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Operational Management techniques by Shell Company

The chosen company to judge the operation management approaches employed in a power company is Royal Dutch Shell Company. Shell a British-Dutch company that delivers essential oil, gas, petroleum products and renewable source of energy to the globe. The corporation is one of the greatest companies round the world that maintains and supplies the world using its fuel, petrol and petrochemical products.

The Royal Dutch/Shell Group is the world's biggest and oldest jv, shaped in 1907 when the Royal Dutch Petroleum Company and the Shell Move and Trading Company Ltd of the uk merged their procedures. It manages in over 140 countries, providing fossil fuels and green fuels like Hydrogen gas cells. A number of the facts related to Shell are: has 102, 000 variety of employees worldwide, provides 2% of engine oil worldwide and 3% of gas, has 45, 000 service channels, 10 million customers worldwide and one of the most notable bundle of money 500 companies.

Shell has five main businesses: exploration and development, gas and electricity, refining and marketing, chemicals, and trading and delivery.

Source: http://www. annualreview. shell. com/2008/servicepages/downloads/files/entire_shell_review_08. pdf


Shell's Procedure Management System

Operation management:


"Management Of this change process which changes inputs such as recycleables and labour into outputs in the form of done goods and services" (Davis, Aquilano & Chase, 1999).

Schroder (2007) described operation management as: "Businesses is responsible for supplying the product or service of the business. Operations professionals make decisions regarding the operations function and its own reference to other functions. The operations managers plan and control the development process and its own interfaces within the organization and with the external environment" (Schroder, 2007).

Operation management (OM) is basically the set of activities that creates goods and services by changing input into result. Activities creating goods and services happen in all corporation. In manufacturing firms, the creation activities that create goods are usually quite obvious. In them we can easily see the creation of any tangible product such as Sony TV or a ford Taurus.

In organizations that not create physical products, the creation function may be less apparent. It might be "hidden" from the general public and even from the customers. A good example is the transformation that takes place at a lender, hospital, air travel office, or college.

Regardless of whether the end product is a good or service, the creation activities that go on in the business are often known as operations or operation management.

Operation management is associated with number of areas linked with a business as how exactly does the organization establish customer's requirements, change of customer's need directly into product and services, what procedures systems/ procedures are in location to meet the product/services requirement of customer, decision associated with capacity planning, inventory, quality of product etc. . . Each one of these decisions come under the umbrella of operation management.

Identification of Customer Requirements:

We know that the essential existence of a business depends upon the merchandise or services it provides to the world. However, with the changing consumer taste and the limited lifecycle of products companies must be looking for new product development. It really is a company's life blood vessels. Both income and development are affected without aggressive product development. Operation managers give high value to the strong communication between customers, product, operations and suppliers that result in a high success rate because of their products.

All companies need to search out their customer's desires and requirements to be able to fill up any gaps on the market. A successful market research for new product development comes from knowing what customers value.


Shell's Operation Management System

Product decision:

One of quite decisions of operation management is the selection, classification, and design of products.

Heizer and Render (2005, pp-132) discussed the merchandise decision in their are it concerned with the development and execution of a product strategy that satisfies the requirements of industry with a competitive advantages that may be achieved via differentiation, low cost, quick response, or a combination of the.

Product development system:

Product development system may well determine not only product success but also the firm's future. Product development goes through a series of steps, you start with ideas that will come from either external or internal sources and concluding with the evaluation of services. Heizer and Render (2005, pp-137) considers two tools that are especially helpful in the first periods of product development are (1) creative imagination and (2) identifying customer wants.

The ex - can be tackled via creative, open up organizations and brain storming and the second with quality function development.

Organizing for product development:

According Heizer and Render (2005, pp-141), There are different approaches to the merchandise development.

The traditional U. S approach to product development can be an organization with distinctive departments. These departments are: First research and development division to do the required research; then an anatomist department to create the merchandise: then a manufacturing engineering team to design an item that can be produced; and lastly, a production department that produced the product.

A second and popular way is to assign a product manager to "champion" the merchandise through the product development system and related organization

The third as well as perhaps the best, product development way found in the U. S. is the use of groups. Such teams are known variously as product development groups, design for manufacturability clubs, and value engineering teams.

The Japanese bypass the team issue by not subdividing corporation into research and development, anatomist, production etc. Consistent with the Japanese design of group effort and team work, these activities are all in one firm.

