Royal Dutch is one of the leading suppliers of petroleum products in Europe. With such a vast supply chain an effective and efficient inventory system is imperative for continued growth. The organization uses a model that is committed to lowering the costs of supply chains thus saving consumers more money. Royal Dutch Shell supply management is very efficient in providing the best quality hydrocarbon products including Gas and oil to facilitate the customers. It has operations in all parts of the world including the USA, Brazil, Canada, Denmark, France, Germany, Kuwait, the United Kingdom, South Africa, Nepal, Newzealand, Qatar, and Srilanka (Ekatah, Samy, Bampton & Halabi, 2011). Shell Plc has t300 terminals and 9000 kilometers of pipelines, in such situations, it can be difficult to track the quality that comes with gas and oil, nevertheless, it works efficiently providing the best quality fuel to its customers.
Importance of Global Supply Chain Management
Globalization has significantly affected the supply chain management landscape in a global marketplace. Existing systems are expected to be capable of meeting modern demands. In the case of royal dutch ensuring that quality oil and gas products are safely delivered from port A to B without disruption. One of the biggest downfalls that can significantly affect supply chain management is the lack of visibility. In such a case a simple decision can redirect change the whole system causing ripples in supply chain management and resulting in high costs and decreased efficiency. As the business expands, there is a need for logistics to broaden and have the ability to quickly oversee the cost and service implications of every decision (Asree & Rao, 2011).
Having a well-defined global supply chain helps companies such as Royal Dutch to address certain pressure point areas for their business. Such a system helps to:
Reduce costs: as a supplier making better procurement decisions through the supply chain will help the company reduce its supplier sourcing and procurement costs (Asree & Rao, 2011).
Increased transparency: working in the global market the supply chain must be able to have an accessible point of entry for Shell Plc this means that all the information will be available for review in such a case (Asree & Rao, 2011).
Lower risk: with such an established supply chain management system Shell Plc and Royal Dutch allows the company to assess a supplier's ability to meet financial, legal, safety, quality, and environmental regulations. Based on such rules they offer essential risk management for the global business (Asree & Rao, 2011).
Support legacy and new products: as with all global companies offering new products in the marketplace are a sign of extensive growth. Shell Plc has allowed them to support existing products and adapt to new product offerings giving. With such platforms in place, it is much easier to accommodate taxation, invoices, and other critical functions.
In today’s environment supply chain includes different practices which are directly or indirectly connected to the organization to fulfill the requirements of the organization. In the previous supply, management was considered management to supplier relationship, but now it is used to manage inventories and transport to the customer’s end. Royal Dutch Shell is segmented to be in highly competitive market environments thus effective supply chain management it’s considered as the most significant competitive advantage as it reduces cost as compared to its competitors (Cheng, 2014).
Risks in Supply Chain Management
Approaches to preventing and managing risks include probability and severity mapping, risk contingency planning, managing commodity and currency fluctuations, a rigorous supplier evaluation and selection process, and supplier development. There are many ways to mitigate risks but the above-mentioned will help shape the discussion. In probability and severity mapping, it's clear that companies need to manage risk effectively but to achieve successfully this, they need to understand the types of risks, and then assess the relative impact of risk and the relative probability of risk occurrence. Using this method Royal Dutch Shell Plc will be able to evaluate the risks affecting the supply management system they are using. In this process, a risk matrix is used to measure the severity and then come up with a contingency plan (Bas & Van der Lei, 2015).
What Is Contingency Planning?
Contingency planning is the next step in developing a blueprint that identifies alternative strategies that will help ensure success if the risk occurred again. A successful contingency plan goes through three key steps which include implications of risk, developing contingency plans, and testing the contingency plans. Evaluating the risk implications involves brainstorming the implications and coming up with a simple technique to avert the risk. The next step is developing an emergency plan based on relative severity and the probability of occurrence of the risk. In this step, the risk matrix plays a significant role in creating strategies to mitigate the risks. In certain circumstances, there can be two contingency plans however the primary objective should be to develop an emergency plan based on probability and severity. Finally, test the program which means ensuring that the plan is realistic and will work (Bas & Van der Lei, 2015).
Analysis of Royal Dutch Shell Supply Chain Management
Royal Dutch Shell plc supply chain management works efficiently providing its consumers with quality services. Nevertheless, they face distinct problems with their supply chain system. Issues, in this case, include cost control, planning and risk management, and supplier/owner relationship management. Globalization in the market continues to affect supply chain management with more issues creeping up each day (Cheng, 2014). Let's look at these matters in a nutshell and how they have changed the game plan in the global marketplace.
