ENM616 Socially Responsible

Management

Supply Chain Management (SCM)

and its role within a company
Corporate Social Responsibility (CSR)
strategy
Dr Sarah Buckler
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SCM =
About managing the flow of information, materials,
service and money across any activity, in a way which
maximises the effectiveness of the process.
Successful Supply Chain Management will reduce the
costs of both clients and suppliers, while sustaining or
improving added value or margins
Leading Oil and Gas Industry Competiveness (LOGIC)
http://www.logic-oil.com/supply/supply.html

LOGIC (Leading Oil and Gas Industry Competitiveness)

created in 1999 to improve supply chain efficiency in
UKCS by UK Government (now subsidiary of Oil & Gas
UK)

Supply
Over 27 billion revenue (Ernst & Young 2012)
High cost of producing hydrocarbons in North Sea
Leads to greater emphasis on efficient, streamlined,
coordinated, highly skilled, asset based processes
Globalisation of energy sector also leads to these
processes becoming interwoven across regional and
national boundaries in increasingly complex logistical
and contractual arrangements
UK world leader in subsea engineering with 45%
global market (Oil & Gas UK 2013)

Supply and Demand

Product Supply
Chain starts before particular customer enters chain
Standardised products
Customer demands products and services
Customised
Often start with customer who initiates chain of
manufacturing, design etc.
Rising influence of broad spectrum of shareholders,
media, NGOs and globalisation upon issues of supply
and demand which has changed relationships and levels
of control.

Supply Chain Management

In oil and gas SCM is for
products, services and
expertise
Local and global
How to develop, maintain
and sustain organisations
and regions positions
within energy sector

Offshore Oil & Gas Supply Chain Categories

Source: Oil & Gas UK 2010a

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Offshore Oil & Gas Supply Chain Structure

Source: Oil & Gas UK 2010a

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Three Tiers
Tier 1 end users, operators in exploration and
production, energy providers & asset holders
Tier 2 Major contractors and consultants involved
in E & P, patent parts, system and solutions to
operators specifications, well management and
decommissioning

Tier 3 Services, parts, specialist equipment,

software and materials required by Tier 2 (and 1)
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Offshore Oil and Gas Supply Chain Categories

Source: Oil & Gas UK 2010a

Who is in the Chain? (196k in

Scotland)

Own company
Employees
Clients
Suppliers
Suppliers suppliers
Customers customers
Look at page 40
http://www.oilandgasuk.co.uk/publications/viewpub.cfm?frmPubI
D=753
Procurement throughout the life of a project:
Development
Production
Decommissioning
Must adapt to meet fluctuating resources and perceptions

Value of the UKCS Chain

27 billion to economy (including 7billion in exports
mainly to Norway, West Africa, North America and Asia)
Biggest increase in investment since 1970s
450,000 jobs
36,000 in operating companies (12,500 offshore)
200,000 in supply chain (45,000 offshore)
112,000 follow on from employee economic activity
100,000 in export of good and services
Critical shortages mid career, onshore roles including
engineering, project management & geosciences
(Oil & Gas UK 2013)
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Strategic approach
Dept of Business, Innovation & Skills (BIS), Oil &
Gas UK & DECC developed related strategies
Look at economic production of resources
Sustain national & international supply chain
Promote collaboration within industry and with
government
Mapping supply chain is one of biggest challenges.
Aim to promote national & international growth &
capabilities
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Activity
Identify a major TNC project on the West of
Shetland
Where do you think the company and
activities fit into the supply chain of this
sector?
Establish which other types of organisations will
be part of supply chain
Consider how the chain can be managed and
how far reaching are organisations social
responsibilities in terms of:
Ethics
Geography
Layers of interaction

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Economic:
Prices for product from planning to sale
In/direct costs including staffing, training, timing, lead
times, idle transportation, measuring risks of failure/non
delivery and subsequent costs
Hidden economic costs and contributions to neighbouring
communities, government etc.
Mergers and economies of scale
Does cheapest prove value for money in short and longer
term?
Direction of the supply and demand markets, bank rates,
share prices and their influences

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Supply Chain Strategy

Supply chain governed by business
arrangements, supply contracts and
external factors such as political situations,
costs and ethics
Mergers change the dynamics and may
condense the chain, especially when
subsidiaries in lower tiers are considered
Bernon, M. (2010) Sustainable supply chain
management Henry Stewart Talks, streaming
video file (25 min.)

