Oman Refinery Company’s Operations Management

Orpic is one of the largest organisations in the Sultanate of Oman and one of the most rapidly growing enterprises in the Middle East oil and gas industry. One of its recent strategic goals is to increase the asset base by more than $9 billion and the product output – by over 4 million tons of fuels and polymers per annum (Oommen 2018). It is clear that without an excellent operations management approach, maximising the efficiency of the organisation processes in multiple areas of performance, Orpic will not be able to achieve these objectives. Considering this, the purpose of the present report is to analyse critically Orpic’s existing operations management practices, focusing on such areas as human resources (HR), quality management, and supply chain.

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Analysis of Operations Management Decisions

Quality Management

Quality is a perceptual attribute of products and services and it guarantees that they are liked and demanded by customers. It means that quality management plays an essential role in generating companies’ competitive advantages by increasing organisational capabilities to foster greater customer satisfaction (Kim-Soon 2012). Orpic pays a lot of attention to the quality aspect of their products and services and implements the ISO 9001-2008 Quality Management System (Orpic n.d.).

ISO 9001-2008 requires enterprises to show abilities “to consistently provide product that meets customer and applicable regulatory requirements” and an aspiration “to enhance customer satisfaction through the effective application of the system” (International Organization for Standardization n.d., para. 1). To meet this standard, Orpic carries out a periodic analysis of its oil products in laboratories located across the territory where it operates (Orpic 2018).

Moreover, as part of its quality assurance system, the company aims to minimise the environmental impact and utilises effluent water treatment systems, as well as other technologies, such as leakage detection systems, allowing to reduce the potential negative effects on the ecology (Orpic 2018).

Noteworthily, the strategic quality planning is part of the company’s current vision and mission of putting health, safety and environment first (Orpic 2018). As stated by Sadikoglu and Olcay (2014), such an approach is positively associated with the integration of quality and safety initiatives across a range of areas, including inventory management, customer service, corporate social responsibility, and so forth. For this reason, it is possible to say that Orpic’s current quality management strategy is comprehensive and effective.

Supply Chain

In the oil and gas industry, the supply chain incorporates various players with different levels of access to resources, technology and knowledge. Within it, Orpic takes the position of a middle link between an oil extractor (Oman Oil Company) and the final consumers of petroleum products produced by the firm (Orpic 2018). Across its own supply chain, Orpic operates four industrial plants situated in Muscat and Suhar, which are connected by a “266-kilometer crude pipeline, delivering feedstock from Mina Al Fahal Refinery to the Suhar plants” (Orpic 2018, p. 4).

After raw materials are transformed into final petrochemical products, they are transferred through pipelines and ships to Al Jifnain and Raysut terminals, from where distinct fuel marketing companies distribute them across the country and abroad (Orpic 2018). In addition, polypropylene products are sold by Orpic’s Polymers Marketing Team that works to “promote its products, identify new customers, capture market information and customer needs, and manage agents and distributors” (Orpic 2018, p. 4). It means that the company’s supply chain operations are informed by market requirements and the understanding of internal capabilities to meet those requirements.

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Overall, the company’s supply chain scheme is consistent with a standard downstream section of the oil and gas supply chain, which focuses on the procurement of raw materials, storage and supply planning, scheduling, and so forth (Ahmad et al. 2017). The efficiency of Orpic’s supply chain is defined by many industry characteristics. For instance, the demand for oil and petroleum products is not very volatile (Ahmad et al. 2017) and, thus, it is relatively easy to schedule and plan production, supply, and delivery processes. Secondly, due to such product characteristics as inflammability, the company can utilise a limited range of viable transport (Ahmad et al. 2017).

Noteworthily, Orpic strives to optimise logistics operations: the establishment of the direct pipeline from Jifnain to Muscat International Airport allows reducing the circulation of more than 20,000 delivery trucks per annum (Orpic 2018). It is also valid to say that a relatively small number of facility locations allows the firm to increase the cost-efficacy of shipping.

Human Resources

In terms of increasing operational efficiency and ensure a smooth flow between various organisational processes, Orpic relies on a plethora of professional teams with specific job duties and specialisations. HR management implements many practices in order to attract talents and retain competent personnel. For instance, to pool qualified candidates to the organisation, Orpic recently conducted a massive recruitment campaign in which experience and field-related knowledge were crucial selection criteria (Orpic 2018).

At the same time, the company frequently offers jobs and training opportunities for emerging talents, students, and beginner workers in the oil and gas industry while also investing in the development of its personnel (Orpic 2018). According to Sohrabi and Hazini (2007), training is a particularly important HR management practice in the circumstances when the talent is scarce, and it is observed that the oil and gas industry has a significant shortage of competent workforce.

The organisational culture and motivation systems play an essential role in employee retention as well (Sohrabi & Hazini 2007). Overall, Orpic aims to acknowledge employees’ achievements, praise them for good performance, and create both physically and psychologically safe workplace environments for workers by implementing various safety standards (Orpic 2018). Therefore, it is valid to say that the company aims to minimise costs associated with employee turnover that can have a wide spectrum of negative effects on operations efficiency.