Game Changer:

Shell Game changer is an internal shell company which searches for new and impressive ideas that addresses a demand or significant problem in the energy industry. Game changer helps enterprisers to convert ideas into products by sponsoring them. Ideas can range from new essential oil exploration ways to improved production tools, or even new form of energy. It provides a sheltered trials zone where a concept is developed, tried out and superior. It also helps to get it to market.


Shell's Operation Management System

Areas of concentrate are:

Increasing energy production

Carbon management

Energy conversion, storage and distribution

Fuelling transportation

Working of Game changer:

Game Changer displays the novel, early on level idea. If the idea has any potential and game changer acknowledge, it will require it through some important steps and provide the money and support to get it to proof-of strategy. Although game changer was raised on ideas from Shell employees, it also invests in those originating from beyond Shell such as from academics and other enterprisers.

Game changer primary criteria:

Novelty - May be the idea truly and fundamentally new and different?

Value - Could the theory create significant new value if it works?

Credible Plan - Is there a plan to control primary dangers prudently by certified people?

Game changer process:

The first step in coming into the GameChanger process is submission of a brief description of the idea through the shell website. A selection panel made by a group of full-time Shell pros with diverse backgrounds in the energy industry holds out assessment of all proposals.

They evaluate the proposal at three different levels [7]:


If a person is a business owner from outside the house Shell then, following the initial diagnosis of the idea, a member of the -panel will contact the businessperson to allocate a Shell complex counterpart to him. This person will then be entrepreneur's "co-proponent" of the idea and help him through the screening process.

Screening -panel:

The Screening Panel contains (any) two associates of the GameChanger team. They'll pay attention to the demonstration of inventor's idea and ask questions in order to obtain a complete understanding of the proposal. The GameChanger panellists will consider the merits of the proposal and within 48 hours decide if the idea could potentially mature into a GameChanger job. If this is actually the consequence, the inventor will then be invited to prepare a more precise display for the Prolonged Panel.

Extended Panel:

The Extended Panel involves three members of the GameChanger team and at least three experts who are not members of the GameChanger team. This group will enroll in the presentation on the inventor's proposal and work plan. The panellists will ask questions and the experts will give viewpoints on the merits of the proposal. The GameChanger panel will then come to a decision on whether to go ahead and fund the development of the


Shell's Procedure Management System

idea. Game changer will strive to speak this decision to the inventor and the co-proponent within 48 hours.

If money is awarded, it is with a period course of 2- three years. The inventor will use the cash to develop the concept relative to an arranged plan. At decided tollgates, progress and continuation are talked about with proponents and panel experts.

Selection Conditions:

GameChanger ideas have the potential to results a substantial improvement in the success of any business or open up opportunities for expansion. The GameChanger -panel funds these projects through to their proof-of-concept level.

The last step: Going to the marketplace place

If proof-of-concept is reached successfully, GameChanger may also be in a position to help take the technology a further level. A couple of three potential onward paths [7]:

Proprietary -The idea is graduated into Shell's internal R&D funnel or another Shell business for immediate use by Shell.

Licensing -The idea is certified to a preexisting technology provider apart from Shell. This is usually applied when complementary capabilities are required to further develop and deploy the theory.

Venturing -A new company might be create to bring the idea to commercial market. In short, once an idea is considered a true GameChanger you won't be shelved and everything options will be considered to ensure the GameChanger idea grows to the marketplace.

Before digging deep in to the procedure management system hired within Shell, we need to first understand the following concepts:


Process identifies the physical process or center used to create the product or service. It offers the kind of equipment and technology, process moves, structure of the center, job design, and labor force policies.

Process strategy:

A process or (transformation) strategy is an organization's method of convert resources into goods and services. The aim of the process strategy is to find a way to create goods and services that meet customers' requirements and product standards within cost and other managerial constraints.

Virtually every good or service is made by using some variance of 1 of the four process strategies

Process emphasis: A production facility arranged around procedures to help low amounts, high variety development. 75% of all global development is devoted to making low amounts, high variety products in places called "job shops". Such facilities are sorted out around performing operations. In factory, these procedures might be departments devoted to welding, milling, and painting. In office, the operations might be consideration payable,


Shell's Procedure Management System

sales and payroll. Such facilities are process concentrated in terms of equipment, design and supervision

Repetitive concentrate: A product-oriented production process that uses modules (parts or

components of something previously prepared, often in a continuing process.

It falls between the product and process focuses.

The repetitive process collection is the basic assembly line. Trusted in the assemblage of

virtually all automobiles and household appliances.

