ADNOC - Abu Dhabi National Oil Company

ADNOC

Executive Summary:

The Abu Dhabi National Oil Company, which is commonly known as ADNOC, deals with oil and petroleum companies in United Arab Emirates. It has access to more than 90% of the nation's oil and gas preserve's and is regarded to be the 4th largest of its kind in the world.

The firm was producing approximately 2.7 million barrels per day in the year 2000. Now after 10 years of work it is producing approximately 21 million barrels per day.

The products and services provided by ADNOC are diversified and benefit the petrochemical companies. The major business and objective is to locate, produce and then market the resources. (ADNOC - Abu Dhabi National Oil Company, 2010)

The company also benchmark few global players in the petrochemical industry to promise superior quality in oil products of the company. The perceived quality of the oil products of ADNOC in front of customers is quite good. The petrochemical products are sent to retail stores (and petrol pumps) with a proper chain of distributors. The company has 4 big distributors in the country which are responsible to make its product available to all the retailers who deal in selling products like lubricants, petrol, engine oil etc. All the distributors maintain a built to stalk inventory.

To ensure constant and emergency supply of stacks, the company maintains warehouses at its distribution centers. The company maintains an effective transportation system from manufacturing plant to distribution centre and then further from distribution to retail outlets. Presently hired vehicles are used to reduce the cost of vehicles. To maintain the high degree of quality in its product, ADNOC has adopted TQM standards in its operations. In supply chain, the company is presently using allocating gaming policy to distribute the products. The company presently follows build to stack approach in maintaining the inventory. The company has strong base of human resource and technological support.

Few problems includes high cost of inventory, decreasing amount of crude oil in the market, higher delivery time and pressure from international community to shift to green production which means higher cost of production. (Products & Services, 2010)
Introduction:

An organization encourages its employees to utilize their services and remain with the organization, so that the bond with the organization and the company is maintained. These are the corporate objectives followed by the organization. The organization that has its benchmark on the oil world needs no introduction, ADNOC. The Abu Dhabi National Oil Company, which is commonly known as ADNOC, deals with oil and petroleum companies in United Arab Emirates. It has access to more than 90% of the nation's oil and gas preserve's and is regarded to be the 4th largest of its kind in the world.

1971 was the year in which ADNOC was established. It was dealing in the petroleum sector and has bloomed like a beautiful flower, by spreading the name of the organization and establishing the petroleum and gas plant in the capital of United Arab Emirates, i.e. Abu Dhabi. The firm was producing approximately 2.7 million barrels per day in the year 2000. Now after 10 years of work it is producing approximately 21 million barrels per day. The consumption has increased so high in the energy utilization area, the analyst at ADNOC say “35 million barrels is our mark”.

ADNOC's growth rate shows the positive side of the company, but to achieve to this extent the company has to go through a lot to. The environmental, health and safety issues are kept on priority. The pollution caused on land, sea and air of the nation would have to be taken into account and curbed with the helping aids. The most spectacular achievement of the company can be rated in consent to the decrease in the gas flaring.

ADNOC has 14 subsidiary businesses working in various fields of the oil, petrochemical, gas, crude oil industry and gas transportation and related services. They include ADMA-OPCO, ADCO, ZADCO, GASCO, ADGAS, ESNAAD, TAKREER, NDC, FERTIL, IRSHAD, NGSCO, ADNATCO, BOROUGE and ADNOC- Distribution. (ADNOC - Abu Dhabi National Oil Company, 2010)

The corporate beliefs and thumb rules of ADNOC are almost same as any other organization. All the organizations in the world have every resource possible. But the most important resource that counts is the human resource present in the organization. The labor from the top level management to the operatives on the onsite work is of extreme importance. The human resource planning of the organization is taken to utter most importance and could be regarded as the goal of the organization. In ADNOC they know that if the employee is dissatisfied and the productivity of the company is hindered. It's solely because of the ill management of the human resource of the organization. ADNOC is a capital owned firm and deals with the oil and petroleum, it still manages the sales of it services and products of the organization and the 14 other subsidiaries. The sales and marketing team has to be lead by marketing manager and fulfill deadlines to reach the maximum profitability and increase the revenue of the organization.

The products and services provided by ADNOC are diversified and benefit the petrochemical companies. The major business and objective is to locate, produce and then market the resources. The activities comprise of exploration of natural gas, refining it, supplying and transportation to the manufacturers of the petrochemical firms.
Vision and Mission:

“Vision:

The vision of company is to become a value-added supplier of environment-friendly, integrated and high quality products and also the services in the gulf”.

