INFLUENCE OF GREEN SUPPLY CHAIN MANAGEMENT PRACTICES ON
SUSTAINABILITY OF OIL AND GAS INDUSTRY IN KENYA. A CASE OF
NATIONAL OIL COMPANIES OF KENYA
A RESEARCH PROPOSAL SUBMITTED TO THE DEPARTMENT OF
PROCUREMENT AND LOGISTICS IN THE SCHOOL OF ENTREPRENUERSHIP,
PROCUREMENT AND MANAGEMENT DEPARTMENT OF PROCUREMENT AND
LOGISTICS IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE
AWARD OF THE DIPLOMA IN PURCHASING AND SUPPLIES MANAGEMENT
OF JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY
FEBRUARY 2020
DECLARATION
This research proposal is our original work and has not been presented for a diploma in any
other university.
Leonard Njue - HDE-121/1129/2017
Danstun Makumi - HDE-121/1090/2017
Shadrack Muthoka - HDE-121/0978/2016
Daniel Mutheu - HDE-121/0889/2016
Signature………………………….
date…………………………….
This proposal has been submitted for examination with my approval as University Supervisor
Signature………………………….
Mr. Charles Muo
JKUAT, Kenya.
date…………………………….
DEDICATION
This Research proposal is a special dedication to our parents, colleagues and every other person
who supported us in any way to succeed in our research project. Your love, support and
encouragement throughout my academic life is greatly appreciated. We will always be proud
of you. God bless you.
ACKNOWLEDGEMENT
It is with a lot concern that we take this opportunity to thank the Almighty God for giving us
the strength and ability to carry out this research project peacefully, we also extend our
gratitude to our parents, brothers and sisters for their encouragement and financial support that
made it possible for this undertaking to be successful, and our supervisor Mr. Charles Muo for
his guidance through our research. Special thanks to other persons who in one way or another
contributed to the final realization of the general dream. This however would have not been
possible without their tremendous support and considerable amount of effort they offered to
me.
DEFINITION OF TERMINOLOGIES AND ABBREVIATIONS
Green logistics is the process of minimizing damage to the environment due to
the logistics operations of an organization.
Environmental performance: Environmental performance is the measurable outcome of an
organization's ability to meet environmental objectives and targets set forth in the
organization's environmental plan or policy
Waste Management: Waste management is merely manipulation of discarded things, waste
management is thus activity upon material.
Reverse Logistics: Reverse Logistics refers to the logistics management skills and activities
involved in reducing, managing and disposing of hazardous or non-hazardous waste
from packaging and products.
Packaging
LCI: Life Cycle Inventory.
BMPs: Best Management Practices.
LCA: Life Cycle Assessment.
ERC: Energy Regulatory Comission.
RCRA: Resource Conservation and Recovery Act.
NOCK: National Oil Corporation of Kenya.
KPIs: Key Performance Indicators.
AHP: Analytical Hierarchy Process.
LPG: Liquefied Petroleum Gas.
ICT: Information Communication Technologies.
SCM: Supply Chain Mnagement.
MRF: Material Recovery Facilities (MRFs)
CO2: Carbon dioxide.
API: American Petroleum Institute.
EPA: Exploration and Production Authority.
BPDRP: British Petroelum Downstream Research program
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
In the recent century, the main concern of the organization is to increase their environmental
performance. These organizations, to achieve the goal, they usually practice green logistics to
enhance environmental performance.
According to Spacey, (2017) Green logistics is the process of minimizing damage to the
environment due to the logistics operations of an organization. Logistics includes
transportation and resource intensive processes such as procurement, inventory management,
warehousing, order fulfillment and distribution. It also includes processes such as reverse
logistics and disposal logistics that concern reuse, recycling and waste disposal. The following
are common examples of green logistics. In oil marketing companies logistics, it involves its
products and supplies being transported daily within and across countries, onshore and
offshore, using various modes of transports such as barge, ships, rail and trucks (Lior, 2010).
Many of its activities are engineering intensive and conducted in environmentally sensitive
areas. It is also a high-risk industry where small mistakes can have severe repercussion to all
companies involved, their employees, the environment and society. To contribute to the
improvement of the management of green supply chain management practices, the
International Organization for Standardization (ISO) published the standard ISO 20400 in
2017, which presents guidelines for sustainable logistics practices. The implementation of
green practices into logistics systems enhances gain to businesses worldwide. Green logistics
practices within oil marketing companies, once well incorporated in logistics systems, it
enhances value chains, and enhances the effectiveness and efficiency of doing the business.
Suppliers and customers (Hamedi, 2009).
Environmental Sustainability as defined by National Environment Management Authority
refers to concerted efforts to mitigate against environmental degradation. It is the maintenance
of the factors and practices that contribute to the quality of environment on a long term basis.
The measurable outcome of an organization's ability to meet environmental objectives and
targets set forth in the organization's environmental plan or policy. Green supply chain
management is the process of minimizing damage to the environment due to
the logistics operations of an organization. Logistics includes transportation and resource
intensive processes such as procurement, inventory management, warehousing, order
fulfillment and distribution. It also includes processes such as reverse logistics and disposal
logistics that concern reuse, recycling and waste disposal. Green logistics is a form of logistics
which is calculated to be environmentally and often socially friendly in addition to
economically functional.(Spacey, 2017).
Green supply chain management describes all attempts to measure and minimize the ecological
impact of logistics activities. This includes all activities of the forward and reverse flows of
products, information and services between the point of origin and the point of consumption.
It is the aim to create a sustainable company value using a balance of economic and
environmental efficiency. Green logistics has its origin in the mid 1980s and was a concept to
characterize logistics systems and approaches that use advanced technology and equipment to
minimize environmental damage during operations. In addition to increasing diversity and
dynamics, environmental issues become more important. Social, political and economic
demands for sustainable development force organizations to reduce the effect on the
environment of their supply chains and to develop sustainable transport and supply chain
strategies. (Zuluaga, 2011).
Green Logistics is defined as an efforts to measure and minimize the environmental impact of
logistics activities, these activities include a proactive design for disassembly. The reasons why
companies choose to go green is that it gives the company a competitive advantage as the
customers are more interested in that the businesses go green. Companies usually adapt a green
transport system in order to reduce traffic congestion, reduce pollution, promote social
harmony and to save transportation costs. When a system of green logistics infrastructure is
established it sets the basis system for the entire green logistics system. Logistics are an
important function of modern transport systems. Contemporary technological and spatial
developments have improved the cost, efficiency and reliability of freight and passenger
transport systems. At the same time, the negative environmental impacts of transportation have
gained wide recognition and are at the core of issues of sustainability, especially in urban areas.
Since the applications of logistics are generally positive for the efficiency of transport systems,
it has been suggested that logistics are environmentally friendly, thus the concept of green
logistics (Schwartz, 2000).
The green logistics practices in the petroleum industry operations involve all of the activities
necessary to develop oil and gas properties and to extract the raw petroleum products, including
exploration, production, oil refining, marketing, transportation and consumption (Chima,
2007). Because of environmental problems and the worsening scarcity of natural resources,
companies must be producing more reliable, healthier products which damage the environment
minimally. Starting from that point, companies have been moving forward with a sense of
social responsibility and adopting green logistics in order to design cleaner manufacturing
processes and manage environmental risks. Businesses have been trying to reduce carbon
emissions in areas such as finding alternative resources, eliminating packaging, reverse-supply
chains and the re-arrangement of distribution channels. Green logistics helps improve a
business’ commercial performance along with its environmental image, and provide for more
efficient uses of resources, while also enabling recycling and improving market shares. Types
of green logistics practices includes; logistics management, low-Carbon warehousing and
packaging, low-carbon transportation, fleet management, alternative energy and logistics
innovation (Yangınlar & Sarı, 2014).
1.1.1 Global perspective of green supply chain management practices
The oil and gas companies involved in a global supply chain management that includes
domestic and international transportation, ordering and inventory visibility and control,
warehousing, import/export facilitation and information technology. Thus, the industry offers
a classic model for implementing supply-chain management techniques. In a supply-chain, a
company is linked to its upstream suppliers and downstream distributors as materials,
information, and capital flow through the supply chain (Chima, 2007).
Oil and gas supplying companies use specific modes of transportation which includes pipelines,
vessels, rail and roads. These commodities are produced in specific and limited regions of the
world, yet they are demanded all over the globe since they represent an essential source of
energy and raw material for a large number of other industries. Several weeks lead-time from
the shipping point to the final customers’ location is very common in this type of industry
(Schwartz, 2000).
The steadily increasing global demand for oil and its products has enabled companies providing
these products improve on the supply chains to reach more customers and increase their market
share and profitability. The increase in global demand has led to complexity of the petroleum
industry’s supply chain management as its still in the development stage of efficiently
managing their supply chains. The complexity of petroleum supply chain arises as a result of
the numerous infrastructures and global sourcing (Easton, 2019).
