Abstract
Behavioural supply chain management is a quickly growing part of the broader discipline that has emerged in response to the challenges that the operational approach could not resolve. It explores companies as enterprises run by people, who do not necessarily make the optimal decision every time.
As such, the discipline investigates factors such as trust, perceived risks, power imbalances and their exploitation, and others. The oil and gas industry operates worldwide, and so, its supply chains are extensive and logistically as well as organisationally complicated. However, current manager knowledge on the behavioural issues and solutions for various aspects of supply chain management are lacking. This proposal suggests a case study of Shell UK to determine whether such factors affect its supply chain performance and whether the application of the latest findings in the field can improve it.
Name of Student
The oil and gas industries are highly prominent in the modern environment due to the common usage of the resource and the high demand that results from its consumption. As such, the industry is involved in numerous complex supply chains in the role of both the supplier and the buyer. Those relationships may have operated inefficiently in the past because oil generated massive profits that distracted managers from small and unexplored issues. However, nowadays, with the advancements in supply chain management theory, new paradigms have emerged in the form of behavioural supply chain management. It is possible to apply them to the oil and gas industry to determine whether the performance of companies in it can improve. More specifically, a case study on the application of behavioural supply chain management in Shell UK could help enhance the understanding of the approach’s effectiveness.
Literature Review
Behavioural supply chain management applies both inside the organisation and in its relationships with its partners. Gupta and Singh (2015) establish a direct correlation between employee relations and training and various aspects of supply chain performance. Bon, Zaid and Jaaron (2018) highlight the role of human resources in the creation of a sustainable framework for the process. Huo, Flynn and Zhao (2017) claim that the power imbalance present in many supply chains can lead the stronger member to pursue short-term gain at the expense of the weaker partners and long-term benefits.
As Khan, Qianli and Zhang (2017) highlight, such practices or their possibility lead partners in the supply chain to try and undermine each other’s power, creating a hostile relationship and damaging everyone’s interests. All of these actions and practices are irrational and would, therefore, be dismissed under the operational supply chain management paradigm, but their existence in practice necessitates the emergence of its behavioural counterpart.
With that said, there are also opportunities for improvement based on the opinions and behaviours of a company’s supply chain partners. Porter (2019) claims that it is easier for similar companies to work together in a supply chain than it for organisations that operate differently and have misaligned goals. Tay et al. (2015) note that a company’s organisational culture can have a significant influence on the sustainability of the supply chains that it establishes.
Lastly, supply chain relationships cannot succeed over extended periods if the partners distrust each other or are not committed to the partnership. Brinkhoff, Özer and Sargut (2015) claim that trust is essential to the success of a supply chain management project, though it is not the sole prerequisite of such. As such, managers should be concerned about all of the issues and opportunities presented above, and most of them can only be addressed adequately via behavioural methods.
The resolution to some of the concerns presented is not complicated, such as the development of one’s human resource management skills to improve personnel productivity. However, others are less obvious but can have a considerable effect, such as Wuttke, Donohue and Siemsen’s (2018) proposal to reframe supply chain contracts to emphasise rewards over penalties to make them appear more beneficial. The risks of a supply chain relationship can be mitigated with better information sharing, which will enable better forecasts and allow for superior product integration and adaptation (Hoque, Sincovics and Sincovics 2016). However, there remain dangers associated with the abuse of specific aspects of supply chain relationships. Esteki, Regueiro and Simal-Gándara (2019) propose a variety of systems that would protect a company from supply chain fraud, which is prevalent in some industries. Managers have to account for actively malicious behaviours as well as irrational ones.
It should be noted that not all findings of behavioural supply chain management are universally applicable without consideration for specific environments or industries. Dike and Dapogiannis (2014) claim that organisational culture characteristics that lead to the best supply chain performance vary significantly between different industries. As such, additional research is necessary to determine the specific traits required of an oil and gas company and the methods necessary to achieve them. Similarly, trust and collaboration can occur in one of a large variety of modes, all of which depend on mutual trust (Soosay and Hyland 2015). Managers have to choose which variety they would prefer and establish trust in a manner that would promote that relationship’s emergence. Overall, there are numerous behavioural supply chain management considerations that may be relevant in the oil and gas industry but require adaptation before they can be fully effective.
Research Questions
Technological advancement is currently taking place, changing the environment in which oil and gas companies, as well as others, operate. For example, Ujakpa et al. (2016) discuss the use of the Internet as a medium for purchasing goods and note that behavioural risks emerge as a result. However, Boonjing, Chanvarasuth, and Lertwongsatien (2015) claim that the field of behavioural supply chain management remains relatively unexplored when compared to the discipline at large. As such, managers will usually not know the best methods that can be used to reduce or eliminate these concerns. However, sufficient research has been carried out that it is possible to identify several potential solutions to the issues before oil and gas companies. As such, the study will aim to answer the following research questions:
- What specific behavioural risks exist in the oil and gas industry’s supply chain?
- What practices can managers use to address these issues and improve the supply chain’s overall performance?
- How effective is the application of these practices in improving the company’s performance in relation to the effort and resources necessary to implement them?
