Saudi Aramco is a globally eminent oil and Gas Company headquartered in Dhahran, Saudi Arabia, and plays a massive role in the energy industry. The American Oil Company (ARAMCO) emerged in 1944 after American geologists collaborated with the Kingdom of Saudi Arabia. Saudi Aramco presumed a decisive duty in acquainting the worldwide extensive insistence for oil with the surging demand for energy. In 1980, the Saudi Arabian government took comprehensive control of the company’s assets, fully nationalizing what had grown into the world’s largest oil company. Under the superintendence of the Kingdom, the mended company became an economic highflier but also emerged as a symbolic representation of Saudi Arabia’s commitment to the productive management and employment of its extensive natural resources. Saudi Aramco engages in research and development by investing in renewable power projects to adjust the worldwide transformation toward a more sustainable energy future. Navigating the complexities of the modern energy industry, the company remains a steadfast symbol of stability and innovation. This thorough analysis explores the intricate details of operations, quality management practices, and the application of Total Quality Management (TQM) concepts, mainly focusing on DMAIC (Define, Measure, Analyze, Improve, and Control) and Benchmarking strategies implemented by Saudi Aramco. Employing TQM tools such as Flowcharts and fishbone diagrams, this study aims to uncover areas of improvement and offer strategic recommendations for enhancing the existing operations management of Saudi Aramco.
Operational Design, Functions and Capabilities
Operational Design
Saudi Aramco’s operational design is characterized by its vertically integrated structure, covering exploration, production, refining, and distribution. Saudi Aramco Company engages globally and possesses a considerable network of facilities with an extensive supply chain (Aramco, 2022). Saudi Aramco is vertically combined as its activities comprise numerous oil and gas value chain levels, including investigation, manufacturing, refining, and dispatching their commodities. This empowers the company to maximize efficacy and answer market dynamics more constructively. Saudi Aramco’s extension across the globe has led to the formation of essential market gestures, which are apparent through the company’s examination and manufacturing operations in various regions (Aramco, 2022). A core feature in Saudi Aramco’s operational design is its robust supply chain, which is the company’s ability to source raw materials, transport them efficiently, and deliver refined products to consumers, which is crucial for maintaining a competitive edge (Aramco, 2022). The amalgamation of advanced logistics and supply chain management ensures a continuous flow of resources and commodities (Aramco, 2022).
Functions
The core functions of Saudi Aramco encompass upstream and downstream activities. Saudi Aramco partakes in the investigation of oil and gas, where the procedure includes identifying and producing crude oil and natural gas from reservoirs (Aramco, 2022). \Removal technologies are embroiled in the detection and unsheathing of hydrocarbons. The downstream activities involve refining crude oil to initiate various petroleum products, encompassing gasoline, diesel, and jet fuel. Downstream also encompasses the dissemination of these commodities and the advancement of petrochemicals. The downstream sector adds value by transforming raw materials into diverse commodities.
Capabilities
Saudi Aramco’s capabilities lie in advanced technology adoption, efficient reservoir management, and a strategic focus on sustainability. Advanced technology adoption is Saudi Aramco’s primary capability and includes using cutting-edge technologies in exploration, manufacturing, and refining procedures, leading to operational efficacy and resource optimization (Aramco, 2022). The universal shift to sustainable operations has made Saudi Aramco hinge on sustainability by initiating options to lower environmental impact, increase energy efficiency, and invest in renewable energy projects (Aramco, 2022). Saudi Aramco’s manufacturing levels and pricing decisions influence global oil prices, making it a key player in shaping the energy landscape (Aramco, 2022). The company’s scale allows it to influence global energy markets and adapt to dynamic industry demands.
Quality Management Evaluation
Total Quality Management (TQM) is an administration perspective that seeks to attain long-lived victory by giving unprecedented purchaser satisfaction by constantly delivering quality Information Technology amenities (Watts, 2020). In the explanation of Total Quality Management, Watts explains that purchasers are being put as their principal as continued consumer support will propel a company to attain its objectives (Watts, 2020). In addition, TQM is process-based, as the three main hinges are creating and implementing the procedures that give organizations the chance to succeed (Watts, 2020). Another principle is communication, as each individual should practice transparency; TQM is data-driven and does not employ guesswork (Watts, 2020). Therefore, applying DMAIC and Benchmarking Total Quality Management (TQM) concepts will provide a precise assessment of quality management of the quantitative and qualitative Saudi Aramco data.