The petroleum industry is in the progress of opening new distribution centers in the global
market closer to final consumers as one way to reduce the lead time and transportation costs.
As the acquisition of such facilities in the oil and petrochemical industries is very costly this
leads to higher operating costs (Hebert, 2004). Supply chain management enables companies
achieve competitive advantage as it focuses on cost efficiency and customer satisfaction. The
petroleum industry of Zimbabwe has been uncompetitive due to the use of weak supply chain
strategies (Bimha, Hoque & Munapo, 2017).
The top world oil producers are Saudi Arabia, Russia,the United States, Iran, Mexico, China,
Canada, United Arab Emirates, Venezuela, Norway, Kuwait, Nigeria, Brazil, Kazakhstan and
Iraq. The values are added by processing and refining. A well-integrated global oil supply chain
management leads to greater economic rewards. The oil and petrochemical supplying
companies are using third party logistics providers (3PL) to manage their supply chains to
reduce on the shipping cost of the oil products (Easton, 2019).
1.1.2 Regional perspective of the green supply chain management practices
The joint World Bank/UNCTAD review proposes ways and means to improve the
competitiveness of a country's international trade by increasing the quality and reducing the
associated costs of international transport, and reducing any possible transaction cost, adapting
commercial practices to international standards, and removing any unnecessary trade barriers
within the economic, social, and political context of that country. Disruption in supply chain
can lead to reduced profit, reduction in production level, company reputation, shareholder
value, and poor customer relationship. A multi-product pipeline is constructed in south Africa
to facilitate increase of oil supplying capacity (Afiqah, Musa, Suraya, & Norhidayah, 2014).
Africa faces a threat of maximizing oil and supply due to increased cost of oil and gas supply
which is caused by corruption, poor infrastructure, and unavailability of proper regulation.
Saharan Africans depend on kerosene for lighting as its not yet connected to electricity.
Shortages of oil in sub-saharan Africa have lead to increase of prices of oil leads to increase
leads to increase of prices of all other goods. Uganda in particular has frequently experienced
oil shortages and price increase which is caused by the disruption of oil supply chain in Kenya.
Libya was an important oil producer, exporting 1,3 million barrels of sweet crude oil a day.
But the fighting has disrupted the chain of production and forced foreign companies to leave
the country. As a result, the production level dropped to barely 60,000 barrels a day (World
bank, 2018).
In Africa, Nigeria is the largest producer of oil in Africa and the petroleum industry supply
chain consists of the upstream sector which involves exploration, production and supply of
crude oil the midstream sector which involves production and storage of petroleum products in
tank farms and depots, and the downstream supply chain’s activities which involves marketing,
and distribution and of the petroleum products from the refineries or import jetties through the
intermediaries and finally is delivered to the final customers In Nigeria the downstream supply
chain involves a complex network of petroleum service providers and logistics firms which
rely on physical infrastructures and information network to perform their functions (World
bank, 2018).
Nigeria has frequently experienced disruptions in the supply of petroleum products which has
lead to petroleum shortages over the years. This has led to loss of revenue and
underdevelopment because most business enterprise depends on petroleum products for their
operations support. Government of Nigeria is offering investor opportunities for gas
infrastructure and development equipment and services so that they can improve on the
efficiency of the supply chain management in the downstream activities (Osuala, 2013).
According to Klieman, & Kairn, (2012), the petroleum industry is both significant and strategic
to the economy of any country, involving substantial economical flows and supporting
transportation and other essential services. petroleum is one of the major sources of energy in
Nigeria,, accounting for about 70 percent of its total energy consumption Energy plays a critical
role in social, economic and political development of the country and any inadequacies in its
supply will not only restrict social-economic activities but also limit economic growth thereby
adversely affecting the quality of life of its citizens.
Nigeria has 4 refineries which includes; Port-Harcourt I & II, Kaduna and Warri, with total
installed capacity of 445,000 barrels per day including 2 offshore jetties and 4 inland jetties as
well as over 90 tank farms with wide-ranging storage capacities being operated by different oil
marketing companies to cater for domestic consumption of refined petroleum products. In
addition, there are networks of 5,120 kilometers of pipelines (consisting of multi-product
pipelines and crude oil pipelines), 23 strategic depots, and 24 pump stations installed to
facilitate petroleum products distribution across the country (World Bank, 2018).
The upstream sector of the oil marketing industry in Nigeria is faced with challenges such as
pipeline vandalism and oil exploration disturbances, the downstream sector is also affected by
lack of maintenance of the refineries which leads to low refining activities for the domestic
market, pipeline vandalism, poor maintenance of pipelines and depots, poor transportation
infrastructure for the physical distribution of petroleum products to end-users. These challenges
in the downstream sector affect the petroleum products supply chain with the leads to shortages
of oil products (Siren, 2018).
Nigeria recorded 16,083 pipeline breaks from 2002 to 2012 with activities of vandals
responsible for 15,685 breaks (97.5%) and the remaining 398 breaks (2.5%) were as a result of
rupture resulting from poor maintenance of petroleum pipelines. The supply of petroleum
products supply and distribution in Nigeria has experienced more challenges resulting from the
chain reaction from pipeline disruptions and oil exploration disturbances. Pipeline vandalism
has resulted in increasing bridging of petroleum products from the south to the north and from
the southwest coastal ports and storage terminals to the east and north of the country (World
Bank, 2012).
The bridging arrangement is inherent with distribution challenges which have serious
implications on the petroleum products supply chain, economic development and growth of
the country as well as the welfare of her citizens. The challenges of the petroleum products
supply chain have also created problems such as increasing cost of product distribution by oil
marketing companies and frequent pump price adjustments by the government which
oftentimes lead to industrial strikes by trade unions in the down stream sector hence leading to
shortages of products availability to the final consumers (Bosshard, 2012).
Angola is the second largest oil producing and supplying country in Africa which annualyy
produces 88.7 million tonnes of oil. This make up 45% of Angola’s gross domestic product
(GDP). The Republic of the Congo is the third biggest oil producing and supplying country in
Africa which produces 14.5 million tonnes annually. Equitorial Gunea is the fourth largest oil
producing and supplying company which annually produces 13.5 million tonnes of oil. It
became the 14th member of the Organization of the Petroleum Producing Countries (OPEC).
1.2 billion-barrel reserve areas of oil are are located in Equitorial Gunea at Zafiro field. Gabon
is the fifth largest oil producing and supplying country in Africa. Joined OPEC 2016, with aim
to improve its production capabilities. Gabon annually produces 11.6 million tonnes of oil.
Gabon has 274 million tonnes of untouched oil reserves area located in Port-Gentil region. The
other top oil-producing and supplying countries in Africa consist of; South Sudan which
annually produces 7.3 million tonnes of oil, Sudan which annually produces 5.2 million tonnes
of oil, Ghana which annually produces 5.2 million tonnes of oil, Chad which annually produces
4.1 million tonnes of oil, and Cameroon which annually produces 3.7 million tonnes of oil
(Africa's gas reserves PwC, 2013).
1.1.3 Local perspective of green supply chain management practices
In 1948 Petroleum Act CAP 116 was established which governed the petroleum marketing
until the year 2006. Some challenges were experienced which included proliferation of the poor
petroleum products. A sessional paper No. 4 of 2004 was established to facilitate regulation of
the petroleum marketing under a new law. This resulted in energy act No. 12 be enforced in
2006 hence it led to formulation of the Energy Regulatory Comission (ERC) (siren, 2018).
Oil marketing in Kenya began in 1903 during colonial times. At first kerosene was the main
import in tins but later gasoline was imported in tins and drums. Royal Dutch Shell established
the first depot on the Mombasa island at Shimanzi. Oil is regulated by the Energy Regulation
Commission and the Ministry of Mining. Current traders include the National Oil Corporation
of Kenya, Shell, Tullow Oil, Kenol Kobil, MOGAS, Hass, Hashi Energy, Gulf Energy,
Olympic, Dalbit Petroleum, Petrocam (Matusov & Brobst, 2014).
The petroleum sector in Kenya includes the upstream activities including; the process of
exploration, development and production of crude oil and natural gas. The mid-stream
includes; storage, refining and transportation of crude oil into consumable petroleum products
and in the downstream section, which involves making the refined products available to the
final consumers through appropriate supply chain and distribution channel which include petro
stations and Kenya pipeline, (Siren, 2018).
