Shell Supply Chain Management

I am student of MBA (Supply chain management) at Bahria University Pakistan. I and my friend made this report on the supply chain management of Shell Oil. Kindly like and if anyone want this report than kindly email me on [email protected].

Regards,
Osama Bin Raees

1. SUPPLY CHAIN MANAGEMENT

Report On:
Supply Chain Processes and Core
Competencies at Shell Oil Company
Submitted By: Submitted to:
Malik Ahsan Haider Sir Irfan Ali
Osama Bin Raees

2. Contents
Introduction .................................................................................................................................................. 5
COMPANY’S SLOGAN/MISSION ................................................................................................................ 5
COMPANY’S OBJECTIVE ............................................................................................................................ 5
VISION OF SHELL ....................................................................................................................................... 5
AIM OF SHELL ............................................................................................................................................ 6
GOAL OF SHELL ......................................................................................................................................... 6
STRATEGIES OF SHELL ............................................................................................................................... 6
ORGANIZATIONAL RESOURCES ................................................................................................................. 6
MARKET LEADERSHIP DUE TO INNOVATION ............................................................................................ 6
NUMBER OF DEPOTS IN PAKISTAN ........................................................................................................... 6
Hierarchy of Supply Chain at Shell ............................................................................................................ 7
SUPPLY CHAIN PROCESS OF OIL INDUSTRY ................................................................................................. 7
TYPES OF STREAMS IN AN OIL INDUSTRY ................................................................................................. 8
Upstream oil sector ............................................................................................................................... 8
Downstream sector ............................................................................................................................... 8
Midstream sector .................................................................................................................................. 8
Supply Chain and its Role in Shell Oil Company: ......................................................................................... 8
Supply chain Core Competencies at Shell ................................................................................................. 9
3PL to 4PL ............................................................................................................................................ 10
Lekkerland ........................................................................................................................................... 10
Technology .......................................................................................................................................... 10
Supplier Collaboration ........................................................................................................................ 11
Shell Complex Supply Chain Operations ............................................................................................... 12
Shell Upstream Operations ................................................................................................................. 13
Shell Downstream Operations ............................................................................................................ 13
Mode of Transportation in Shell Oil Company .......................................................................................... 16
Pipeline Transport ................................................................................................................................... 16
Ship Transport ......................................................................................................................................... 16

3. Railway Transport ................................................................................................................................... 17
Trucks ...................................................................................................................................................... 18
Main Issues in the Supply Chain at Shell ............................................................................................... 19
Cost Control ........................................................................................................................................ 19
Planning and Risk Management ......................................................................................................... 19
Suppliers/Owners Relationship Management .................................................................................... 19
Shell’s Strategies to overcome these Issues .......................................................................................... 20
Conclusion .................................................................................................................................................. 20
References .................................................................................................................................................. 21


Table of Figures

Figure 1: Hierarchy of supply chain at shell .................................................................................................. 7
Figure 2: Types and example upstreams industries in Pakistan ................................................................... 8
Figure 3: Supply Chain Process at shell ....................................................................................................... 12
Figure 4: Divisions of stream's process at shell .......................................................................................... 15

5. Introduction
Shell has an over 100 year’s presence in the subcontinent.
The Shell brand name enjoys a 100-year history in this part of the world, dating back to 1899 when Asiatic
Petroleum, the far eastern marketing arm of two companies: Shell Transport Company and Royal Dutch
Petroleum Company, began importing kerosene oil from Azerbaijan into the subcontinent. Even today,
the legacy of the past is visible in a storage tank carrying the date - 1898. The documented history of Shell
in Indo Pakistan subcontinent dates back to 1903 when partnership was struck between The Shell
Transport & Trading Company and the Royal Dutch Petroleum Company to supply petroleum to Asia.
In 1928, to enhance their distribution capabilities, the marketing interest of Shell and the Burmah Oil
Company Limited in India were merged and Burmah Shell Oil Storage & Distribution Company of India was
born. After the independence of Pakistan in 1947, the name was changed to the Burmah Shell Oil
Distribution Company of Pakistan. In 1970, when 51% of the shareholding was transferred to Pakistani
investors, the name of changed to Pakistan Burmah Shell (PBS) Limited.
The Shell and the Burmah Groups, retained the remaining 49% in equal proportions. In February of 1993,
as economic liberalization began to take root and the Burmah divested from PBS, Shell Petroleum stepped
into raise its stake to 51%. The years 2001-2 have seen the Shell Petroleum Company successively
increasing its share, with the Group now having a 76% stake in Shell Pakistan Ltd (SPL) - an expression of
confidence.
COMPANY’S SLOGAN/MISSION
“You can be sure of Shell.”
COMPANY’S OBJECTIVE
Shell is focusing on retailing, providing better facilities to customers, clean petrol pumps constructing
international standard petrol filling stations, good advertising campaigns and mini markets (select).
VISION OF SHELL
To Be The Top Performer Of First Choice.