DMAIC (Define, Measure, Analyze, Improve, and Control) Application
DMAIC refers to the data-controlled quality scheme for boosting procedures and is an intrinsic section of a company’s Six Sigma quality initiative (Terry, 2010). DMAIC is an abbreviation for five interrelated phases: Define, Measure, Analyze, Improve, and Control (Terry, 2010). In this scenario of Saudi Aramco, defining involves identifying the problem: the need to optimize refining procedures within Saudi Aramco to lower environmental impact, including lowering emissions and energy consumption and enhancing overall operational efficiency. Quantitative data supported the identified problem of the amount of pollutants and greenhouse gas data during the refining procedures. For example, the amount of carbon dioxide from fossil fuel and industrial purposes in Saudi Arabia was nearly 608 metric tons from the industrial procedures. Saudi Aramco is leading in carbon dioxide manufacturing worldwide (Tiseo, 2023). Carbon dioxide levels have risen since 1970, and the levels shot up in 2015 to 610.95 million metric tons. However, in 2023, levels were 607.91 million metric tons (Tiseo, 2023), in addition to quantifying the energy consumed in various refining stages and assessing the efficiency of refining procedures, considering components like yield, throughput, and resource utilization. Saudi Aramco plans to attain net-zero scope one and scope two greenhouse gas emissions across all international organizations by 2050 as they want to attain net-zero emissions by 2060 (Aramco, 2023). In 2022, 10.3 kilograms of carbon dioxide upstream intensity and 99.9% reliability were recorded (Aramco, 2023).
The core aim is to define a precise objective for the optimization process, aligning it with the broader sustainability initiatives of Saudi Aramco. For example, the aim is to attain a particular percentage reduction in emissions or energy consumption over a specified period. Measuring will involve collecting quantitative data examples, including energy consumption concerning the refining procedure, getting the emission levels in metric tons per annum and quantifying the operational efficacy. Analyzing the problem will involve the use of fishbone to pinpoint the possible causes of the environmental effect of the emissions and consumption issues in the refining procedure and the use of flowcharts to develop a visual representation of the refining procedure, allowing for the identification of specific steps where environmental impact and inefficiencies occur. Improving involves upgrading technologies that enhance the efficacy of the refining processes. In addition, Implementing changes to refining procedures, such as adjusting operating parameters, boosting heat integration, and considering insights gained from the fishbone analysis, will help reduce environmental catalysts. Control will include establishing real-time monitoring systems to track primary performance indicators related to emissions, energy consumption, and efficiency, ensuring the detection of any deviations from the optimized state.
Moreover, promotes a culture of continuous improvement by promoting monitoring and technological advancements and remaining vigilant to emerging best practices in sustainable refining. Lastly, regular audits and evaluations should be conducted to verify the sustained effectiveness of the implemented improvements, including internal and external audits to ensure compliance with environmental regulations and industry standards. Therefore, integrating the Fish, bone diagrams, flowcharts, and continuous monitoring will address the defined problem and introduce a framework for ongoing improvement and sustainability in its refining operations.
Benchmarking for Saudi Aramco
Benchmarking measures a company’s quality attainment and growth by assessing the procedures and processes of others (Fallon, 2021). Therefore, benchmarking is essential for Saudi Aramco to evaluate its performance and standing in the global energy landscape. By comparing key performance indicators (KPIs) connected to operational efficiency, environmental effect, and safety with industry benchmarks, the company can gain valuable insights and identify areas for improvement (Fallon, 2021). In business, there are three distinct categories of benchmarking. The first is strategic benchmarking, in which a business enterprise strives to copy particular accomplishments and techniques of exceptional organizations (Fallon, 2021). The second one is competitive benchmarking when organizations set their objectives based on what their competitors are up to (Fallon, 2021). The last category is internal benchmarking, which involves boosting a business by comparing it to historical data (Fallon, 2021). Therefore, business benchmarking is a tool to measure progress and growth in the primary operational sections of an organization (Fallon, 2021).