In the market environment, business continues to expand their reach from country to country delivering goods in different areas of the world. The extra cost is incurred when companies use the freight mode as a method of supply chain management to reach their customers. It's more noticeable that using this model the price of fuel increases because the design creates the extra cost that is ultimately felt by the client (Ellram, Tate & Feitzinger, 2013).
Planning and Risk Management
As the supply chain management predicts material prices are uniquely set in the system, but huge errors in the system can adversely affect the supply chain system (Ellram, Tate & Feitzinger, 2013). Due to this fact, huge brands such as Royal Dutch shells use their efficient management system to avert such risks. Risk management is a huge factor that can significantly affect the brand name and lead to high-profit losses from such errors. To make it better, Royal Dutch Shell plc sets in place risk management plans that achieve direct and desired results.
Supplier/Owner Relationship Management
Multinational corporations are set in different countries, providing the same product but with different qualities. Royal Dutch Shell is set in more than 300 countries worldwide; this means they have to adhere to different rules and regulations regarding taxation and safety. Because it has different stations across the world the chances of conflict increase between the suppliers and owners which can quickly affect the business. Having the proper relationship with the host company offers them the opportunity to build better business models that are conducive to growth (Ellram, Tate & Feitzinger, 2013).
Royal Dutch Shell Strategies to Overcome these Issues
Royal Dutch has over the years come up with ways to overcome issues related to supply chain management; it has established procedures such as the Use of the best mode of freight, the appointment of competent staff, and clear policies for the evaluation of the oil and gas products. By coming up with these strategies, they reduce and mitigate the issues without affecting the business. More so it's important to note that supply chain risks come in different forms. These include financial risk which can easily be caused by inventory costs due to obsolesce, price drops, and increases. A mismanaged supply chain can lead to excessive or mismatched inventory that is liable to high financial risk (Ellram, Tate & Feitzinger, 2013). It is important to have an efficient system but at the same time, complexity and uncertainty can significantly affect the results from the sales funnel. If such risks continue, they can significantly disable the growth pattern leading to more financial risk.
With efficient systems, there should be competent decision-makers who are the overall of the company. Having skilled workers can help you to manage greatly the risk caused in such instances thus building confidence and reducing mistrust. Royal Dutch Shell has established sure ways to mitigate the risks and improve its supply chain management system without affecting the product quality (Ekatah, Samy, Bampton & Halabi, 2011). With so many issues affecting the supply chain management system, the Royal Dutch have used their resources to try and rebuild confidence in the organization in the following ways:
Using the most economical mode of freight - mode of shipment reduces the operational costs incurred in the supply management system. Royal Dutch has enhanced its freight mode using cost-efficient methods in all its stations to improve customer delivery. Mitigating costs in their freight mode has considerably improved service delivery and thus built a good supply chain system (Gligor, 2015).
Competent staff - Royal Dutch Shell has used its resources to secure the best human resource across the world to overlook their stations. In each country, special engineers are picked to make sure the pipelines and product quality is top-notch by doing so Shell plc continues to be a dominant player in the petroleum industry. Competent staff can detect changes and track market trends thus minimizing risk both as a competitor and financially (Gligor, 2015).
Clear policies in all branches - setting up clear policies in all departments to evaluate the oil and gas materials. By creating such systems, Shell plc offers suppliers and owners a level playing field regarding quality. These have significantly influenced the product relationships between the owner and vendors thus resulting in proper due diligence on both sides (Gligor, 2015).
Fraud and obsolesce are common denominators in big organizations; small oversights on the inventory can cost companies millions of dollars. Fraud, especially in stock, is a huge risk factor that can grossly affect an organization in building integrity around its business. Strategies to mitigate such risk are more financial and for record-keeping so that managers can take record-keeping seriously. Although the oversight is caused due to poor recording by companies, need to come up with high-quality record-keeping for their products. Financial risk in such cases is likely due to the use of systems for self-gratification. In most multinational companies the managers are palpable for such inadequacies ("Fraud Risk Management, 2015).
Proper record-keeping from the manufacturer, supplier, and the end-user can be difficult but essential to keep in check. Moreso, suppliers, have the obligation to keep their records clear and well defined especially during auditing. Companies...
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