Global Supply Chain Strategies for British Petroleum and Marks & Spencer

The report discusses the supply chain strategies used by British Petroleum and Marks & Spencer. It covers the upstream and downstream activities of BP, the challenges faced by the company, and the flexible and efficient supply chain strategies used by M&S for different products.

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GLOBAL SUPPLY CHAIN AND PROJECT MANAGEMENT
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Executive Summary
The success of a company depends on the effectiveness of supply chain strategies. A
supply chain is made up of different elements which must work together for the effective
movement of a product. The customer is normally the start and the end of a supply chain. In
the global economy, oil and gas are seen as a critical products in ensuring economic growth
(Evangelista,2002). The oil and gas industry is responsible for supplying various products to
some industries such as transport and many others. However, these industries are further
exposed to some risks specifically from the supply side such as oil spills and fires. The oil
spill that occurred in Mexican Gulf is one of the worst in history. The project focuses on
various supply chain strategies used by British Petroleum (Evangelista,2002). On the other
hand, M&S uses different supply chain strategies for various products. M&S is able to
manage their supply chain based on the origin of the product and customer
requirements .Moreover, company logistics policy normally depends on the product origin.
Introduction
The report is about supply chain strategies for British petroleum and Marks &
Spencer companies. One is a global company while the other is a retail company. British
Petroleum is rated as the third popular oil and Gas Company globally. The organization was
started in 1909. However in recent years the organization has merged with Amoco thus
becoming BP Amoco Plc. The organisation majors in excavating some downstream product .
The company is known of producing 4 million barrels of crude oil each day. It also operates
in more than 80 countries globally Biello, (2010).The company happens to have the largest
market share in the United States.

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On the other hand Marks and Spencer is a leading retail company in the United
Kingdom which is thought to have more than 21 million customers buying from their store
every week. The company majors in selling home products, quality clothes, and food at an
affordable price. The retailers have around 665 stores across the United Kingdom. They also
have 291 franchised stores in 40 countries globally. These factors made the company become
the largest footwear and clothing retailer in the United Kingdom.
Supply chain strategies for British Petroleum
British petroleum supply chain is characterized by three elements which are
inflexibility, complexity and uncertainties. The oil and gas supply chain is associated with
inflexibility and has many variables. Thus oil companies have vertically integrated supply
chain. Crude oil has to move from where it is being produced to the refineries. This long
distance brings about a long lead time. On the other hand, production is done in some
countries, while the finished product is demanded everywhere in the world. The refining
process is also very complex where a lot of capital must be invested. The refined products are
distributed by use of water, air, and pipelines. This supply chain is based on a certain
traditional model which is demonstrated by some stages in the supply chain, the supply chain
for this company is divided into two activities which are upstream and the downstream.

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Figure 1: British petroleum supply chain (Burns, 2013)
The diagram above is the supply chain of British Petroleum Company. BP has a
vertically integrated supply chain. The company carries out all the activities involved in the
oil and gas supply chain. The supply chain activities include the extraction and exploration of
crude oil and gas, transportation and trade of oil and gas, manufacturing stage which involves
refining of petrochemicals, lubricants, and lastly is the sales and marketing of the oil and gas.
The sales and marketing activities include selling petrol to about 18000 service stations
internationally. The first two stages in the supply chain are categorized as upstream while the
last two steps are categorized as downstream we also have the midstream activities as shown
from the diagram below

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Figure 2: British petroleum upstream and downstream activities (Biello, 2010).
From the above diagram, it is clear that multinational networks of BP are thought to be
heterogeneous. Many activities in these different stages have different requirements
Upstream operations
Upstream activities are determined by the location of the natural resources and whether they
can be exploited to bring a profit to the company. The location of these natural resources is
mainly in politically unstable environments and developing countries. External partners are
thought to be state-owned or people who have a close relationship with the government.
Downstream activities
These activities are mainly affected by demand patterns. In this case, countries such as
Europe and the United States are essential sales markets. These activities should be carried
out near the markets through networks of the various service stations. They can also be
carried out through partnership. On the other hand, petrochemicals which are normally used
as inputs in this production process, can only be found in developed economies

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Selecting location for both the upstream and downstream activities is necessary in a
comprehensive company network. On the other hand mid-stream activities acts as links
between upstream activities and downstream activities
Upstream exploration and production
In the oil and gas industry access to natural resources is what influences the
companies’ decisions. However, there are many oil reserves located across the world and
mainly in the Middle East. There are many risks associated with doing business in an
unstable environment (Biello, 2010). For example in 1970 when the late president of Libya
came to power through a military coup, he nationalized the BP operations in Libya. Come
2008 BP had to struggle with the TNK-BP. This is because the shareholders wanted to take
control of the company while being supported by their Russian government. However, in rich
economies, BP must also form alliances with other local companies. However, there are
significant advantages in collaborating with other companies. One is that the huge investment
risk is shared between these companies.
What happened in the Gulf of Mexico affected the BPs upstream activities. Thus Bp
came up with a "value over volume ''strategy. This was a situation where the company sold
its non- core assets primarily in the upstream portfolio. Since 2010 the company has reduced
its operated installations globally by a high percentage. However, considering geographical
locations, this meant focusing on producing larger units. For example, the company sold its
small upstream operations in countries such as Columbia and Vietnam. The principal aim of
the company is to focus their investment in the regions that are considered higher margin
regions in their portfolio. It simply means reducing low margin assets and keeping the

