The paper is a proposal to UKOOA on what kind of supply chain it opts to adopt in order to supply oil product in the United Kingdom region. It is no doubt that currently, in this competitive world of business where resources seem to be scarce, for a company or any corporation to be successful, and then one of the best options is on how best it can control their supply chain. This can be done through various ways such as surmounting the resultant bottlenecks. Supply chain has been thought of as "a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer". Major activities of supply chain are to change natural resources, raw materials and components to products that are well furnished and can be utilized by end users. Every organization has a supply chain that includes various activities including receiving and filling customers request. The activity entails but not limited to new product development, marketing, operations, distribution, finance and customer service (Peck, 2006).
Oil and gas industry is very vital in UK's economy and currently serves over 0.5 million jobs. With the increasing demand for human resources, there is need to establish appropriate means of remaining competitive as well as meetings the oil demands in EU markets. It is also important to address the current challenges that are associated with energy production. These include climate change, depletion of energy resources, increasing reliance on imports, and access to affordable and secure energy.
It is apparent that in this centaury globalization has made regions to be dependent on one another due to increased interconnectedness. For that matter, there ahs been increased use of energy thus need to ensure energy supply and security is stable as well as fully protect the environment. There is no doubt that oil is the number one source of energy in the world. Statistics show that consumption in the entire world has gone up by 20.0% and annually it is deemed to grow by 1.6%. Recently the world has experienced unpredictable price changes, environmental degradations has led to a debate that has spilled over into the political arena. In Europe, emphasis has been on ensuring that supply of the product is accessible and very effective Parliamentary Office of Science and Technology (2004).
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Oil trend in UK and Supply chain aspects
Oil has been the world's number one energy source in the 21st century and it is expected to remain so in many years to come. Research reveals the global consumption has increased by 20% since 1994 and global oil demand is stipulated to be 1.6% annually. As a result, the oil prices have increased indefinitely which have affected the efficiency, transparency. With oil as the leading energy source in EU activities, it is important to ensure a reliable access of energy at reasonable prices to all Europeans. It is also important to secure oil supplies to EU and ensure that the oil market remains transparent, fair, and competitive. This calls for an efficient oil chain supply that will meet this demand.
The above chain supply offers a workable skeleton, which can help in addressing the rising demand for oil products. In first stage, the manufacturer is better placed to solicit for resources available for production. In other words, the manufacturers do not work with probability but with the actual available resources. Depending on the needs of the customers, he then can negotiate on the amount of resources required for the production and the actual cost. After negotiation, the manufacturer can go ahead to place an order for raw materials. This is termed as procurement of raw materials (Peck, 2006). He must verify that the procured raw materials meet the quality assurance requirements. The materials can then be stored appropriately before manufacturing process commences.
With the growing global demand for energy, the above supply chain is well positioned to supply the necessary goods and services in the oil and gas industries globally. In fact, it already does so with an estimate of 6 billion annually. This is essential in securing employment, support to the balance of trade, and increased revenues to the government. Another important development associated with oil and gas industry is the development of remotely driven vehicles (ROVs) which are used by engineers and scientist in varied fields as well.
The above supply chain helps to ensure the establishment of low-carbon economy, which has been done through reduction of the level of emissions. This will help to preserve the environment as well ensure maximization of oil energy. The EU has established European energy policy, which encompasses all energy sources ranging from fossil fuels to nuclear energy and renewable. This is aimed at steering industrial revolution to deliver low-carbon economy while ensuring that the energy consumed is secure, sustainable and competitive Parliamentary Office of Science and Technology (2004). The estimated future levels of oil and gas production in UK is dependent on two major factors the amount of remaining oil and gas resources and the probability of the actual utilization of such resources. The above proposed supply chain therefore enables the government to ascertain the level of available resources and if possible work on the possibility of subsidizing the resources when necessary.
Since the evidence from UK oil and gas, industry shows that future production is likely to reduce, the presence of supply chain is a security measure, which shall ensure that despite the estimated fall, the energy needs of the Europeans are still met. Despite the fall of price in oil and gas, the industry still faces the challenges of high technical costs. Information from the supply chain companies has contributed in helping increase investment levels. As a result, the capital base is boosted which enhances production. With the supply chain, the industry is well positioned to improve its infrastructure in order to facilitate distribution of raw materials as well as finished products to consumers. The table below shows the effect of oil price on production level.
