Aramco Supply Chain Managment

Topics: Petroleum, Saudi Arabia, Supply chain management Pages: 13 (4512 words) Published: May 23, 2010
Table of Contents

Page Number

Background of the Company8
The Dilemma in Saudi Aramco Supply Chain Management10
Analysis of the operation of the Company’s Supply Chain Management12 Conclusion16


Several company managers are continuously searching for the best possible way of reducing cost and utilizing their inventories so that the company can implement cost reduction strategy. With all prices of prime commodities are accelerating for increases to maintain the business, the challenge for manufacturing companies nowadays is to come up with a management strategy that could lessen the burden of imposing additional prices to the consumer’s purchases. Yet seemingly, it seems impossible to achieve due to the domino effect in the market offering. Starting from the raw materials to the manufacturing plant then to the manufacturing plant to its distribution centers and from the distribution centers to the consumers, the process entails expenditures either from the supplier or from the manufacturing plant. Once transporting raw materials is affected by the movement in the prices of gasoline and oil, salary increases of its work force and additional price for the vehicle’s spare parts suppliers cannot but face the reality that they must charge additional cost to their buyers. So goes the trend. The usual thinking about a supply chain is a vertical flow of the entire materials for production that is fully integrated because it is owned by a single firm although its channels are operating independently. Hence, an efficient coordination among the managers of its channels is demanded for the success of the supply chain. However, a supply chain need not only be limited to a single ownership of the entire process. By its definition, according to the paper of B.B. Arntzen, G. G. Brown, T. P. Harrison, and L. Trafton (1993) a supply chain is a network of facilities and distribution alternatives that begins from the procurement of materials, converting the materials into mid-way and finished products, then the distribution of the products to customers. Supply chain is not limited to manufacturing alone but also in the service industry. There may also be expected difficulties along the entire chain due to the varying approaches from industry to industry or from firm to firm but the process proceeds as planned.

Company A Company B DistributorCustomers

Raw Materials manufacturing plant Finished Product Company

This may sound simple but a realistic supply chain actually embraces several finished products with shared components, facilities, and capacities. Materials flow does not come only from one single network but from other networks also. At times, different modes of transportation are considered and usually the bills of materials for the finished products are both costly and enormous. R.H. Ballou, (1992) believes that traditional supply chain still operate along this pattern but on this case the supply chain deviates from the old practice of supply chain and paved the way to another model of creating an effective cost reduction strategy. In the supply chain, according to M.C. Cooper and L. M. Ellram (1993) the main focus lies on the mistake of materials, unnecessary information and unpredictable finances as they move from their supplier, to the respective manufacturer then to the wholesaler passed on the retailer before finally reaching the consumer. However, another view was presented by J.B. Houlihan (1985) because his notion of supply chain is involved in coordinating and integrating these flows for inside the company and its relation with other companies. The ultimate goal of all effective supply chain management is to reduce inventory but available when needed hence, minimize the cost of...

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Al-Naimi, A
Expanding Energy Frontiers - The Institute of Energy Economics of Japan, Osaka, Japan (access June 5, 2009)
Arntzen, B
Ballou, R. H. (1992) Business Logistics Management, 3rd Edition, Prentice Hall, Englewood Cliffs, NJ, p. 21 - 23
Cohen, M
Cooper, M. C., and L. M. Ellram (1993) Characteristics of Supply Chain Management and the Implications for Purchasing and Logistics Strategy. The International Journal of Logistics Management, No. 23 pp. 4, 2, 13-24.
Jum 'ah, A. S. (2002) President and CEO Saudi Aramco, Calgary, Canada, June 11. (access June 5, 2009)
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Lee, H. L., and C. Billington (1993) Material Management in Decentralized Supply Chains, Operations Research, No. 41 pp. 35-47
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Thajudeen, S.M. (2009) Foster Wheeler Group of Companies Middle East Region, Al Khobar, Saudi Arabia, February 15. (access June 5, 2009)
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