The Kenya Pipeline Company provides oil supply, distribution and storage ensuring that the
oil products are made available to the final consumer through an appropriate supply chain
infrastructure. Distribution and Marketing of petroleum products is also done by oil marketing
companies. The National Oil Corporation of Kenya (NOCK) is the state body that is engaged
in this area. It is also involved in the upstream activities (Ministry of Energy and Petroleum,
petroleum@energy.go.ke).
The Kenya pipeline operations have repeatedly experienced disruptions caused by power
shortages due to delays on timely delivery. In Kenya road transport is adversely affected by
poor road conditions, traffic jams, and slow border clearance. An effective load limits
regulations and enforcement in the road transport sector will lead to reduction of the road
accidents, improved traffic safety, encouragement of use of more fuel-efficient truck, and
reduction of associated oil supply cost (Uche, 2008).
1.1.4 Key performance indicators of the oil and gas industry
Environmental performance is the measurable outcome of an organization's ability to meet
environmental objectives and targets set forth in the organization's environmental plan or
policy
The oil and gas sector has a significant impact on sustainable development, making it important
for the sector to implement serious changes in the way it does business. Oil and gas operations
involve both upstream activities, and downstream activities. Due to the nature of these activities
which cause high risks, companies work continuously to reduce the significance of their
adverse impacts on the environment and people. Thus, evaluating the sustainable production
in this sector is become a necessity. This paper proposes a set of Key Performance Indicators
(KPIs) for evaluating the sustainable production believed to be appropriate to the oil and gas
sector based on the triple bottom line of sustainability. The Analytical Hierarchy Process
(AHP) method is applied to prioritize the performance indicators by summarizing the opinions
of experts. It is hoped that the proposed KPIs enables and assists this sector to achieve the
higher performance in sustainable production and so as to ensures business sustainability.
(Elhuni, 2017)
1.1.3 Oil and gas industry in Kenya
According to Muema (2014) The history of oil marketing in Kenya began in 1903 during
colonial times. Initially, kerosene was the main import in tins but later gasoline was imported
in tins and drums. Royal Dutch Shell established the first depot on the island of Shimanzi, in
Mombasa, in the early 1900s.As of July 2018, there were over 60 registered oil marketing
companies in Kenya. The industry was controlled by major companies such as Libya Oil Kenya
Limited, Vivo Energy Kenya Limited and Total with competition from some locally
established companies such as Kenol Kobil, National Corporation, Tosha and Dalbit
Petroleum.
Efficiency can be measured in terms of air pollution through emulsion of gases into the air,
recycling of used oil, packaging of the petroleum during transportation to avoid spillage of the
petroleum on the surrounding, cleaning of the oil transporting containers and handling of the
used oil waste oil from the solution got during cleaning the containers used to transport oil
during dumping and ensuring secure dumping of the same at secure areas avoiding dumping
into rivers, dams, oceans and into other water bodies which serve water to the public, and waste
management and reduction and reduction of carbon emission in course of production of
petroleum. (Feng, 2009). Through the National Oil Corporation, incorporated in 1981 under
the companies act (Cap 486), was mandated to supply as much as 30% of (lie crude oil required
in Kenya and coordinate activities towards oil exploration on behalf of the government (Njau,
2010).
The sector boasts of over 30 oil importing and marketing companies comprising of live major
companies namely Shell, Total, Kenol/Kobil, Oil Libya. Chevron, and the government owned
National Oil Corporation of Kenya (NOCK). Challenges faced the sector which included
proliferation of substandard petroleum, dispensing and storage sites which pose environment
health and safety risks. In 2006, the Energy Act No. 12 of 2006 was enacted which created the
Energy Regulatory Commission (ERC) mandated to regulate petroleum and renewable energy
sectors in addition to electricity. The functions of ERC included regulating the importation,
exportation, transportation, refining, storage and sale of petroleum and petroleum products.
This is according to the ERC website www.crc.go.ke. All petroleum operators and products
are required to comply with provisions for environment health and safety. The major oil
manufacturing firms have different groups that differentiates them for instance Total Kenya,
Kenol/Kobil, shell Kenya have lubricants and Liquefied petroleum Gas (LPG) products with
their respective names thereby building brand loyalty. They also own major oil installations
such as lubricant blending plants, LPG filling and petroleum storage plants with nationwide
retail networks. Kenya Shell has such installations while Kenol/Kobil has over 180 service
stations in the country (Macheo & Oiniti 2003).
Current challenges in the oil industry in Kenya include uncontrollable high prices partly as a
result of the weak Kenyan shilling against the US dollar, lack of steady supply and storage
facilities which cause fuel shortages and inefficient transportation of fuel via road.
1.2 Statement of the Problem
The problem of influence of Green Logistics Practices on environmental performance in
Multinational Organizations in Kenya has been a great issue for quite some time. According to
Sarkis (2012) he stated that interest is mirrored by the increasing attention in the environment
and climate change and the efforts by governments and organizations around the world to
minimize their impact on the environment. Despite this increasing popularity, there are still
several areas of green logistics practices that require further research studies particularly as
effect of green logistics practices in environmental performance for oil marketing companies
in Kenya. This study therefore sought to explored what past scholars have done on the effect
of green logistics practices on environmental performance in oil marketing companies.
Previous studies by Ayugi (2007) on effectiveness and efficiency of the supply chain model in
the Wriglcy Company (Cast Africa) Ltd identified increased productivity, customer service,
customer responsiveness and high quality standards as the most common supply chain
objectives for the organization and reported findings that company supply chain had led to an
increase in sales with greater stock visibility to a greater extend. Mwirigi (2007) went further
and did a survey on the influence of green supply chain management practices by oil marketing
firms in Kenya with findings that green supply chain practices were found valuable in
overcoming environmental impacts arising from manufacturing operations as environmental
impacts occurs at every stage of the product life cycle.
The studies highlighted did not address the impact of green supply chain on performance of oil
marketing industries. Abuko (2011) went further and did a research on the impact of green
supply chain practice on performance of oil marketing firms and found that if an oil firm wants
to adopt green supply chain, they have to make it a priority sourcing from suppliers who
observe environmental friendly practices and collaborate with them as it was seen that most
organizations choose suppliers based on reliability and cost. He also suggested that more
government involvement and creation of awareness among all stakeholders is necessary to
ensure not only adoption but also sustained green supply chain practice. Most of the researchers
have majorly focused on the effects of the green supply chain practices on the procurement and
supply chain performance in oil marketing companies. As the identified from the existing
studies that there was need to research on the influence of green supply chain management
practices on the performance of oil and gas industry, there is need to research more on the same
as there is continuous increase of the registered companies in the oil and gas industry.
1.3 Objectives of the Study
1.3.1 General objective
The general objective of this study will be to establish the influence of the green logistics
management practices on performance of oil and gas industry
1.3.2 specific objectives
1. To determine the effect of packaging on performance of oil and gas industry in Kenya.
2. To assess the effect of waste management on performance of the oil and gas industry in
Kenya.
3. To evaluate the effect of information communication and technology on performance of oil
and gas industry in Kenya.
1.4 Research Questions.
1. How does packaging enhance performance of oil and gas industry in Kenya?
2. How does waste management enhance performance of oil and gas industry in Kenya?
3. How does adoption to information communication technology enhance performance of
oil and gas industry in Kenya?
1.5 Significance of the Study
The research will be essential to:
1.5.1 The Researcher
The researcher who is undertaking a course in procurement and logistics management will
benefit from the research as it’s a requirement for the fulfillment of the course for the award of
a masters certificate in the procurement and logistics management.
1.5.2 The Organization
The organization where the research is carried out, it will help the production manager,
purchasing manager, warehouse manager and transport manager to effectively, efficiently and
appropriately adopt to the green logistics practices in their operations to enhance environmental
performance
1.5.3 The future researchers
The findings of the research will be base for future researchers who undertake supply chain
management, procurement and logistics management studies at future dates.
1.6 Scope of the Study
The study will involve all the registered oil supplying companies by the Energy Regulatory
Commission (ERC county Nairobi county has been selected because every registered oil
supplying companies have an office destination in Nairobi city county, its cheap to access the
county and also Nairobi is more developed compared to other counties as it’s has the capital
city of Kenya. The study will aim at examining the influence supply chain collaboration,
customer service management, demand forecasting, and information communication and
technology on the performance of the oil supplying companies. The target population will be
105 oil supplying companies with 105 officers in procurement, and distribution departments
respectively.
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter presents theoretical framework, theories, models, the conceptual framework,
critique of existing literature on performance of supply chain systems, research gaps and
summary of the literature.
2.2 Theoretical Framework
Theoretical framework is a concept that can hold or support a theory of research study. It
involves introduction and definition of the theories within a topic and showing how they are
related to the subject under study. It involves description and explanation of the theories which
explains the existence of the research problem (William, 2016).