6. AIM OF SHELL
Creating a secure business environment, minimizing economic losses, and business disruptions
safeguarding the group’s integrity and reputations.
GOAL OF SHELL
The goal of the company is to position itself as the preferred oil company in Pakistan, leading the field in
its commitment to safety, customer service, quality and environmental protection.
STRATEGIES OF SHELL
A strategy of corporation forms a comprehensive master plan stating how the corporation will achieve its
mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage. The
strategy of Shell is to grow internally by expanding its operations through acquisition and strategic
alliances. Shell focuses to differentiate its products from competitors in the area of quality and services.
ORGANIZATIONAL RESOURCES
Shell has established 1404 petrol filing station in different areas of Pakistan. But now the company is trying
to reduce the number of petrol filling station because they do not need that filling station, whose monthly
sales are less than 500000 liters. Up till now about 50 pumps are renovated in deferent cities of Pakistan.
MARKET LEADERSHIP DUE TO INNOVATION
Shell is considered to be the market leader in innovation. It was the first company to get legal approval to
operate Mini-Market. It provides suggestive literatures to its customers while launching a new product
such as Helix super and Helix Lubricant etc. It was also the first company to introduce the concept of
Mobile Training Unit (MTU) for the purpose of training the workers and introducing quality and quantity
control units, which check the quality and quantity of motor gasoline at various filling stations.
NUMBER OF DEPOTS IN PAKISTAN
Shell has got 14 depots in different areas of Pakistan. Oil and petroleum industry supply chain is totally
different than the supply chain of FMCG instead of lubricant. Shell Pakistan or oil marketing companies
follows downstream supply chain.

7. Hierarchy of Supply Chain at Shell:

Figure 1: Hierarchy of supply chain at shell


SUPPLY CHAIN PROCESS OF OIL INDUSTRY
The supply chain model of oil and gas companies starts with raw materials such as copper and steel,
drilling equipment, mudding, and specialized tools. It extends through manufacture of products necessary
to construct drilling rigs, off-shore platforms and a host of facilities in often very remote parts of the world.
The supply chain includes multi-tiered suppliers, subcontractors and original equipment manufacturers,
out-sourced construction and facilities operations, and state-of-the-art operating techniques. In this
environment, logistics excellence brings a new, higher dimension to the opportunities while lowering the
risks it continues through production, transport, and refining until the products are consumed by the
people or end users. It certainly includes the products and services brought to the operating systems by
those companies representing the oil and gas field services businesses.


General Manager
Supply Chain
Facilities
Terminal Manager
Logistics
Manager ME and
SA
North South
Central
Supply Contract
and Negotiations
Supply Chain
Analyst
Supply Operations
Supply Operation
Lead

8. TYPES OF STREAMS IN AN OIL INDUSTRY
The oil &gas industry is usually divided into three major sectors: upstream, midstream and downstream
Upstream oil sector is also commonly known as the exploration and production (E&P) sector. The
upstream sector includes the searching for potential underground or underwater crude oil and natural
gas fields, drilling of exploratory wells, and subsequently drilling and operating the wells that recover and
bring the crude oil and/or raw natural gas to the surface.
Downstream sector commonly refers to the refining of petroleum crude oil and the processing and
purifying of raw natural gas, as well as the marketing and distribution of products derived from crude oil
and natural gas. The downstream sector touches consumers through products such as gasoline or petrol,
kerosene, jet fuel, diesel oil, heating oil, fuel oils, lubricants, waxes, asphalt, natural gas, and liquefied
petroleum gas (LPG) as well as hundreds of petrochemicals.
Midstream sector involves the transportation (by pipeline, rail, barge, or truck), storage, and wholesale
marketing of crude or refined petroleum products. Pipelines and other transport systems can be used to
move crude oil from production sites to refineries and deliver the various refined products to downstream
distributors.