Data collection instruments
The methods of data collection include research finding which are presented in the charts and tables. This method is termed as secondary sources of data. Materials from the library, internet and related research reports will be used to provide the required data and information concerning oil supply chains in the United Kingdom, characteristics its association with organization performance. Internal sources sought after include information compiled by the ministry of energy regarding oil issues in the country. External data sources included information from the government sources, previous research studies and academic institution (colleges and universities material related to oil supply chain). According to Creswell, 2003 the secondary sources will be very essential to support what has been collected in the primary data.
The following are secondary sources that aided in providing vital information
- Business new letter, journals article and book related to oil, and supply chain
- Business databases services
- Government, Non Governmental Organization and oil industry statistics
- Annual reports of oil corporations in UK
Analysis and discussions
It is no doubt that a supply chain opts to be developed based on a number of factors so that it can be successful in meeting the reasons for its development. The proposed supply chain will be a success because it has all the attributes that make it a sustainable one. By definition, a sustainable supply chain is a way of managing "raw materials as well as services from the suppliers to manufacturers or service providers to end consumers and back with improvement of the social and environmental impacts explicitly considered." The ability of the supply chain to fully consider the association between business and their customers or end users of there products and services as well as suppliers is key in ensuring a successful supply chain (Peck, 2006).
The proposed supply chain will help shift the focus on propelling for greener consumers to where the retailer is more responsible. The later will assume responsibilities in ensuring of making consumers purchase products as well as services that are environmentally friendly. Having in mind that the ultimate goal of doing business is to exercise responsibility when it comes to the world environment all stakeholders will hail the process hence a success. Additionally, the chain has changed the relationship that initially existed between manufactures and retailers. Initially, manufactures used to be drivers of how the oil products was being manufactured as well as distributed this brought problems in creating shortages (New Zealand Business Council for Sustainable Development, 2003). With this proposed supply chain, the retailers will be responsible in driving supply of oil products. Additionally, quality and cost is important in supplying of oil products. With reduced cost of supplying the product, the proposed supply chain will help the industry use it as a competitive advantage.
The success of the supply chain is based on its ability to fully co-ordinate the flow of material; as well as services, information and financial resources from the place of origin; so as to achieve the ultimate goal of maximizing benefit and reducing cost of undertaking business. The proposal contains the four major variables, which are location, production, inventory and transportation. The location refers to the location of facilities and sourcing points, production refers to what is produced and at which facilities, inventory decides on the size of the order, timing, and the size of safety stock. Transportation concerns the decisions on mode of transport, size of the shipment, routing and scheduling] (Peck, 2006).
Additionally, the chain has been developed in a manner that it is flexible. With this in mind, and the changing environment with which customers usually change their demands and need, the supply chain will fully carter for this hence ensuring that the product reaches the end users. On the same note, origin of product, inbound transport, processing, storage, storage facilities and processing operations, which are major components of retail supply, are clearly brought out clearly (Chopra & Meindl, 2004). If implemented in a rational manner, the whole process will meet the future oil supply of the region. For instance, sourcing for product will make sure that the retailer is in a position to point out, create, nurture as well as strive to maintain association with those who will supply oil products. Ultimately, this will help in creating an accurate system of delivery of the right products and services at the right time, place and price. On the same line of reasoning, outbound transportation in combination with inbound transportation systems help in creating a flexible and controlled order of doing things such moving the correct and desired volumes of the product to stores or even directly to customers.
Additionally, it is worth noting that the retail supply chain is also provided for in the proposed supply chain. The channels that can be derived from the supply chain may include directly to customers, directly to stores, single level distribution and multiple distribution. With all these four forms of retail distribution, it is evident that all the needs and demands of consumers will be successfully met. Interestingly, the proposed supply chain provide for the organization to have in place strategic key alternative suppliers. This is of significance especially when natural disruptions that are unpredictable occur. With multiple suppliers, it is worth noting that this helps avoid drawbacks associated with depending on a single supplier together with problems associated with technical issues (Chopra & Meindl, 2004). The section on storage, handling and quality assurance will help propel success in the industry. Since quality and assurance is what help meet customer's needs and demands, proper implementation of this section will go greater heights in ensuring that the whole process met the demand of oil supply in the country, as it will aim in cutting down waste.
