of products from the company to the customer is commonly termed the supply chain. Management of the SC is relevant to handling the entire flow of goods and production materials to maintain smoothness in the supply of products to customers. Wieland (2021) opines that the supply chain tends to be operated, having no broader contextual consideration of the external environment. It further looks at the supply chain process as a socio-ecological system as it represents the complexities effectively. The present report considers the British company Royal Dutch Shell to analyze the SCM processes to understand the supply chain structure.
1.2 Aim
The aim of the present report is to understand the SCM process at Royal Dutch Shell, where a brief account of operation management and sustainability approaches are taken into consideration. Additionally, the report considers the digitization and technological approaches of the company for the improvement of SCM (SCM). However, the major focus of the concerned report is to illustriously understand the sustainability approaches of Royal Dutch shell to implement in the SCM.
1.3 Scope
Initially, the report takes a look into the different SCM practices of the Royal Dutch Shell, with a focus on the network of supply chain stakeholders. Further, the environmental sustainability approaches along with operation management and digitization are evaluated. Furthermore, the ways of improvement are recommended as per the illustration of the present SCM process.
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2. Findings and Critical Analysis
2.1 Four Components of SCM
Chehbi-Gamoura et al. (2020) offer an insightful view of the SCM process based on the SCOR model, where planning is the first step and source, delivery, and make as the second, third, and fourth stages, respectively.
Figure 1 SOCR Model
(Source: Chehbi-Gamoura et al., 2020)
Planning
The initial stage of SCM relied upon the planning and development of metrics for product designing and service offering, keeping profit maximization in mind (Chehbi-Gamoura et al., 2020). Fulfillment of customer needs and demands is the key point for the management of resources in SCM.
Source
Identification of dependable seller or supplier along with the shipping and planning method, the delivery process of the product can be smooth. However, the Sourcing stage of SCM is relevant to building strong communication with the suppliers for better handling of goods and inventories (Dissanayake and Cross, 2018).
Make
Identification of suitable sources for the SCM is relevant to the selection of the effective manufacturing process, where the customer demand can be fulfilled. Product design, production, testing, and product synchronization for delivery are steps for the improvement of the SCM process (Dissanayake and Cross, 2018). It is the metric-dependent process, where the production level and quality of products are both analyzed along with the evaluation of worker’s productivity.
Delivery
Delivery of the products is the last of the SCM, where the delivery of the products to the desired location of the customer is fulfilled, and it is relevant to the strength of the logistics department of the company. Networking and warehouse management, along with a transparent payment system, incoming can improve the delivery process (Sundarakani et al., 2018).
However, the most problematic part of the SCM system is the return, as the defective products are returned to the house of the supplier. This aspect demands a responsive and flexible network for the SCM, where the acceptance of damaged products can be ensured.
2.2 Selected Supply Chain Structure
2.2.1 Network and Nodes of Supply Chain
Figure 2 Network of Supply Chain and Nodes
(Source: Li et al., 2017)
The supply chain is made up of numerous links and nodes that include multiple elements for the smooth transition of the supply chain. The completed part of the mentioned network of supply chain combined with five elements, which is reflected in the planning process of the supply chain of the concerned organization (Li et al., 2017). The company warehouse is the conjecture of the supplier’s end and the buyer’s end. The supplier end is divided into two sections, as produced inventories are collected from the supplier’s supplier and transmitted to the company (de Sá et al., 2019). Similarly, the buying end has two other nodes, where the primary customer has their own customer base. Hence, the nodes of the supply chain network consist of some of the significant nodes, which are the factory, warehouses in the supply end and distribution center, retailing stores are the nodes of buyers end (de Sá et al., 2019).
The SOCR model improves the management decision of the supply chain of Royal Dutch Shell, where every node has an approach to mitigate the management decisions.
2.2.3 Stakeholder Involved
Luo et al. (2019) opine that a supply chain network consists of different stakeholders that influence the performance of SCM. The engagement of stakeholders to the SCM enhances the effectiveness of the supply chain and creates an opportunity to deliver values to the operational management (Luo et al., 2019).
Figure 3 primary Stakeholders involved in Supply Chain
(Source: Silvestre et al., 2018)
The three main stakeholders relevant to the SCM process are the supplier, company, and consumer. These are the most important nodal stakeholders relevant to the materialistic flow within the supply chain. Luo et al. (2019) further argue that the stakeholders relevant to the supply chain change as per the industries. It also defines clients, product designers, contractors, and transportation authorities as to the relevant stakeholders of the supply chain (Li et al., 2017). Resource planning and controlling of different activities within the supply chain are also important to operation management. Social networks, human work, and risk analysts are also the effective and influential stakeholders of a supply chain (Silvestre et al., 2018).
