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ExxonMobil is the largest publicly traded energy company which evolve form small marketer of kerosene in regions of United States to the largest publicly traded petrochemical and petroleum company/business in the world which operate in many parts of the world over a time period of 125 year.
ExxonMobil prepare product that which are as diverse as supplying petrochemical building blocks from which thousand of other products used by individual consumers are made to drive new generation of transportation, power cities and to lubricant industry. The emerging economies of China and India that have been the biggest demanders of energy in the past few years are being hit by the recession in the developed economies and thus have reduced their rates of energy consumption that has caused the organization to loose out on projected levels of profit.
The increased attention to the conservation of the environment has resulted in the reduction of the use of energy and energy savings and in the future this will only increase thus reducing the profitability of the organization. The organization has been accused of not doing enough to go green and conserve the environment rather that it is polluting and destroying the environment.
1 Conduct a research using appropriate PROCESS ANALYSIS MODELS to identify key operations management issues/ problem facing by the organization.
Today ExxonMobil is energy for growing economies and helping improve the standard of life throughout the world. ExxonMobil has build its structure on globalize basis and therefore its designed in itself allow ExxonMobil to compete in the best possible way in the dynamic market of energy industry worldwide and furthermore ExxonMobil always strive for and use innovative and changing technology to deliver its energy product which includes exploration, production and finally sell of crude oil, natural gas and petroleum product not only in United States but throughout the world . 1
We will use PEST analysis to assess the operational problems faced by ExxonMobil.
Environmental awareness among public cause energy companies like ExxonMobil to work in a more responsible way due to increase expectation of public.
Today competitive and informed world it is increasingly important and become a necessity for energy companies the change the way the use to conduct their operation and to strive for and achieve operational excellence with following areas are critical such ethical operations, safety of employees, environment , local community etc, corporate governance and corporate social responsibility, security, operations reliability healthy and energy efficiency with good environmental performance, investment in environmentally sound together economically worthwhile projects. 1
Energy market is traditionally and by its very nature is significantly different from other business as here decision are made for the future as long as decade ahead instead months or years in other business and therefore decision making require formal and discipline, organize approach . 1
Today's environment requires companies and especially those operating volatile sector on energy business to achieve maximum return with reduced risk through innovation and effectively adjusting changes in this dynamic environment. Those companies operating single or few geographical location or with few business mix in their portfolio especially if they are in industry like energy very risky and less preferable by investors and together this those business operating with diverse portfolio of geographical locations and business mix etc but lack of integration on global basis to get advantages of scale are also least likely to survive the competition where organizations are on the one hand reduce their risk by having diversified portfolio and on the other hand proper integration leads to operate one single global organization and achieve economies of scale. 4
The potential problems are legislature and people are taking energy industry as source of additional tax revenue which is though short term view which will restrict growth in long term and so that new jobs and high energy cost for consumers.
Today environmentally concern and active atmosphere requires from energy companies especially from industry giants like ExxonMobil to not only follow law and regulations in later and spirit at minimum but go beyond and comply an uphold high standard even to place/areas where there is no particular legal requirement. Therefore it is increasingly important for energy companies especially big names like ExxonMobil to not only achieve good results but also look at the means of achieving those results and develop uphold high ethical standard with strong controls in business and practical approach and actions regarding corporate governance and social responsibility. 1
Innovation and continuous change in technology is essential in today's energy industry as through technological innovation new opportunities are created by delivering least cost solutions development which is vital for success in this dynamic and competitive environment together with this technological innovation and change is vital and for improving performance as well. 1
2 Comment on quality of the organization's output and its strategic fit with its current operations processes and systems in the design and delivery of its product/ service portfolio:
Exxon mobile has an effective strategies to deal with the problem arises as a result change and innovation strategies takes into effect. In past there were very few incident with very high rate of work related to injuries and illness that shows the effectiveness of its safety strategy. ExxonMobil reduce its corporate wide lost time incident rate by setting priorities, measuring progress and holding people accountable. 4
ExxonMobil responded on setting high standards for operation through its operation integrity management systems which provide a framework to ensure its operation safe and according to standard set. Nothing would be possible if there is lack of participation by employees and the biggest which organization. Exxon has given particular importance to operational efficiency in past and therefore they can claim that operational efficiency in build in deep inside in their culture. 2
