Operational and Supply Chain Management in Petronas Chemical

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 1
OPERATIONAL AND SUPPLY CHAIN MANAGEMENT IN PETRONAS CHEMICAL
GROUP, MALAYSIA
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Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 2
Introduction
Business organizations adopt various mechanisms and processes of improvement in order
to enhance performance and growth. Operations and supply chain management are key aspects
mandatory for any success and profit-oriented company. Across the globe, every business is
striving hard to establish, sustain a reliable approach to operations. In this paper, an analytical,
critical, and reflective approach is used to demonstrate a case study on the two key business
attributes. The case is targeting one of the vibrant economies in the Middle East, Malaysia. And
the company of interest is Petronas Chemicals Group. The different business environments with
relevance in shaping the future of the target company are well highlighted and tentatively
discussed. An argument based on John Gattorna’s article is also a key component of this essay.
Conception and Scope
For any consumer, successful access to product and service is a complex process.
Multiple external and internal intrigues and processes are involved along the way. A robust and
well-provided system is involved in the oversight and management of the process and movement
of products. Operations management and supply chain management are aspects that hold the key
to any process of product supply and customer satisfaction. The world of business is
progressively turning competitive. To enjoy the lion's share of the available market,
organizations like Petronas Chemicals have invested tremendously in management.
According to Regattieri et al. (2019), operations management refers to the systems of
running a business organization efficiently and with absolute diligence and effectiveness. The
various sub-systems which are entailed include production system analysis, material handling,

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 3
and movement as well as maintenance. Operations head are tasked with the coordination of
internal operations, driving the production and movement of the product and service as well.
Supply chain management, on the other hand, involves all processes of materials
collection, production of the product, and delivery to the market or consumer (Monczka and
Trent, 2005). Key players in the supply chain include the logistics team and experts, suppliers,
and consumers. Companies with a global network usually come to life with a strategic and
formidable supply chain system ranging from purchasing orders to market forecasting. A broader
and deeply integrated emphasis on supply chain management has been created and evolved over
the years (Jraisat, L.E. and Sawalha, 2013). Value creation and competitive advantage are key
aspects in shaping the future of any organization.
Introduction to the case organization
Petronas Chemicals Group (PCG) is one of the biggest global organization of integrated
chemicals in the whole of southeast Asia. The company is known for its world-class sites of
production fully incorporated and integrated with feedstock and final downstream products. The
company’s production capacity is above 12 million metric tons annually (Jalan et.al, 2017).
Some of the products processed marketed and sold by the company include a range of chemical
products; polymers, olefins, fertilizers, ethanol, methanol, and other derivative products. For the
last three or so decades, PCG has been a regular in the Bursa Malaysia listing (Jalan et.al, 2017).
The ability of the company to maximize the value of the vast oil and natural gas resources in
Malaysia is uncompromised and unrivaled. The journey to success is not an easy venture for
PCG. The turbulent global market has been a breathtaking challenge and equally an opportunity
for the company to hit new targets and special economic goals.

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 4
Organizational Challenges of Implementing Process Control, Process Performance
Management, and Plant Availability
In order to facilitate and guarantee success in the three aspects of supply chain
management discussed above, the performance management system and process control should
balance flexibility and consistency. However, several organizational challenges derail the
implementations of the key elements of the performance.
The first challenge is inadequate or total lack of alignment frameworks. The availability
of sperate and isolated organizational processes is responsible for the lack of proper alignment.
Sometimes organizations suffer from disjoints between strategic development, operational
planning, and budgeting frameworks with antithetical frameworks (Baldea et.al, 2014). The
whole system hence lacks concrete alignment between individual, departmental, and plant
performance and the overall organizational delivery. The supply chain becomes disoriented and
full of gaps that downplay the surge to excellence and improved product brands as well as
service delivery. The development of poor measures is another challenge that PCG and similar
organizations face (Dubey et.al, 2017). No relevant and substantial measures are established to
meet the demands of set targets and goals. Occasionally, critical figures and data collection are
missing. Hence, the path to a well tacked and responsible performance framework is null and
almost lost.
According to Seuring and Gold (2013), organizations with huge financial and resource
foundations are often affected by leadership turmoil. The management challenge is life to the
operations of most oil and chemical companies in Malaysia. The process of integrating and
aligning a sustainable management framework for process control and process performance
management becomes a burdening challenge. The framework should be well-disciplined, and its