2.2.1 Knowledge based view theory
The knowledge-based theory of the firm considers knowledge as the most strategically
significant resource of a firm. Knowledge-based resources are the major determinants for
organization’s performance, and competitive advantage. This knowledge is carried through
multiple entities including organizational culture and identity, policies, routines, documents,
systems, and employees (Devaraj, Krajewski & Wei, 2007). Information technologies plays an
important role in the knowledge-based view of the firm in that information and technologies
systems can be used to facilitate, enhance, and expedite extensive intra- and inter-firm
knowledge management (Devaraj, et al, 2007). The supply industries benefit from the use of
information and communication technologies (ICTs) in the global market. Increased revenues
of supplying companies give them an opportunity to increase their adoption and
implementation of IT (Borgdorff & Schwab, 2014). ICTs implementation facilitates increasing
in effectiveness of products supply and efficiency by cutting down the products supply costs
in many sectors of the economy. Modern supply chain technologies provide new opportunities
to improve products supplying companies performance in downstream and upstream
operations of the supply chain management (Nasarullah & Raja, 2014).
ICTs implementation provides more predictability about future product supply. It could also
be a stabilizing factor helping to allay investors and consumers’ fears, and could contribute to
putting downward pressure on product prices (Sakhuja & Jain, 2012). ICTs play a major role
in increasing productivity and cutting costs through reduced much paper work, reduced
information sharing cost, ease of market analysis, in many sectors of the firm incorporated
(Salavasidis, 2012). ICTs and modern petroleum technologies which are also becoming
information intensive technologies provide new opportunities to improve economic
performance at all stages of the supply chain management. Modern ICTs implementation
provide more predictability about future product supply. It could also be a stabilizing factor
helping to allay investors and consumers’ fears, and could contribute to putting downward
pressure on product prices (Saad, Udin, & Hasnan, 2014).
Firms use some form of ICTs to control documents, information and records related to the
operating activities of the company. They also use these tools to coordinate with suppliers; and
they also use such tools with customers in supply management, agreements and collaborations
with suppliers in order not to affect the supply of material resources. firms ensures that use of
ICT must be appropriate for the characteristics and conditions of the company in order to have
better corporate control and coordination and also use of ICT depends not only on the type of
technology used, but also on the degree of adaptation of the technology to the business needs
and the ability to use it correctly (Fernández, 2014). The integration, implementation and use
of any technological supply chain systems in particular attention to SCM requires evaluating
aspects such as operation and negotiation skills with both suppliers and with the companies
that buy the products (Mohali & Panchkula, 2012). ICT implementation objectives in the SCM
includes; to strengthen existent trade agreements with suppliers and customers, speeding up
communication and data management, reducing costs and time in the transmission of
information (Silva, 2013). This theory has a direct link to the information, communication and
technology implementation variable.
2.2.3 Waste management theory
waste management is merely manipulation of discarded things, waste management is thus
activity upon material. The word ‘management’ actually indicates manipulation of activity, and
it is argued that waste management encompass more than just merely treatment of waste. As
illustrated in the previous section, turning wastes to non-wastes involved a number of
applicable waste management actions. Waste management also entails strategic planning,
prescribing options, prevention of the contamination of environment and waste management
and the Environment conservation of resources, minimizing the amount and toxicity of waste
creation. choosing the best treatment option, with taking into consideration legislation,
assessing effects and consequences and decision making. Waste management is control of
waste related activities, with the ultimate aim of resources conservation and protection of
human health and the environment. To be able to design the most appropriate waste
management system, the proper theoretical background has to be established. will have to be
built, such that embraces the following notions. Waste management is to prevent waste causing
harm to human health and the environment. (Cheyne & Purdue, 2010).
The primary aim of waste management is the conservation of resources. We shall avoid waste
creation by creating useful objects primarily. Waste management is to encompass the goal of
turning waste into nonwaste. As with any new theory, one should start with defining the scope
of the theory, and define the core of its concepts. Waste management has to be planned within
restrictive limits, where the choice of options is generally pre-specified. It is expected that the
insight that the theory of waste management would give to the domain would greatly contribute
to achieving the goals of waste management: resources conservation and environment
protection. The practical values of Providing a foundation for how and when to select and
integrate waste management options. Predicting the outcomes of the use of waste management
actions. Aiding legislation in how to prescribe activity for waste (Phillips, Clarkson, Barnes, &
Adams, 2002).
The Theory of Waste Management, as differentiated from waste management practice,
represents a more in-depth account of the domain and contains conceptual analyses of waste,
the activity upon waste, and a holistic view of the functions and goals of waste management.
In this article, a conceptual description of waste management was offered, providing novel,
dynamic definitions of waste and waste management.. It is concluded that there is a need for
more theoretical research to be made in the waste management domain, and to offer a
scientifically founded and optimal choice of waste management options (Smith, 2003).
Wastes generated from crude oil and natural gas exploration and production are generally
subject to regulation under Subtitle D of the Resource Conservation and Recovery Act (RCRA)
and state regulations, and many state governments have specific regulations and guidance for
exploration and production wastes. In addition, some states are developing legislation and
regulations in response to the increase in the use of hydraulic fracturing, including requirements
related to waste management. As the use of hydraulic fracturing has increased, so too have
concerns about potential impacts on public health and the environment, including potential
impacts arising from improper management of wastes from exploration and production
activities. Proper waste management is important for all exploration and production wastes,
including those that are associated with hydraulic fracturing activities (Claire, 2015)
In response, EPA entered into a consent decree to conduct a review and determine whether
revisions to the federal solid waste management regulations are necessary. To support this
effort, EPA conducted an extensive literature review of government, industry and academic
sources to supplement the information available from previous Agency actions. This review,
to determine whether changes to the federal solid waste regulations are necessary, evaluated
factors such as waste characteristics, management practices, damage cases and the coverage of
state programs. EPA works with states and other organizations to identify areas for continued
improvement and to address emerging issues to ensure that exploration, development and
production wastes continue to be managed in a manner that is protective of human health and
the environment. Natural gas plays a key role in our nation's clean energy future. The United
States has vast reserves of natural gas that are commercially viable as a result of advances in
horizontal drilling and hydraulic fracturing technologies enabling greater access to gas in shale
formations. Responsible development of America's shale gas resources offers important
economic, energy security, and environmental benefits. Many state governments have specific
regulations and guidance for exploration and production wastes (European Council, 2017).
The management of exploration and production wastes should occur in a manner that prevents
releases of hazardous constituents to the environment, particularly releases that may impact
groundwater and surface water resources. Regulatory programs include regulatory parameters
such as liner requirements, clear definitions of waste fluids and characterization requirements,
operational controls, maintenance, closure, and financial assurance requirements. Several areas
do not appear to have specific requirements; for example, groundwater monitoring, air
monitoring, or post closure monitoring. Numerous states have recently updated regulations to
include disclosure requirements for the chemicals used in the practice of hydraulic fracturing.
State regulations continue to evolve as hydraulic fracturing issues become more prevalent and
additional information becomes available. In concert with the application of state regulatory
requirements, there are a variety of voluntary management practice guidance often referred to
in industry as Best Management Practices, (BMPs) for operators to evaluate and use in the
development of site-specific exploration and production waste management plans (Claire,
2015).
Operators should evaluate and, as appropriate, employ practices best suited to prevent releases
during the generation and management of exploration and production wastes including wastes
from hydraulic fracturing. Voluntary management guidance for oil and gas exploration and
production wastes should be matched and adapted to meet the site-specific requirements of the
project and local environment. Operators should also integrate source reduction and recycling
measures into their operations, where practicable. There is much existing guidance developed
and being used by industry, federal, state, and non-governmental organizations (Phillips,
Clarkson, Barnes, & Adams, 2002).
Waste management prioritises waste handling methodologies in order to reduce waste volumes
to landfill facilities, Interwaste has developed an Integrated Waste Management Model closely
aligned to the hierarchy which forms the cornerstone of our service offering. By leveraging the
Integrated Service Offering and diverse range of skills and capabilities across the supply chain
members leads to achievement of sustainability goals by understanding their strategies and
waste streams. Recycling waste into reusable materials has the double benefit of reducing the
amount of waste reaching landfill sites and offering employment and income generating
opportunities.
Material Recovery Facilities (MRFs) is responsible for the collection of recyclable materials
such as used oil, paper, cardboard, plastic, glass and metals. Using the principle of zero waste
to landfill, we are committed to a pre-landfill waste treatment service where waste is assessed,
classified and then directed towards appropriate treatment processes with a focus on resource
recovery
and
waste
to
energy
solutions.
pre-landfill
waste
treatment
service ensures minimization of hazardous waste to landfills, it reduces the volume of waste
for landfill which then assists clients in meeting the required specifications for landfill disposal.