Operations safety and integrity are central to the successful execution of ExxonMobil's business strategies. The objective of operational excellence is embedded in our company culture and drives continuous improvements in all areas of our business. ExxonMobil has developed a wide range of management and operating systems that address critical aspects of business, including: ethics, safety, corporate governance, security, health, environmental performance, operations reliability, business controls, project investment and execution, energy efficiency, profit improvement, and external affairs. The disciplined application of these management and operating systems, deployed through our functional organization, has consistently delivered superior result. 3
Operate in a Safe and Environmentally Responsible Manner ExxonMobil's long-term safety performance leads the industry. Its commitment to safety, security, health, and the environment creates a solid foundation for superior results in all aspects of their business. ExxonMobil's senior management and employees are committed to the goal of creating an incident-free workplace, and their culture do reflects this objective. ExxonMobil drives improvement in environmental performance with the goal of reducing incidents with real environmental impact to zero. I t conduct business using an approach that is compatible with both the environmental and economic needs of the communities in which we operate. 1
Pursue Operational Excellence
ExxonMobil has developed a wide range of management and operating systems that address critical aspects of our business, including: ethics, safety, corporate governance,
Security, health, environmental performance, operations reliability, business controls, project investment and execution, energy efficiency, profit improvement, and external
affairs. The disciplined application of these management and operating systems, deployed through our functional organization, has consistently delivered superior result
Uphold High Standards
ExxonMobil adheres to all applicable laws and regulations as a minimum standard, and, when requirements do not exist, they apply responsible standards to their day to day operations. Which shows believe that a well-founded reputation for high ethical
Standards, strong business controls, and good corporate governance are a priceless corporate asset. This means that how they give importance to achieve results is as important as the results themselves. 1
Leveraging Scale and Integration
There are also opportunities for refiners to capture efficiency benefits from world-scale, integrated manufacturing sites. At ExxonMobil, more than 75 percent of their refining capacity is integrated with either their lubes or chemical businesses - or in some cases, both. These integrated operations allow us to optimize manufacturing processes, lower costs and improve product yields. 1
Integration also brings significant "circuit synergies." ExxonMobil global network of reliable and efficient manufacturing plants, transportation systems, and distribution centres enable them to provide fuels, lubricants, and other high-value products to customers in more than 100 countries and territories. Their global supply organization directs raw materials to their refineries, finding the most efficient processing configuration and determining the best way to supply products to their customers around the world. Every day, this network lowers costs and optimizes overall supply chain performance. 1
3 Discuss and apply any operations management strategies/ theories that you identify for this organization:
There is never been more importance and need for energy industry to think ahead and formed strategies which are essential to address the difficult challenges that this industry face and improve the efficiency of value chain of entire energy industry.
In today's increasingly environmentally conscious and concern environment energy companies are not only expected by but required to show more commitment to safety, security, health and of course the environment/ climate in order to not only survive but achieve superior results. And therefore Exxon has to change the way industry work in past and develop new and innovative approach to things. 2
Potential problem from changing the manner in which energy business use to operate will be most importantly cost as new approach to things required financial and other resource. ExxonMobil is in operation since past 125 years and its would be very challenging to difficult to change the culture and manner in which it work in past such as bringing safety and health concerns embedded in the culture in of ExxonMobil would require lots of efforts training and commitment from senior management and middle management.
The energy industry is has the most important role to play as it has played in past (by providing significant tax revenue to governments, providing huge employment and increase share holders value in the development of not only national economies but global development. 3
The oil and gas is expected to remain primary source of energy and expected that almost 60% of energy supply of world till 2030 will be through oil and gas. Although there is enough oil reserve according to source there are four trillion barrels of oil and gas reservoirs are present around the world but problems with their extraction as only one trillion is extracted till now. 5
Therefore there is still significant amount challenges ahead in terms of scale of efforts and technological deployment required and required for long term not for years and months but decade and generations as this new supply of energy will come from thousands of mile away or thousands of feet below the sea level, so to keep energy supply stable international energy agency estimate that an investment of 25 trillion dollars required. 4
There is another problem associated with the energy demand and finally is the environmental impact on increase energy as carbon dioxide emission of the world is increasing by an average on one percent per year.
