UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ MASTER OF BUSINESS ADMINISTRATION LATE DELIVERY OF EQUIPMENT - THE CASE STUDY OF KOREA NATIONAL OIL CORPORATION VIETNAM OFFICE LE THI TUNG ID: 20150077 SUPERVISOR: Prof. TRAN HA MINH QUAN Ho Chi Minh City - 2017 123doc CONTENTS Excecutive summary. 3 Overview of oil & gas industry in Vietnam. 4 CHAPTER 1: PROBLEM IDENTIFICATION .3 Problem definition and importance of the problem .5 Potential causes of problem and the justification .1 Ineffective company policy.2 Inappropriate procurement procedure.
19 Cause and effect map. 21 Chapter 2: ALTERNALTIVE SOLUTION. 24 Chapter 3: ACTION PLAN. 31 Appendix A: In depth Interview information.
32 Appendix B: Terms and conditions. 38 Appendix C: Procurement Procedure. 61 1 123doc EXCECUTIVE SUMMARY Korea National Oil Corporation is production sharing contract with Petro Vietnam. Its activities take place in exploration, development, and production of oil & gas in Block 11-2, approximately 320 kilometers offshore Vietnam.
Procurement of equipment is considered one of the most importance works of the company such as a factor determinant of revenues, expenditure costs. To build and maintain a significant effect to organization, the procurement department needs to know that problems are affecting its business. When interviewing procurement manager, the writer realizes that procurement department is facing with lots of problems including late delivery of equipment, poor quality of equipment, wrong item. Among many issues, late delivery of equipment will create significant impact to the project objective, specifically for the project in the remote area such as offshore where access for transportation and delivery is geographically limited.
Its existence, importance and causes have also been justified by interviewing with KNOC’s Procurement Manager. The consequences are clarified late delivery of equipment leads to cost overrun and poor production capacity. Moreover, in order to find solution for central problem, the writer makes an attempt to discover its possible causes which are ineffective company policy and inappropriate procurement procedure. From those points, the solution for central business problem is determined to build a process for supplier selection and performance evaluation in order to work well for further purchase orders.
The company will take action on the third quarter of 2017. 2 123doc INTRODUCTION Global business trends have led the oil and gas industry to seek better solutions to overcome the emerging challenges and critical issues, such as the need for procurement process based on new values and contextual factors including multi-cultural complexity. One way to overcome some of these critical issues is to adopt new innovative approaches to suit different locations, countries or regions while trying to incorporate the differences in business philosophy, culture or values within the oil and gas organization themselves into these approaches. New innovative approaches to procurement process are also required to meet the contextual needs found in different locations and countries around the world.
These approaches also need to accommodate specific project needs and different values either in the business philosophy or culture within the oil and gas organization themselves. Oil and gas exploration and production is a highly risky business in a very complicated industry. It links government, owners of the natural resources with operators, investors of private capital, technology and equipment necessary for resource development, in a single industry where the stakes and risks, as well as the possible profit margins, can be very high. Effective procurement of equipment will have an impact on company's competitive advantage.
The quality of equipment inputs to finish products’ quality as well as stakeholders’ satisfaction and revenue. If the procurement process management is not 3 123doc effective and efficient input costs will rise and be a large part of the total cost. Being an important factor in determining revenues and cost, it is obviously seen that procurement has recently been receiving more attention within business industries. A comprehensive procurement guideline on selection processes to be used by decision makers in the industry should be developed and produced comprising a set of phases and critical steps that needs to be followed and performed during the selection process.