It is no doubt that the corporation between buyers and suppliers is of essence in ensuring that the demand of oil product is met in the country. The chain allows the two to utilize all the available resources in making the relationship mutual. This will work well in ensuring that costs of doing business is cut down, improvement in quality will be realized, there will be short design cycle, higher degree of flexibility translating to customers being provided with products and services that are of high quality (Peck, 2006). Finally yet importantly, it has been argued that information is power. The proposal has in place a mechanism in which information will be adequately shared among the relevant stakeholders in the supply chain. All these will be done having in mind that the ultimate beneficiary is the consumer concerning their product selection. To achieve competitive advantage the chain allows for planned coalitions between relevant players in the industry.
Conclusion and Recommendation
It is no doubt that there is need to enhance security of supply of the product based on the current situations. With increased demand and reducing reservoir of oils, ensuring availability and reliability of the product is of paramount significance as it will help ensure interruption of supply is adequately addressed hence keep the economy running.
The UKOOA should see the urgent need of de-carbonizing UK's economy in order to curb the effects on climate. However, this should be couple with the need for security in supply. There is need to develop a standardized processes in the procurement stage. The objective of the clients and the producers opt to be harmonized. One way through which the above oil supply chain will curb the growing demand for oil is by tackling the skill shortages in its manufacturing process (Peck, 2006). The industry will need to recruit skilled personnel and specialist engineers who will endeavor to ensure quality and sufficient production. Apart from recruitment, the underlying capacity for training should be intensified. This will ensure that technicians are maintained for both onshore and offshore roles.
The increasing demand for oil calls for an alternative source of energy for the people. Even if the 15% of energy could be achieved in 2020, the country will still need 70% of its energy needs to be met by oil industry. It is therefore important that the government invest in extracting other potential sites for oil in order to meet the energy demands of its people. The government of UK should facilitate credit from bank to establish a fair and sustainable regime for the oil and gas industry. It is worth mentioning that among the alternative that are best in line with environmental conservation include solar energy and other sources that are renewable. Going green in term of energy consumption will help ease pressure on oil and gas products that their reservoirs are tremendously declining.
Additionally, UKGOOA needs to embark on initiatives that are geared towards educating consumers to cut down on their fuel consumptions especially during winter periods. This is termed as demand side response. On the same note, to ensure steady supply of the product, there is need for UKGOAA to have additional import infrastructure plans especially during winter for instance the extension of United Kingdom and Belgium interconnectors is the way to go.
With the advent of technology, the organization should indeed adopt it to ease in supply of the product. It is worth noting here that technological adoption if rationally implemented will help cut down the cost of supplying the product hence less prices fluctuations. UKGOAA to successfully ensure that oil and its product supply is steady also opt to encourage gas users to have in place back up systems in which they can be used not only when the oil products are not available but also when the [prices of the same go up. This will help to ensure that the region does not go to a state of emergency.
It has been argued and practiced in other countries that liberalizing oil markets might help in meeting gas supplies. By having in place a fully integrated and liberalized oil market having a common storage, transmission as well as supply and a well thought way of distributing natural gas would work well in guaranteeing supply of the product in the region. On the same note, there is need to have in place plans to pipeline import routes although over reliance on the same is not encouraged. This can be done only with countries that seem to show political stability. The notion behind market liberalization is that initially, a few organizations were mandated by legislation to fully control the market this is very wrong and only applicable for a shorter period. It is full competition that across the board that has the potential of helping delivering efficiency. Similarly, competition in internal market will play a major role in ensuring that oil operators are doing business in larger markets propelling them to adopt efficiency hence improving their capability of contributing to oil products supply in a stable manner.
It will also be rational if the organization strives to increase the storage capacity of gas. Currently, the storage capacity stands at 3.3bcm. This can only supply for only two weeks during winter periods. Together with the relevant stakeholders, if the capacity rose to 5.0bcm then this will help sustain the supply of oil and its product in the country. Additionally, it is apparent that the region has extensively exploited number of oil sources; there is much hydrocarbon accumulation still to be exploited. There is need to support the partnership, PILOT to see to it that the initiative is a success. The UKGOOA opt to support the initiative of providing an opportunity to private and even foreign investors to engage in oil business in the country. This brings competition with its advantages previously stated. Lastly and more importantly, it was deemed previously that reliance on imported oil sand its product was a solution, however, with the current situation of political instability especially in the middle east and OPEC regions, there is need to shift from such notion and develop our own system of meeting the countries oil products supply (Parliamentary Office of Science and Technology, 2004).