The continuous improvement of operations will not only result in result in fuelling the economic growth in this turbulent time but also meet the future need s of energy product. There is huge demand of energy in future expected and therefore this demand will create opportunities for energy companies like ExxonMobil to develop new source of energy and improve their existing operation to improve efficiency. 1
Technological innovation is vital to increase efficiency of energy while reducing emission and help industry meets the global increase in demand of energy not only now but in future as well. The measure to charge extra tax on energy industry will restrict its abilities to invest in the development new technologies. To meet this increase energy supply and reduce its carbon impact energy supplies developing new technological innovation is necessary. 1
Operating as one global functional organization is one of most significant challenge which today's organization faces with common standard process and culture of one corporation generate significant competitive advantage and finding new ways to increase cooperation's and working one big global functional organization is important factor to consider when making change and innovation strategy. 1
Extraordinary performance of any organization will always depend on the performance people working in it. Therefore any change and innovation strategy must take into account human factors and try to attract and retain outstanding people. 2
Contributing to community in which business is operating is also important factor and therefore must be consider when making strategy for change as it give positive image of an organization which is important asset. 1
The fact is, government and private-sector assessments of the world's energy needs consistently highlight the certainty of demand Nan over time. As the world grows and economies develop, future demand for energy will grow dramatically. The International Energy Agency and many others predict that the world's total energy demand will grow by 35 percent in 2030 versus the demand in 2005, even after factoring in the current economic slowdown. 4
4 Evaluate the cost implications for the organization and how it impacts its stakeholder:
The problem with improving efficiency is that it require financial resource and with measure taken by governments to increase tax on energy products limiting its ability to invest in improvement of its operations but energy industry must continue to improver their safety and reliability of operation with efficiency of its plants and increase shareholders return. 5
The ultimate aim of any business to make profit and therefore any strategy must take into account the financial worth of different measures to be taken.
Global reduction in demand for energy due to recession in recent years and other reason create additional pressure on energy industry for time being. Leaders around the world are discussing importance of climate change policies which create significant legislative uncertainties which would have significant and huge long term impact every one using developing or using energy. 4
ExxonMobil is very sound in term financial position and its even great competitive times advantage for ExxonMobil especially in these challenging times. And therefore to finance above strategies is not a big issue for ExxonMobil as achieving high efficiency through technological innovation is quite long term process and results will at much later time on implementation of technology but before that a lot of research is required regarding the viability of technology and its practical application etc. 5
The top credit ranking companies have given high rank to ExxonMobil's financial obligations and therefore arrangement of finance is not big issue as far a giant company like ExxonMobil is concern although the increase borrowing will come with huge cost of borrowing which will restrict the returns available to shareholders . 1
5 Recommend the most appropriate and effective operations management strategy for the organizations with credible rationales:
The strategies which should form the foundation ExxonMobil future success and growth must consist of following basic elements
ï‚· Exploration of source of energy reserve to meet growing need of energy in the world
ï‚· Technological innovation to increase efficiency of use of existing energy reserves and achieving operational efficiencies.
ï‚· investing in human capital to achieve competitiveness
ï‚· Maintain reputation of safe, caring and environmentally aware and aggressive company 1
Further elaboration of four basic points in strategy.
Any discussion of demand growth in developing countries must include Asia Pacific. Between 2005 and 2030, we expect total liquids demand to grow about 2 percent per year in this dynamic region. This translates to an increase of 65 percent by 2030. Refiners will need to move aggressively to meet that demand growth. ExxonMobil know that in the long run, demand for energy and for refined products will grow and to meet future demand, they must act now and invest capital and human ingenuity into expanding supplies and increasing efficiency. That is why they continue to invest in improvements and new projects, even during these challenging times. 4
Therefore must act now in order to be successful long term, they must continue to invest to sustain competitiveness regardless of business conditions. The oil and gas industry is a high-tech industry and the best hope for addressing the enormous dual challenge of meeting growing energy demand while mitigating emissions is through development and deployment of new advanced technologies. 1
Back in past in terms of identifying energy savings at ExxonMobil, their Global Energy Management System has proven to be one of their most important tools for bringing about positive, near-term change. This initiative helps identify potential energy efficiencies in their operations, and allows them to use resources more effectively, ultimately reducing e energy usage and emissions from their operations. 1
This energy efficiency program began by tapping knowledge from their best operations around the globe. We looked at every link in the energy chain, documented their best practices and then applied those lessons to their worldwide operations. Each day, as part of this initiative, they track more than 12,000 energy variables worldwide, using them to improve both individual plants and global operations. Since 2000, they have identified $1.5 billion in potential efficiency savings, approximately 60 percent of which have now been captured. One of ExxonMobil most important energy efficiency stories is one that is critically important to refining - cogeneration. ExxonMobil currently have interests in approximately 100 cogeneration plants in more than 30 facilities around the world. Their latest expansion in Antwerp, Belgium, inaugurated a 125-megawatt cogeneration facility. That new plant will reduce Belgium's carbon dioxide emissions by approximately 200,000 tonnes per year. 1
Developing and deploying promising technologies requires long-term thinking, focus, and disciplined investments - the same fundamentals that have driven their businesses for more than 100 years. ExxonMobil's more recent technology developments. One of their technology focus areas directly relates to consumers - our work on advanced vehicle technologies. In the world's massive transportation sector, even tiny improvements in efficiency can yield impressive benefits to both consumers and society.