Baralla et al. (2018) opine that transparency, reliability, along the decentralized nature of developing smart SCM. Shell offers a range of activities for the suppliers as important stakeholders to maintain the full scope of activities like the upstream, downstream, and other project management processes. However, the stakeholders are better managers at Shell with transparency as the company provides necessary elements to the suppliers in their SAP Ariba Platform (Shell.com, 2019).
2.2.4 Quality and Cost Requirements
Fernandes et al. (2017) opine that quality management is a system-based approach, which is taken for the improvement of performances, integrating the overall development of supply chain partners. Leveraged nodal connections between the upstream and downstream create value in the supply chain that influences the satisfaction of intermediate and final customers of the system. Abdel-Basset et al. (2019) further include that a quality-controlled SCM process has a focus on the investment cost, transportation cost, procurement cost, and inventory cost so that the price can be controlled regarding the SCM.
Quality of products and the quality of SCM are ensured with the SCOR model of the supply chain, where the company has consistency in managing the relations with suppliers in building a social network of the company. It further evaluates the contemporary market situation to identify the strategies for risk mitigation relevant to the SCM (Reports.shell.com. 2020). Collaboration with the logistics firm increases the cost efficiency of the supply chain along with the overall quality management. However, the present operation of Dutch Shell has collaborated with ‘Certas Energy’ and ‘WFL’ to ensure transparent transportation through oil tankers (Shell.com, 2019).
2.3 Operations and Management
Gaghman (2020) opines that SCM in the Dutch Shell is not fully integrated with the business structure; rather, a communication and collaboration gap exists in the organizational SCM at Dutch Shells.
Figure 4 Organizational Hierarchy of Dutch Shells
(Source: Gathman, 2020)
Analysis of Supply Chain Costs
As per Frank et al. (2020), ‘the Pecking Order Theory’ identifies the moderate deficits of a firm and introduces the major issues in terms of debt (Frank et al., 2020). However, the performance of the capital structure of the Dutch shell is based upon this theory, where the transparent relationship with external and internal shareholders is maintained efficiently. The supply chain is efficiently maintained at Dutch Shell with its 29000 suppliers along with the expenditure of $44.9 billion (Shell.com, 2019).
Management Strategy and Approach
Suppliers and contractors are critically managed at Royal Dutch shell, where the positive impact on the community is ensured with the operation management considering the successful business outcomes. Internal robustness is ensured through the assessment of service design and performance evaluation as per the global standards (Gaghman, 2020).
Figure 5 Different Activities of Dutch Shells in SCM
(Source: Gathman, 2020)
The strategies and activities of Dutch Shell’s SCM are highly aligned to organizational strength and information sharing (Gaghman, 2020). The SCM activities of Dutch Shell include the integrated behavioral approach along with the mutual risk, reward sharing process.
Decision Support System
Market demand and customer needs are analyzed through a data-driven decision-making process. The DSS or the decision support system is a data-driven technology that defines the market demand in terms of the global oil and gas market to modify the process of SCM operations (Shell.com, 2019).
2.4 Environmental Impact and Green practices
Ahmad et al. (2017) opine that the oil and gas industry offers significant pressure on sustainable operation within a business environment. Contextually, a focus on external environments and consideration of environmental variables in the SCM improves the sustainability approaches of SCM of Oil and natural gas companies.
Focus on Climate Change
Dutch shells are condemned by the court to adjust the climate change issues. Palmer (2021) opines that climate change has created an existential crisis for humanity, where the Oil production companies are condemned for their ignorance of sustainable operation as they contribute 50% of the greenhouse gases of the world (Palmer, 2021). Dutch Shell faces a severe problem due to the court’s pressure to cut down the emission quickly to 45% within 2030 in comparison with 2019 statistics (Palmer, 2021). In opposition to this problem, the company has taken a net-zero GHG by 2050, where Methane emission would be limited in different activities (Palmer, 2021).
