investigation of the total supply chain issues at lam son joc

L I S T O F F I G U R E S Figure1: Report Structure Figure 2: Supply Chain Management Figure 3: Lam Son JOC - Blocks 01/97&02/97 Location Map Figure 4: Lam Son JOC - Preliminary Field La

HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES

SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT

S T A T E M E N T O F O R I G I N A L I T Y

I, Nguyen Ngoc Minh Nguyet, hereby certify to be the author of this master final project report, which was written under the mentorship of Professor Jacques Martin The report is submitted as part of the requirement for the award of Master

in Business Degree of Quality Performance Management, is wholly my own work unless otherwise referenced or acknowledged

Signature:

Print name: Nguyen Ngoc Minh Nguyet

Date: 12 April 2016

A C K N O W L E D G E M E N T S

This report has never come to be without excellent guidance and supports I would like to acknowledgement the helpful advices and comments of who gave me the possibility to complete this

First and foremost, I offer my sincerest gratitude to Professor Jacques Martin; he has shown me the way through his knowledge and motivation while keeping me

on track in completing this report

This report contains the views, opinions, guidance of my co-workers particular the interview participants who provided freely of their time and though; I truly appreciate their efforts and sincerely thank them all

My sincere gratitude also goes to my Bosses who have shared their valuable expertise and industry knowledge with me I am grateful to my company for giving the opportunities to study this program

Especially, I would like to thank my family, my husband, and my two little sons who encouraged and fully supported me during my studying time

ACCEPTANCE OF FINAL PROJECT REPORT FOR DEFENSE

T A B L E O F C O N T E N T S

INTRODUCTIONS 1

1 INTRODUCTION OF THE SUBJECT 1

2 OBJECTIVES 3

3 METHODOLOGY 4

4 LIMITATIONS 6

5 REPORT STRUCTURE 7

PART1 TOTAL SUPPLY CHAIN MANAGEMENT PROCESS AT LAM SON JOC 9

CHAPTER 1: THE CONTEXT OF SUPPLY CHAIN MANAGEMENT 9

1 DEFINITION 9

2 THE IMPORTANT OF SUPPLY CHAIN MANAGEMENT 12

CHAPTER 2: PROJECT OVERVIEW 14

1 COMPANY PROFILE 14

2 CORPORATE CONTEXT 16

3 THE TOTAL SUPPLY CHAIN AT LAM SON JOC 19

PART 2: THE TOTAL SUPPLY CHAIN MANAGEMENT INVESTIGATION AND RECOMMENDATIONS 22

CHAPTER 1: THE TOTAL SUPPLY CHAIN ISSUES ANALYSIS 22

1 SPECIFYING REQUIREMENT AND PLANNING SUPPLY 22

2 ANALYSING SUPPLY MARKETS 29

3 DEVELOPING SUPPLY STRATEGIES 35

4 APPRAISING & SHORTLISTING SUPPLIERS 41

5 OBTAINING & SELECTING OFFERS 49

6 NEGOTIATING 57

7 PREPARING THE CONTRACT 61

8 MANAGING THE CONTRACT 65

9 MANAGING LOGISTIC & INVENTORY 70

10 MEASURING AND EVALUATING PERFORMANCE 77

CHAPTER 2: RECOMMENDATIONS FOR IMPROVEMENTS 81

1 MAXIMIZE LOCAL CONTENT STRATEGY 81

2 DEVELOP AN E-PROCUREMENT STRATEGY 82

3 PROMOTE GROUP PURCHASING 84

4 UTILIZE QUALITY & SUPPLY MANAGEMENT TOOLS 85

CONCLUSIONS 92

REFERENCE 95

APPENDIX A: LAM SON JOC - SR/PR PREPARATION WORK FLOW 98

APPENDIX B: LAM SON JOC - PURCHASING WORKFLOW 99

APPENDIX C: LAM SON JOC - OVERALL CONTRACT STRATEGY TEMPLATE 100

APPENDIX D: LAM SON JOC - PROCUREMENT FORM 104

G L O S A R Y

Bbl Barrel (1 barrel = 35 imperial gallons approximately)