The aspect in which the benchmarking procedure in Saudi Aramco will be used is operational efficacy; it is crucial to pinpoint the key metrics by comparing all the relevant ones. The steps include refining yield, which in this case is through measuring the efficiency of converting crude oil into valuable products; throughput, in this case, evaluating the speed and volume at which the refining procedures operate; and lastly, downtime, in this case, assessing the reliability of operations by comparing downtime percentages. Furthermore, comparatively analyzing the metrics with industry benchmarks will aid in understanding how efficiently Saudi Aramco’s refining operations are performing relative to peers, and deviations will indicate areas of improvement. Additionally, identifying industry leaders with superior operational efficiency and studying their best practices will enhance operational efficiency (Fallon, 2021). For example, in a comparison of Saudi Aramco and ExxonMobil company in June 2022, ExxonMobil recorded total earnings of $62 billion in profits, and Saudi Aramco recorded $105 Billion in earnings (Helman, 2023). Two decades ago, ExxonMobil was placed number 4 with profits of $15.8 billion, which is only a tenth of Saudi Aramco’s haul today (Helman, 2023). Recently, Saudi Aramco acquired Saudi chemicals for $69 billion, with its assets growing to $620 billion. On the other hand, ESG has not slowed down Exxon; therefore, for the two companies, good strategies have made them stay in the game (Helman, 2023).
In addition to pinpointing the key environmental for Saudi Aramco, the procedure involves evaluating metrics such as emissions, which will compare the number of pollutants released during refining processes with industry averages, assessing the efficiency of waste management practices, and assessing the use of resources like water and energy in comparison to industry norms. Then, ensuring that Saudi Aramco’s environmental practices align with international standards and regulations will aid in identifying gaps. In addition, it explores innovative remedies adopted by leading companies to minimize environmental impact, which include implementing cleaner technologies and investing in renewable energy sources (Fallon, 2021).
In identifying safety performance metrics for Saudi Aramco, benchmarking will include evaluating the frequency of accidents and incidents in the workplace, assessing adherence to global safety standards and regulations, and comparing the effectiveness of safety training programs. The next step includes pinpointing safety protocols, training methodologies, and incident response strategies of companies with exemplary safety records to enhance Saudi Aramco’s safety practices. Additionally, benchmarking against companies known for a robust safety culture will help encourage the adoption of continuous improvement practices in safety, fostering a proactive approach to identifying and mitigating potential risks (Fallon, 2021). Benchmarking will give Saudi Aramco a powerful tool to assess its operational performance in the global energy landscape and maintain a leadership position in the ever-evolving energy sector.
Analyzing
Fish Bone (Cause and Effect Diagram)
The Cause and Effect diagram clarifies the nature of challenges and is used as a brainstorming tool crucial in generating opinions and organizing them (Bell, 2021). The Fish Bone, or Cause & Effect Diagram, is a Total Quality Management (TQM) tool employed by Saudi Aramco to analyze the root causes of environmental impact in refining processes. The ”bones of the fish” represent different factors contributing to the identified problem—in this case, environmental impact (Bell, 2021). In the case of Saudi Aramco, the primary categories of the Fish Bone Diagram include evaluating the effect of existing technologies on environmental factors, exploring the role of human actions and decisions in contributing to environmental impact, and considering external factors such as regulatory requirements, climate conditions, and geopolitical elements. When using the fishbone diagram, each category is broken into particular factors that may contribute to environmental impacts, such as inefficient processes and outdated equipment under the technology category. Then, visualizing the information will factor in factors that may contribute to environmental impact (Bell, 2021). Once the core causes are pinpointed, Saudi Aramco can develop targeted strategies and solutions to address each cause, thereby mitigating the overall environmental impact. Lastly, the Fishbone diagram will be continuously updated to reflect the evolving understanding of the problem and the effectiveness of implemented solutions. The iterative process aligns with the principles of continuous improvement integral to Total Quality Management (Watts, 2020). Analyzing Saudi Aramco Company using the Fish Bone Diagram will involve assessing the efficiency of the existing technologies, pinpointing opportunities for technological upgrades, evaluating the refining procedure, and identifying areas where process modifications could lead to improvements.