SDGs of UN and SCM
Dutch shell has taken a pledge to comply with the United Nations sustainable development goals (SDGs) for global improvement. 7,9,13 provisions of the sustainable development goals consider the environmentally friendly operation, where innovation and clean energy are taken as an approach for environmental sustainability (Shell.com, 2019). 6,12,14,15 provisions of UNs SDGs have a focus on the development of an approach within the organizations to create natural awareness. Dutch shell respects natural diversity, and natural resources align with a balanced state of nature (Shell.com, 2019). Further, the company works for the minimization of carbon footprint and overall remission through the power supply from the organization.
Management Practices
Van der Byl et al. (2020) opine that responsible management can minimize the sustainable challenges of an organization. Consideration of environmental goals as a part of the organizational goals for SCM can act as a process to overcome sustainability tensions. The management of Shells is working for universal energy accessibility with a mixed commercial approach in the SCM (Reports.shell.com. 2020). The Community program of Shell is exclusively tailored to support the local communities as a part of the sustainable approach. ‘Fair and just transition’ is maintained in the dutch shell, where the company supports the terms of the Paris agreement to limit the average increase of global temperature below 2 degrees centigrade (Shell.com, 2019).
Figure 6 Operational Strategies of Royal Dutch Shells
(Source: Reports.shell.com. 2020)
Green Initiatives
The operational strategy of Royal Dutch Shell has a focus on the generation of the shareholder’s value along with powering lives and nature, along with the net-zero emissions. However, the performance of Shell is also concerned about the promotion of green initiatives. The company has taken the initiative to improve the green farming process. The company is helping the local farmers of China to shape the environmental stability for future generations (Reports.shell.com. 2020). This approach of the green initiative is taken as a part of the suppliers’ principle of Dutch Shell. Decommission of gas projects in China has funded this process.
Insolar and Solar Power
Nast (2017) opines that the performance of Dutch shell and the approach of suppliers management strategy has created #makethefuture strategy to show how the ideas can change a life. Insolar is such an innovative idea that brings life to modern society and fulfills the demand for power to the masses through the solar power supply (Nast, 2017).
2.5 New technologies and digitization
Digital technologies in transforming the lives and the business process of the Dutch shell as it focuses on the development of overall technological capability. The company claims that they are at the tipping point of exponential technological development (Shell.com. 2021).
Figure 7 Management Process of Supply Chain
(Source: Gathman, 2020)
The SCM process can be improved with the planning for demand forecasting, transportation management, along service scheduling. The SCM process of Shell is tailored to be dependent on technology and digitization (Gaghman, 2020).
The advanced valve design is implementable for the improvement of atmospheric emissions. The volume of emission can be further controlled with flare gare and NGL recovery. Lu et al. (2019) further identify that steam injection and combined cycle power generation can optimize waste and heat management. Combustion performance management, as well as the changes in burner technologies, significantly contributes to the reduction of possible pollution occurrence (Lu et al., 2019). Further, the digital technology for real-time data tracking and customer demand analysis enhances the effectiveness of the performance of Dutch shell in terms of SCM.
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3. Conclusion
The organizational structure of Royal Dutch Shell is very well demonstrated, and different tasks are assigned to different individuals within the organization. Operational management of a firm’s performance is controlled by the different steps of the organizational hierarchy. However, the management of the supply chain of Shell is concerned with reducing the competitiveness of the market and enhancing the effectiveness of the resources. Shell aims to work economically and environmentally with the stakeholders and as well as the suppliers of the firm. Planning for operation management at the Dutch shell is controlled with a focus on the ‘capital structure’ and ‘operating cost’ of the firm. However, the performance of a firm can be based on the external debts when the internal strength does not have enough capacity to support the functioning.
4. Recommendations
Scope to enhance the strength in the digital technology can create an option for Dutch Shell to optimize the performance. The company has few recommendations as follows-
- Toorajipour et al. (2021) opine that focus on data mining and Big data technology can improve the market analysis as well as optimize the strength of the supply chain process. The data-driven approach can detect the possible issues in the supply chain and define the solution based on the collected historical information.
- Supply and procurement activities of the Dutch Shells should have a focus on the zero carbon emission process for the minimization of Global carbon footprint. Though the company has expressed its organizational goal, no specific activity is taken to combat the carbon footprint (Palmer, 2021).
- Continuous risk assessment of the supply chain and the relevant activities can offer insightful detailing regarding the possible risks relevant to the operation. The company can implement AI technology for the risk assessment along with the deep learning technique (Toorajipour et al., 2021).
- Climate change has created pressure on the existence, where Dutch shell has faced condemnation from the court. The company has enough resources to implement green operational management and SCM in the organization (Shell.com. 2021).
5. References
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