Waste management compliance is a non- negotiable. Working jointly, our Technical Services
and Compliance teams participate in legislative developments with the Department of
Environmental Affairs to keep up-to-date with ever-evolving legislation. This knowledge
allows us to drive innovation within the bounds of compliance resulting in ‘win win’ waste
management solutions for our clients (Claire, 2015).
Theory of Materials Handling
Material Handling refers to the movements of materials and handling there in store. Handling
of materials is an integral part of the production process. Handling can be manual or
mechanical. The movement can be horizontal, vertical or the combination of these two
(Mulcahy, 1999) Usually a large part of indirect labour is engaged in material handling. Also,
the average material handling cost in nearly 25-30% of the total production cost. It has become
clear that total or net cost of the production process can be lowered by making a saving in
material handling cost.
Material handling functions includes; transportation of materials from stores to shops, proper
positioning of purchased material for the purpose of storage, transportation during process from
one machine to other, unloading the imported materials from trucks or trolley, to make the
economical use of floor space, and maintain suitable flexibility of arrangements and layouts.
Material handling puts emphasis on the need of the installing efficient and economical methods
for material handling. A material handlings equipment is not considered production machinery.
A material handling system should be able to move and store the material effectively with
minimum effort, maximum safety and in the shortest time. Using the principles of
containerization, unit load or palletization, materials to be moved should be aggregated into a
larger unit size and the unit size should also be same for all the materials. The materials and
typically carried on a pallet for convenience in handling. Transport the full unit load whenever
possible instead of practical loads. Load the material handling equipment to its maximum safe
limit loading. Minimize the distance traveled by adopting shorter distances possible, Follow
the straight line flow rule i.e. the material handling path should be a straight line this rule is
also consistent with principle of shortest distance (Kulwiec, 1985).
Utilize the gravity principle for assisting the movement of materials wherever it is possible
with due consideration to safety and risk of product damage. Minimize the non-move of
terminal times. The total time required for the movement of material is sum of the actual move
time and time taken in loading, unloading and other allied activities which do not involve the
actual transport of materials. Follow the mechanization principle. Employ mechanical aids in
place of manual labour in order to speed up material movement, increase the efficiency and
economy of the system where possible. The handling equipment’s should not interfere with the
production lines. Run conveyors overhead and stack load on top of each other or in racks as
high as safety permits. Provide right equipment at right time (Frazelle, 2002).
The usual production cycle consist more in moving the materials than converting them into
final product. Hence, sufficient attention must be given in fitting the internal transport system
in the manufacturing plant so as to constitute a single unit. If it is insufficient it may cause
delays and decrease efficiency of the production systems, which results in the increased cost
of production. Hence this problem should be given dire consideration and material handling
equipment should be utilized unless it is quite sure that will be cheaper than manual means of
handling (Apple, 1972).
The selection of material handling equipment’s depends upon the; Nature of product and its
portability, value of production, shape and size of products, methods of production, sequence
of operations, the production rate of the industrial unit, space availability and type of layout
used, distance to be covered by the material, power availability, initial cost of installation,
operation and maintenance costs, depreciation costs, availability of unskilled labour, and
design of material handling equipment its capacity.
It is clear from above that the selection of material handling equipment’s depend on so many
factors and it is difficult to make any recommendation without taking into consideration the
practical aspects of the problem. Material handling equipment must be able to perform the basic
function of material handling like storage and transportation. It must facilitate production
planning, inspection and process control activities. It should be able to reduce the work cycle
time i.e. minimizing the unproductive material handling time. It should improve the capacity
utilization of plant. It should minimize the work in process or the total inventory requirements.
It should be able to reduce the workers mutual and physical fatigue. This factor will ultimately
improve satisfaction and safety level of workers (Frazelle, 2002).
Conceptual framework
Information communication
technology
1.
E-procurement
2.
E-sourcing
3.
E-payment
Oil marketing companies’
sustainability
Waste Management
1.
Resale
2.
Reuse
3.
Recycle
4.
Repair
5.
Waste treatment and disposal
Packaging
1.
Containerization
2.
Green packaging
3.
Order consolidation
4.
Employee training
Independent variables
1.
Environmental friendliness
2.
3.
4.
Profitability
Social welfare
Government regulation
Compliance
5.
6.
Competitiveness
Innovativeness
Dependent variable
2.2.1 Information Communication Technology
Technology use of improved draining pipes of petroleum from the trucks into the storage tanks
to reduce petroleum exposure to air which leads to air pollution. The storage tanks should be
fixed under underground at controlled temperatures to reduce chances of explosions, and
exposure of the petroleum into the air thus reduced air pollution. Refinery and Petrochemicals
technology innovations aims to; maximize efficiency; minimize utilities consumption, improve
the environmental quality or finished products, maximize yields on higher added valued
products, process unconventional crudes, and use remote natural gas and bio-fuels. Innovation
in refinery objective is to increase flexibility and efficiency of refining cycles, to process
unconventional crudes and to produce fuels, biofules, high performance lubricants, with
minimal environmental impact (Mukhopadhyay, Kekre, & Kalathur, 1995).
Advanced control and analysis technologies are necessaries for ensuring the optimization of
operations and of blend of products. Refineries should be able to optimize control and manage
their process units and obtain the required products at the minimum costs. At this aim operating
systems are yet developed, based on very complex and sophisticated models, which allow to
manage automatically units or even several units connected among them. The use of retails of
microcomputers connected with a central processor allows to reach very high safety and
efficiency in the plants operations (Samaddar, Nargundkar, & Daley, 2006).
These systems need sensors which measure continuously both quantitative; temperature,
pressure, flows, levels and qualitative parameters. The refining industry faces considerable
challenges in fuel specifications in accordance with the European Union’s environmental
regulations on petrol and diesel quality. General goals are to; minimize sulphur content on
gasolines, gasoils and heavy fuel oil, reduce aromatic components in gasolines and in gasolis.
These goals could be reached through several technologies, the majority of which based on
high pressure hydrogenation processes (desulphurization, hydrocracking, mild hydrocracking).
The R&D objective is the improvement in catalyst which has to be cheaper, with better
performance and capability. The improvements have also to reduce investment and operations
costs. The technological frontier is to produce very high quality gasoil from synthesis gas
through the Fisher Tropsch reaction. A few processes have been developed based on cobalt
catalysts which allows to use as feed-stocke natural gas. At moment only Shell have realized
industrial unit. Heavy oil production and upgrading aims to upgrade as much as possible heavy
oil into distillates is traditionally the main one or refinery. In the same time the intent is to
produce both distillates and not upgraded residue at minimum content of sulphur. Upgrading
of heavy distillates through FCC and HDC and of residue through thermal processes like as
visbreacking, thermal cracking and delayed cocking are yet conventional technologies. The
innovation of technology is now focused to heavy residue catalytic conversion in high pressure
of hydrogen (Mukhopadhyay, Kekre, & Kalathur, 1995).
A nike technology is Coke calcination that in fact it is more a metallurgical process than a
refining process. It is a process whereby green or raw petroleum coke is thermally upgraded
to; remove associated moisture and volatile combustion materials, improve critical physical
properties like electrical conductivity, real density, and oxidation characteristics. The
development of new lubricants and fuels require the use of additives which have to be
increasingly advanced and competitive with the continuous market demands related to higher
performance, cost-efficiency and environmental value of the products. Dispersants and
detergents are respectively the main elements of lubricant and fuel packages. The innovation
in this context is aimed to realize a flexible technology for the production of additives which
allow products to be exploited for different uses in both fuel and lubricants by changing
operating conditions or characteristics of the reagents. In the automotive sector, research has
long been focused towards; the reduction of CO2 and pollutant emissions, the optimization of
fuel economy, and the reduction of the impact of the lubricants on the exhaust gas treatment
systems with reduced content of ash, phosphorus and sulphur (Samaddar, et al, 2006).
British Petroelum downstream Research program’s (BPDRP) aim is to develop tools that will
help refiners understand how feedstocks have to be optimally processes in the refinery before
they are purchased or processed helping refiners maximize value and to reduce maintenance
risks while the feedstocks will be subsequently processed. Researches carried out in this sector
are mainly focused on increase the flexibility of technologies to ensure production continuity
using different feedstocks, both fossil or from renewable sources, improve chemical and energy
efficiency, to reduce environmental impact. Companies are exploring new solutions in the
fields of elastomers for car tires in line with the strict European standards. One of the these
innovative solutions consists on the use of oils of vegetable origin, with low environmental
impact and high performance. The oils can be used as rubber extender oils. The challenge is
the production of compact polystyrene resins used for packaging, coating and household items,
which replaces the traditional ones in aqueous suspensions. This process, in fact, is performed
without the addition of water which must be separated after the reaction section (Samaddar,
Nargundkar, & Daley, 2006).
