Boliver Oil Company

8/8/2019 Boliver Oil Company

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Bolivar oil company ================================================

OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT

CASE STUDY

GROUP MEMBERS:FASAL MEHOOD (MB022014)SAEED AHMEED (MB022023)MALIK FAYYAZ (MB022016)ASIM ARSHAD (MB022020)

RASHID QURESHI (MB023004)MUHAMMAD ABID (MB022012)


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PREFACE

n the business arena, those who have keen interest in the natural selection of

successful commercial organizations are relatively luckier than a

sensational evolutionist being charged of heresy in return of a successful &

legendary endeavor. We need only to relax at our desks with the business

magazines to see the survival of the fittest in action .

I

A striking feature of the modern capitalist economies is the ruthlessness with

which floundering firms are allowed to expire. Fame and past glory spare none as

a look in any countrys corporate graveyard will reveal: in todays sink and swim

business environment, only the strongest survive. In this hectic and hostile world,

firms often appear to run around headless chickens, madly seeking breakthrough

business solutions but more often muddling through in time-honored fashion.


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EXECUTIVE SUMMERY

n todays competitive landscape, organizations are under increasing

pressure to deliver more direct marketing campaigns that yield higher

response rates and greater customer retention. At the same time, lean budgets and

limited staffing gather the organizations ability to develop and execute

successful campaigns.

I

In tough times, organizations must make every dollar count. Direct marketing

campaigns must effectively engage customers to generate more; high quality

leads that result in real ROI (Return On Investment) for the investment.

Equally important, direct marketing success must be achieved without adding

to resource costs.

We present the quest of Bolivar Oil Company for the positive synergy of

appropriate resources at MINIMUMCost.

To begin with, the Bolivar Oil Company is a Multinational producer, refiner,

transporter & distributor of Oil Products. The company has various subsidiaries,

i.e.

Oil extraction Saudi Arabia & Brunei.

Refineries Australia & Japan.

Marketing operations Australia, Japan, Philippines & New Zealand.

The extensive descriptions of the salient activities in regards of Gurneys

organizational objectives can be presented as:


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Far Eastern OperationsThe two major sources of Crude Oil

for Gurney Oil Company are Saudi Arabia & Brunei. This crude oil serves as an INPUT

for further Oil operations around the globe. The cost breakdown is given as under:

CAPACITY/Requirement COST

Saudi Arabia(Ghawar Fields)

70,000 barrels/day $25 per barrel

Brunei(Borneo Fields)

30,000 barrels/day (required) $26 per barrel

Refinery OperationsThe refineries are mainly located in Australia

& Japan. They are supplied with crude oil from Saudi Arabia & Brunei which is refined

here to produce Gasoline & Distillate as OUTPUTS. Furthermore, these refineries possess

adequate processing flexibility that allow the Operations Managers the room to estimate

start & finish dates relatively freely.

Marketing Operations The Marketing operations are set to

commence as soon as possible, i.e., as soon as the inventory is capable enough to bear

adequate number of orders. These subsidiaries have the luxury of implementing Research

& Development (R&D) methodologies to estimate Consumer Demand and the related

costs. The subsidiaries are located in Australia, Japan, and Philippines & New Zealand.

Shipment / Tanker Operations The shipment involves the

transportation of refined oil products from Australia & Japan to New Zealand &

Philippines, or to the Customers. These operations cannot afford to lag and must meet the

start & finish deadlines. Moreover, there are a limited number of tankers available, and

there exists variable shipping costs & tanker-capacity constraint.

US SupplyThe Contingency plan of Bolivar Oil Company involves

the back-up supply of refined oil from United States. The US bears a particular number of

surpluses during 2004, and the company can take advantage of this facility with the

precedence of oil-supply shortage.


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The reception of orders from customers and the End of Project are considered to

be MILESTONES for Bolivar Oil Company. Moreover, these activities are the

critical ones.

Problems

The major problems faced by the Bolivar Oil Company that greatly hinder the

organization include.

Difficulty in coordinating the actions of subsidiaries into an overallcorporate plan.

The trial-&-error based corporate plan does not reflect appropriately

the prevalent operating conditions.

The plan does not optimize for the total company.

The ISSUE

COST MINIMIZATION

The SOLUTION

Linear ProgrammingLinear Programming

Network AnalysisNetwork Analysis

The Linear Programming will require the Lindo software, that can be

downloaded from www.lindo.com. We have formulated the project in accordance

with lindo syntax. On the other hand, Network analysis requires MS Project

2000. We have scheduled the tasks involved along with the network diagram,

using this user-friendly software.
http://www.lindo.com/http://www.lindo.com/


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The VARIABLESThe VARIABLES

SHIC(A) = No. of barrels of Saudi Arabian high intensity crude oil in Australia.