CIT Corporate Income Tax

CPM Critical Path Method

DO Delivery Order

E&P Exploration & Production

ECV Estimated Contract Value

EPCI Engineering Procurement Construction and Installation

EVA Economic Value Added

FCWT Foreign Contractor Withholding Tax

FPSO Floating Production Storage and Offloading

H2S Hydrogen Sulfide

LSJOC Lam Son Joint Operating Company

MCM Management Committee Meeting

NOC National Oil Company

O&G Oil & Gas Industry

RFP Request for Proposal

SCM Supply Chain Management

SoW Scope of Work

L I S T O F F I G U R E S

Figure1: Report Structure

Figure 2: Supply Chain Management

Figure 3: Lam Son JOC - Blocks 01/97&02/97 Location Map

Figure 4: Lam Son JOC - Preliminary Field Layout

Figure 5: Lam Son JOC - SWOT analysis

Figure 6: Lam Son JOC - PESTEL Analysis

Figure 7: Lam Son JOC - Porter Five Forces

Figure 8: Lam Son JOC - Total Supply Chain

Figure 9: Purchase Specification

Figure 10: P-D-C-A Cycle

Figure 11: Supply Positioning Model

Figure 12: Lam Son JOC - Supply Positioning Model

Figure 13: The Four Quadrants Items - Supply Positioning Model

Figure 14: Life Cycle Cost Analysis

Figure 15: Negotiation Cycle

Figure16: Supplier Perception Model

Figure 17: Various levels of objectives

Figure 18: Scheduling – based on a “bottom up” process

Figure 19: Gantt (bar) chart

Figure 20: Lam Son JOC - Receive Flowchart

Figure 21: PDCA Cycle

Figure 22: Supply Position Model

Figure 23: Risk Matrix

Figure 24: Ishikawa Diagram

Figure 25: Mind mapping - Summary of report

L I S T O F T A B L E S

Table 1: Statistic of Suppliers had back for further information in 2014

Table 2: Market survey for provision of 400 Feet Jack up Rig

Table 3: Lam Son JOC - Supply Risk/Impact

Table 4: Procurement Method - Advantage Vs Disadvantages

Table 5: Ratio of Supply Strategy in using local content in 2012

Table 6: Lam Son JOC – Procurement Thresholds

Table 7: Detailed technical evaluation criteria for the provision of pigging

Table 8: Supplier Capability Ratings

Table 9: Lam Son JOC - Warehouse stock taken 2014

Table 10: Lam Son JOC - Action plan for warehouse improvement 2014

Table 11: Fuel Consumption rate

Table 12: E-Procurement Vs Manual Time

Table 13: Balance Score Card Performance Measurement

Table 14: Risk Matrix

INTRODUCTIONS

1 INTRODUCTION OF THE SUBJECT

This is my master final project report for the award of my Master Decree in Business Quality and Performance Management Program in 2015

The starting point for this report was provided by challenges encountered by my Company in the oil price-plumping situation The depressed price of oil has spurred a new wave of break-even point in the energy exploration & production oil and gas Companies When the crude oil price is around US$100, all exploration and production oil & gas Companies try to drill as fast as they could Now when the prices have down to around USD$35, the companies are focus on efficient by getting the most petroleum for the less amount of money

Which the current plumping of oil price, an effective supply chain management will become more and more important than ever

The oil and gas industry has been considered as large capital investment Managing the complexity of major capital projects in the industry is really challenging The shareholders of such projects will expect greater efficiencies from the supply chain management of the organization Shareholders are demanding improved return on investment, reduced risk while schedules and budgets are tight and safety is crucial, therefore, an effective supply chain management is the key success factor for the exploration and production oil and gas projects

