FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS, BUSINESS AND FINANCE
Production and Operations
Improvement Plan
BME1101 – Section 1
Production and Operation Management
AY 2021- 2022
SUBMITTED BY:
AGGALUT, NORJELYN
CHOING, DAVID JOSEPH
CORPUZ, JADE ELIZABETH
HUTSCHISON, WEST DYLANN
MIGUEL, JOHN CALVIN
SUPSUPIN, SHAINA MEREN
VILLA, CARL PATRICK
SUBMITTED TO:
Mr. Mark J. Santiago
Part 1
Chapter 1: Operations & Productivity
Company
Pilipinas Shell Petroleum Corporation
Pilipinas Shell history dates back to the Asiatic Petroleum Company (Philippine Islands), Ltd.,
which commenced importing and selling vehicle gasoline and kerosene throughout the Philippines in
1914. Throughout the 1940s, The Shell Company of the Philippine Islands, Ltd. was changed to Asiatic
Petroleum Company (Philippine Islands) Ltd. Pilipinas Shell was formed in 1959 under the title The
Shell Refining Company (Philippines), Inc. to comply for the percent of Filipino shareholding in
significant industrial companies (25 %). Pilipinas Shell changed its name to Shell Philippines, Inc. in
1970, and then to Pilipinas Shell Petroleum Corporation in 1973.
Nature, Background/History
In Tabangao, Batangas, Pilipinas Shell Petroleum Corporation is a service company that started
building a raw oil refinery. The Tabangao Refinery began operating in 1962, with just a maximum output
of 30,000 barrels per day. From 1982 to 1999, PSPC collaborated with the Pilipinas Shell Foundation,
Inc. (PSFI) on initiatives in the areas of (i) health coverage, sanitary conditions, and safety and security,
(ii) technical, skills training, and agricultural learning and development, coaching, and work
opportunities, (iii) financial wellbeing and entrepreneurial spirit development, (iv) management or
governance enhancement and outlook development, and (v) ecological sustainability.
PSPC established a bitumen or a residue from petroleum distillation storage and distribution
facility in Villanueva, Misamis Oriental, and a Bitumen Solutions Center somewhere at Tabangao
Refinery between 2003 and 2016. The Tabangao Refinery marked its 50th anniversary at this time, and
PSPC introduced three new premium performance fuels (Shell V-Power Nitro + Gasoline, Shell VPower Nitro + Racing, and Shell V-Power Nitro + Diesel) during this time. They then started building
the NMIF (North Mindanao Import Facility) and finished upgrading the Tabangao Refinery. PSPC has
not had any affiliates or subsidiaries as of July 2021, however it does own some of the Associates
(Bonifacio Gas Corporation and Kamayan Realty Corporation).
Management Team
Industry
Shell has a number of businesses inside the Philippines that deal with oil and gas
development, manufacturing, refinery, distribution, and sales volume. The firm began operations
in 1914 and has since evolved to become one of the Philippines' big shareholders, with over 3,000
employees across the country.
Chapter 2: Operations Strategy in a Global Environment
Mission
Pilipinas Shell Petroleum Corporation aims to continue to revolutionize and provide not only
high-quality products to cater the changing needs of motorists, but also to improve consumers’
experience in fuel retail stations and offer a reliable service to more Filipinos all over the
country.
Vision
Pilipinas Shell Petroleum Corporation being the forefront of innovation, they want to progress
with the Filipinos by providing energy responsibly while caring for their employees, business
associates, consumers, communities, and the environment.
Goals
The Pilipinas Shell Petroleum Corporation is committed to sustainability to improve and
make significant progress to the future. Their commitment to sustainable goals is focused on the
environment, communities, health and safety, employee empowerment, and energy future.
Environment
Pilipinas Shell Petroleum Corporation (PSPC) is devoted to environmental protection to
ensure that no people will be harmed. They have high environmental standards that meet and even
surpass all the regulatory requirements. PSPC’s goal to meet the world’s future energy needs with
cleaner energy, they promote energy efficiency as the easiest and most cost-effective method with
regards to reducing emissions and combating climate change.
Communities
The PSPC cares for the communities as to how they are concerned with their operations by
establishing various programs that support community well-being, growth, and development. They
are engaged with a variety of government agencies, local communities, and stakeholders to provide
safety information and standards. Pilipinas Shell Petroleum Corporation also pursues to develop
the youth by continuing their sponsorship with programs for the youth such as Shell National
Students Art Competition (“NSAC”) and Shell National Youth Active Chess Competition
(SNYACC).