An example of a problem is the high emission level in the refining procedure. The primary causes of the challenge can be outdated technology, a lack of adequately trained staff, ned and a lack of environmental regulations concerning emissions. The challenge will involve greater concentrations of greenhouse gases, principally carbon dioxide, which will inhibit efforts for sustainability; deteriorating air quality, which may hurt human and wildlife health; and emissions that may disrupt weather patterns. The greenhouse gases will influence the environment by disturbing ecosystems and harming water and land resources. Last but not least, defying the law will harm the company’s brand and reputation and may result in significant fines, damaging the business.
Flowchart (Process Diagram)
A flowchart is an illustration that pictures the seriate steps of a procedure and the choices needed to make the procedure work (Solvexia, 2023). The advantage of using a procedure flowchart is that it is standardized, making it easily acknowledgeable, as anyone looking at it can understand what is happening. They are easy to create (Solvexia, 2023). In this scenario of Saudi Aramco company, the Flowchart is a powerful Total Quality Management (TQM) tool that enables Saudi Aramco to visually represent its refining processes by showcasing each step in the procedure, including inputs, outputs, and decision points.
The first step in the Flowchart is that each stage in the refining process is virtually represented by illustrating it using graphical elements, giving a precise overview of the entire procedure, which will enhance the acknowledgement and clear communication of the intricacies of the refining procedure. The second step outlines the procedure’s constituents, including the inputs, procedures, decision points, and outputs. Inputs will include the resources to be used in the procedure; processes will include the transformations to be applied to the inputs; decision points are where a choice has to be made; and outputs are the final results of the process. The third step indicates the flow in the process as the arrows will connect each stage to show a specific order; directional arrows will indicate the progression of materials in the refining procedure. The Flowchart acts as a communication and analysis tool for understanding and improving refining processes by identifying bottlenecks, which are points in the process where the production flow is slowed or obstructed (Solvexia, 2023). Pinpointing the bottlenecks will aid Saudi Aramco in improving its efforts in particular areas to enhance efficiency and throughput. Additionally, clearly defining the steps of inputs and outputs will enable a detailed examination of resource utilization and product yields, and by visually assessing the entire process, Saudi Aramco can identify opportunities for optimization.
Saudi Aramco Risk Analysis and Management
A qualitative analysis of primary risks includes oil cost volatility because slight fluctuations influence Saudi Aramco’s revenue and profitability as a primary oil manufacturer (Aramco, 2023). Saudi Aramco can engage in hedging strategies, maintain a diverse portfolio, and implement cost-efficiency measures to mitigate the impact of price volatility. Another risk is that cybersecurity perils from digitizing activities, as there is a danger posed to data integrity, operational continuity, and reputation (Aramco, 2023). The company should invest in robust cybersecurity infrastructure, conduct regular assessments, and implement employee training programs to enhance cybersecurity awareness. The research done by Suandi and Putra contacted research to evaluate the possibility of risks connected to politics, operations and the market (Putra, 2017). Lastly, Saudi Aramco operates internationally, but its perils are associated with regional tensions (Aramco, 2023). The company likely employs diplomatic channels, diversified operations, and geopolitical risk assessments to navigate uncertainties.
Conclusion
Despite Saudi Aramco being a leading oil and gas company, the following recommendations can aid the company in maintaining its lead in the industry. The first commendation is allocating resources to invest in cutting-edge, environmentally friendly technologies for refining processes by considering renewable energy sources and innovative solutions that reduce the carbon footprint. Secondly, prioritize employee training programs to enhance environmental awareness and responsibility and strengthen collaboration with suppliers and stakeholders in the supply chain to ensure a holistic approach to sustainability.
References
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Solvexia. (2023, November 14). What is a Process Flowchart and How to Use it? Www.solvexia.com. https://www.solvexia.com/blog/what-is-a-process-flowchart-and- how-to-use-it
Terry, K. (2010, March 13). What Is DMAIC? Isixsigma.com. https://www.isixsigma.com/dmaic-methodology/what-dmaic/
Tiseo, I. (2023, September 19). Saudi Arabia fossil fuel CO2 emissions 1970-2020. Statista. https://www.statista.com/statistics/486065/co2-emissions-saudi-arabia-fossil-fuel-and- industrial-purposes/
Watts, S. (2020, February 18). What is TQM? Total Quality Management Explained. BMC Blogs. https://www.bmc.com/blogs/tqm-total-quality-management/
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