SLIC(A) = No. of barrels of Saudi Arabian low intensity crude oil in Australia.

SHIC(J) = No. of barrels of Saudi Arabian high intensity crude oil in Japan.

SLIC(J) = No. of barrels of Saudi Arabian low intensity crude oil in Japan.

BHIC(A) = No. of barrels of high intensity Brunei crude oil in Australia.

BLIC(A) = No. of barrels of low intensity Brunei crude oil in Australia.

BHIC(J) = No. of barrels of high intensity Brunei crude oil in Japan.

BLIC(J) = No. of barrels of low intensity Brunei crude oil in Japan.

AUg = Demand of gasoline in Australia.

JAg = Demand of gasoline in Japan.

PHg = Demand of gasoline in Philippines

NZg = Demand of gasoline in New Zealand.

Aud = Demand of distillate in Australia.

Jad = Demand of distillate in Japan.

PHd = Demand of distillate in Philippines.

NZd = Demand of distillate in New Zealand.

The CONSTRAINTS


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Demand Constraints (2003)

(10.0) Aug + (7.0) Jag + (5.0) PHg + (5.0) NZg < = 27.0

(10.00Aud + (5.0) Jad +(3.0) PHd + (2.0) NZd

< = 20.0

Capacity Constraints

1.19 SHIC (A) + 0.89 SLIC (A) + 0.93 BHIC (A) + 0.61 BLIC (A) < = 30,000.

1.26 SHIC (J) + 0.88 SLIC (J) + 0.91 BHIC (J) + 0.55 BLIC (J) < = 40,000.

Tanker constrains

SATA(0.12) + BTA(0.05) + PTA(0.02) + NTA(0.01) + SATJ ( 0.11) + BTJ (0.05) +

PTJ ( 0.01) + NTJ ( 0.06) < = 1000

Non-Negativity

All given Variables >= 0


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OBJECTIVE FUNCTIONOBJECTIVE FUNCTION

MIN

SATC (A) 0.40 + SATC (J) 0.60 +

SAHIC (A) 1.19 + SAHIC (J) 1.26 +

SALIC (A) 0.89 + SALIC (J) 0.88 +

BTC (A) 0.20 + BTC (J) 0.30 +

BHIC (A) 0.93 + BHI (J) 0.91 +

BLIC (A) 0.61 + BLI (J) 0.55

Standard formStandard form

MinMin

SATC (A) 0.40 + SATC (J) 0.60 +

SAHIC (A) 1.19 + SAHIC (J) 1.26 +

SALIC (A) 0.89 + SALIC (J) 0.88 +

BTC (A) 0.20 + BTC (J) 0.30 +

BHIC (A) 0.93 + BHI (J) 0.91 +

BLIC (A) 0.61 + BLI (J) 0.55.

Subject to :

(10.0)Aug + (7.0) Jag + (5.0)PHg + (5.0) NZg < = 27.0

(10.00Aud + (5.0)Jad +( 3.0) PHd + ( 2.0 ) NZd < = 20.0

1.19 SHIC (A) + 0.89 SLIC (A) + 0.93 BHIC ( A) + 0.61 BLIC (A) < = 30,000.


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.26 SHIC (J) + 0.88 SLIC (J) + 0.91 BHIC ( J) + 0.55 BLIC (J) < = 40,000.

All variables are > = 0

END


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NETWORK ANALYSISNETWORK ANALYSIS

We have used the software MS lindo for the purpose of problem formulation of

the issue on hand. Using the software, we have successfully accomplished these

tasks:

Task Scheduling.

Determination of Project duration (i.e. 54-55 days).

Precedence Relationship of the Activities involved.

Determination of Critical Activities & Critical Path.

Categorizing the Project tasks on the basis of constraint type.

Network Diagram.

Draft of the Scheduled Calendar.

All this content is included in the ANNEXURE in order to give it the due priority.


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Critical Issues Questions

Relevance of Sales Price

The issue on hand is ofCost Minimization. So, we should not be concerned

with the profits, at least for the time being. Moreover, the case has NO

mention of the sales price ofrefined products. In addition, the problems being

faced by us are at the operational level, and not concerned with our pricing

strategies. However, the consequent effect of Cost appropriation is on the

Sales price of the finished/refined product.

Criticality of Refinery Operations

The objective is to optimize the cost of operations, be it extraction or refinery.The refinery operations led to certain outputs that depict the plant capacity. So,

the location and the activities of the refineries hold direct impact on cost of

manufacturing and eventually price of output.

Transportation Cost

Transportation is an operating expense that directly affects the net income

earned. So, appropriation of inbound and outbound logistics becomes a must

for Gurney Oil Company, and this can be achieved via Value ChainAnalysis.


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Boliver Oil Company

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