Investigation of the total supply chain issues at Lam Son Joc

HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES

SOLVAY BRUSSELS SCHOOL OF

ECONOMICS & MANAGEMENT

MBQPM5

N G UY E N NG O C M I NH NG UY E T

INVESTIGATION OF THE TOTAL

SUPPLY CHAIN ISSUES

AT LAM SON JOC

M A S TE R FI N A L P R O J E C T

M A S T E R I N B U S I N E S S Q U A L I T Y A N D P E R F O R M A N C E

M A N A G E M E N T

H O C H I M I N H C I T Y

( 2 0 1 6 )

STATEMENT OF ORIGINALITY

I, Nguyen Ngoc Minh Nguyet, hereby certify to be the author of this master final

project report, which was written under the mentorship of Professor Jacques

Martin. The report is submitted as part of the requirement for the award of Master

in Business Degree of Quality Performance Management, is wholly my own work

unless otherwise referenced or acknowledged.

Signature:

Print name: Nguyen Ngoc Minh Nguyet

Date: 12 April 2016

ACKNOW LEDGEMENTS

This report has never come to be without excellent guidance and supports. I would

like to acknowledgement the helpful advices and comments of who gave me the

possibility to complete this.

First and foremost, I offer my sincerest gratitude to Professor Jacques Martin; he

has shown me the way through his knowledge and motivation while keeping me

on track in completing this report.

This report contains the views, opinions, guidance of my co-workers particular the

interview participants who provided freely of their time and though; I truly

appreciate their efforts and sincerely thank them all.

My sincere gratitude also goes to my Bosses who have shared their valuable

expertise and industry knowledge with me. I am grateful to my company for giving

the opportunities to study this program.

Especially, I would like to thank my family, my husband, and my two little sons who

encouraged and fully supported me during my studying time.

ACCEPTANCE OF FINAL PROJECT REPORT FOR DEFENSE

Mr/Ms NGUYEN NGOC MINH NGUYET’s final project report for the degree of Master in

Business Quality and Performance Management is officially accepted for defense.

On 13 April 2016

Dr. Jacques M.A. Martin

Academic Director

Master in Business Quality and Performance

Management

Solvay Brussels School of Economics and

Management – Ho Chi Minh City Open

University

TABLE OF CONTENTS

INTRODUCTIONS ............................................................................................................ 1

1. INTRODUCTION OF THE SUBJECT ..................................................................... 1

2. OBJECTIVES......................................................................................................... 3

3. METHODOLOGY ................................................................................................... 4

4. LIMITATIONS......................................................................................................... 6

5. REPORT STRUCTURE.......................................................................................... 7

PART1. TOTAL SUPPLY CHAIN MANAGEMENT PROCESS AT LAM SON JOC ........... 9

CHAPTER 1: THE CONTEXT OF SUPPLY CHAIN MANAGEMENT............................. 9

1. DEFINITION........................................................................................................ 9

2. THE IMPORTANT OF SUPPLY CHAIN MANAGEMENT.................................. 12

CHAPTER 2: PROJECT OVERVIEW.......................................................................... 14

1. COMPANY PROFILE........................................................................................ 14

2. CORPORATE CONTEXT ................................................................................. 16

3. THE TOTAL SUPPLY CHAIN AT LAM SON JOC ............................................. 19

PART 2: THE TOTAL SUPPLY CHAIN MANAGEMENT INVESTIGATION AND

RECOMMENDATIONS................................................................................................... 22

CHAPTER 1: THE TOTAL SUPPLY CHAIN ISSUES ANALYSIS................................ 22

1. SPECIFYING REQUIREMENT AND PLANNING SUPPLY............................... 22

2. ANALYSING SUPPLY MARKETS..................................................................... 29

3. DEVELOPING SUPPLY STRATEGIES ............................................................ 35

4. APPRAISING & SHORTLISTING SUPPLIERS................................................. 41

5. OBTAINING & SELECTING OFFERS............................................................... 49

6. NEGOTIATING ................................................................................................. 57

7. PREPARING THE CONTRACT ........................................................................ 61

8. MANAGING THE CONTRACT.......................................................................... 65

9. MANAGING LOGISTIC & INVENTORY............................................................ 70

10. MEASURING AND EVALUATING PERFORMANCE..................................... 77

CHAPTER 2: RECOMMENDATIONS FOR IMPROVEMENTS.................................... 81

1. MAXIMIZE LOCAL CONTENT STRATEGY...................................................... 81

2. DEVELOP AN E-PROCUREMENT STRATEGY............................................... 82

3. PROMOTE GROUP PURCHASING ................................................................. 84

4. UTILIZE QUALITY & SUPPLY MANAGEMENT TOOLS................................... 85

CONCLUSIONS.............................................................................................................. 92