Originality and Significance
Behavioural supply chain management is still not adequately explored because it does not fit into the traditional operational view of work. Olajide et al. (2019) claim that the adoption of behavioural practices is not motivated by the drive for efficiency or the desire to obtain an advantage over competitors, but rather by the need to acquire institutional legitimacy. The definition of the latter is broad, but Rendtorff (2009) claims that it consists of the company constructing its image and social appearance to correspond to the norms of its environment. The link from this practice to supply chain performance is not easy to understand, as the changes presumably only concern the company’s appearance and not its practices. As such, many researchers and managers disregard these aspects and assume that companies operate using the rules of mathematical logic.
However, some people and companies in the industry are starting to show an interest in topics adjacent to behavioural supply chain management. Oktaei, Cloutier and Lehoux (2017) highlight the importance of collaboration and integration on supply chain performance. Both activities depend on mutual trust between the supplier and the buyer, which is determined by behavioural factors to a significant degree (Shubhansh and Acharyulu 2017).
However, research on the development of inter-organisational trust remains scarce, whether due to the lack of knowledge on the matter or the perception that non-behavioural methods are sufficient. This example, as well as many others, demonstrate how behavioural issues in supply chain management are overlooked in the oil and gas industry. As such, this study will contribute to the field by gathering information about whether it is necessary or beneficial to implement changes proposed by researchers in the field in current practices.
However, the research conducted in the field of behavioural supply chain management suggests that numerous issues exist in the field and should not be disregarded. Dujak, Šebalj and Koliński (2019) discuss the incidence of the bullwhip effect in gas supply chains and the use of behavioural models in mitigating it. The phenomenon is well known, and behavioural supply chain management methods are effective at reducing them.
Osobajo and Moore (2017) discuss the importance of secondary stakeholders to the oil and gas industry and define them based on their intentions, behaviours, interests, influences, and interrelations. As such, viewing them as other companies that aim to maximise profits is not an adequate approach with regards to improving supply chain performance. However, behavioural supply chain management may be used to understand these stakeholders and establish mutually beneficial relationships with them.
Oil and gas can be found throughout the world, and it is in the interest of the larger companies in the industry to expand into locations where it is present. However, local businesses will typically surface to take advantage of the resource, and they may refuse to collaborate with their multinational counterparts despite the potential benefits. Calignano and Vaaland (2016) claim that only fifteen per cent of Tanzanian oil and gas companies have collaborated with each other or international corporations, even though they would have gained access to critical experience, competencies and resources as a result. Cooperation is generally seen as highly valuable in supply chains, as it provides a wide range of benefits such as better risk management (Duhamel, Carbone and Moatti 2016). As such, learning how to promote it through behavioural methods would be beneficial to both large enterprises and smaller companies in the field.
Methodology
The study will consist of two primary stages: data gathering and proposal implementation. During the former, Shell UK’s supply chain performance and relationships with its suppliers and buyer will undergo a qualitative investigation. The inquiry will identify any issues or potential inefficiencies that require improvement and analyse them in detail. Behavioural factors will be a focus of the data gathering, though other aspects will also require attention due to the possibility that there may be behavioural approaches to addressing them. The researchers will then develop a set of suggestions based on their analysis of the firm and compose a list of the information they will need to implement it. They will then gather this data from the firm as well as from its environment and partners. Once the preparations are complete, the study will proceed into the implementation stage.
The second part of the study will involve the implementation of the behavioural supply chain management guidelines established in the first section. The costs and difficulties encountered in the process will be recorded and analysed to determine opportunities for improvement. After the improvement process concludes, quantitative data regarding the supply chain’s performance will be recorded throughout the next year. After the period, it will be analysed, and the performance indicators will be compared with those gathered by Shell UK in the previous years. If there is a significant improvement proportional to the scale and costs of the changes implemented, the hypothesis that the application of behavioural supply chain management methods leads to better performance will be validated. Additionally, the employees of Shell UK’s supply chain management department will be interviewed with regards to their opinion of the change and suggestions for further refinement.
The qualitative data will be gathered via interviews with employees of Shell UK who work in the supply chain management department as well as its current and potential supply chain partners that display irrational behaviours. They will be recorded, transcribed, and analysed to determine the primary themes and issues that impede the company’s supply chain’s performance. The quantitative data present will be present in Shell UK’s financial and administrative records, to which the researchers will request access.
They will search them for specific events such as contract proposal refusals by partners and identify supply chain KPIs for comparison. Every interviewee will be informed about the purposes and benefits of the research as well as the treatment of their personal information and the interview’s content. They will give informed consent before conducting the discussions, and their personal information will be kept private and redacted from any records used for the research.
Conclusion
Behavioural supply chain management is becoming more prominent nowadays, though research on many of its topics is still lacking. As such, many managers remain unaware of it or do not know how to apply its findings or whether doing so is beneficial. The oil and gas industry is one area where such tendencies are likely due to the geographic and national separation of the various companies in it. Even if one wanted to improve supply chain performance using behavioural methods, it would be challenging for him or her to determine where to begin. As such, an analysis of current issues and the solutions that may be used to address them would be beneficial for managers around the world. A case study of a specific company, Shell UK, in this case, would also demonstrate the effects of the successful implementation of such a methodology. As such, the proposed study has significant implications for supply chain management theory and practice.
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