“Mission:

ADNOC is a quality-focused association managing a considered logistics support base providing inclusive products and services to the industry of oil and gas, while remaining committed to its customers, owners, employees and the community”
Marketing Strategies:

Marketing itself is an in-depth analysis of the ongoing products of the market. Before creating strategies for your product, it is advisable to know your product in depth. The strategies created should be in context to the present market and what this market is going to be after a span of five years. ADNOC's market is defined very well and it has set the ground lay for the customers in the span of time. The customer for oil stands all over the world. ADNOC is a gold mine which can only see the demand of oil to increase over the coming years. The petrol stations are promoted with the help of renowned joints opening around them. They help maintain the crowd at this junction in turn increasing the sales of the ADNOC. (ADNOC - Abu Dhabi National Oil Company, 2010)

Brand Positioning

The brand positioning of a product is how the product can be differentiated in the market with the rest of the product. ADNOC the oil giants have their points of difference set over the market. As ADNOC is a company managed by the capital and the oil reserves are in plenty. So in this manner we can diverse the product from the rest of the market. Price differentiation is set by the oil generals OPEC and variance is managed by them. There are no new competitors entering the market. So the brand positioning is pretty firm and steady.

Product differentiation

The product differentiation is the uniqueness of the product launched in the market. ADNOC provides petrochemical and oil products. Difference of the product cannot be accounted for, but uniqueness of the product can. Petrochemical supplies of the world are depleting every year with a factor of 0.04 percent. Therefore the product over here is a stand out and the demand is going to hike to the extremes.

Channel differentiation

The large network of ADNOC is for sustaining its customers and exporting to the rest of the places. The customers are the actual promoters of the organization or firm. There is no better promotion than from the customer itself. The channel in this network is well maintained within the country and outside it through the customer maintenance.

Service differentiation

The product and services provided by ADNOC are a brand name to the company. They have created such a reputation with time and can't lose over quality. The services provided by the firm are up to the mark and has no flaws to its share.

Pricing Strategies

The prices of the oil and other petroleum products are managed by the OPEC organization for generalizing the prices over the world. The pricing of the profit margin of the petroleum agencies are managed by the ADNOC officials and help maintain company's reputation.

Price Discounts

The offers of ADNOC are offering large prizes like cars, televisions, fridge, etc. these all things help promote the petrol pumps managed by the firm. There are a lot of offers managed by the food joints or marts at the stations.

* Cumulative quantity discount

* Seasonal discount

* Cash discount

* Promotional discount

Identification and Ranking of order winners and qualifiers:

Quality:

Considering the quality aspect of ADNOC, as an oil company, ADNOC's product is maintained at high level of quality. Petrochemical products cannot be made below expectation as they serve huge number of people and any dissatisfaction can result in breakdown of whole customer base of the company. The quality aspect of the product is taken care by TQM standards in the company. The company also benchmark few global players in the petrochemical industry to promise superior quality in oil products of the company. The perceived quality of the oil products of ADNOC in front of customers is quite good.

Service and time of delivery:

The petrochemical products are sent to retail stores (and petrol pumps) with a proper chain of distributors. The company has 4 big distributors in the country which are responsible to make its product available to all the retailers who deal in selling products like lubricants, petrol, engine oil etc. All the distributors maintain a built to stalk inventory which means that product are always available for retailer. The time between delivering of service is thus instant whether we talk about wholesaler to retailer or retailer to customer service.

Flexibility:

The company does not have enough flexibility in its product. The reason is oil industry is dependent on automobile industry. Thus, there is less flexibility in terms of service and product offered by the company.

Quality:

Lastly, talking about the image of the company, ADNOC's brand image is a big asset to the company. The name, ADNOC is a symbol of high quality and trust. The quality of the product in the company is maintained by TQM approaches implemented in the company.

Type of main transformation process used to create the product or service:

ADNOC has world's largest amount of oil reserves under its belt. The company uses latest technology to drill crude oil from it's over 100 oil wells and then transport this oil to its refineries. The shipment of this crude oil from oil well to refineries is done via dedicated pipelines. Separate pipelines are made for oil and natural gas transportation.

The crude oil is refined in refineries and the process results in a number of products like kerosene, petroleum, diesel, lubricants etc.

These products are transported to warehouses from where; they can be transferred to the suppliers.

Delivering of order winners:

Warehousing:

To ensure constant and emergency supply of stacks, the company maintains warehouses at its distribution centers. The stock maintained in the warehouses depends on the forecasting model of the retailing company. As mentioned earlier, the company relies on two set of customers, permanent and temporary. The stock required for permanent customers is still predictable but that for the temporary set of customers is not. Thus the company invests heavenly on warehousing stocks as it needed to maintain extra stock every time.

Fast Transportation:

The company maintains an effective transportation system from manufacturing plant to distribution centre and then further from distribution to retail outlets. Presently hired vehicles are used to reduce the cost of vehicles.

Quality:

To maintain the high degree of quality in its product, ADNOC has adopted TQM standards in its operations.

