Information Technology and Cleaner Production SABIC Company - Case Study Example

Industrial Systems and Environment Information Technology and Cleaner Production – SABIC Company Name: Instructor’ Name: Institution: Date: Contents 1.0 INTRODUCTION 4 1.1 Background Information 4 1.2 Selection of the Organization 4 2.0 CHARACTERIZATION OF THE ORGANIZATION 6 2.1 Mission 6 2.2 Vision 6 2.3 Objectives 6 2.4 Key Business Activities 6 2.5 Mechanisms Operating Within the Organization 7 2.6 Current Planning Processes 7 2.7 Corporate Structure 7 2.8 Strategic Analysis 9 2.9 SABIC Capabilities 10 3.0 Porter’s Forces Analysis 10 3.0 PROBLEM/CHALLENGE IDENTIFICATION 14 3.1 Information Technology (IT) 14 3.1.1 Issues that Impact on SABIC’s IT Decisions 14 3.1.2 SABIC’s Current and Projected IT Needs 15 3.1.3 Challenges to Be Addressed In the Continuing Development and Implementation of IT and Related Systems 16 3.2 Environmental Management 16 3.2.1 Cleaner Production 16 3.2.2 Approaches to Cleaner Production 17 3.2.3 Challenges To Be Addressed In Cleaner Production 18 4.0 ACTION PLAN 19 4.1 Action Plan for Information Technology 19 4.1.1 Short-term 19 4.1.2 Long-term 19 4.2 Action Plan for Cleaner Production 19 4.2.1 Short-term 19 4.2.2 Long Term 19 5.0 CONCLUSIONS 21 References 22 1.0 INTRODUCTION 1.1 Background Information Information technology and cleaner production technologies have become essential in development of modern information management systems and improved integration of environmental processes, systems and structures for development of sustainable strategies (Karush & Samii, 2004). Information technology is important in an organization for improvement of operation efficiency, supporting effective decision making, enhanced competitiveness, management of wastes, and improved profitability (Roche & Blaine, 2000). On the other hand, improved organization and cleaner production technologies minimize industrial wastes and emissions, and help to provide better choices for materials and energy to prevent waste generation, emissions, noise pollution, and waste heat released to the environment (Schaltegger, et al., 2008). This paper presents a report on business improvements targeting two main areas; information technology and cleaner production with reference to an organization known as Saudi Arabia Basic Industries Corporation (SABIC). 1.2 Selection of the Organization SABIC is a petrochemical company in the Kingdom of Saudi Arabia that consists several business units that produce different kinds of products. The products include: Chemicals, Metals, Agri-nutrients, and Plastics – Polyolefins, PVC, PS, PET and Engineering thermoplastics. The company was formed in 1976 as a public company, and is currently the largest company in Saudi Arabia. Its headquarters is located in Riyadh, with branches across the globe. In 2013, it was ranked as the world’s 4th largest chemical producer (SABIC, 2016). The motivation behind the formation of the company was the desire to convert natural gas, which was initially underutilized, and oil-byproducts, which caused environmental pollution, into various petrochemicals that can be used allover the world (SABIC, 2011). SABIC was selected as a company of choice because of its diverse nature. It deals with manufacture of a wide range of products in the petrochemical industry, and has a large global market share for its products. Its large organizational structure requires an efficient information communication technology systems in order to manage their operations in supply, manufacturing, sales marketing and logistics around the globe. 2.0 CHARACTERIZATION OF THE ORGANIZATION 2.1 Mission The mission of the SABIC is to responsibly provide quality products and services through innovation, learning and operational excellence while sustaining value for our stakeholders. SABIC’s quality products are expected to meet customers’ needs, whilst sustainable product value should meet business profitability. 2.2 Vision SABIC’s vision is to be the preferred global leader in chemicals. Many of the decisions that are made reflect on this vision, which has seen SABIC expand its operations in the global market. 2.3 Objectives The main objective of SABIC is to deliver business performance through strategic approaches to sustainable social, economic and environmental considerations. Other objectives include: i. Creating economic value ii. Sustainability in production iii. Improving communities 2.4 Key Business Activities The key business activities that SABIC is involved in include the production and manufacture of the following: Chemicals – This is the largest business unit and form the building blocks for plastics, advanced chemicals, fabrics, paint, packaging materials, antifreeze, textiles and paper. The products created from the chemicals include: gases, olefins, glycols, chlor-alkali, aromatics, and oxygenates. Polymers – These materials find wide applications in the manufacture of both consumer goods as well as industrial goods, e.g. packaging, building materials, automobile parts, clothing, diapers, pipes etc. Polymers produced by SABIC include: low and high density polyethylene, polyvinyl chloride, polyethylene terephthalate, polypropylene, polystyrene and polythene. Innovative Plastics – In general, plastics are used in almost all areas of modern manufacturing, including electronics, automotive, construction, lighting, healthcare etc. The types of plastics produced by SABIC are CYCOLAC ABS, CYCOLOY PC/ABS, LEXAN PC, NORYL PPE, VALOX PBT, ULTEM PEI, STAMAX PP (resins and compounds), XENOY PC/PBT, LNP specialty compounds, EXATEC automotive glazing, and Specialty film. Performance Chemicals – Performance products include ethanolamines, acetone, ethoxylates, acetic acid, linear alpha olefins, di-octyl phthalate, catalysts, n-butanol, and 2-ethyl hexanol. These products are used in the construction industry, household cleaning, textile, oil and gas, alternative energy, automotive, and aviation (SABIC, 2012). Fertilizers - Fertilizers produced by SABIC include urea, ammonia and phosphates. Metals – Metals produced are long steel and flat steel. 