My report presents my investigation of all the main issues occurs through the total supply chain process of Lam Son Joint Operating Company - an exploration and production oil and gas Company, then, give recommendations to improve the effectiveness and efficiency of the supply chain management The report tries to incorporate many different aspects of supply chain management that can be further develop to a framework for the proposed supply chain process for a same structure exploration and production Operators in Vietnam

Now, Lam Son JOC is in production phase when almost all significant operation activities need to be planned in advance Timely deliveries, inventory of the equipments and services are a vital requirement for the supply chain function as the output of one activity is the input for the second phase of activity The total supply chain management system is an integration system in the organization To improve the current supply chain process in Lam Son JOC we need to have a basic understanding of Lam Son JOC’s supply chain process by describing, highlighting, and analyzing the issues of each stage that would make us have an overall picture for all the issues that the Company is facing now Moreover, based

on that, recommendations to solve for better improvement of the system will be presented accordingly

2 OBJECTIVES

The aim of the paper focuses on investigation and analyzing the total supply chain process of Lam Son JOC to make suggestion for improvement of effectiveness and efficiency of the current total supply chain as to promote the competitiveness

of Lam Son JOC through the more success process management

The report aims to assist to select appropriate improvements in each stage of the total supply chain process The recommendation was developed based upon the issues findings through the investigation The major objectives of this report are:

ü An overview of Lam Son JOC’ total supply chain process

ü Identify main challenges/issues that the Company is facing now

ü Study the challenges/issues and recommend the most appropriate solution

in order to address the challenges/issues highlighted

Having a competitive supply chain management could let the Company:

ü Minimize of material procurement

ü Maximize of manufacturing capacity

ü Meet production numbers

ü Respond quickly to market opportunity

3 METHODOLOG Y

The report methodology was based on both primary data and secondary data The author divides the project step by step to investigate and analysis the issues of each stage of the company's total supply chain process

The primary data will be collected from the casual interviews were conducted with key personnel throughout the organization during breaks and free time

According to Hussey (1997), interviews are methods of acquiring and collecting data through face to face or voice to voice interactive dialogues in order to discover the opinions or feelings of people on certain subject The un-structured interviews were conducted in the Company to investigate the current issues of the company Un-structured interviews were used because this type of interview is allowed people to answer more on their thought than the standardized interview The issues were developed and analyzed from these interviews These interviews served to collect the different opinions on the status of the problems and help to develop solutions through that In line with the objectives, the interview questions were generally designed towards achieving the objectives Among the questions put forward during the interview are categories but not limited to the issues of total supply chain process

The secondary data will be gathered through literature in order to identify the problems, databases, journals, newsletters etc., seminar papers and the internet

to gathering all the figures, facts to gain the understanding of the identified problems

Since the scope of the report was limited only to investigate and develop a more effective supply chain management process for Lam Son JOC Nevertheless, the report has provided a basic platform to launch further research into develop a framework of supply chain management for the contractors who work in exploration and production oil and gas industry in Vietnam with the same structure oil field as Lam Son JOC

This report will utilize data and information that is either publicly available or not deemed to be confidential to Lam Son JOC The recommendations were designed and developed through the interviews, from literature and the real analysis, understanding of the author while working in the organization The mind mapping diagram was also used and truly a useful tool for the author to generate and structure the ideas during writing this report

4 LIMITATIONS

There are some limitations in the data collection as a limited number of references

on the topic and some data is confidential data of the Company that the author could not show in the report that made difficult in doing the analyzing

The author has no deep knowledge in technical aspect Therefore, the analysis and the recommendations are only specifying on general management aspect

The report will only cover the investigation of the total supply chain management process of Lam Son Joint Operating Company – an exploration and production oil

& gas Company

To leverage the limitation, a further development of the report could be used as the general framework for supply chain management of the E&P oil and gas operators in Vietnam

The author only provide the analysis and recommendations for improve the current highlighted issues/challenges with the limitation of detailed action plan as it could

be develop in the future report for a detailed execution plan

5 REPORT STRUCTURE

The report is structured as below chart:

Figure1: Report Structure

o Investigate the total supply chain process of Lam Son JOC; address the issues on the current challenges of the process

o Findings from this part will become the foundation of the development of the research framework and proposed recommendation for the improvement

ü Conclusions

o Summary of the investigation for what can be done in the future to improve the supply chain management based on the highlighted issued

PART1 TO TAL SUPPLY CHAIN MANAGEMEN T PROCESS

AT LAM SON JOC

To understand the total supply chain of Lam Son JOC, the author would like to have an overall picture of the supply chain management context, the company profile, and its process

CHAPTER 1: THE CONTEXT OF SUPPLY CHAIN MANAGEMENT

Describe the concept of supply chain management and have an overview of its process

1 DEFINITION

Based on Wikipedia, the term "Supply Chain Management" entered the public domain when Keith Oliver, a consultant at Booz Allen Hamilton, used it in an interview for the Financial Times in 1982 The term was slow to take hold It gained currency in the mid-1990s, when a flurry of articles and books came out on the subject In the late 1990s, it rose to prominence as a management buzzword, and operations managers began to use it in their titles with increasing regularity

According to Joel Sutherland, the board chair of the Council of Supply Chain Management that there are a hundreds of definitions of SCM He said, “Logistics is part of the supply chain process as the Earth is part of the universe” The comment accepted definition of supply chain management:

ü The management of upstream and downstream value-added flows of materials, final goods, and related information among suppliers, company, resellers, and final consumers

ü The systematic, strategic coordination of traditional business functions and tactics across all business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer, J.T.; et al (2001)

ü A customer-focused definition is given by Hines (2004): "Supply chain strategies require a total systems view of the links in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer As a consequence, costs must be lowered throughout the chain by driving out unnecessary expenses, movements, and handling The main focus is turned to efficiency and added value, or the end-user's perception of value Efficiency must be increased, and bottlenecks removed The measurement of performance focuses on total system efficiency and the equitable monetary reward distribution to those within the supply chain The supply chain system must be responsive to customer requirements."

ü The integration of key business processes across the supply chain for the purpose of creating value for customers and stakeholders (Lambert, 2008)

ü According to the Council of Supply Chain Management Professionals (CSCMP), SCM encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics

management It also includes coordination and collaboration with channel partners, which may be suppliers, intermediaries, third-party service providers, or customers SCM integrates supply and demand management within and across companies More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise

Use of the phrase “supply chain” has become widespread According to Ohio State University’s 2004 career pattern survey in logistics, 27% of the respondents had the words “supply chain” in their title Academics have written extensively on the subject, but their definitions have at times been unclear or evasive Moreover, senior management is increasingly aware of the important of SCM

Among these definitions, the author would like to choose one of the most applicable definitions of the term SCM in the oil & gas industry from International Trade Center:

“SCM is defined is a process of getting goods and services from the supplier to the point of production on time and within budget in order to minimize the total life-cycle cost to the organization”

Figure 2: Supply Chain Management Source: Institute for Supply Management

2 THE IMPORTANT OF SUPPLY CHAIN MANAGEMENT

Supply chain management involves optimizing your operations to maximize both speed and efficiency Speed is important because customers value fast service Increasing speed, however, can cause costs escalation, so maximizing efficiency

is equally important The most effective supply chain delivers products as fast and

as cheaply as possible without sacrificing quality

SCM creates competitive advantages by lowering your prices is a standard way to compete other businesses, but that is not always feasible For example, the cost of doing business limits how low you can drop the prices without going into the break-even point SCM provides a way to develop a competitive advantage without having to lower the prices For instance, by developing a more efficient supply chain, Company can deliver orders faster to customers All else being equal, customers will choose the company that meets their needs fastest, giving a competitive advantage in the industry where the company is working at