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 5
relevance is attributed to the ability of the organization to work off a single masterplan divided
into significant areas and portions of concern and responsibility. The responsibility of the
management needs to comprehend the various contradicting appraisal process and measurement
development and imply it consistently and to the latter (Seuring and Gold, 2013).
Establishing plant facilities in the oil and chemical industry is a challenge that has faced
many organizations. The world is very desperate towards lowering the impact of industrialization
on the environment and humanity in general. The coexistence of a sustainable carbon footprint is
a thorny challenge for many organizations (Jaggernath and Khan, 2015). Upstream domestic
GHG emissions are on the verge of escalation. Increased number of plant facilities with toxic
emissions to the atmosphere is fueling the human-environment conflict. The industrial balance of
climate change and the challenge for sustainable, affordable, and reliable energy is far from
realization (Petronas Group, 2016). To attain the balance is not easy at all. Most organizations
have notably failed in the emphasis of “Technology as the Key Differentiator.” With many
breaking the global regulations and treaty agreements for their own economic gains (Petronas
Group, 2016).
Impact of the "Triple-A Supply Chain Revisited" on the Operational Aspects of PCG
Supply Chain Management
The article by Dr. John Gattorna is a special tool that any organization can utilize to
redefine, improve, and generally change its fortunes. Malaysia is one of the most competitive
areas to excel in the oil and chemical products Industry. Therefore, organizations like Petronus
Chemical Group should work day in day out to ensure the aspects discussed in the article are

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 6
implemented and technically supported. According to Dr. Gattorna, any organization driven by
excellence, market dominance, and growth, should invest and strongly focus on three aspects and
areas (Gattorna, 2008). The three areas are process control, process performance management,
and plant availability. To maintain its relevance and market share, the company has banked on
policies and formulations towards world-class and excellent operations (Dubey et.al, 2017). All
centered on the attributes of the three issues in the article. The following is a critical analysis of
how the three key areas mentioned in the article would impact the supply chain management
operational landscape in PCG.
Process Control and Its Ramification on the Operational Landscape of PCG’s Supply Chain
Management (SCM)
Supply Chain Management is known for its direct impact on quality margins and the
general profitability of any organization (DeBenedetti, 2018). For companies like PCG, it
becomes mandatory to establish quality and process control in the supply chain. Consequently, a
cutting edge in the competitive and strained market will be there portion.
As earlier mentioned, SCM is the involvement and support for leveraging channel
integration for better customer service. Every organization needs a clear framework and
strategic investment towards the operational management of its supply chains (Strozzi, Noe and
Zaldivar, 2008). Petronus Chemical Group is no exception. The journey for sustainable
productivity, quality excellence, and profits will be a reality when PCG adopts effectively and
strategically process control. Coordination of quality management and upstream activities is very
challenging for expansive companies like Petronus. The history of the various mammoth
chemical plants under the Petronus Group is immense. The management and technical personnel
are key players in shaping a remarkable reputation in terms of production and process control

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 7
(Marley, Ward and Hill, 2014). Critical components of the operator- oriented quality control and
management form the basis of enhanced plants and process control (Jarret, 2016). The company
needs a rigid and technology bound approach and mechanism to counter the challenge of
operation mistakes.
A perennial challenge for many chemical companies is the menace of scrap and defects.
The sensitivity of chemical production and the corresponding raw material is immense. Without
proper process control, the supply chain will be a victim of flawed raw materials, hazardous and
life-threatening inputs (Fu et.al, 2013). All the loopholes and quality gaps from suppliers will be
filled equally to ensure all supplied materials from both local and international origins meets the
required specifications. Through strategic quality control of production inputs, the company will
have a tool to protect and preserve the integrity of the operations (Jraisat, L.E. and Sawalha,
2013). Nothing matches the role of integrity in production systems and supply chains.
Process Control ensures that corrective approaches are firm and tall enough to face
threats and incidences of safety and accidents (Gattorna, 2008). A top priority should be
managing risks in the logistics section. A comprehensive and well-founded control system
should be adopted to elevate safety leadership and accountability (Neelakandan, 2019). We all
know the sensitivity and danger posed by the Refinery and Cracker Facility. The processes in
those facilities should be crafted to enable the personnel and technicians to recognize hazards
through the creation of a resounding culture of "concern" and "absolute care.' The process
control system will generally give the organization a good platform to exploit its potential and
meet its financial targets (Fernandes et.al, 2017).
Process Performance Management and Its Ramification on the Operational Landscape of PCG’s
Supply Chain Management (SCM)