Health and Safety
Safety is PSPC’s top priority, the company strives to establish and maintain high health
and safety standards in the workplace in order to protect their employees, resources, and the
community where it operates. Their “Goal Zero” goal is to have zero or no fatalities and accidents
to the company facilities and its neighbors which focuses on areas that have highest risks such as
personal, process, and transport safety.
Employee Empowerment
PSPC creates more opportunities for their employees to develop their skills in order to
improve the company’s performance and competitiveness since the company believes that their
people are the key to their success. The Pilipinas Shell Petroleum Corporation (PSPC) and
Pilipinas Shell Foundation Inc. (PSFI) wants to promote local community upskilling through
employment and training, so they developed programs such as Sanayan ng Kakayahan sa
Agrikultura (SAKA), Gas Mo Bukas Ko (GMBK), and Sanayan sa Kakayahang Industriyal
(SKIL).
EnergyFuture
With the growing population and rising standard of living, the demand for energy is
increasing globally. Pilipinas Shell Petroleum Corporation aims to have a cleaner energy future.
The company is preparing with regards to addressing the difficulties in achieving the lower-carbon
future to counter climate change. PSPC’s knowledge, technological advancements, and
innovations will assist in the delivery of more, cleaner energy.
Organizational Strategies
The primary plan of action in order to achieve the company’s objective growth are as follows;
1. Pursue profitable opportunities selectively in the fast-growing Philippine market.
The PSPC intends to expand its retail network across the country. The company also aims to
increase its market share, multiply its dealers and customers through loyalty programs and adding
additional
services.
2. Nurture a structured and well-grounded manufacturing, distribution and supply.
The PSPC strives to obtain and upgrade its cost and efficient structure through elevating the
cost
savings
in
its
supply
network.
3. Offer to increase loyalty to customers and increase connected product selections.
The PSPC provides a broad set of regular and premium fuel and other associated fuel products
to
commercial
and
retailer
customers
for
better
competitive
offerings.
4. Convenient retailing markets and embrace market growth chances in lubricants.
Through the PSPC’s lubricants, the company will continue to increase and complement fuel
related products. The company is also in a good position collaborating with fast food chains and
other leading brands to complement the company with its fuel related products and services.
5. Sustain a high value corporate governance standards and corporate social responsibility.
The company aims to be a world class model in terms of corporate governance and perform
business in a transparent and proper manner. The company PSPC is strongly committed to its good
corporate governance and sustainable and successful business. Through the adoption of a manual
of corporate governance, the company will regularly review and monitor every aspect of the
company to know where to improve.
Tactics
1.
Selectively pursue profitable opportunities in the growing Philippine market.
The PSPC intend to selectively expand its retail network in profitable urban centers,
surrounding suburbs and other emerging economic regions and growing rural trade areas. The
PSPC targets to increase its market share by capitalizing on its leading brand preference position,
growing the company’s base of customers and dealers through innovative loyalty programs,
forging or strengthening relationships with the company’s dealers, and expanding its commercial
offering through various additional services.
2.
Maintain a reliable and efficient manufacturing, supply, and distribution chain.
The company seeks to maintain and improve it’s integrated, reliable and cost-efficient
structure by maximizing cost savings in the company’s integrated supply chain network. The PSPC
also intend to capture the market growth by maximizing the benefits and strategic geographical
positions of its various supply points.
3.
Optimize related product portfolio and offering to increase customer loyalty.
PSPC offers both retail and commercial customers a comprehensive set of premium and
regular fuel related products and services that are differentiated from other competitive offerings.
The company plan to expand and develop its leading market position, improve margins and
increase customer base by:
(i) inducing more customers to shift to premium fuels through sustained education and marketing.
(ii) continually offering technologically innovative and superior fuel related products.
(iii) continuing to upgrade our wholesale commercial offering.
(iv) capitalizing on the company’s position as the sole fuel oil producer in the Philippines; and
(v) expanding the company’s loyal customer base by sustaining the growth of PSPC loyalty
programs, developing dedicated loyalty schemes, and further enhancing the retail customer
experience through various initiatives.
4.
Capture market growth opportunity in the lubricant and convenience retailing
markets.
PSPC’s lubricant and non-fuel retail offerings continue to complement and augment its
fuels related business. Given the company’s extensive retail network, PSPC are also wellpositioned to capture greater market share in the lubricant and non-fuel retail sectors. Co-locator
collaboration with major fast-food chains and leading brands will also be increased to complement
our convenience store offerings.
5.
Uphold the Shell Group’s high standards for corporate governance, HSSE matters
and corporate social responsibility.