Fast food companies are an example of a repetitive process using modules

Product concentration: a facility prepared around products; something oriented, high volume, low variety process.

They are also called constant process, because they have got long continues production runs. Shell uses product centered approach because of its oil refinery functions.

Mass customization: rapid, low cost development that caters to constantly changing unique customers desires. Mass customization brings us the variety of products customarily provided by low amount manufacturer (a process targeted) at the price of standardized high amount (product centered) creation.

Operational Systems and Functions at Shell:

Shell is involved with production of several products and services. It boasts that

"We provide transport petrol to around 10 million customers daily through our 45, 000 service stations worldwide. We are working to provide cleaner using up and more efficient fuels. Our products and services are also made to meet the needs of businesses - from the construction industry to aviation, chemicals to transport. " [1] (Shell. com)

Shell is most beneficial known for its service stations as well as for discovering and producing engine oil & gas on land with sea. Shell delivers a huge selection of energy alternatives and petrochemicals to customers; produce and sell petrochemical building blocks to industrial customers on a worldwide scale; invest in making renewable and lower-carbon energy resources; involved in moving and trading oil and gas; marketing gas; producing and selling fuel for boats and planes and making electricity and providing energy efficiency advice.

As mentioned prior, shell is involved in five core businesses and each business includes number of procedures within. To limit our opportunity, we will discuss the essential oil & gas exploration and creation business.

Oil & Gas exploration and production cycle involves oil exploration, drilling, refining and creation of petroleum products.

Oil exploration process:

In this stage, step one is to find the oil. That is of huge importance and Shell invests big money to work with statistical analysis to determine the location of olive oil. This review process is recognized as Seismic Surveying. You will discover three components in Seismic Surveying:


Shell's Operation Management System

A seismic source


Recording equipment

During this study, the experts create a picture of the rock layer structure beneath the earth and the info accumulated is carefully analyzed and interpreted to decide whether to further research would be need or to start the exploration process.

Once the positioning of oil is determined, Shell draw up exploration agreements with the countries within whose restrictions the oil was first established. After the deals have been approved and negotiations agreed the business can then start its drilling process.

Drilling process:

Once the oil's location is diagnosed, the next thing is to drill. Well play important role in recovering oil and gas. With the progress of technology, new drilling techniques and technology has been developed that helped Shell in drilling wells from few metres to more than 10 kilometers. Wells aren't only drilled vertically but also horizontally, can change edges and snake in one pocket of engine oil to another.

Souce: http://www. shell. com/home/content/innovation/meeting_demand/getting_more/smartfields/smartfields. html

As drilling is vital part during essential oil extraction process, however the issue of planning and operating of wells is of higher importance. Shell realizes that as part of its operations it requires to research into whether a well would produce petrol, gas or both. Through the late 90's Shell created "Drilling the Limit" methodology which allowed the company to focus attention how successfully wells are planned, drilled and been able as an activity. The primary reason for bringing out such a plan was to limit costs and reduced to time it try drill.

Shell also have introduced a Smart Fields program providing both the knowledge and the control by integrating digital it with the latest drilling, seismic and reservoir monitoring techniques.


Shell's Procedure Management System

Furthermore, Shell has introduced the Enhanced Engine oil Recovery (EOR) technology to press out the extra oil that would have been left out in the essential oil fields credited limited access and hard to get them out. Estimation shows that "by recovering just 1% extra across the world would mean 20-30 billion barrels of olive oil - oil that might have been left out. " [5] (Shell. com)

Scouce: http://www. shell. com/home/content/innovation/meeting_demand/getting_more/eor_ccs/eor. html

Shell is using three techniques: injecting heavy steam into reservoirs to heat up and make the oil more fluid, and relieve its stream; injecting gas to thrust oil out or even to thin it, or injecting chemicals that free captured oil.

Refining process:

Refining is the make of petroleum products from crude petrol extracted in the drilling process. Refining process can be grouped into three major processes: separation techniques, conversion techniques and the chemical treatment techniques. Refining includes separating crude petrol in to the desired components depending on the final operations chosen and the available crude essential oil selected.

Separation Procedures:

It's the first level of petroleum refining. During this process the crude essential oil is sectioned off into a few of its fractions. This stage involves three parting processes:

Fractional Distillation:

In the procedure, the crude petrol, which really is a mixture of various kinds of hydrocarbons, is boiled and re-condensed to split up the crude petrol into components predicated on runs of boiling factors. The components with low boiling point are evaporated and accumulated in top of the area of the chamber known as Distillation column, as the component with higher boiling details are heavier and gathered in the


Shell's Procedure Management System

lower part of the distillation column. The components gathered at the top of the chamber are known as Liquefied Petroleum Gas (LPG).