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Supply Chain
Outsourcing, contractors and suppliers of
equipment, systems & services
Complexity & size of oil concessions have
increased chain.
Top tier companies coordinate exploration &
production
Benefits of involvement
Extent to which apply & regulate same
regulations and policies
Impact of reputation varies down the chain

Green Chains
Sustainable development within CSR
Green sustainable chains which acknowledge impact
of chain beyond immediate partners
ISO standards
Improve or do not harm ecological and social
systems
Link between innovative companies and
sustainability within SCM = new ways of working
Shifts focus within and beyond organisations
Need to align finance with environmental and social
elements

SCM Framework

SCM across the chain requires:

Shared objectives
Planning
Code of practices - consistent
Long term relationships
Contracts
Risk management
Payment arrangements
Feedback mechanisms
Governance and audit framework
Training
Measurements
Corporate commitment and compliance

Potential Problems include:

Identifying and aligning shared objectives
Inter and intra organisational communication
Staff shortages and fluidity of energy
employment market exemplified by insufficient
supply of engineers
Silo mentalities
Tensions between technological and logistical
systems and levels of knowledge
Personalities

Further Problems include:

Different socially responsible approaches and contradictions

Range of company sizes and capabilities
Who governs and imposes penalties
National, EU and international demands and standards
Political, economic and ethical changes
Changing demands and expectations in rapid markets
Fluctuations in prices and demand. E.g. reduction in lending
means that smaller companies struggle to raise revenue
require for investment in order to develop or even maintain
market position

Global Standards include

Social Accountability 8000

ISO 14001
Global Reporting Initiative
UNs Global Compact, a set of core values in the areas of
human rights, labour standards, the environment and anticorruption

http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html

Who designs the standards

Western imposition?
How to impose?
Weaker than law
Malleability

Can SCM and CSR improve society?

Need to balance costs of related policies with outputs
and outcomes
Can reduce waste, pollution, environmental damage,
(clean up costs), improve staff morale, reduce
community tensions, improve asset management,
longer term prospects of company, products and
services
How can these and intangibles such as reputation, trust
be measured?
According to triple bottom approach, outcomes can be
contradictory? Have to integrate social and
environmental improvement with economic goals
How could SCM be developed to improve?

Activity
Assess implications for North East Scotland SCM of
economic downturns and upturns at the level of:
UK
Global

How could SCM and CSR more generally help manage

the implications?

Additional References
BIS , Department for Business Innovation & Skills [Website] Employment rights,
http://www.bis.gov.uk/policies/employment-matters/rights (Accessed Aug 2012)
BIS, Department for Business Innovation & Skills [Website] Corporate Responsibility Report.
http://www.bis.gov.uk/policies/business-sectors/low-carbon-businessopportunities/sustainable-development/corporate-responsibility (Accessed Aug 2013
FPAL [Website] First Point Assessment: Supply Chain Database,
http://www.fpal.com/pages/about/whoweare.htm (Accessed 2013)
HSE, [Website] Leading Health & Safety at Work Act: Leadership Actions for Directors,
http://www.hse.gov.uk/
Oil & Gas UK, [Website] Economic Report 2013
http://www.oilandgasuk.co.uk/publications/viewpub.cfm?frmPubID=753 (accessed
November 2013)
Oil & Gas UK, [Website] Supply Chain Structure
http://www.oilandgasuk.co.uk/knowledgecentre/SupplyChainCodeofPractice.cfm
(Accessed Nov 2013)
Oil & Gas UK, [Website] Promoting Success A Policy Framework for the UKs Offshore Oil
and Gas Industry http://www.oilandgasuk.co.uk/governmentrelations.cfm (Accessed Aug
2013)
Oil & Gas UK, [Website] Environmental Legislation: Statutory Regime
http://www.ukooaenvironmentallegislation.co.uk/contents/pages/statutory.htm (Accessed
Aug 2013)
(PILOT, [Website] Activity areas, http://www.pilottaskforce.co.uk/data/aboutpilot.cfm
(Accessed 2012)
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