Supply Chain:

In supply chain, the company is presently using allocating gaming policy to distribute the products. In this strategy, in case when the supply goes down, the suppliers place the products on allocation. This mean that that supplier will not supply the demand of the downstream fully but will cut short the quantity to be supplied in order to make sure that all the nodes of downstream get at least something. For example if 2,00,000 ADNOC products are demanded by 4 equally important downstream nodes but there is problem in consistent supply, then the upstream suppliers will supply 25,000 products to the consuming nodes even when it can supply more to insure that each node get something and stock is not empty.

It is also find that is the irregularity in demand is too often, some costumers (downstream nodes of supply chain) order more than the actual need to compensate future disorder in supplies.

Inventory in process and role in process performance:

The company presently follows build to stack approach in maintaining the inventory. In petrochemical industry, the company has few fixed set of customers and a set of temporary customers to. In order to maintain service quality, it is essential to maintain constant availability of service to both these customer segments.

To achieve this goal, the company maintains in-house stock in equal proportion for temporary and permanent employees. The company maintains the stock in advance (like maintain the inventory for these customers prior to the placement of orders). The company stores the inventory in a hired warehouse whose rent is deposited in proportion of the inventory stored in the warehouse. The built to stalk inventory make sure that products are always available to the customers whenever they need it. So this adds to the effectiveness of the system better service standards and quality perception.

Identification description and analyse of strategic infrastructure support

The company is dependent on effectiveness of its marketing team to enhance the sales. The oil and gas market ADNOC services in is too quality conscious too. Any limitation in the quality of the product can completely ruin the business of the company. The company relies on best quality technical staff and new generation managerial and technical tools for quality in its products and services and efficiency in its managerial operations. The company follows TQM or Total Quality Management practices

Human Resource Strategy:

Human Resource Planning in ADNOC is concerned towards continuous recruitment and maintenance of the man power for various purposes in the company. The company keeps a continuous eye on availability of Human resource for current work base and also tries to forecast the need of additional workforce if required.

The company presently hiring more employees of UAE nationality as mentioned under its plan called Group National Recruitment program which is managed by Group National Recruitment Department. Under this program, the company is aiming to increase the number of UAE nationalist in the company up to 75% by the year 2010.

Apart from GNRP, the company highly relies on cheep workforce form Indian-subcontinent for basic ground works at numerous levels in the company to reduce the cost of its operations.

Apart from its objective to increase the number of UAE nationalist in the company, the organization is to constantly work on improving the skills of the human resource and to make ADNOC and friendly place to work.

ADNOC has a well established procedure via which the company estimates the required number of labor and skilled manpower. The GNR department communicates with all other department seeking their requirement, future plans and present status. Based on this information, the department forecast the requirement of the manpower in near future. As the GNRS is equipped with information of respective departments, it identifies any vacancy in any department and thus takes steps to fill it. Based on the present skill needs altitude of work, the department issues the skill requirement and number of people required for any particular vacancy.

Presently ADNOC is hiring in 2 spheres: firstly it's giving partiality to local candidates by means of its GNR department. For the remaining posts, the company has another department that takes care of human resource within the organization by means of newspaper advertisements, recruitment sessions in educational institutes and online recruitment methods. The company invites resumed for respective positions and has a mechanism to select the reasonable candidate for a post. The other key features of HR policy of ADNOC are its training and employee improvement program which are described below.

Training:

As the GNR programs is already mentioned in detail in earlier parts, so in this part we are concentrating on training of the employees. Once the employee is inducted in the company, he undergoes a training program. ADNOC'S training program has been rated as the best training program. The average training day of 3.5 per employee at ADNOC during 2004 is way ahead of the global industry average of less than 2.75. For the year 2004, ADNOC conducted 1,267 training courses out of which 522 were related to operations, 135 linked to environment, health and safety in the work environment and 64 on management development courses. The rest were related to quality improvement and information technology (IT)[1].

Performance improvement program:

ADNOC launched a Performance Enhancement Program in 1986 which involved major projects, opportunities and challenges supporting department objectives. There were teams formed for all the major organizational activities. These teams were led by the respective team manager.

Main features of the program were

* Recognition through celebrations

* Monitored at Departmental Division level

* Directed at Head Of Department/Manager level

* Encourages teamwork across the function (breaks departmental barriers)

* Multi-level/discipline project work

Salaries and incentives:

The company is highly employee intensive company and thus deals in high degree of reward to it employees. To reward the employees for high performance, the company generally offers pay according to pay for performance plan. For the employees working on ground, the company provided cafeteria based incentive system where the employee can choose any of the following incentives according to his or her needs. The key highlight of this plan consists of:

* More holidays on better performance

* Sponsorship for child's education

* Free telephone calls at family and friends

* No transfer for reaching sales target

* Desired sales region for future work

* Insurance for employee and family

* Company's bearing the cost of license of employee to work in UAE

* Interest free home and personal loan.