2.2.2 Waste Management
The oil and gas industry must dispose of this waste in accordance with various laws and
regulations of federal, state and local governments. In 1976, Congress enacted the Resource
Conservation and Recovery Act (RCRA) (codified at 40 C.F.R. 239 – 299), to classify solid
waste as either hazardous or nonhazardous and to provide guidance for managing both.
Hazardous waste is regulated under Subtitle C of RCRA; other solid wastes are regulated under
Subtitle D. In 1978, EPA proposed to exempt oil and gas exploration and production (E&P)
waste from the Subtitle C hazardous waste rules (43 Federal Register 58946). The exemption was
first codified in the 1980 amendments to RCRA (Solid Waste Disposal Amendments Act of
1980), which was the 1980 amendment to RCRA. The Act required that the EPA conduct further
studies about E&P waste and report to Congress by October 1982. EPA missed that deadline and
submitted their study in December 1987. In 1988, EPA released a regulatory determination that
regulation of oil and gas E&P waste under RCRA Subtitle C was not warranted. The exemption
for oil and gas exploration and production waste is now codified at 40 C.F.R. 261.4 (b)(5). In
1988, EPA also published a list of exempt and non-exempt waste. Consequently, most oil and
gas exploration and production waste is regulated under Subtitle D as solid waste.
The EPA is the federal agency with principal authority to implement RCRA, but EPA can
delegate regulatory authority to states. These states, said to have “primacy,” then regulate
handling, treatment, and disposal of hazardous waste through statutes and regulations at least as
effective as RCRA and EPA’s regulations. The states regulate nonhazardous solid waste through
a solid waste management plan approved by EPA. Unlike its Subtitle C regulations for hazardous
waste, EPA has not promulgated regulations dictating how states should manage solid waste. The
only exceptions are criteria for nonhazardous, nonmunicipal landfills (40 C.F.R. Part 257) and
municipal solid waste disposal facilities (40 C.F.R. Part 258). EPA’s principal role in solid waste
management is in setting national goals, developing educational materials and providing
leadership and technical assistance (Jackson, Rohlik, & Conway, 1984)
The EPA, various state agencies and industry organizations and companies recognize that
disposing of waste should not be the first line of defense for protecting the environment
as waste minimization pollution prevention should dominate the strategy. Waste management
includes avoiding waste generation, generating the least toxic waste possible, Material
elimination, inventory control and management, material substitution, process modification,
improved housekeeping, and return of unused material to supplier. Reclaiming useful
constituents of a waste material or removing contaminants from a waste so that it can be
reused. Also may involve the use of a waste as a substitute product for a commercial product
through reuse, reprocess, reclaim, use as fuel, underground injection for enhanced recovery,
and road-spreading. Any method, technique, or process that changes the physical, chemical, or
biological character of a waste (LaGrega, Buckingham, Evans, 2010).
2.2.3 Packaging
The rise of plastics recycling plants may stunt demand for oil. Reaction against the
environmentally damaging effect of plastic packaging is fuelling the development of plants in
Europe and elsewhere that can recycle it as liquid feedstock or fuel in a trend that is likely to
reduce refineries' demand for oil. Many say the chemicals industry will have to undertake a
fundamental shift towards recycling if it wants to prevent consumers rejecting plastics and
especially single-use packaging in a widespread swing against harmful materials. But further
pressure is mounting from major brands that use packaging and are evaluating shifts to
alternatives other than plastic. One of the consequences may be a reduction in demand for oilbased petrochemical feedstock. But recent concern over the proliferation of plastics in the
environment is leading large and small companies to study the possibility of recycling plastics
as liquid feedstock or fuel. Most of the recycling technologies are either still in the pilot plant
stage or just leaving it. However the results are encouraging. Other companies are engaged in
recycling plastics back to their chemical components (Zabaniotou, & Kassidi, 2003).
Sustainable packaging is the development and use of packaging which results in
improved sustainability. This involves increased use of life cycle inventory (LCI) and life cycle
assessment (LCA) to help guide the use of packaging which reduces the environmental
impact and ecological footprint. It includes a look at the whole of the supply chain: from basic
function, to marketing, and then through to end of life (LCA) and rebirth. Additionally, an ecocost to value ratio can be useful. The goals are to improve the long term viability and quality
of life for humans and the longevity of natural ecosystems. Sustainable packaging must meet
the functional and economic needs of the present without compromising the ability of future
generations to meet their own needs. Sustainability is not necessarily an end state but is a
continuing process of improvement (Wiley, 2008).
Sustainable packaging is a relatively new addition to the environmental considerations for
packaging. It requires more analysis and documentation to look at the package design, choice
of materials, processing, and life-cycle. This is not just the vague "green movement" that many
businesses and companies have been trying to include over the past years. Companies
implementing eco-friendly actions are reducing their carbon footprint, using more recycled
materials and reusing more package components. They often encourage suppliers, contract
packagers, and distributors to do likewise (Svanes, Mie Hanne, Marit, Pettersen, Hanne, & Ole
Jørgen, 2010).
Environmental marketing claims on packages need to be made with much consideration.
Companies have long been reusing and recycling packaging when economically viable. Using
minimal packaging has also been a common goal to help reduce costs. Recent years have
accelerated these efforts based on social movements, consumer pressure, and regulation. All
phases of packaging, distribution, and logistics are included. Sustainable packaging is no longer
focused on just recycling. Packaging is frequently scrutinized and used as the measure of a
company's overall sustainability, even though it may contribute only a small percentage to the
total eco impact compared to other things, such as transportation, and water and energy use.
The criteria for ranking and comparing packaging based on their sustainability is an active area
of development (Stillwell, 2008).
Government, standards organizations, consumers, retailers, and packagers are considering
several types of criteria. Each organization words the goals and targets a little differently. In
general, the broad goals of sustainable packaging are; functional which includes product
protection, safety, regulatory compliance, etc., cost effective; if it is too expensive, it is unlikely
to be used, support long-term human and ecological health (Fecourt, Adrien & Li, 2013).
Specific factors for sustainable design of packaging may include: Use of minimal materials;
reduced packaging, reduced layers of packaging, lower mass, lower volume, etc.,
Energy efficiency, total energy content and usage, use of renewable energy, use of clean
energy, etc., Recycled content; as available and functional. For food contact materials, there
are special safety considerations, particularly for use of recycled plastics and paper.
Regulations are published by each country or region. Recyclability; recovery value, use of
materials which are frequently and easily recycled, reduction of materials which hinder
recyclability of major components, etc., reusable packaging; repeated reuse of package, reuse
for other purposes, etc., use of renewable, biodegradable and compostable materials; when
appropriate and do not cause contamination of the recycling stream, avoid the use of materials
toxic to humans or the environment, effects on atmosphere/climate; ozone layer, greenhouse
gases (carbon dioxide and methane), volatile organic compounds, etc., water use, reuse,
treatment, waste, etc., worker impact: occupational health, safety, clean and technology
(Europen, European Organization for Packaging and the Environment, 2011).
Some aspects of environmentally sound packaging are required by regulators while others are
decisions made by individual packagers. Investors, employees, management, and customers
can influence corporate decisions and help set policies. When investors seek to purchase stock,
companies known for their positive environmental policy can be attractive. Potential
stockholders and investors see this as a solid decision: lower environmental risks lead to more
capital at cheaper rates. Companies that highlight their environmental status to consumers can
boost sales as well as product reputation. Going green is often a sound investment that can pay
off. The process of engineering more environmentally acceptable packages can include
consideration of the costs. Some companies claim that their environmental packaging program
is cost effective. Some alternative materials that are recycled/recyclable and/or less damaging
to the environment can lead to companies incurring increased costs. Though this is common
when any product begins to carry the true cost of its production. There may be an expensive
and lengthy process before the new forms of packaging are deemed safe to the public, and
approval may take up to two years.[ It is important to note here, that for most of the developed
world, tightening legislation, and changes in major retailer demand (Walmart's Sustainable
Packaging Scorecard for example) the question is no longer "if" products and packaging should
become more sustainable, but how-to and how-soon to do it. Efforts toward greener packaging
are supported in the sustainability community (Zhu, Sarkis & Geng, 2005).
2.3.5 Performance of oil and gas industry
In a competitive global market where customers demand on-time delivery of high-quality
products at competitive prices, firms must operate efficiently and effectively in order to achieve
sustainability in the market. For firms to achieve sustainability in the market, firms must ensure
that they satisfy their target customers with timely delivery of products in right quality, right
quantity, at the right place, at the right price and to the right customer. firms must also be
flexible to cope with changing technology and demand so as to benefit from the changes
(Rushton, Croucher & Baker, 2011).