It is also important to create and support a culture where every employee and contractor understands he or she must take part in creating a safe workplace. For instance, ExxonMobil refineries in Beaumont and in Joliet, Illinois, they have worked to achieve OSHA recognition as "Star" sites in OSHA's Voluntary Protection Program (VPP). 1
Through VPP, management, Labour, and OSHA work together to implement a comprehensive safety and health management system. VPP Star recognition requires outstanding efforts by employers and employees alike and is awarded only when together they have achieved exemplary occupational safety and health performance.
It is important that achieving success in safety takes more than day-to-day diligence. It requires foresight and vision, which is why ExxonMobil continuously focus on identifying and reducing risks inherent in their businesses, strengthening our systems and work processes, and upgrading our facilities. A recent example is their new Plant Automation Venture, which provides their operators with the latest technologies for operating procedures, real-time plant monitoring, and abnormal event detection and management. By identifying issues early, they can quickly take corrective action that ultimately improves the overall safety of operations. 1
ExxonMobil commitment to safety also yields benefits reflected in the bottom line - especially important in these challenging economic times. A safe workplace is a more productive one. Operational excellence refers to a constant focus on improving efficiency; a more efficient operation yields numerous benefits, including lower costs and fewer emissions. 1
In addition these strategies ExxonMobil should consider its human resource seriously as in order to deliver best performance the need people and therefore aim should be to provide their employees highest technical and leadership skill to make them able to lead ExxonMobil in future. Exxon should therefore emphasis on long term career development of its employees based on merit and to do this they need to recruit highly capable and talented around the world and should provide essential training and skills to them to do their job and also variety of experience to make them able to lead the company and become leaders of the next generation as the employees of ExxonMobil will be its permanent and sustainable way of achieving competitive edge. 1
6 Suggest what budget and evaluation methods the organization would have to deploy for your recommendation to be effective:
The energy industry is a long-term business that requires decisions to be made with a time horizon that is measured in decades, rather than months or years, and that spans
Multiple business cycles. Projects are tested over a range of economic scenarios to ensure that risks are properly identified, evaluated, and managed. This approach enables superior investment returns through the business cycle. ExxonMobil proven project management system incorporates best practices developed around the world. Emphasis on the early phases of concept selection and effective project execution results in investments that maximize resource and asset value. ExxonMobil complete a rigorous reappraisal of all major projects and incorporate learning's into future project planning and design, further strengthening our capabilities. 1
ExxonMobil has a long-standing commitment to fundamental research to develop and grow our technical capabilities and to deliver advantaged technologies for all of
Our businesses. ExxonMobil have a wide array of research programs designed to meet the needs identified in their functional businesses. Over the past five years, ExxonMobil have invested more than $4 billion in research and development. ExxonMobil global
Functional organization enables rapid deployment of new technologies to ensure early value capture.
The key factors Exxon Mobil should consider when investing in above strategies is comparing the cost of investment with benefit derived from investment and operational feasibility of investment. 1
Few industries are more instrumental to economic growth and development than the energy industry. And in the years ahead, the role energy industry play in meeting the world's increasing energy needs will only grow.
Looking at current economic challenges, ExxonMobil must maintain our commitment to safety, reliability, and continuous improvement in our operations.
And finally, the world's shared energy challenges will require long-term planning and a steadfast commitment to develop and deploy new technologies that meet multiple objectives. A commitment to innovative thinking and deployment of new technologies will expand energy supplies, increase energy efficiency and reduce greenhouse gas emissions - all helping to keep people, communities and nations safe and prosperous.
Not only will these strategies ensure ExxonMobil return value to shareholders, they will be key to economic growth and increasing opportunity for all.
PRELIMINARY RESEARCH ON FLOW CHART.
COST BENEFIT ANALYSIS
EXTRACTION SUSPENDED NO
EXTRA RESERVES ETRACTED
RAW OIL/GAS REFINED
SOLD TO CUSTOMER
STORED AT SITES FOR STORAGE