Efficient supply-chain management has other cost benefits Eliminating redundant steps, for example, saves salary costs by ensuring workers do not waste time on unnecessary procedures A more efficient supply chain also increases your negotiating power with partner businesses, such as suppliers and retailers, which also stand to benefit from doing business faster

Large impact on financial results: the benefits of SCM translate to improvements in revenue, cost and assets Since economic value added (EVA) captures all of

these in one metric, it can be said that the primary benefit of SCM is an improvement in EVA

The primary goal of every oil and gas company is to find and produce oil However, it has become more challenging in regards to the environments and locations and the respective trade lanes Therefore, an effective supply chain solution have to be applied in order to find the best way from the reservoir to the refinery and to keep the supply chains as smooth and visible as possible It gets more and more important for oil and gas companies to manage and oversee their supply chains in an effective manner in order to reduce cost as well as to enhance and guarantee efficient operations

CHAPTER 2: PROJECT OVERVIEW

To understand the SCM of LSJOC, the author would like to have an overall picture

of the Company profile and its SCM process

1 COMPANY PROFILE

Lam Son Joint Operating Company (Lam Son JOC) was established following a Petroleum Contract being signed between Petro Vietnam Exploration and Production Company and PETRONAS Carigali Overseas Sdn Bhd on 7 January

2003, providing for LSJOC to conduct petroleum exploration within Blocks 01/97 & 02/97 in the Cuu Long basin, offshore southern Vietnam

Figure 3: Lam Son JOC - Blocks 01/97&02/97 Location Map Source: Petroleum Contract – Block 01/02-97 Offshore Vietnam

The LSJOC partnership is comprised of the following companies:

ü Petro Vietnam E&P: 50.00%

ü PETRONAS Carigali Overseas Sdn Bhd.: 50.00%

The Thang Long – Dong Do (TL-DD) field was first discovery made in the Block 01/97 & 02/97 Petroleum Contract areas, and were declared commercial on 06 January 2009, following the successful outcome of the TL-DD wells The development period of the TL-DD field started from 07January 2009 and entered into production period from 06 June 2014

Figure 4: Lam Son JOC - Preliminary Field Layout Source: Lam Son JOC - Field Development Plan

Thang Long – Dong Do is a marginal oil field with the average oil production rate around 13,000 bbl/day, therefore, cost optimization is always a strategy for such

marginal oil field company like LSJOC In order to maximize the profit, the Company is trying to have an effective supply chain management

2 CORPORATE CONTEXT

To understand the environment of a business operates in is a key part of having

an effective management Therefore, the author would like to have an overall picture of the company context of vision, mission, SWOT, PESTEL, Porter Five Force Analysis

Figure 5: Lam Son JOC - SWOT analysis

PESTEL ANALYSIS

A PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which an organization is operating The PESTLE Analysis identifies and analyzes the key drivers of change in the strategic or business environment The abbreviation stands for Political, Economic, Social, Technological, Legal, and Environmental factors

Figure 6: Lam Son JOC - PESTEL Analysis

PORTER FIVE FORCES

It’s a strategic tool designed to give a global overview, rather than a detailed business analysis technique It helps review the strengths of a market position, based on five key forces

Figure 7: Lam Son JOC - Porter Five Forces

3 THE TOTAL SUPPLY CHAIN AT LAM SON JOC

"The oil supply chain is also known to be a very complex chain compared to other industries" (Jenkins & Wright, 1998; Hussain, Assavapokee & Khumawala, 2006)

To describe the process required to supply equipments, materials and other resources required to carry out Lam Son JOC's work, below is the total supply chain process in LSJOC

There are ten (10) steps in the SCM process which starting from the specifying requirements and planning supply and ended in the measuring and evaluating performance These are:

1 Specifying Requirements and Planning Supply

2 Analyzing Supply Markets

3 Developing Supply Strategies

4 Appraising & Short listing suppliers

5 Obtaining & Selecting Offers

6 Negotiating

7 Preparing the Contract

8 Managing the Contract

9 Managing Logistic & Inventory

10 Measuring & Evaluating Performance

Figure 8: Lam Son JOC - Total Supply Chain

For the whole chain of the current SCM, every stage the Company has challenges; the author will analysis the highlighted issues in each stage, which the Company is facing now

The starting point of the analysis is necessary to understand of the objective of SCM in Lam Son JOC:

ü Ensure customer satisfaction (in terms of availability, lead-time, delivery, quality, cost)

ü Secure continuity of supply of the inputs needed to meet the company’s short and long-term production plans

ü Secure flexibility and speed of supply of inputs needed for the company to respond rapidly to changes in market conditions and in customer demand

ü Through supply of inputs, work to reduce the company’s cycle time

ü Help the company to focus on its core competences through outsourcing non-essential functions and services

ü Assist the company in making relevant make-or-buy decisions

ü Contribute to total quality management in the company

ü Contribute to total cost reduction in company operations

PART 2: THE TO TAL SUPPLY CHAIN MANAGEMENT INVESTIGATION AND R ECOMMEND ATIONS

CHAPTER 1: THE TOTAL SUPPLY CHAIN ISSUES ANALYSIS

There are so many issues in the Company total supply chain management to go through all and analyze the issues, the author would like to go step by step of the SCM process to point out the issues and then give recommendation for better improvement the efficiency and effectiveness of the SCM

1 SPECIFYING REQUIREMENT AND PLANNING SUPPLY

It is the starting point in the purchasing & supply process If this stage is not done well, then all subsequent stages in the process will also be defective and can result in a number of very damaging consequences to the Company It says

"garbage in, garbage out"

It is therefore critical to have this stage right Specifying requirement correctly is fundamental, since it is a major determine factor of cost and effectiveness, and hence of profitability

The purpose of this stage is to provide the information that the supplier requires in order to meet the user’s expectation This is one of the most important steps as it

is a major determining factor of cost and effectiveness In order to achieve this, SCM needs to be able to determine what these requirements are and specify them

in such a way that what is eventually purchased meet the needs of the firm Over

as well as under specifying are equally bad

There occurs the situation that almost our previous order in the development phase did not include the H2S and corrosive prevention requirement for the casings, tubing equipment using in the wellhead platform (WHP), that now adds up

a lot of cost for production to modify the equipment to suit with the current situation

of H2S contain in the field The amount for modification is now a big number and bring difficult to the project in the current plumbing oil price situation

Lam Son JOC also faces with over specification and over scope of work as it not only adds up to the cost but also limit the source In the scope of work for Floating Production Storage Offloading (FPSO), one of the over requirement of specifications that added up to current higher charter rate is:

ü FPSO must designed and have the ability to process a live multiphase crude stream containing significant quantities of produced water and associated gas at a rate not less than 18,000bopd

ü FPSO must be CAP 1 rated

However, the current production rate of Lam Son JOC is only around 13,000bobp, the higher requirement of process ability of 5,000bobp is waste money, and the CAP 1 requirement is so luxury to the current production status of the company

The number of supplier had to back to LSJOC for further information in 2014 is 48 suppliers over 91 packages as 52.7% The three (3) main questions that the suppliers asked regard to the quality, specification justification and HSE questions

No Total Tender

Package

Supplier need more information

What

2 Specification Justification

3 HSE Questions

Table 1: Statistic of Suppliers had back for further information in 2014

In order to prevent for the future of this There are a list of information need to present in the scope of work & the order specification To prevent time wasting, the total eight (8) questions list below should be included in a purchase specification:

1 What exactly is required (in terms of quality, type, size, performance, etc.)?

2 How should the quality be tested?

3 How much is required?

4 When is it required?

5 Where should it be delivered?

6 How should it be transported?

7 What is the nature and extent of customer support required form the supplier?

8 What other responsibilities will the supplier need to fulfill, and what information will it have to provide?

To summary, the eight (8) questions above categorized in the five (5) main categories of information:

Figure 9: Purchase Specification

Effective planning is a critical foundation for improvements in the supply chain in O&G Companies A careful planning for long-lead-time equipment is required to avoid project delays Poor planning could lead to suffer a heavy cost impact Any delay in the arrival of pipes, casing, tubing and other accessories can consequently high operating cost While the rig rate for the Company is around US$ 150,000, a day of delaying job offshore can add up a huge cost number up to US$ 300,000 as the manpower & other support services

A common problem that exists in my organization is that the procurement department does not get sufficiently involved the early process of specifying and planning requirements with the typical problem of late in the process as the user often mention “it is urgent”

There is one example in our previous drilling campaign, as the company did not plan well for the wellhead equipment, as its delivery time is 120days from the date

of place order However, when we change the drilling schedule we need to drill more well, then we have to consider for the case of air freight delivery, the cost was add up to 30% for the poor planning

To take a lesson learnt on an short planning Company is suggested that the technical operation Departments included Drilling, Subsurface, Development and Production Department have to cooperate together to do a detail execution plan based on the approved work program and budget of the year; also, sharing this plan to Procurement Department for them to prepare a tender plan It should be a cross functional process

For scheduling better, the company can consider to use computer-based materials planning systems such as:

ü Material Requirement Planning (MRP): to plan production and the supply of inputs needed for production to take place

ü Distributed Resource Planning (DRP): to simulate all expected activities involved in moving goods through distribution networks over a defined planning time horizon

ü Enterprise Resource Planning (ERP): to integrate the various functions of

an enterprise, including production and purchasing

ü Maximo

Maximo is a leading system integrator and solution in oil & gas industry Lam Son JOC is using an one (1) operation module of Maximo that only serve for operation maintenance purpose To leverage the current Maximo software, a good

Do

Check Act

recommendation for the company is to use this software with added one (1) more module of SCM to optimize costs, enhance return on investment, manage growth and deliver better value to customers by zero unscheduled downtime, optimum tuned inventory, no dead capital, clear processes and procedures, budget control and centralized procurement

A suggestion to use the effective planning, the data should be update, discuss on

a monthly basis There should always need to follow the P-D-C-A cycle management approach: Plan – Do – Check – Act (P-D-C-A) in the in whole planning stage:

· Information collection and analysis

· Identify any factors that may cause the plan to need adjustment

· Regular check the actual demand against the plan

· Identify and take any required action

Figure 10: P-D-C-A Cycle

Other suggestion is the purchasing & supply should be involved at an early stage

To be effective and efficient, the purchasing & supply function needs to be aware

in good time of what requirements are coming up This will allow it to properly plan and manage the process to prevent:

ü Disruption and delays in supply

ü Additional costs arising from the service/equipment not performing as needed

ü No opportunity of negotiation as lack of time

ü Pay at high price

In conclusion, it is critical that purchasing & supply should be involved very early in the process of developing purchase specifications and in supply planning This will help to avoid costly problems Specifying requirement and planning supplies is often a cross functional process that should involve users, purchasing & supply

2 ANALYSING SUPPLY MARKETS

According to Kolter, a market is an arena for potential exchange Whereas, supply market analysis is review of the structure, characteristics and trends of a supply market for a particular product or service

Analyzing supply markets is important as it helps to identify the best possible supply segments for your requirements and to understand the risks and opportunities associated with these risks as the most significant success factor in the business world today is the ability to anticipate, accept and adapt to change The result of neglecting of analyzing the supply market can lead to:

ü Supply disruption

ü Quality problems

ü Cost overrun

ü Long supply lead times

Analyzing supply market can be time consuming and costly Clearly, an organization cannot and do not need to undertake a comprehensive supply market appraisal for every item that it purchases It will have to be selective about the amount of effort that it puts into each item to be purchased There are some factors to consider for the purchase:

ü Is it a new purchase?

ü Level of expenditure?

ü Level of impact?