Streams In Oil Industry
Upstream Companies
United Energy Pakistan
Pakistan Petroleum Ltd
Midstream Companies
National refinery
Pakistan Refinery
Downstream Companies
Shell Pakistan
Pakistan State Oil
Figure 2: Types and example upstreams industries in Pakistan

9. Supply Chain and its Role in Shell Oil Company:
In today’s environment, supply chain includes different parties which are the direct or indirect part of the
organization in order to fulfill the requirements of the organization. In previous days, supply chain was
considered as the manufacturers and suppliers, but now it is used in order to manage inventories and
transport to the customer’s end. Supply Chain Management (SCM) focuses on the external market in order
to grab favorable opportunities in order to provide relief to the organization e.g. rates vary day by day so,
SCM orders needed material during less expensive days. After buying cheap material Supply Chain
Management (SCM) transports this material at organization’s warehouses then organization starts
production. Thus, Supply Chain Management (SCM) is a cycle which starts from buying martial and deliver
the material to the organization which leads the organization to start its production. There are many
organizations which are operating very successfully within the high competitive environment such as;
Wal-Mart, Dell and Shell etc. In high competitive markets effective Supply Chain Management (SCM) is
considered as the most important competitive advantage because due to the effective Supply Chain
Management (SCM) organization’s cost reduces as compared to the other competitors in the market. In
Shell Supply Chain Management is very effective because they provide best quality hydrocarbon products
to the Shell Plc including; Gas & Oil in order to facilitate the customers. As Shell is operating all around the
world including; United States of America (USA), Brazil, Canada, Denmark, France, Germany, Kuwait,
United Kingdom (UK), South Africa, Nepal, New Zealand, Egypt, Qatar and Sri Lanka. However, it is very
difficult to supply quality Oil & Gas to the Shell Plc because Shell has 300 terminals and 9,000 Kilometers
of pipelines, but they are working very efficiently as they are providing best quality fuel to the customers.
Supply chain Core Competencies at Shell:
“More upstream, profitable downstream”. In 2005, Shell used this mantra to distil its new strategy. With
upstream initiatives, the energy and petrochemicals group searches and recovers oil and gas. Shell
develops the way it refines and delivers products to customers via its downstream initiative. In short,
Shell’s mantra means that if it boosts production, its income from refining will also go up.
A supply chain transformation was key to realizing this strategy. As a result, Shell restructured its supply
chain, with various end goals. These include standardizing practices and technologies, generating stable
cash flows and putting demand-driven best practices front and center of operations.

10. 12 years on from the new strategy launch, and Shell considers the supply chain transformation a success.
It’s ready for the next step, i.e. transferring the new strategy to its operations in emerging markets, namely
Asia. Shell’s transformation journey has been long, but it can be broken down into distinct parts:
3PL to 4PL
Before 2005, Shell was using third party logistics (3PL) to buy products. However, this meant that it lacked
command of the procurement process. Shell collaborated with Accenture to build a fourth party logistics
operation (4PL), which Shell calls Logistics Management Services (LMS). LMS supports Shell’s upstream
operations, covering production, wells and projects. It is also a single-client platform, which provides a
Shell-tailored solution. Furthermore, Shell is able to maintain close control of the outsource provider. It is
able to build long-term strategic relationships with the provider, granting access to the provider’s best
people, technology and innovation. Ultimately, by losing its old practice and negotiating with Accenture,
Shell was able to take back control of the business.
Lekkerland
Lekkerland had been the supplier of many Shell filling station shops in the past already. As a result of the
transformation, in 2007 Shell closed a framework contract with the German-based company as their
wholesale and logistics partner in several European countries. Almost ten years later, Shell and Lekkerland
have now signed a new international framework agreement for six countries that includes supplying more
than 2,500 filling stations across Europe.
Lekkerland delivers food, tobacco, and non-food products to Shell’s stores with the same quality standards
throughout Europe. Depending on the country, Lekkerland also provides support on matters such as
category management and the further development of the food service offering.
“We are very delighted that our long-term partner Shell continues to place its absolute trust in us,” said
Patrick Steppe, Chief Executive Officer of Lekkerland AG & Co. KG. On an international level, Shell is one
of the largest customers of the 360-degree full-service concept providers for on-the-go consumption.
Technology
Shell adopted an SAP and APO sales system as its single platform for supply chain planning. For its
lubricants business, Shell worked with supply chain company E2open. E2open provided Shell with
Demand Sensing (DS) and Multi-Enterprise Inventory Optimization (MIO), the former able to adapt to
shifts in consumer behavior and market influences. From this, it produces the most likely prediction of
future short-term demand. On the other hand, MIO uses advanced mathematics and daily granularity to

