Purchasing & Supply Management - Case study on marathon oil.

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Introduction

Purchasing & Supply Management Case Study Table of Content Summary of case study Review of problems and concerns Information on key players Problems answered in case study How the problems solved its self Global Supply Management References Case Study 14-2 centers around Bob Engel, the procurement supervisor for Marathon Oil Company, and whether or not in his capacity in procurement, he should take the initiative in submitting a plan to justify an additional International Purchasing Office based in the Sakhalin Island. The Sakhalin Island Project, a primitive piece of land with little infrastructure to work with and challenging climate located in Russia, will be home to Marathon's Oil for many years and needs facilities at the site location. How Marathon Oil came to this pressing dilemma, and the solving, by researching Marathon's roots and past global ventures brought them to the Sakhalin Island Project. In the early 1990s, Marathon Oil Corp. was a pioneer in the development of Russia's resource-rich offshore fields in the Sea of Okhotsk in the Far East.

Middle

With the Sakhalin Island Project, and a long time commitment to see through several phases of the project they needed an onsite purchasing office, but at what price? Marathon's corporate offices are located in Houston, Texas. The late 1980's until the mid 1990's the company reorganization, mostly by downsizing and delegating duties to other onsite offices, knew that they would have to create additional manpower to oversee the project from the US or to locate an office in the Sakhalin Island. With millions of dollars invested and the prospect of millions in return, the elements associated with the island, climate is severe; arctic in the north, with heavy snowfalls and strong winds and in the south; churning seas create flooding, typhoons, and heavy rains. The geographical terrain is very mountainous, no roads, bridges, or utilities in the area of the designated offshore mark. By employing additional workers from other countries, it was still a real possibility the drilling would not start on time and this could cost many millions of dollars. So, should a procurement department supervisor submit his plan for an IPO and the research or justification for his decision?

Conclusion

With this decision to pull out they swapped its 37.5 percent stake with a major partner in the consortium, Shell Oil in 2000. Marathon Oil walked away with 28 percent interest in Shell's UK operations, all Shell's interests in discoveries and prospects in this UK region as well as an eight-block area in the Gulf of Mexico, including the Ursa and Princess field discoveries. Shell Oil Ltd., with this swap, became a major shareholder in the Sakhalin Island Project. This Houston-based oil giant, pioneers in global management, with exploration and development soundly rooted international, has now embraced its place in Russia with only a few international oil majors involved in oil production in the country. This acquisition has already paid off, 35 percent of the oil supply exported to Europe and the 65 percent will stay in Russia delegated by their newly Russian based IPO. In conclusion, I would have voted for the Tokyo Office to oversee the project. Japan has a base facility and with this country in close proximity to the island and for legal residency, Japan had as much claim and or knowledge as Russia, the additional expense would be better suited with offshore and environmental issues.

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