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profitable ones. BP focuses on important regions for their investments. These regions are the
Gulf of Mexico, Angola, North Sea, and Azerbaijan.
Midstream activities –efficient bridges from production to refining
For better connection between extraction and marketing of oil and gas, these
hydrocarbons must be transported. This is done by use of various transportation methods and
more specifically pipelines. Pipelines tend to be huge projects that run across different
countries.
Downstream refining and marketing
BP not only extracts oil and gas, but it also markets it. BP has invested heavily in the
sales department (Biello, 2010). The company invested in various refineries in Germany. To
improve its downstream activities the company acquired the shares of Sohio which used to be
an American oil company and had refineries and service stations (Evangelista, 2002).. Come
1998 BP merged with Amaco to deal with the fierce competition through bringing together
their global operations, giving birth to the largest producer of oil and gas in the USA. Amoco
stations were later named as BP (Biello, 2010). Come 2000; ARCO also joined BP.ARCO
happened to be an American oil company with many networks of refineries, chemical plants
and pipelines, and more than 900trading outlets which have been named AMPM. Thus the
service stations of BP Group around the Rocky Mountains were named as ARCO. However,
after the Gulf of Mexico tragedy, ARCO was sold to another company named as Tesoro in
Texas. Many of the downstream activities for this company are located in the United States
and Europe. The company has since been looking for new markets. It recently got partners
such as Sinopec and petrol china, and it has already come up with 850 retail stations in China.
In the UK, for example, the company works closely with Marks and Spencer. In other parts

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of the world, the company acts as a franchise or with independent retailers who adhere to the
standards of BP.
Major issues faced by BP in its supply chain
Some of the significant problems faced by BP are the fact that upstream activities are
carried out in countries which are not stable economically or may be facing conflicts
(Dermansky, 2013). These two factors may significantly affect the company because
governments are likely to come up with different rules and regulations. Like we have seen
British petroleum was made a national company in Libya after Gadhafi ascended to power
On the other hand, the oil and gas industry is faced with a lot of uncertainties and
inflexibilities which might end up affecting the company’s operations in various parts of the
world (Hussain, Assavapokee, & Khumawala, 2006). Some of these uncertainties are brought
about by accidents, changes in economic policies, changes in oil prices and even a change in
the business model can significantly affect the companies supply chain (Hayler, 2003).
M&S supply chain strategies
M&S Company has different supply chain strategies for different products. However
below is a general supply chain diagram for various products of mark and Spencer (Theorpe,
2012)

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Figure 3: M&S supply chain (Burns, 2013)
The company sources its raw material from local producers or globally. On the other hand,
the manufacturers are either located near the raw material, and the products are transported to
the places where demand is high.
 A focus of managing supply chain by flexibility-Responsive
The M&S Supply chain is based on flexibility it encourages high service levels and customer
reactions. Stores must be located near the customers. The main agenda is to ensure a constant
supply of products in case of changes in demand. Thus the supply chain must be flexible
enough to take in any changes. This can further be termed as agility. Thus M&S uses the
concept of agility to ensure a continuous market demand and supply
 Focus on managing supply chain efficiently
The supply chain strategy ensures a low level of stock in the retail locations. Thus the retail
company majors in manufacturing and other functions while making sure that the cost of

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inventory maintenance is kept low(Burns, 2013). There must be a high-level of
communication from the retailer to the manufacturer. These help in managing high demand
and ensuring an adjustable lead time.
 Product characteristics and impact of origin on the supply chain
Syrah Grenache 2009, is a French wine made by Marks &Spencer. The wine is made from
France because that is where the facilities of production of red wine are located (Theorpe,
2012). However the distribution and warehousing of this wine is in the United Kingdom
(Burns, 2013). This provides a balance between demand and supply. The supply chain of
wine is thought to be responsive because it is meant to meet the demands of customers
(Burns, 2013). This is further demonstrated by the company ensuring that the warehouses are
located near the customers. Wine is further transported to the United Kingdom using rail. The
idea to source wine from a grape producing country is a great idea and gives the company a
competitive advantage.
 Autograph collection leather bags, Women's Accessory section
The M&S Company sources bags from India. The M&S has good supply chain policies for
leather bags. The supply chain effectively makes sure that the leather bags are well supplied
to retail locations where inventory must be kept low (Burns, 2013). India happens to be the
source of quality leather products, and also the labour cost is very low. However, M& S must
have assurance from Indian suppliers.
Comparing and contrasting strategy of different products