11. produce more informed inventory targets. These targets mirror real-world market conditions, even in
volatile markets. Combined, the solutions allow Shell to improve forecast accuracy. Excess inventory has
been reduced, which has in turn improved working capital use and free cash flow.
By using a single-instance ERP system, Shell was able to globally implement DS and MIO relatively quickly.
This change had significant results. The majority of Shell’s finished product portfolio is now demand sense,
while users can go about their daily and weekly planning tasks without disruption.
Supplier Collaboration
Improving relationships with suppliers was a key aspect of Shell’s transformation plan. Shell works with a
wide variety of suppliers, from household names such as Mars to local suppliers. In order to get the most
out of relationships with these firms, Shell now holds comprehensive internal reviews on how to improve
current situations. Additionally, the company developed the Shell Diverse Supplier Pipeline Management
System in 2014. The programme aims to make sourcing easier and more transparent for ethnic minority
and female-owned businesses and smaller potential suppliers. If a supplier meets Shell’s procurement
needs, the system records basic details about the supplier into the Supplier Pipeline database and sends
the potential vendor a link to add more information. This technology also tracks the progress made by
diverse businesses introduced to Shell stakeholders.
Prelude FLNG, a floating liquefied natural gas platform in Australia, provides a modern example of Shell
building effective relations with suppliers. Shell built effective bonds with main contractors to design and
build this ground-breaking project.
Through its transformation, Shell has proven how important supply chain is to wider company changes.
By restructuring its supply chain, it has been able to demonstrate “more upstream, profitable
downstream” in action. The company has modified its supply chain in several key areas, and thus primed
it to make huge strides in Asia and beyond.

12. Shell Complex Supply Chain Operations:
The whole supply chain in this industry as very complex compared to other industries. The crude oil has
to make a long journey from the point of production to the refineries. Long distance results in a long lead
time of several weeks and in numerous players in the supply chain. The production is concentrated in
certain areas but the product itself is demanded all over the world. The refinery process is a complex and
capital-intensive part of the chain. The refined products are distributed either by road, water, rail or
pipeline.
The oil supply chain is fundamentally based on a traditional model and the different stages in the chain
also illustrate it. The oil companies have their classic way to serve the customers with products being
'manufactured', marketed, sold and distributed. The main goals are the same like in other industries,
deliver the right product to the users in the right time and at the right price. The oil supply chain essentially
can be divided into two closely linked major segments: upstream and downstream supply chain. The
supply chain as a whole consists of 6 main stages where the middle refining stage separates the up- and
downstream parts of the chain, although procurement as a vital function has to happen before refinery
stage in order to provide the inputs for it. Figure illustrates the before mentioned and gives a schematic
view about the typical oil supply chain.

Figure 3: Supply Chain Process at shell

13. Shell Upstream Operations:
Shell’s upstream businesses explore for and extract crude oil and natural gas. Shell is using joint ventures
with international oil companies around the world. Shell liquefies natural gas by cooling and transporting
it to their customers across the world. They are also converting natural gas to liquids to provide cleaner
burning fuels. The upstream business are grouped into two organizational unites. First the Upstream
America, covering the Americas and Upstream international, covering the rest of the world with major
projects in Europe, Asia, Middle East, Russia, Australia and Africa.
Upstream of Shell Petroleum basically starts with the acquisition of crude oil and with the related
operation such as exploration and production. Afterward logistics management has to be involved in order
to deliver the crude oil from the exploitation point to the refinery.
1. Exploration:
This stage involves seismic and geological operations.
2. Production:
These concerns about exploitation of the crude oil from the reservoir by drilling. Production needs highly
qualified engineering work and it also links to other activities such as procurement, transportation. The
crude oil produced is transported by pipelines or oil tankers to the terminals for storage. From here it is
either to transport directly to the refinery or exported to other companies’ refineries.
Shell Downstream Operations:
Shell’s downstream organization is made up of a number of businesses. Collectively these turn crude oil
into a range of refined products, which are moved and marketed around the world for domestic, industrial
and transport use. These include fuels, lubricants and bitumen. Shell benefits from tremendous scale
through their global integrated network of refine using chemical plumes they are turning 4 billion bails of
crude oil per day into valuable transport fuels, base chemicals and other products. Their worldwide supply
distribution infrastructure is complemented by their global trading capabilities together they allow Shell
to make the right make or buy decisions. And optimize earnings. Shell’s branded fuel retailed network is
the world largest. Shell has more than 45.000 service stations in more than 90 countries. Everyday Shell
is selling more than 315 million liters of fuel to approximately 10 million customers. Shell’s lubricants
products are available in 120 countries and have a 13% share in the global lubricants market. Our
Downstream organization is made up of a number of businesses. Collectively these turn crude oil into a