The company aims to continue being a role model for world class corporate governance
and conduct business in an open and transparent manner, consistent with its existing corporate
governance standards. PSPC are committed to good corporate governance and overall business
sustainability and success, as evidenced by the company’s adoption of the Manual of Corporate
Governance, which requires regular review to provide an avenue for continuous improvement.
6.
Continuing to focus on world class talent development and retention to realize the full
potential of its people.
PSPC are led by an experienced management team supported by a highly skilled and highly
motivated workforce that has been recruited through the Shell Group’s international recruitment
process. The PSPC’s organizational structure is based on a lean and fit-for-purpose design, which
facilitates a high level of employee empowerment and engagement between management and
front-liners. The Company has been able to retain talent, through our commitment and focus on
people, evident in the low talent attrition rate.
SWOT Analysis
STRENGTHS
WEAKNESS
Size and Financial Resources
Dropping Reserves
Size matters in the energy sector. Shell has over
80.000 employees and is active in 70+
countries with an integrated supply chain.
Because of its size, it has relatively more
financial resources and flexibility to get
through phases with lower profitability. Shell
has a strong cash flow which helps them make
investments for future gains. By doing this,
Shell makes sure their business remains viable
in the future.
Shell’s oil and gas reserves have been
dropping in recent years. In 2019, the
number of production years left in Shell’s oil
and gas reserves decreased for the sixth year
in a row. In addition, Shell’s reserves are
falling faster than that of its competitors. For
Shell, this means the firm has to keep
finding or buying new reservoirs of oil and
gas. In 2019, Morgan Stanley named the
lack of reserves as a reason to downgrade its
rating for Shell’s stock.
Vertical Integration
Shell is highly vertically integrated, in
upstream as well as downstream areas. The
company is active in all parts of the supply
chain: from searching for oil (exploration) to
production, refining, transportation, and
marketing.
Research and Development
Shell invests heavily in research and
development. In 2018, the investment in R&D
was $1 billion. Shell employs many scientists,
engineers and researchers. Their aim is to
improve the efficiency of their products,
processes and operation. This is necessary to
maintain a sustainable business in the future.
Shell does not only individually on R&D. The
company has many collaborations with
universities, laboratories, public entities, and
technology start-ups.
Exploration Capabilities
Shell invests heavily in finding new reservoirs
of oil and gas. The exploration process is
becoming increasingly more difficult. Oil &
gas companies need to drill deeper to reach
Low Presence in Renewable Energy
The world’s energy supply is changing
towards more renewable, sustainable sources
of energy. Examples of such types of energy
are wind and solar energy. Mobility is also
changing towards electric vehicle charging.
Shell is investing in these new technologies
& types of energy, but its origins lie in fossil
fuels. In 2020, reports showed that Shell
spent less on investments in renewable
energy than targeted. Shell only spent a
fraction of its spending on green energy
projects. Shell plans to invest more in
renewable energy. At this moment however,
Shell is also cancelling planned investments.
The company made this decision because of
the problematic market situation in the oil
industry. It will be interesting to see whether
the current market will impact the spending
on renewable energy.
Dependency on Oil Price
Shell’s profits strongly depend on the oil
price. The oil price has fell as a
consequence of covid-19, which decreased
undiscovered resources. Finding new oil & gas
resources is a long and complex process. Shell
has proven that they have the expertise to keep
finding new reservoirs.
Wide Product Portfolio
Shell has a diversified product portfolio. The
company is active in a variety of markets. This
exposes the firm to crude oil, natural gas, oil
product and chemicals prices. With this
diversified product portfolio, Shell mitigates
the risks of price volatility in one of these
markets. This is helpful in the current market,
where oil prices have been low and production
has been cut. During this period, natural gas
production have not lowered as much.
Strategic Partnerships
Shell has partnerships in many areas, including
governments, NGO’s, energy producers,
industry bodies and local organizations. The
firm’s extensive number of partnerships helps
them maintain a strong market position.
the demand for oil. The current low oil price
reduces the value of Shell’s assets as well as
its revenues. Once more, this demonstrates
that Shell has to make a transition towards
other sources of energy. Historically, Shell
always had a high, stable dividend.
However, because of the current market
struggles, Shell took the drastic decision to
cut dividends by two-thirds. This illustrates
Shell’s dependence on the oil price.
OPPORTUNITIES
THREATS
Economic Growth
Macro-economic Uncertainty & Price
Volatility
One of the key drivers of demand for Shell’s
products is economic growth. Although the
economic growth for 2020 has been extremely
negatively impacted by the coronavirus, in the
long term the global world economy is
expected to grow. Especially for LNG (liquid
natural gas), the economic outlook is positive.