Solvent Extraction:

This process requires the parting of engine oil into parts by adding chemicals to dissolve the unwanted substances to the crude oil. The primary solvents used in this technique are furfural, phenol and benzene. Refineries utilize this method to improve the quality of lubricating natural oils.


This method is mainly used to eliminate wax and other semi-solid chemicals from heavy fractions or components. The components are cooled to a temperatures of which them become solidify or crystal. These are then put through a filtration system that separates the solid.

Conversion Functions:

Petrol is obtained through this technique. Conversion process consists of to processes: Cracking process and merging process.

Cracking Process:

It involves breaking up of large hydrocarbon molecules into smaller molecules using a blend of warmth and catalytic action. These processes not only improve the production of petrol but also improve its quality and brings about products like Kitten Cracked Gasoline (CCG) etc.

Combining Process:

This process is the contrary of breaking. It combines simple hydrocarbons to form more technical fractions. This technique results in several products like LPG, Coke (used to generate heavy steam and electricity).

Chemical Treatment Procedures:

Hydrogen Treatment:

This process is utilized to remove the impurities like sulphur materials by blending the components with hydrogen.


This is the last stage of refining process. This stage dealt with the mixing of varied hydrocarbons, made in the refining processes, together to make the final product as required by the client. The final product is tested before sold to the buyer.

Capacity Planning and Inventory Management System:

Inventory represents a major investment for most companies. Inventories are of four types (Heizer, Render 2005)

Raw material and purchased components

Work-in-process (WIP)

Maintenance, repair, and functioning (MRO)

Finished goods


Shell's Procedure Management System

All organizations have some type of inventory planning and control system. In case of physical products, the business must determine whether to produce goods or purchase them. Once the decision is made, the next thing is to forecast demand. Then operation professionals determine the inventory essential to service that demand. Procedure administrator establish systems for taking care of inventory.

Vendor Managed Inventory:

VMI is an abbreviation of supplier- managed inventory. Shell offer VMI. Vendor-managed inventory (VMI) is more good for the chemical customers. In this technique supplier warehouses the product till customer uses it. In this way Buyers are able to reduce a big portion of inventory of their books. In addition they benefit from the reduced paperwork, phoning in product orders and following up to see they are delivered where so when they're needed. VMI often ends up with the introduction of better inventory and offer management, which can shave significant personal savings off the full total cost. VMI calls for inventory from the production formula for buyers. Clients no more have to fret about container levels or when to plan new shipments. The provider deals with that. By monitoring the customer's reservoir (often using superior telemetry equipment), suppliers know when inventory levels are low. When they reach a certain point, usually decided upon with the client, the provider schedules a delivery and the truck turns up at the customers' site to replenish the fish tank.

In November of this past year, Shell Substance Corp. , Herndon, Va. , went into an contract with ControlSAT, under which ControlSAT would be Shell's exclusive telemetry distributor. The arrangement has helped the shell a great deal because of the compatibility of ControlSAT's technology to Shell's Company Inventory Management Order Network (SIMON), that was produced by Shell Services, the technology arm of Shell Corp. (Reilly, 2000)

ControlSAT Telemetry system:

ControlSAT, is a technology company that manufactures and markets satellite television -established inventory monitoring telemetry systems (system predicated on mobile and radio influx transmission).

Working of ControlSAT's System:

Orbocomm Global, L. P. , ControlSAT's mother or father company, has a network of 36 del fluorocarbon satellites orbiting the planet earth. The satellites are spaced to orbit the polar planes, tropical planes, equatorial airplane and about 45 certifications among, providing total coverage of the Earth. (Reilly, 2000)

ControlSAT installs hardware on customers' tanks made to relay inventory data to prospects satellites. Then, one time per day, data is delivered via the dish network to a central monitoring computer, then on to the supplier by using a secure Internet website link. Data that suppliers acquire show their customers' inventory levels in tanks round the world.

When product inventory levels land below a certain point, the provider receives notification to replenish the material in the tanks. In this manner, the provider can proactively


Shell's Procedure Management System

schedule its own deliveries. Using its daily operating inventory and materials needs forecast it can streamline supply.