2.5 Mechanisms Operating Within the Organization SABIC operates with 6 strategic business units that are identified by product. These are; chemicals, polymers, innovative plastics, performance chemicals, fertilizers and metals. It has 60 world-class manufacturing plants globally. There are also corporate research and innovation centers, innovation centers, technology centers, application centers and many patents run across the globe. 2.6 Current Planning Processes SABIC has implemented planning processes that apply mathematical algorithms to bring together a wider global view of logistic capabilities, processing and production, and order demand for full utilization of vessel capacity, maximize the flow of products, and also minimize energy and resource utilization. SABIC recognizes the importance of sustainability, technology and innovation in business to be able to meet global challenges and market needs. They have started various programs to enhance development of new innovation technologies, and production methods that are focused sustainability trends whilst reducing environmental impacts. 2.7 Corporate Structure SABIC comprises of six major interconnected but distinct strategic business units categorized on the basis products. The six units are; chemicals, innovative plastics, polymers, performance chemicals, metals and fertilizers. Each unit makes different kinds of products. Below is the corporate structure of the organization. Figure 1: SABIC’s corporate structure 2.8 Strategic Analysis SABIC has set up a clear goal – to become the global leader of petrochemical. In perusing this goal, the company has developed various strategies in their journey to achieving SABIC’s goal. The strategies are based on two important aspects; sustainable performance, and technology & innovation. Sustainable performance is integrated into social, economic and environmental considerations. Sustainability is incorporated in the initial product design to ensure that energy and carbon footprints are lowered, wastes are minimized, and that the global environmental regulations are complied with. SABIC is on the forefront in developing strategies for new technology and innovation to drive its growth over short term and long term. It has made further step by establishing technology and innovation centers in various countries and also making strategic projects and partnerships with other institutions, such as, Mount Vernon Evans School Project, and Abdullah University of Science and Technology (KAUST). SABIC’s investment in technology and information is intended to develop more efficient and sustainable solutions to manufacturing processes, as well as environmental, social and economic constraints (SABIC News, 2010). SABIC’S SWOT Analysis Strengths: 1. SABIC is the global market leader in producing polypropylene, methanol, polyethylene, glycols, fertilizers, and advanced thermoplastics. It is one of the largest petrochemical companies. 2. Comprehensive portfolio and products that address a large customer base, with presence in 40 countries in N. America, Europe, Asia and Africa. It has a large sales distribution network. 3. High revenue and profitability. 4. Development of technology and innovation research centers globally. 5. A large workforce – more than 40,000 employees across the globe. 6. Strong value enhancement policies, and customized solutions for their produts. 7. Strong support from the government of Saudi Arabia. Weaknesses: 1. SABIC has been under dumping allegations in Turkey and India, this hampers the company’s brand portfolio. 2. SABIC’s weak supply chain can affect its sales network. 3. Turbulent relationship between SABIC and subsidiaries on sub-licensing other issues. Opportunities: 1. Educating communities on challenges of sustainability, such as use of energy, disposal of waste, and water constraints. 2. Building on talent pipeline by supporting various science and technology programs. 3. Joint ventures can expand operation capacity to effectively meet customer demands. 4. Increasing opportunities for involvement of employees in community work to increase the impact of the program and also boost morale of the employees. 5. Increased demand for sustainable methods in the production of fertilizers. Threats: 1. Political instability in the countries in which the company has its operations may disrupt its activities. 2. Increased operation costs and potential liabilities due to environmental liabilities. 3. Increased competition in the chemical industry, this will affect revenue and profitability. 2.9 SABIC Capabilities SABIC is an organization that is capable of the following: a) Developing and producing a wide range of petrochemical products through application of innovative technology. b) Supporting incubation and development of innovative solutions through educational programs, research partnerships, competitions and career days. c) Integrating and promoting sustainability in product design and manufacturing processes. d) Provide product sustainability solutions. e) Improving communities around the globe to have a positive impact and create a social value. 