14. range of refined products, which are moved and marketed around the world for domestic, industrial and
transport use. These include fuels, lubricants and bitumen.
Their manufacturing business includes Refining, Supply and Distribution. Marketing includes our Retail,
Business to Business, Lubricants and Alternative Energies. Their Chemicals business has dedicated
Manufacturing and Marketing units of its own. Shell also trade crude oil, oil products and petrochemicals
primarily to optimize feedstock for their Manufacturing business and to supply our Marketing business.
The global network of Shell Trading companies encompasses Shell’s trading activities in every major
energy market around the world. They also manage one of the world's largest fleets of liquefied natural
gas (LNG) carriers and oil tankers. Their industrial and heating fields marketed by their commercial fields
business count for 20% of all Shell fuels sold worldwide. Shell is creating a strong portfolio through
investing in key markets and disinvesting non-strategic assets. Over the last 5 five Shell has invested 23
billion dollars in their oil products chemical businesses. Shell is investing in big projects in several countries
and reduces cost through letting businesses go that are not profitable. By this, their build a strong brand,
the Shell brand.
The first stage of the downstream supply chain is the refining process which is based on demand
forecasting and triggers the procurement and the logistics activities in order to supply crude oil to the
refinery and deliver its derivatives to the customers.
3. Transportation:
“Wide oil pipeline” goes all the way to Lahore. It is used to transport Diesel from the southern part of
Pakistan to Northern and mid country parts of Pakistan. Due to this pipeline the carrying/transport cost
for the customer becomes very low. The pipeline can be used by all the oil marketing companies. Ship
tanker transports carrying Diesel usually come to Port Qasim. Terminals of Shell at Mehmoodkoth and
machine are connected to this pipeline and for transportation of Diesel Shell does not have to use over
land Tanker transport as it is using this pipeline. As transport cost is low, automatically the cost to end
consumer is also low.
4. Refining:
This is a complex, well planned process which involves the transformation of the crude oil into different
types of derivatives based on demand forecasting. Therefore, this has a tight link to the next stage, to the
marketing activities and also involves inventory management.

15. 4. Distribution:
Logistics management assures that the right products get delivered to the right customers in the right
time preferably in a cost efficient way. Shell trading is a section of the shell business and controls the
distribution across the world and with external customers. Shell has more than 300 distributions facilities
with more than 3,000 storage tanks in 70 countries. With this, Shell moves their products through USA
and Europe. Shell owns around 7,000 trucks and these trucks travel around the world and deliver every
seven seconds.
6. Marketing:
This deals with marketing the different crude oil derivatives to the right customers. Marketing has to have
an accurate knowledge about the current inventory level and refinery activities in order to manage its sale
function.