SIMON is a Lotus Notes-based computer software that delivers process industry suppliers with information and analysis tools. SIMON displays and monitors inventory and ingestion and then creates demand forecasts, minimum inventory requirements and re-supplies schedules. As a result, suppliers benefit from an improved potential to control center and warehouse costs, increased inventory changes, streamlined administrative techniques, and better focus on production capacities.

Through ControlSAT's container telemetry service, the SIMON databases automatically incorporates well-timed, accurate and reliable inventory data with no need for manual intervention.

Before SIMON and the telemetry given by ControlSAT, Shell's inventory monitoring used to need a lot of calls, faxes and interaction between your customer and Shell. Any Information related to the customers' inventory position would be initiated by the client. Automating the process allowed the distributor to become more proactive in interacting with the customers' needs (in terms to getting the right product in the right location at the right time) and get rid of the need for time put in faxing and phoning in purchases, etc.

Shell currently supplies the service and then customers that are sole-supplied by Shell, where a very strong method of trading has been developed and where there's a strong, demonstrated opportunity for cost savings through inventory monitoring.

One of Shell's customers currently using the program agrees so it can save a lot of time in product procurement. Balmoral Sea Inc. , a petroleum and professional gas drilling company based in Houston, Texas, is supplied by Shell and is currently using Shell's SIMON and ControlSAT's inventory management systems for way to obtain a specific resin product. (Reilly, 2000)

Feature of the new system:

Through SIMON, Shell Chemical keeps essential inventory; customers pay upon use for what is consumed.

Shell Substance is the sole source supplier, linked with a company/customer business model.

Customers reduce basic safety securities to bare minimums.

Lotus-based SIMON

Extracts data on amount of product consumed in past a day.

Determines the amount of new product that came and was unloaded in same period.

Draws information on current and expected product schedules.

Compares data against known changes to schedules.

Data is replicated back again to central customer support centre for automated reconciliation with SAP/MRP systems, making an automatic re-supply plan.


Shell's Procedure Management System

SIMON Features:

- When plan suggests a stocking level below accepted least, electronic digital purchase order and shipment is set up.

All information regarding status is obtainable to customers.

Invoices are given monthly, based on usage, not shipments.

Introduced to 23 of the most proper customers.

Short-term (a year) results were plus $20 million in product sales.

Customer Benefits:

Eliminates excess safeness stock, minimizing working capital and holding costs.

Facilitates well-timed, low-cost re-synchronization of source chain.

Ensures product is on site when needed.

Creates shorter response time to changing conditions.

Reduces deal costs - data entrance, invoicing, payables, etc.

Smoothes erratic order patterns.

Reduces order management costs.

Streamlines financial accounting.

Monitoring and Analysis of Procedures at Shell:

Shell has greatly committed to monitoring and analysis of every of its operations and functions because every process in this business is very much vital and need careful attention. During the primary stage of oil exploration and creation pattern, Shell conducts Seismic Surveying to confirm the existence of oil beds beneath the earth. Otherwise drilling is very much cost intensive process and failing to the original stage may results in heavy lose to the organization. To determine if the well would produce petrol, gas or both Shell presented "Drilling the Limit" technique which allowed the business to focus attention how successfully wells are organized, drilled and maintained as a process. Significant reduction both in drilling cost and drilling time has been seen in the ages with the introduction of "Drilling the Limit" strategy.

Shell has released a Smart Field program which control buttons the ongoing drilling, seismic and reservoir monitoring from the independent place prepared with information technology.

"Combined with the experience of geologists, engineers and more, Smart Areas can help boost the total amount of petrol recovered from a field by 10 % and gas recovery by 5 per cent, while also increasing the rate of production. " [4] (Shell. com)

Furthermore, Shell has made a office under the name "Shell Global Solution". Shell Global Solution provide business and operational consultancy, technological services, catalyst and research& development know-how to its global customers as well as provide its assist with Shell in many functional areas such as exploration and production, refining, gas and LNG etc.


Shell's Operation Management System


Shell is one of the major companies about the world that maintains and provides the world with its fuel, engine oil and petrochemical products. With this report we attempted to describe how Shell establish its customer requirements, its product development decisions, different functional systems involved in oil and gas exploration and development, inventory management systems and monitoring and evaluation strategy by Shell. As Shell is involved in range of businesses (exploration and production, gas and power, refining and marketing, chemicals, and trading and transport) and each business has amount of operations and techniques that need to be preserved. To limit the opportunity of this survey, we only centered our review on the olive oil exploration and production business.

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