In 2019, global demand grew by 13%, and is
expected to keep growing in the coming
decades.
New Discoveries
The oil price has fell as a consequence of
covid-19. The pandemic decreased the
demand for oil. The current low oil price
reduces the value of Shell’s assets as well as
its revenues. Once more, this demonstrates
that Shell has to make a transition towards
other sources of energy. Historically, the
current market outlook is highly uncertain. It
is unclear when the demand for oil will rise
again. Additionally, Saudi Arabia and
Russia have shown to be willing to ramp up
their oil production. Increasing supply will
again lower oil prices.
Exploration activities may lead to new
discoveries which helps the firm to maintain its
market position. As mentioned under Strengths,
Competition
Shell has strong exploration capabilities.
The oil & gas market is highly competitive.
Renewable Sources of Energy
Shell has major competition from, among
Shell’s size and financial resources allow them others, the following large firms, together
called the ‘supermajors; BP, a British oil and
to invest heavily in renewable sources of
energy. There are many opportunities for Shell gas company headquartered in London,
UK;ExxonMobil, a US oil and
to increase their presence in green energy
petrochemical company with global
sources. It is up to Shell to take advantage of
presence;
these opportunities.
Partnerships / Mergers & Acquisitions
To grow further, partnerships could help Shell
to increase their expertise in renewable energy
sources. It could also help the company to
rapidly gain a bigger market share in this
market. Corporate development activities could
speed up this process as well. As became clear
from Shell’s (failed) takeover bid to buy Dutch
Energy firm Eneco in 2019, Shell recognizes
the potential of mergers & acquisitions. Eneco
has a strong focus on renewable energy.
Total, a French oil and gas company;
Chevron, a US-based energy corporation.
Chevron acquired Texaco in 2001; Eni, an
Italian oil and gas company; ConocoPhillips,
an American multinational energy firm.
Aside from these so-called supermajors,
Shell has competition from corporations
such as Saudi Aramco (Saudi Arabia),
Petrobras (Brazil), CNPC (China), Gazprom
(Russia), and many more.
Shift Towards Sustainable Energy
Mentioned several times already in this
article, one of the biggest challenges faced
by Shell is the transition to renewable
energy. This is both an opportunity and a
threat. With reserves decreasing and a shift
towards renewable sources of energy, the
current business of Shell is not sustainable in
the long-term future. Shell does not have
another choice than to invest heavily in new,
sustainable sources of energy.
Chapter 3: Forecasting
Tools
Judgemental Approach
Because of a huge array of different kinds of oil and car services, it is important to analyze
what the consumers like what kind of oil and car services the most. This is to keep up with the
trends and judge whether we need to make or improve various products for the consumers in the
future or not.
Outside Opinion
Since this is a huge company where it offers oil and car services, it is very
important to
consult to the experts in oil companies whether the products are safe for the cars without
consequences. Safety is a must in this company, and we must ensure that each car can drive by
without issues.
Executive opinions or Consensus method
Considering that PSPC is one of the most successful businesses in the Philippines and has
had a strong presence in the nation for more than a century, when generating a forecast, this
strategy might be helpful. PSPC must conduct a discussion with upper-level management,
executives, and consulting experts to gather ideas and views that will aid in maintaining the
company's leading position while also expanding the company's range and profitability. To
forecast sales or make a certain choice, the perspectives of managers and executives must be
consulted. As a group, they will be able to come up with a more accurate forecast by summing up
their thoughts and knowledge.
Test marketing technique
This forecasting approach, which considers the opinions of consumers, may be used by the
PSPC to anticipate the market for its goods and services. The PSPC must put their products through
extensive testing by offering their customers a "free first service" of their products in any of their
branches. It will enable them to check the accuracy and quality of their products and assess whether
or not they are harmless for use in vehicles without causing damage. It includes determining
whether or not a product will be competitive in the market after testing. People's feedback is
essential and advantageous to their business since it may benefit in the identification of problems
and errors that could occur during the product's launch. This compromise means it will be easy for
them to improvements their product using this method.
Chapter 4 Product and Service
Service Design
Pilipinas Shell Petroleum Corporation has been powering the Philippines' progress for
about a hundred years through their excellent and dedicated services and by providing the energy
needs of the country making them a leader in the oil and gas industry. Shell intends to extend their
market share, improve cost efficient structure, and many more.
Product Design
Pilipinas Shell Petroleum Corporation offers different products from oils, gas, lubricants,
and many more which can be found in their mobility stations all over the country. Shell provides
their products directly through gas pumps and in containers on the go.