Figure 4: Divisions of stream's process at shell

16. Mode of Transportation in Shell Oil Company
Oil transportation is a major industry in and of itself, with a range of transportation options available,
depending on the situation at hand. The most important methods include pipeline, rail, barge and truck.
Each method has its own advantages and is desirable in certain situations, and minute amounts of oil
may use several of these transportation methods during its transit time. Three of the best transport
methods are pipeline, ship, rail, and truck. Let’s take a look at the benefits of each.
Pipeline Transport
Crude oil that is gathered from its source at wellheads can be moved to processing plants, tankers, and
refineries via pipelines. There are several benefits to the pipeline technique, including:
 Safety – Moving gas and oil through pipelines is a safe way to get the job done. There are nearly
500,000 miles of pipelines weaving through various states in America. The pipes are equipped to
carry petroleum products, crude oil, and natural gas. This technique is environmentally friendly
and leads to exceedingly low rates of injuries and fatalities. In fact, it would be easier for a
citizen to get struck by lightning than hurt in a pipeline accident.
 Energy Efficient – The pipeline transportation method uses less energy than trucks and trains;
therefore, this technique is eco-friendly and leaves a low carbon footprint.
 Convenience – Because booster pumps are positioned along the pipelines, pressure can be
conveniently maintained to keep oil flowing to its destination.
Ship Transport
Another good way to move fuel from one location to another is via ship or barge. Some of the pluses of
using ships to transport petroleum include:
 Inexpensive – Moving crude via barge or ship is one of the least costly methods of transport.
 Large Capacities – Tank barges carry huge amounts of oil; a typical tank barge can hold 30,000
barrels.
 Multiple Barges Available – There are approximately 275 tank barges and integrated tug-barges
available to ship oil.

17. Railway Transport
Moving crude from its source to the refineries around the nation can also be efficiently done by rail.
Although this was first considered to be a stopgap technique until pipelines could be built, it has
developed into a popular transport method. Some of the benefits of railway transport include:
 Low Cost Set Up – It takes a short time to recover the capital costs of setting up railway
infrastructures to move gas and oil.
 Short Construction Time – Building new rail infrastructures takes a relatively short amount of
time. Some estimates give lead times of only 12 to 18 months from startup to fruition.
 Fleet Resources – Rail operations can easily access a mass amount of fleet resources, such as rail
crews, railway cars, locomotives, and extra tracks.
 Shorter Transit Times – Transporting crude via train has a fairly short transit time. Shipping fuel
from Alberta to the U.S. Gulf Coast only takes one to two weeks.
 Quick Response to Market Fluctuations – Railway carriers are able to respond rapidly to
changes in the marketplace. This allows for flexibility to adapt to the ebbs and flows in the
business of transporting gas and oil.
The oil is loaded into the tank cars, and are moved by a diesel train across the rails to the refinery or the
trains planned destination. Trains can carry a mass amount of this oil by using of multiple tank cars.
Though each rail car holds a lot less oil than a large marine tanker vessel, when multiple are used a lot of
oil can be transported. For example, the DOT-111 tank car is a very common tank car and can hold
34,500 US gallons (820 bbl; 131 m3). If ten tank cars were pulled the train would be carrying 345,000 US
gallons (8,200 bbl; 1,310 m3) of oil, so the amount of volume increases rapidly. The locomotive used to
pull these rail cars have a massive amount of horsepower and can be hooked up with other locomotives
to increase the horsepower, making the rail car a fairly cost effective way to move this oil. These railcars
just like the pipelines can be used to carry a refined fuel instead of crude oil from a refinery to a
distributing plant.

18. Trucks
Tank trucks are used a lot like rail cars are, but they will usually transport refined fuel to a fuel station,
like a gas station. Trucks are usually used to carry smaller capacities of oil short distances. Like railcars
these trucks can carry several different forms of this petroleum, but they do not really carry the
petroleum in its crude oil form because it would take a lot of trucks to deliver the volume of crude that
the refineries demand. These trucks can deliver this fuel to gas stations, or deliver the fuel straight to
the consumer.
These trucks are used in situations where it would be illogical to use railcars, pipelines and tanker ships.
Places like gas stations; that are not able to be accessed by marine vessels, and do not demand the
volume that is delivered by pipelines or trains, would get their fuel from tanker trucks. This allows a
rational and cost effective way to deliver the fuel to the consumers.
To meet the needs of moving crude from its source to the refineries that process it and get it out to
consumers, there have to be efficient methods to get the job done. Pipelines are safe, energy efficient,
and convenient. Barges and ships offer cost benefits, flexibility, and have large capacities. Transporting
fuel by railway can be an inexpensive technique that takes a short time to set up; it offers minimal
transit time, has readily available fleet resources, and responds quickly to the market fluctuations. Each
of these transport methods has its own unique advantages and applications.