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 8
The process of Performance Management begins at the stage and process of hiring. The
process of continuous employee and expertise evaluation begins. The operational landscape of
the Petronus Chemical Group is incomplete without a collective and profound Process
Performance Management. The various plants under the umbrella of PCG cannot be efficient
performers if the board of management ignores the essence of performance management. The
company’s employees should be at the core of the whole process (Keskin et.al, 2013). The work
environment should be created so as to facilitate the implementation of processing ideas and
technology. No chemical company can succeed without the input and integration of technology.
The company should work hard to sustainable systems across all sections and departments for
enhancing process management initiatives.
Recommendations
The supply chain of PCG can be redefined with a number of cornerstone elements for
successful process management.
a) Get Members of the Organization on Board
For any performance management strategy to work for Petronus, all members, stakeholders,
and expertise should be broad to board. Sufficient sensitization and motivational initiatives
should be started. The commitment to proper process performance begins with the leadership.
The President of the Group is the key figure in modeling effective performance management
together with the executive team (Michael, & Liro, 2014, p. 380). The top management then will
bring down clear expectations to all staff with high-level support. If management support is not
enough, the process performance management policies will fail terribly. The strong the support
from the top leadership of the Group, the higher the program's success potential. With the

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 9
foundation of the top leadership support, the process of performance management becomes easy
(Pulakos, 2004, p. 22).
PCG should formulate a strategy that entails key individuals in the design, conceptualization,
and implementation of the process. The steering team should comprise all major business lines
and geographical locations of the various company’s plants within Malaysia and beyond. All
sections, including, management, technical team, quality department, process plant expatriates,
logistics, sales, environment, and health sections, should not be left out.
b) Automate
Automation is a tool for change in all process management engagements. Companies like
PCG have the chance to win big from the input of automation. Supply Chain is a key component
whose future lies in the confines of automation. Paperwork and manual handling of key and
sensitive supply chain documents is a thing of the past with automation (Pulakos, 2004, p. 24).
c) Evaluate and Enhance
Process Performance Management requires continuous evaluation and improvement with
time. For PCG, numerous metrics should be properly tracked to facilitate the assessment of the
system's efficiency. Large companies like the PCG cannot be assessed on performance without
evaluation. When evaluated, the system gives the authorities a clear outlook of the state of the
various processes of production. All resources and raw materials are effectively handled
whenever the system is evaluated and loopholes repaired (Pulakos, 2004, p. 28).
Plant Availability and Its Ramification on the Operational Landscape of PCG’s Supply Chain
Management (SCM)

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 10
Petronas Chemical produces a variety of products. They include polymers, olefins,
ethanol, and methanol. Sufficient plant availability is essential in ensuring that the company
serves the different markets for its products. The integrated supply chain will give each product a
robust life cycle, which is free from inconveniences of other related products. The right product
will be channeled to the right market with minimal itches in logistics and general deliveries
processes.
Recommendations
Supply chain management and plant availability are correlated. The phenomenon gives
birth to a strong network of supply chain integration. The presence of plant facilities and relevant
technology is key for chemical companies like PCG. The revolution of supply chain and
facilities integration is the game-changer in the manufacturing and processing sector. The Group
is left with the option of an expanded network of plant facilities. And each phase of the product
life cycle is shaped and determined by the available technology and developments in the supply
chain management and also logistics.
The new facilities should be established and operated through a rigorous process of site
research and analysis to facilitate the smooth integration of the supply chain systems. For
instance, the raw materials and necessary equipment and tools will be easily transported to the
site. Oil wells are very expansive in Malaysia and neighboring countries. The plan for new plant
establishment should be driven by the various product and raw material matrices to ensure easy
business and production processes. Flexibility should divine the supply chains for new plants and
markets as well. The delivery processes should be economically viable to ensure that the
company hits the right path in economic stability and profitability.