The importance of customer satisfaction has challenged the application of relevant and efficient
supply chain management system. Companies have adopted to the modern technology which
has enhanced cost reduction, increased efficient in information sharing and communication.
They have also engaged in long term relationships with the suppliers and customers resulting
to timely delivery of final product to the final consumer effectively and efficiently. This
improves company’s performance (Jain, 2014). Excellence in managing supply chains
practices is directly enhances improvement in organizational performance (Christopher, 2005).
An organization's profitability is indicated by the surplus of the revenue generated from sales
less the operation costs. Supply chains can increase products’ prices through increased service
levels and costs through reducing operating expenditure (Hendricks & Singhal, 2005).
There are two generic competitive strategies which includes; cost advantage and
differentiation. Cost advantage is achieved through reducing costs, and differentiation
increases profitability by providing increased levels of customization and service. Increased
levels of service can be provided through efficient order capture, product availability, on‐time
delivery, information transparency, and improved responsiveness (Christopher & Ryals, 1999).
There is a positive relationship between increased levels of service and increases in sales
volume and customer retention. This indicates that supply chain improvements must have the
two aims of reducing costs without negatively impacting customer service or improving service
without a disproportionate increase in costs (Zsidisin, Ellram & Ogden, 2003).
Reduction of the organization's cost also contribute to profitability. The cost reduction ways
consist of; reducing the cost of operation through reduction in the total cost of sourcing of
materials, and enhance customer contribution management through minimization of inventory
holding costs by optimizing the inventory levels and eliminating non value adding supply chain
activities and their associated costs (Sabath, 2003). There is a link between proper supply chain
management practices with improved organizational performance, the effect of poor supply
chain management leads to supply chains disruptions results to decreases in lower sales growth,
hence the cost increase (Hendricks & Singhal, 2005).
2.4 Empirical Review
This chapter elaborates literature of title under study. According to Kothari, (2014) the review
on similar studies is used along with empirical data collected. The review of empirical literature
plays a key role in establishing research gaps upon which the study can be build on. According
to Zhu et al., (2005), GSCM has emerged as a key approach for enterprises
seeking to become environmentally sustainable. Authors evaluate and describe GSCM
drivers, practices and performance among various Chinese manufacturing organizations.
Chinese enterprises have increased their environmental awareness due to regulatory,
competitive, and marketing pressures and drivers. However, this awareness has not been
translated into strong GSCM practice adoption, let alone into improvements in some areas of
performance, where it was expected. The investigation and its findings are still relatively
exploratory.
According to Ho et al., (2009), Green supply chain aims at confining the wastes within the
industrial system so as to conserve energy and prevent the dissipation of harmful materials
into the environment. Authors compared and contrasted the traditional and green supply
chains and discussed several important opportunities in GSCM in depth, including those in
manufacturing,
bio-waste,
construction,
and
packaging.
Doherty and Hoyle (2009) examines the role that the logistics and transport sector plays in
reducing emissions, both in its own operations and by influencing shippers and buyers to
undertake broader supply chain improvements. Researchers highlighted that logistics and
transportation activities contribute approximately 5 percent of the 50,000 mega-tonnes of
carbon-dioxide emissions generated by all human activity annually. Report reviews 13
commercially viable opportunities for reducing supply chain carbon emissions within the
logistics and transport sector as well as across the extended supply chain and assesses them
according
to
carbon-dioxide
abatement
potential
and
feasibility
to
implement.
Seuring (2008) assess the current practice in research on supply chain management applying
a case study method. Two particular research fields, namely sustainable supply chain
management
and
performance
supply
chain
management
are
used as examples. Two major findings were: first, supply chain researchers have to make a
greater
effort
to
collect
data
from
supply
chains
Ninlawan et al., (2010) surveyed current green activities in computer parts’ manufacturers in
Thailand and evaluated GSCM. In-depth interview about green procurement, green
manufacturing, green distribution, and/or reverse logistics has been taken. To evaluate
GSCM, the questionnaire related to investigate GSCM practices, measure GSCM
performance, and explore GSCM pressure/ driver within Thai electronics industry was used
to obtain survey results. Then suggestions were given to develop GSCM in electronics
industry.
2.5 Critique of Existing Literature
This chapter elaborates literature of title under study. According to Kothari, (2014) the review
on similar studies is used along with empirical data collected. The review of empirical literature
plays a key role in establishing research gaps upon which the study can be build on. According
to Zhu et al., (2005), GSCM has emerged as a key approach for enterprises
seeking to become environmentally sustainable. Authors evaluate and describe GSCM
drivers, practices and performance among various Chinese manufacturing organizations.
Chinese enterprises have increased their environmental awareness due to regulatory,
competitive, and marketing pressures and drivers. However, this awareness has not been
translated into strong GSCM practice adoption, let alone into improvements in some areas of
performance, where it was expected. The investigation and its findings are still relatively
exploratory.
According to Ho et al., (2009), Green supply chain aims at confining the wastes within the
industrial system so as to conserve energy and prevent the dissipation of harmful materials
into the environment. Authors compared and contrasted the traditional and green supply
chains and discussed several important opportunities in GSCM in depth, including those in
manufacturing,
bio-waste,
construction,
and
packaging.
Seuring (2008) assess the current practice in research on supply chain management applying
a case study method. Two particular research fields, namely sustainable supply chain
management
and
performance
supply
chain
management
are
used as examples. Two major findings were: first, supply chain researchers have to make a
greater
effort
to
collect
data
from
supply
chains
Ninlawan et al., (2010) surveyed current green activities in computer parts’ manufacturers in
Thailand and evaluated GSCM. In-depth interview about green procurement, green
manufacturing, green distribution, and/or reverse logistics has been taken. To evaluate
GSCM, the questionnaire related to investigate GSCM practices, measure GSCM
performance, and explore GSCM pressure/ driver within Thai electronics industry was used
to obtain survey results. Then suggestions were given to develop GSCM in electronics
industry. Basing on the existing literature, it has not captured the current situation in the oil and
gas industry as there has been increase of the number of registered oil supplying companies.
2.6 Summary of the Literature
Green supply chain management practices on the performance of the oil and gas industry has
been a more interest of several researchers. The previous studies on the performance of the oil
supplying companies in connection to customer satisfaction has mainly forecasted proper
demand forecasting, designing supply chain modeling storage capacity, transportation
infrastructure, government regulations, quality control, ethical procurement, supplier
relationship management, E-technology, green supply chain management practices have been
used in improving the performance of oil supplying companies. Some of the supply chain
management practices studied by the previous researchers covered small number of the oil
supplying companies in Kenya compared to the current number of registered oil supplying
companies in Kenya. This is evidenced by the Energy regulation commission who have
registered 105 oil supplying companies in Kenya as at in the year 2019 compared to year 2014
whereby only 73 oil supplying companies had been registered.
2.7 Research Gaps
It is evident that proper management of the supply chain practices in the petroleum companies
is very important because it improves the level of customer satisfaction. Customer satisfaction
is a pressing issue in any petroleum industry worldwide. There is existing challenges that
hinders the performance of the oil supplying companies in Kenya as evidenced by Osoro (2015)
who studied on the factors affecting performance of supply chain systems in the petroleum
industry in Kenya.
Lin (2012), who did a research on why firms implement green practices in developing
countries. This study was not sufficient because it did not involve all the green logistics
management practices Gist, (2013) who conducted a research on the impact of the oil industry
on economic growth performance in Nigeria, Barrow, (2013) who studied on the impact of
information and technology use on the performance of the oil supplying companies, and
Wambui (2014) who researched on the influence of procurement practices on the performance
of the oil marketing firms in Kenya The available studies have focused on the existing issues
in the oil and gas industry where the green aspect in the supply chain has not been captured
which my research is addressing.
CHAPTER THREE
METHODOLOGY
3.1 Introduction
This chapter presents research design, target population, sample and sampling technique,
instruments, data collection procedure, pilot test, statistical model, operationalization of
variables, data processing and analysis.
3.2 Research Design
Kothari (2004), defined research design as a method used to collect, analyze and present data.
The study involved the use of a mixed research design. A mixed research design is applicable
to large population in a large geographical area coverage and it also facilitates collection of
data for the independent and dependent variable (Creswell, 2014). Anderson (2013), argued
that mixed method research design is a research design that facilitates ease use of combination
of the qualitative and quantitative research approaches. Qualitative research facilitates
collection of data inform of descriptions and not numerical. This is supported by Anderson and
Hughes (2013), who argued that qualitative research can be applied to achieve more and
detailed information that may not achieved quantitatively. Quantitative research aims
numerical data that can be numbered (Taylor, 2014). This is supported by Zhu et al. (2013),
who found that use of qualitative and quantitative research approaches supports each other.