Shell has been providing the Philippines these following products and services to the
market:
Fuels
With nearly over a century of fuel development, Shell provides quality fuels for you and
your car developed by our best scientists in the field to help give our customers a nice and safe
drive on the road.
Shell FuelSave
Shell FuelSave is Shell’s regular priced fuel brand that lasts longer than standard fuel brands.
Throughout the years, Shell FuelSave has been improved and developed by our scientists to help
give our customers the best when they are on the road
Shell FuelSave Gasoline
Shell FuelSave Gasoline is Shell’s regular priced gasoline that lasts longer than standard gasoline
brands. This gasoline helps improve engine efficiency and keeps it clean and smooth running.
Shell FuelSave Diesel
Shell FuelSave Diesel is Shell’s regular priced diesel that lasts longer than standard
diesel brands. This diesel helps with engine efficiency while also improving combustion of your
car.
Shell V-Power
Shell V-Power is now new and improved through the cooperation with Scuderia Ferrari.
Shell V-Power has DYNAFLEX technology that can help protect your engine to help give your
car its best performance and efficiency on the road.
Shell V-Power Gasoline
Shell V-Power Gasoline removes up to 80% of performance robbing deposits on
your gasoline and helps maximize the energy that is in the gasoline to help improve performance
Shell V-Power Diesel
Shell V-Power Diesel restores up to 100% of your car engine’s performance that
helps clean key fuel system components to provide a better riding experience.
Lubricants and Oils
Shell provides lubricants and oils to help give your vehicle a better performance.
Shell has developed different oils to help give our customers the best of what they need
Shell Helix Oil Change +
Shell Helix Oil Change + is a service that Shell does to help customers in changing
the vehicle’s oil while also performing maintenance checks on the vehicle by expertly trained
mechanics on the job. There is a lounge facility equipped with WiFi access for the customer while
they wait for their vehicle to be finished.
Shell Helix
Shell Helix is one of the line of engine oils that can suit any vehicle engine it can. It
provides your engine with extending its life, reduces the needed maintenance cost and oil
consumption, and helps give more engine cleanliness.
Shell Rimula
Shell Rimula is a line of engine oil recommended for trucks and public
transportations as it gives cleaner energy while also giving smarter mobility and sustainable
energy, especially for the aforementioned vehicles.
Shell Advance
Shell Advance is a line of engine oil suited for motorcycles and scooter engines to help give
maximum protection and help provide a smoother ride for your motorcycles or scooters.
Shell Diala
Shell Diala is a line of electrical oils that protects your vehicle equipment and to give
an efficient operation throughout its use.
Shell Omala
Shell Omala is a line of gear oils that extends oil-drain intervals in order to increase
the oil life in your vehicle.
Shell Tellus
Shell Tellus is a line of hydraulic fluids that are capable of four times standard life through
the use of Shell’s wide range of hydraulic fluids.
Shell Select Convenience Store and Deli-To-Go
It is one of Shell’s beliefs that a gas station should not only be a pit stop for drivers to pick
up fuel and oil but rather it should provide the customer more than their car needs but also their
own personal needs as well. That is why Shell stations have a convenience store called Shell Select
for that exact purpose. Just like any other convenience store, Shell Select provides a wide variety
of food, snacks, drinks, and other necessities and wants our customer would need on the road or
when they get to their destination. Shell Select has also launched its new offerings, Deli2go, that
provides fresh and tasty meals all at an affordable price to further a customer’s satisfaction and
experience at Shell.
Loyalty Programs
Shell also provides their customers with various loyalty programs that can give
benefits
to
their
customers
every
Shell Pepeng Pasada Club / Shell Go +
time
they
visit
a
Shell
station.
Shell Go +, previously known as Shell Pepeng Pasada Club, is specially designed
for drivers of any PUV vehicles (jeepneys, taxis, etc). Whenever they visit a Shell station,
customers will present their Shell Go + card and earn points. These points that they earn can be
exchanged with the three following benefits:
Scholarship - Gives members access to free scholarships
Insurance - Gives members access to free insurance
Rewards - Gives members a chance to claim exclusive rewards with any of our partners
with the points they earn.
SM Advantage Card
Members can earn points for their SM Advantage, SM Prestige, or BDO reward
cards with every visit and purchases they make at any Shell stations in the Philippines.
Shell Citi Visa
Customers can apply for a Shell Citi Visa, especially for motorists, to gain the benefits of
fuel rebates, saving on toll fees and many other automotive-related purchases they make at any
Shell station in the Philippines.