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 11
Effective Alignment for Operational Excellence
Strategic alignment is the process of positioning, directing, and handling all operational
components of an organization towards a resolute goal and focus. Effective alignment and
operational excellence are relatives of close blood. Whenever organizations get it right on
alignment policies, operations excellence is a total guarantee (Wagner et.al, 2014). The ability of
the employees within the various sections and departments to understand the frameworks of
alignment is paramount. When the management embraces the empowerment of employees, it
translates to equal or much higher performance and customer satisfaction.
With alignment strategies, improvement and collaboration become a norm in the
organization. The platform for improvement is a special and tremendous management practice
and houses the central repository for all chances and allows a smooth inter-functional
collaboration. Progress never stalls when strategic planning and alignment are actualized
(Prajogo et.al, 2016). The corresponding technology will serve as a tool and knowledge hub for
the future of the company and its endeavors (Khalili Shavarini, Salimian, Nazemi, J. and
Alborzi, 2013). Proper alignment also brings accountability and objectivity on board. Every
employee, department, and the overall supply chain systems contribute in a holistic manner to
the set targets and objectives — all driven by improvement goals and performance excellence.
PCG is a good example of how contemporary management practices can redefine global
business. Adapting to the changing regulations which hinder the oil and chemical business
frontier is excellent. Virtual communication has stood tall in depicting its inevitability in almost
every aspect of the organization (Zakariah, 2012). Asset integrity management and Safety
Critical Elements (SCE) have changed the reliability strategies in the manufacturing industry.

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 12
The SCE is well established to facilitate reliable performance and control the emission of
hazardous substances.
Challenges of Implementing an Improvement Program in Petronas Chemical Group
The plot for change is not a walk in the park for any organization. Petronas is one of the
few organizations whose success story is written in the foundation of improvement programs.
However, the course has been derailed by a number of challenges whose effects are negative, if
not devastating. The first challenge has been differing visions. The war of interest between
compliance and quality improvement has been immense in the various chemical plants under the
Petronas. The company is guided on one side by a strict collection of provisions imposed by
outside entities like the Paris Treaty, UNEP, and the United Nations (Petronas Group, 2016).
Climate restrictions are taking center stage in the phenomenon of differing visions. The world is
advocating for lesser non-renewable energy; hence PCG lands on the receiving end. The
challenges are the strict lapse of time, which is never enough for the implementation phase of
change and development. The process is time-consuming, and sometimes the financial goals
subdue to the implementation of improvement programs and policies (Deas, 2017).
Example of Suitable Supply Chain Model for Petronas Chemical
The most suitable example for Petronas is the customs configured model (Seuring, 2013).
The model is the only hybrid sort that blends the characteristics of continuous flow and agile
models. Having established as a specialty organization, the active component of the custom-
configured model will ensure that the chemical products from them are in continuous supply.
The continuous flow component will, on the other end, ensure that stability is maintained and

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 13
fluctuations in the market forces will not hurt the financial, supply chain, and process
management of the organization (MailMunch, 2019).
The company is not restricted to one example of improving the supply chain management
and channel. Collaborative strategic sourcing is a key cornerstone in transforming any
organization. It entails shaping best-in-class formations in functional areas such as accounting,
operations, safety, quality assurance and finance. The approach example ensures availability and
flow of supplies resulting in streamlined processes and enhanced responsiveness. Other examples
which can be utilized as game-changers include: Total Cost Ownership model, fast chain models,
and flexible models (Strozzi, Noe and Zaldivar, 2008). With flexible model Petronas is given the
freedom to meet the peak seasons demands.
Conclusion
Operational and supply chain management are fundamentals in any organization. The
success and the future lie in the policies and strategies utilized to achieve excellence in the two
critical aspects. Petronas is a global figure and majesty in chemical production and it is all thanks
to the tremendous frameworks of operational supply chain. The key aspects of operational supply
chain include process performance management, plant facilities and process control. With
technological tools and efficacy in skilled manpower and professionalism, the organization is
destined for better heights. Some of the challenges endured in the systems of supply chain
include conflicting interests and priorities both inside and outside the organization. The global
picture of business success is an outcome of how organizations like Petronas Chemical Group
live with the dynamic operational and supply chain management.

Operational and Supply Chain Management in Petronas Chemical Group, Malaysia 14
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