3.2 Target Population
According to Ngechu (2004), a population is a set of individuals, elements, and events, group
of things or households that have certain characteristics and are of interest to the researcher.
According to Explorable statistics (2011), a target population is generally a large collection of
individuals or elements that is the main focus for the study. For this study the focus was on the
105 registered oil supplying companies in Kenya with an approximate of 2000 employees
according to the Energy regulatory Comission (2018).
3.3 Sampling frame
Mugenda and Mugenda (2003) defines a sampling frame as a device from which a sample size
is derived from the target population. For this study the sampling frame was 105 oil and gas
marketing companies in Kenya.
3.4 Sample and sampling technique
3.4.1 Sample size
According to Mugenda and Mugenda (2008) defined sampling technique as a specific process
by which the entities use to select and analyze a relevant small number of individuals to
represent the population and achieve a desired sample size. Bartlett, Kotrlik and Higgins (2001)
defined sample size as the number of participants taken from a target sampling frame, from
which data was collected to present the whole picture of population. If a researcher wants to
conduct a statistical analysis on his data then, the minimum sample for any one category of
data should be not less than 30 as this is most likely to offer a reasonable chance of normal
distribution (Greener, 2008). For this study the sample size was 84 oil supplying companies
which was attained from calculations using the Yamane formulae at a confidence level of 95%.
n=
N
1 + N (e2)
Therefore,
n=
105
1 + 105 (0.052)
= 84
Where;
n = Desired sample size
N = Total population
e = Margin error.
3.4.2 Sampling technique
This study used stratified random sampling technique to get the sample size from the target
population, whereby the 84 oil supplying companies were selected.
3.5 Data collection Instrument
According to Creswell (2002) data collection is the process by which information is obtained
from the selected sample size of investigation. For this study, data was collected through
questionnaires which had both closed ended and open-ended questions.
Likert scale was used for the quantitative questions for which, SA= Strongly Agree, A = Agree,
N =Neutral D = Disagree SD = Strongly Disagree.
3.6 Data Collection Procedure
The researcher self- administered the questionnaires to respective respondents in the sample
size through a drop and pick method. 2 questionnaires will be dropped at each sampled oil
supplying companies. The respondents will be given one week to fill the questionnaires and
picked once done.
3.7 Pilot Test
Kothari (2004) commented that it is very important to do a rehearsal of your research study
with the questionnaires so that it can help the researcher identify weaknesses in study design
and data collection instrument, so as to be able to collect reliable, relevant and accurate data
during the main data collection. Bryman and Bell (2003) commented that pilot study should be
done before administering the questionnaire to the respondents. They also argued that piloting
helps to pretest the questionnaire to know whether the questionnaire is appropriate and easily
understood by the respondents. Muus and Baker-Demaray (2007) commented that, a pilot test
should draw subjects from target populations and simulate the procedures and protocols that
have been designed for data collection. The pilot study was carried out in Nairobi county which
6 companies of which they were not included in the sample, this gave 30 respondents for pilot
testing as this is supported by Tayie (2005) who suggested that samples of 25-50 are commonly
used for pilot testing.
3.7.1 Validity of Research Instruments
Validity as noted by Kothari (2004) is the ability of the research instrument to measure and
generate the desired results of the study. The two main types of validity include content validity
which focuses on the extent to which a measuring instrument provides adequate coverage of
the topic under study and criterion-related validity which relates to our ability to predict some
outcome or estimate the existence of some current condition. During preparation of the
questionnaire a professional expert was consulted to help in framing the questions.
3.7.2 Reliability of Research Instruments
According to Kothari (2004) reliability is a measure of degree to which research instruments
yields constant and reliable results data after repeated trials.
The two commonly used
indicators of a scale’s reliability are test-retest reliability and internal consistency. The testretest reliability of a scale is assessed by administering the instrument to the same people on
two different occasions, and calculating the correlation between the two scores obtained. High
test-retest correlations indicate a more reliable scale. Internal consistency is the degree to which
the items that make up the scale are all measuring the same underlying attribute (Julie, 2011).
Reliability was measured using Cronbach Internal Consistency method, whereby the
acceptable scale is 0.7 this supported by Griethuijsen, Eijck, Haste, Brok, Skinner and Mansour
(2014) who suggested that Cronbach’s Alpha value of 0.70 is the sufficient measure internal
consistency of the instrument.
3.8 Data Processing and analysis
Data processing involves editing, coding, organizing, interpreting, and presentation of data
collected from the respective respondents before analysis (Kothari, 2004). The study used
descriptive technique to analyze the quantitative and qualitative data so as ensure that
numerical data is organized and interpreted in a way that they are meaningful and easily
understood. Quantitative data was analyzed in percentages, means, standard deviations and
frequencies and presented in tables while qualitative data will be analyzed by use of content
analysis which will involve grouping of related ideas and evidence and make decisions.
Multiple regression was used to determine the influence of the independent variables on the
change in the dependent variable. Further correlation analysis will be undertaken to determine
the relationship between the independent variables and dependent variable. The statistics will
be as follows:
Y=β0+β1 X1+β2X2+β3X3+ε
Y= Performance of the oil and gas industry
𝛽1 , 𝛽2 , 𝛽3 , = 𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑒𝑛𝑡𝑠 𝑜𝑓 𝑑𝑒𝑡𝑒𝑟𝑚𝑖𝑛𝑎𝑡𝑖𝑜𝑛
𝛽0 =Constant
X1 =Waste management
X2= Packaging
X3 = Information communication and technology
𝜀 = Error term
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QUESTIONNAIRE
INTRUSTRUCTION: TICK AND FILL WHERE APPLICABLE
SECTION A. GENERAL INFPRMATION
1. The name of your company?
………………………………………………………………………………………
2. Number of years your company have been in operation?
[ ]1-5
[ ] 6 - 10
[ ] 11 - 15
[ ] 15 and above
3. Your designation in the company
[ ] Procurement officer
[ ] Transportation officer
[ ] Inventory management officer
Other ………………………
4. Number of years have you worked for the company?
[ ] 1-5 years
[ ] 6-10 years
[ ] 11-15 years
[ ] Over 15 years
5. What is your level of Education?
[ ] PhD
[ ] Master’s degree
[ ] Degree
[ ] Diploma
[ ] Any other
6. State any training you have attended in the area of supply chain management.
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
……………………………………………………………………………………......................
......................................................................................................................
INDEPENDENT VARIABLES
SECTION B: Waste Management
7. To what extent do you agree with the following statements in regard to supply chain
collaboration where SA = Strongly Agree, A = Agree, UD = Un-Decided, D =
Disagree, and SD = Strongly Disagree.
S/N STATEMENTS
1
Our company recycles used oil
2
Our company reuses used oil for servicing machines
3
Our company complies with the NEMA policies
4
Our company practices collaborative communication with the supply chain
partners.
6
Our company practices joint knowledge creation with the supply chain partners
7
We jointly develop KPI’S with our oil supply agents
8
We collaborate with our key suppliers to solve oil supply chain challenges
SA A
UD D SD
8. Other ways in which you manage
waste……………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
………………………………………………………………………
SECTION C: Packaging
9. To what extend do you agree with the following statements in regard to packaging
where SA= Strongly Agree, A = Agree, UD = Un-Decided, D = Disagree, and SD =
Strongly Disagree,
S/N STATEMENTS
1
Our company has a green packaging platform
2
Our company considers the environmental sustainability
4
Our company ensures that oil and gas are well sealed to avoid air pollution
5
Our company has adopted to proper containerization
SA A
UD D
SD
10. Ways in which your company does towards ensuring effective packaging
management
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
……………………………………………………
SECTION E: Information Communication and Technology
11. To what extend do you agree with the following statements in regard to information
communication and technology SA= Strongly Agree, A = Agree, UD = Un-Decided, D
= Disagree, SD = Strongly Disagree.
S/N
STATEMENTS
1
Our company has EDI platform
2
We usually source our oil using E-sourcing platform
3
Our company has integrated communication infrastructure with other
supply chain partners
5
Our company has an E-procurement platform
SA A
UD D
SD
6
Our company operates on e-distribution system
12. Other ICT technologies in use
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
DEPENDENT VARIABLE
SECTION F: Green Logistics Management practices on the company’s sustainability
13. To what extend do you agree with the following statements in regard to oil and gas
industry sustainability
SA= Strongly Agree, A = Agree, UD = Un-Decided, D = Disagree, and SD = Strongly
Disagree.
S/N STATEMENTS
1
Waste management enhances company’s sustainability
2
proper packaging facilitates company’s environmental friendliness
3
ICT implementation enhances company’s profitability
4
Recycling used oil facilitates reduction in wastage of oil and gas
SA A
UD D
SD