19. Main Issues in the Supply Chain at Shell:
Although, Shell’s Supply Chain Management (SCM) is working very efficiently in order to provide Shell’s
customers quality services, but there are some very obvious issues to the SCM. These issues are; Cost
Control, Planning and Risk Management and Suppliers/Owners Relationship Management etc. In recent
days, these are the main issues to the Supply Chain Management (SCM) due to the increasing globalization
of the businesses so; Supply Chain Management’s issues are increasing day by day. Other possible details
about each issue are discussed as follows

Cost Control:
In today’s environment, businesses are increasing from one country to another therefore; Supply Chain
Management (SCM) feels difficulties to deliver goods to the different areas in all over the globe. In
addition, Supply Chain Management (SCM) use freight mode in order to deliver the product to the
organization so, extra costs are incurred by the SCM in order to provide best services to the customers
(Boyle, 2002). Moreover, increasing prices of the fuel is also very huge threat for the Supply Chain
Management (SCM) because it creates extra costs for them.
Planning and Risk Management:
As Supply Chain Management (SCM) predicts material prices on the basis of the past results of the market,
but there are huge chances errors so, risk has been increased for the Supply Chain Management (SCM).
Due to the effective Supply Chain Management (SCM) organizations achieve huge brand name in the
market, but due to the poor performance organizations can lose its image within a single moment. Thus,
it is not an easy job because it has a lot of technicalities which cannot be easily understood by the layman
so; they work hard in order to achieve desire results.
Suppliers/Owners Relationship Management
Shell has different stations all over the globe including; China, India, Japan, Australia, United Kingdom
(UK), Brazil, Unites States of America (USA), New Zealand and Pakistan. Thus, different stations in different
countries have different rules to measure or access the quality of the Oil & Gas so, the chances of the
conflicts increase between the suppliers and owners.

20. Shell’s Strategies to overcome these Issues:
In order to overcome these issues related to the Supply Chain Management (SCM), Shell has established
some strategies such as; Use Best Mode of Freight, Appointment of Competent Staff and Clear Policies for
the evaluation of the Oil & Gas Products. These are the main strategies which are used by the Shell in
order to reduce these issues because they know that it is impossible to finish those issues from the core
level. In order to reduce the freight costs Shell uses most economical mode of the freight because it
reduces the cost. In addition, in order to minimize the level of risk Shell has appointed competent
employees who has good eye in order to evaluate the market condition effectively. In last, in order to
reduce the chance of conflicts and clashes Shell has formed clear policies in all the branches to evaluate
the Oil & Gas materials so, due to the clear polices about the assessment of the Oil and Gas product
relationships between the owner and suppliers will remain good.
Conclusion:
To conclude, Shell comes from the position of a big corporation, and still is a giant. It can be described as
a big octopus with multitudes of arms, each of which as one operating companies. Throughout history,
that complexity and sophistication has helped Shell create the needed flexibility to accommodate to the
environment. The trend by time, however, does not favor the complexity and vastness of a giant like Shell.
In environment which grows more and more volatile, competition fiercer and fiercer, Shell is urged to
change: local flexibility now does not suffice, multinational company like Shell also needs the effects of
standardization which, in the end, helps benefit from economies of scales leading to cost reduction and
learning effects. That is all Shell trying to do currently, although there might be many strategies, approach:
restructuring, merging sectors, streamlining, unification etc. All of those strategies is to come toward a
more integrated system, with standardized process, balancing between responsiveness and power-
concentration. However Shell tries to integrate its system, this will always prevail: Shell will never be
completely integrated or power-centralized. The nature of its business has always been susceptible to
regional environment: political, legal, social, economic. Therefore, it would be interesting to see how Shell
manage to balance between these two orientation, pursuing a more integrated system while harnessing
the advantages of a responsive chain of operating companies in a circumstance of the rising state backed
national oil company and scarcity of oil in the future.

21. References:
 https://www.supplychaindigital.com/company/how-shell-executed-its-supply-chain-
transformation#
 https://www.ijser.org/researchpaper/Royal-Dutch-Shell-Plc-and-Its-Supply-Chain-Management.pdf
 https://www.shell.com/energy-and-innovation/the-energy-future/future-transport.html
 https://www.shell.com.pk/about-us/who-we-are/our-history.html
 https://www.shell.com/investors/shell-and-our-strategy.html
 https://www.linkedin.com/pulse/pipeline-ship-rail-benefits-needs-different-oil-gas-methods-
kingsley/
 https://www.supplychaindigital.com/company/how-shell-lubricants-remains-ahead-curve-thanks-
demand-driven-planning#