The Four V’s of Operations

It is chosen to compare the performance of Orpic in accordance with the Four V’s of Operations framework with a fashion corporation, Gap Inc., because the latter organisation operates within an industry that is drastically different from the oil and gas market (Appendix A). In contrast to petroleum products, fashion products are associated with faster life cycles and greater volatility in demand that frequently changes based on consumer preferences and interests.

Therefore, compared to Orpic, it should have more flexible operation systems to be successful and profitable. To achieve this, Gap Inc. works with an extensive number of proximate vendors and producers of raw materials, while also gaining speed by positioning those raw materials further downstream in the supply chain (Gap Inc. 2018). At the same time, Orpic enjoys a significant level of predictability determined by high utilisation of petroleum and polypropylene products. Some degree of demand volatility is possible in the oil and gas industry, but it is rather not substantial and critical.

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Orpic also differs from Gap Inc. in terms of product variety and visibility. Due to the seasonal nature of fashion, the latter firm must design a plethora of products on a regular basis, whereas Orpic always has relatively few offers. Thus, although it may benefit through innovation and the introduction of more competitive offers into the market, it does not need to change production standards and routines too often. As for visibility, Orpic’s operations processes are generally not seen, whereas Gap Inc. renders a greater number of visible services related to both online and offline purchasing experiences. Lastly, both companies have high production volumes, which means that their operations are capital intensive, systematic, and highly repeatable.

Recommendations

Overall, Orpic’s current strategies allow it to meet the core operations management objectives: quality, speed, cost, and so forth. It utilises a vertical integration approach with a sole sourcing partner (Oman Oil Company) from whom the company gets necessary raw materials. This system fosters significant control over the supply chain assets and processes than standard outsourcing. According to Chima (2007), vertical integration is beneficial when input materials are relevant to the firm’s specialisation and in line with its current focus. Considering that Orpic does not plan to expand operations to other sectors, there is no need to change anything in this regard.

Nevertheless, it is observed that in refinery operations, “the decision-making process may be divided among various departments with conflicting objectives” (Ahmad et al. 2017, p. 582). Additionally, a problem may arise when information systems are poorly coordinated and are not compatible between different departments and partners. In order to avoid the potential negative effect on performance and increase operations efficiency, there is a need to develop and implement an integrated information system for the storage and open sharing of data related to exploration, production, refining and marketing operations among distinct organisational units (Chima 2007).

Chima (2007) states that the creation of an integrated, supply chain-wide information technology system can result in greater flexibility and adaptability to modern-day environmental changes. It may also increase the company’s operational innovation capabilities and, in this way, add more value to its services and products.

Conclusion

In conclusion, it is valid to say that Orpic’s approaches to the management of different operations areas – quality, HR, and supply chain – are effective and suitable for the industry in which it operates. Based on the company’s emphasis on quality initiatives, use of employee development and retention strategies, and its overall supply chain structure, it is clear that Orpic aims to eliminate all types of waste, reduce and manage risks, and facilitate processes to achieve greater competitiveness and profitability.

No significant deficiencies were identified in the company’s current operations management practices. Nevertheless, it is recommended for Orpic to focus on the creation of an integrated information system across its supply chain as this measure is considered to add more flexibility and strengthen operational innovation capabilities that are important for success in the present-day business world.

Reference List

Ahmad, NK, Brito, MP, Rezaei, J & Tavasszy, LA 2016, ‘An integrative framework for sustainable supply chain management practices in the oil and gas industry’, Journal of Environmental Planning and Management, vol. 60, no. 4, pp. 577-601.

Chima, CM 2007, ‘Supply-chain management issues in the oil and gas industry. Journal of Business & Economics Research, vol. 5, no. 6, pp. 27-36.

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Gap Inc. 2018, ‘Three ways Gap Inc. is using scale to speed up its supply chain’, Gap Inc. Web.

International Organization for Standardization n.d., ISO 9001:2008. Quality management systems – requirements. Web.

Kim-Soon, N 2012, Quality management system and practices. Web.

Oommen 2018, ‘Driving growth’, Oil & Gas Review. Web.

Orpic 2018, Orpic magazine. Web.

Orpic n.d., Inside Orpic. Web.

Sadikoglu, E & Olcay, H 2014, ‘The effects of Total Quality Management practices on performance and the reasons of and the barriers to TQM practices in Turkey’, Advances in Decision Sciences, vol. 2014, pp. 1-17.

Sohrabi, M & Hazini, K 2007, Strategic human resource management and its challenges in oil & gas industry projects. Web.

Appendix A: The Four V’s of Operations

Volume Variety Variation in Demand Visibility
Orpic High:
Repeatability of processes, systematisation, and relatively low unit costs.
Low:
Standardisation and well-defined routines.
Low:
Relatively predictable and stable demand for petroleum products.
Low:
Petroleum businesses rarely show their operations processes to the public.
Gap Inc. High:
Increased process complexity, need for greater flexibility in order to meet everchanging consumer needs and interests.
High:
Need for increased flexibility capacity and ability to anticipate changes in the volume of demand for certain products.
Moderate:
While manufacturing processes may not be visible to customers, operations processes associated with online purchases are visible.
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