Organizational Structure:

The company has a big hierarchy in its organizational structure. The company is leaded with the CEO of chief executive officer and is followed by head of finance, marketing, quality, operations, manufacturing, human resource and public relations. All these departments have their own chain of authorities. The diagram of the organization structure of ADNOC is as shown below:

Quality system:

ADNOC is currently using TQM as a quality management tool. As a operation management tool, efficiency of TQM is widely accepted, even by management gurus like Demin and Juran. Previously QM was traced by statistical tools to improve mass production settings. Control chart and sampling-probability theories were used to find variations form tolerance levels. The efficiency of these charts was seen in Japanese case where these control charts were used at all employee levels along with plan-do-check-action-cycle. This PDAC forms the basis of today's Quality Control. Juran in 1986 depicted that QM goes beyond statistical tools to quality of conformance, quality of improvement, managerial tool for quality and Pareto principle. By 1960, Japanese stress on Quality Management was going to describes as an integrated method of habitual improvement.

The company relies on TQM standards to maintain quality of its service and products. Recently the company has worked well in implementing TQM in it operations. A different thing about ADNOC's TQM approach is its quality enhancement in entire set of departments. For this work it has chosen quality parameters in each of its departments. For example, some of these are

Operation/Manufacturing

* -Unit Cost

* -Labour Cost

* -Labour Productivity

* -Quality, Scrap Rate

* -Plan utilization

* -Plan vs. actual production

Sales and Marketing

* -Market Share

* -Revenue

* -Sales Growth

* -New products

* -Customer satisfaction

R&D

* -Functions/features

* -Labour & material cost

* -Time-to-market

* -Best designs

* -Design for manufacturability, assembly, etc.

The key theme of TQM of ADNOC is customer oriented approach.

Customer Oriented approach:

The business of the company is completely customer dependent. Thus, in order to maintain the customer with the company and to ensure superb degree of service, the company has implemented Total Quality Management standards.

Planning and control mechanism:

ADNOC is purely a customer focus company. As it is required by the adopted TQM standards also, the company focuses its service in direction of entertaining customer requirement. So, in all aspect of business, customer opinion is a key in planning and controlling. The control system's highlight is shown below:

Using customer Complaints:

ADNOC believes that the customer who did not complain is most prone to switch to another product. Thus it is believed that individual complaint is needed to be entertained. Results also suggest that half of the dissatisfied-customers will buy again if they feel that their complaint had been addressed. This is the reason for the company to rely heavily on the complaints received.

Feedback: Complaints Resolution

Quality management in the company requires customer feedback to be continuously monitored. It is required to identify costumer dissatisfaction, needs, opportunities for enhancement and comparison with substitute in the market.

Methodologies for feedback being employed by the company involve comment card, survey, focus group, toll free numbers, report card, internet, customer visits, employee feedback and using standard indexes like ACSI.

Customer care service:

A customer care is also there where customers can call anytime and customer care executives respond to the complaint in record some fixed time.
Assessment of strategic operational alignment and present operations strategy limitations

Let us cover this under various issues faced by the company.

Environment friendly production of oil:

ADNOC is trying to align its present methods of oil production with international eco-friendly standards. The problem is basic framework of production in ADNOC is very old and it would be tough to move on some other methods.

Solution: the problem can be solved using strategic measures to implement benchmark process. The company can train its man-power under a rotation policy to impart new set of skills to them. The technological changes can again be bringing with course of time. The process could be fastening if the company hires a consultancy to do its work.

The time of delivery: Last year a number of occasions were noticed where the company failed to deliver the service at right time. The key reason was that the company relies heavily on hired vehicles.

Solution: The service time can be significantly decreased if the company can buy its own vehicles so that the delay of shipment form production plant to warehouse can be reduced.

Decreasing production: The production of ADNOC is decreasing in last few years. The reason is clearly the depleting natural resources.

Solution: the company can launch hybrid product which required less quantity of non-renewable resources.

High cost of inventory: The Company as mentioned earlier too, maintain built to stock inventory. This increases the inventory carrying cost for the company. Also inventory of oil and petroleum is expensive to maintain.

Solution: The Company is required to reduce the quantity of stalk it maintains in inventory. The stalk reduction can help in lesser expenditure on maintaining the inventory.

References:

About ADNOC. (n.d.). Retrieved on March 18th 2010, from http://www.adnoc.ae/content.aspx?mid=22

Products & Services. (2010). Retrieved on March 18th 2010, from http://www.adnoc.ae/content.aspx?mid=43&tree=1

ADNOC - Abu Dhabi National Oil Company. (n.d.). Retrieved on March 18th 2010, from http://www.subsea.org/company/listdetails.asp?companyID=257

[1] http://www.adnoc.ae/content.aspx?newid=160&mid=160

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