REFERENCE.................................................................................................................. 95

APPENDIX A: LAM SON JOC - SR/PR PREPARATION WORK FLOW ......................... 98

APPENDIX B: LAM SON JOC - PURCHASING WORKFLOW........................................ 99

APPENDIX C: LAM SON JOC - OVERALL CONTRACT STRATEGY TEMPLATE....... 100

APPENDIX D: LAM SON JOC - PROCUREMENT FORM ............................................ 104

GLOSARY

Bbl Barrel (1 barrel = 35 imperial gallons approximately)

CIT Corporate Income Tax

CPM Critical Path Method

DD Dong Do

DO Delivery Order

E&P Exploration & Production

ECV Estimated Contract Value

EPCI Engineering Procurement Construction and Installation

EVA Economic Value Added

FCWT Foreign Contractor Withholding Tax

FPSO Floating Production Storage and Offloading

H2S Hydrogen Sulfide

LSJOC Lam Son Joint Operating Company

MCM Management Committee Meeting

NOC National Oil Company

O&G Oil & Gas Industry

PC Petroleum Contract

PO Purchase Order

PR Purchase Request

PVEP Petro Vietnam Exploration and Production

PVN Petro Vietnam

RFP Request for Proposal

SCM Supply Chain Management

SoW Scope of Work

TdC Tender Committee

TL Thang Long

VTSB Vung Tau Supply Base

WHP Wellhead Platform

WO Word Order

LIST OF FIGURES

Figure1: Report Structure

Figure 2: Supply Chain Management

Figure 3: Lam Son JOC - Blocks 01/97&02/97 Location Map

Figure 4: Lam Son JOC - Preliminary Field Layout

Figure 5: Lam Son JOC - SWOT analysis

Figure 6: Lam Son JOC - PESTEL Analysis

Figure 7: Lam Son JOC - Porter Five Forces

Figure 8: Lam Son JOC - Total Supply Chain

Figure 9: Purchase Specification

Figure 10: P-D-C-A Cycle

Figure 11: Supply Positioning Model

Figure 12: Lam Son JOC - Supply Positioning Model

Figure 13: The Four Quadrants Items - Supply Positioning Model

Figure 14: Life Cycle Cost Analysis

Figure 15: Negotiation Cycle

Figure16: Supplier Perception Model

Figure 17: Various levels of objectives

Figure 18: Scheduling – based on a “bottom up” process

Figure 19: Gantt (bar) chart

Figure 20: Lam Son JOC - Receive Flowchart

Figure 21: PDCA Cycle

Figure 22: Supply Position Model

Figure 23: Risk Matrix

Figure 24: Ishikawa Diagram

Figure 25: Mind mapping - Summary of report

LIST OF TABLES

Table 1: Statistic of Suppliers had back for further information in 2014

Table 2: Market survey for provision of 400 Feet Jack up Rig

Table 3: Lam Son JOC - Supply Risk/Impact

Table 4: Procurement Method - Advantage Vs Disadvantages

Table 5: Ratio of Supply Strategy in using local content in 2012

Table 6: Lam Son JOC – Procurement Thresholds

Table 7: Detailed technical evaluation criteria for the provision of pigging

Table 8: Supplier Capability Ratings

Table 9: Lam Son JOC - Warehouse stock taken 2014

Table 10: Lam Son JOC - Action plan for warehouse improvement 2014

Table 11: Fuel Consumption rate

Table 12: E-Procurement Vs Manual Time

Table 13: Balance Score Card Performance Measurement

Table 14: Risk Matrix

1

INTRODUCTIONS

1. INTRODUCTION OF THE SUBJECT

This is my master final project report for the award of my Master Decree in

Business Quality and Performance Management Program in 2015.

The starting point for this report was provided by challenges encountered by my

Company in the oil price-plumping situation. The depressed price of oil has

spurred a new wave of break-even point in the energy exploration & production oil

and gas Companies. When the crude oil price is around US$100, all exploration

and production oil & gas Companies try to drill as fast as they could. Now when

the prices have down to around USD$35, the companies are focus on efficient by

getting the most petroleum for the less amount of money.

Which the current plumping of oil price, an effective supply chain management will

become more and more important than ever.

The oil and gas industry has been considered as large capital investment.

Managing the complexity of major capital projects in the industry is really

challenging. The shareholders of such projects will expect greater efficiencies from

the supply chain management of the organization. Shareholders are demanding

improved return on investment, reduced risk while schedules and budgets are tight

and safety is crucial, therefore, an effective supply chain management is the key

success factor for the exploration and production oil and gas projects.