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Logistical drivers such as facilities, transportation, and inventory determine whether the
product will have the same supply chain or not. Also, factors such as pricing and sourcing
decisions determine the supply chain
Logistical Drivers
A company comes up with a logistics strategy to identify the service level which is cost
effective. Marks and Spencer have different logistics strategy for different products. French
wine is usually gotten from France (Theorpe, 2012). Thus the logistics strategy is classified
as food logistics. We also have the fashion logistics which is meant for Autograph collection
leather bags (Hussain, Assavapokee, & Khumawala, 2006). Other products, especially those
that belong to the furnishing section, depend on low volume sourcing markets
 Facilities
Facilities determine the performance of a supply chain regarding efficiency and
responsiveness. The locations of the production facilities are different for every product. The
responsive supply chain of colour lipstick and French wine need to have distribution centres
which are centralized. While the supply chain of furnishing equipment's and leather bag need
to have a lower inventory volume
 Inventory
Inventory has a significant role to play in the supply chain. It ensures that a firm has a
competitive advantage. M&S supply chain strategy for both the color lipsticks and French
wine is to take a huge amount of inventory near the customers (Mohitpour, 2003). However
for furnishing equipment's and leather bags the strategy is usually to reduce the inventory by
use of efficient value chain strategies.

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 Transportation
Transportation has a great effect on responsiveness and efficiency (Gainsborough, 2006).
M&S Gets its products from different locations (Johnson, 2013). The mode of transportation
for each product is very much different. Supply network and the mode of transport depend on
the quantity and size of each product.
Cross-functional drivers
 Sourcing strategies
M&S Company makes use of both local and global sourcing of products .sourcing products
from local suppliers helps the company to participate in local community business (Burns,
2013). Some of the product sourced within the locality includes furnishing products.
However French wine and leather bags are sourced from global suppliers. The company gets
quality products from global suppliers at an affordable price.
Supply chain issues faced by mike and spencer retailers
The supplier bargaining power is very low, especially in retail clothing. M&S usually
changes its supplier more often. For example, the initial suppliers of clothes were British
suppliers, but it later decided to be outsourcing its product globally (Theorpe, 2012).This
helps in avoiding cost but it affects the companies relationship with its suppliers (Burns,
2013). In this case, the company does not depend on some special suppliers. Therefore, their
bargaining power is low. The company is also faced with the issue on logistics however, it is
has a multimillion project meant for building automated warehouses to solve this issues.
The decreasing value of a pound, together with the European debt crisis has caused a
negative effect on the UK retailers. The suppliers are faced with major issues especially when

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it comes to currency conversion. However, M&S have outsourced other supplier from
different countries thus abandoning British Companies
Comparison between the BP's and M&S supply chain strategies
One major similarity between these companies is that they are engaged in global
sourcing and outsourcing. Global sourcing is a situation where the company acquires finished
products, intermediate products and raw material (Theorpe, 2012). On the other hand,
outsourcing can be defined as acquiring services across the world. BP sources oil and gas
products from different parts of the world. It is also known to sources services globally. The
same case happens to M&S retailers. They are known to source products from India and
France.
However, there are major differences between these companies in logistics. Logistics
is defined as the coordination and movement of information and goods in an organization.
Managing logistics in M&S is different from managing logistics in British petroleum. This is
because one is a domestic company that covers a small geographical area while the other is a
multinational company that covers a large geographical scope. For example in the area of
transportation M&S has very many transportation options while British Petroleum has very
few transportation options. Multinational companies are known to use multiple transportation
methods in moving products from warehouse to customers. The case of British petroleum is
worse because they have to know which means of transport to use for oil and gas since they
are considered delicate and risky to human life .the Company also has a lot of costs to incur
as compared to M&S. In M&S, for example, the cost incurred may only include
transportation, worker, technology and store facilities (Theorpe, 2012). British petroleum
incurs the same costs, but they have added government taxes, fees and tariffs when trading

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internationally. This company also get to be negatively affected by fluctuations in currency
exchange rates. On the other hand, M&S have a single logistics manager that is responsible
for managing planning and executing the movement of goods and information .However, for
a multinational company such as British petroleum, the corporate logistics manager carries
out his activities assisted by other regional logistics managers . This coordination brings a lot
of issues when it comes to decision making.
Recommendations
There are many lessons to learn from these companies especially the oil spill which
happened at the Mexican Gulf in 2010 and ended up affecting the supply chain of British
petroleum (Evangelista, 2002). This made the company sell off its assets to cater for the
expenses. One major lessons is that companies need to come up with emergent strategies
which can assist them in case unplanned events happen without having to change their
corporate strategy like what British Petroleum did .Not only can emergent strategies be used
to cater for risks but also they can be used to take advantage of emerging opportunities.
On the other hand, companies need to have a good and long-term relationship with
their suppliers. These will ensure that they have a high supplier bargaining power. Though
many domestic companies are always advised to source products from local companies, they
can choose to source products from other countries where products are much cheaper than
locally.
Conclusion

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In conclusion supply chain strategies are important for the success of both domestic
and multinational companies. Domestic companies always find it easier to handle activities in
the supply chain compared to multinational companies. Domestic companies tend to have a
different supply chain as compared to multinational companies.
References
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