3.0 Porter’s Forces Analysis This model has been used to assess the level of SABIC’s competitiveness within the petrochemical industry. Analysis by this model can help to determine how much competition SABIC faces from its competitors, such as, Mitsubishi Chemical, Formosa Petrochemical Corporation, Lyondell Basell Industries AF S.C.A. etc., customer base, and the overall profitability of the organization. The figure 1 below shows the Porter’s five forces model. Figure 2: Porter’s model (Source: Competitive strategy, Porter 2008) The five forces are divided into horizontal and vertical forces; vertical forces are threat of new entrant and threat of substitute products or service, and horizontal forces are bargaining power of buyers and bargaining power of customers (Porter, 2008). Table 1 below shows the analysis of SABIC by Porter’s model. Table 1: Analysis of SABIC by use of Porter’s Forces analysis 1. Threat of new entrants There is a low possibility of having new entrants into the petrochemical segment. Venturing into this business segment requires high initial capital, patented technology, economies of scale, complex supply chain and strict compliance with government and environmental regulations. In addition, it requires high expertise in order to be competitive in the industry. Although there is currently abundance of feedstock, the government is contemplating an increase in the price of feedstock. Cheap raw materials do not encourage entrant of new businesses, they are scared away by the challenges and constraints of investing in the business. The polymers segment faces between moderate to low threats of new entrants because the polymer industry is still under evolution. Starting a polymer business segment demands high initial capital, with moderate economies of scale. The major limitation is exposure to technology. 2. Threat of substitute products Petrochemical companies produce materials that are used across many sectors in the world, ranging from food/beverage processing, packaging, electronics, healthcare, automotive, electrical lighting, construction, agriculture to mass transportation and industrial use. The materials are used to make products that are used by people in all walks of life. There is low likelihood of new materials replacing the ones that are currently being used in the near future. This means that there is a low threat of substitute products. SABIC is also in a better position to adapt to new changes in the market trend. The polymer specifications determine its demand in the market. It is moderately difficult to substitute polymers with other alternatives, and in addition, some polymer products are patented. 3. Bargaining power of suppliers Suppliers in the petrochemical sector have high bargaining power. SABIC plays a sole role in supplying feedstock to its affiliate companies and other regional private players. The prices of raw materials are influenced by government policies. The major threat companies that use oil and gas is the price of oil, which can influence the cost of production and revenues. The availability of these resource has enabled SABIC to keep the cost of raw material at minimal, which is a boom to the companies. Several chemical producer companies provide the key resource input for polymer industries. The switching cost to other materials is lower, thus, limiting the bargaining power of the suppliers. 3.0 PROBLEM/CHALLENGE IDENTIFICATION 3.1 Information Technology (IT) Information technology (IT) refer to the application of computer hardware and software devices, infrastructure, and human practices and processes integrated in the information management systems for storage, retrieval, transmission, and networking of electronic data. Initially, the term information technology was used to distinguish between general purpose computing machines and purpose-built machines made to perform a narrow scope of functions, but as the IT evolved in the 20th century, information technology encompassed both integrated circuits and transistors (Karush & Samii, 2004). Computer-based technologies and its associated applications play a wide scope of roles in both engineering and technology companies; including, enabling system design, implementing real-time control systems, and improving accuracy and speed of calculations. Information technology in industrial systems is applied in the support and management of corporate information systems to enhance strategic thinking and planning. 3.1.1 Issues that Impact on SABIC’s IT Decisions The main organizational issues that impact on SABIC’s IT decisions include: SABIC’s mission and vision – The vision and mission of SABIC is to become a global leader in the chemicals industry. Sound IT decisions have to be made and implemented for proper coordination of SABIC’s activities operational excellence across the globe to meet its customers’ needs and expectations. The size of the company – SABIC is a multi-national processing and manufacturing company. The company has its customers in different geographical locations with different specific demands and unique level of sophistication and dynamics demand. This calls for a great need for technological improvement and application that will come up with solutions to meet the market demand; like smarter designs, greater functionality and product sustainability to meet customized needs. The global operations provide a challenge in fast flow of information, decision making and response. This requires a properly laid down IT management systems. The nature of SABIC’s key business activities – SABIC operates six main strategic business units that are interrelated. The products of one business unit can be a raw material to another business unit. Coordinating the activities of all the business units require a tailor made information technology management system. There is also need to exchange expertise knowledge among different specialists in various fields. Faster exchange of these ideas and research findings is of importance to the continued competiveness and growth of the company in the industry. Well-developed IT systems is an important tool in the effective management of large organizations like SABIC, since coordination and timely dissemination of decisions and information to the various strategic business units and management in different geographical location around the globe is required from time to time. Availability of Resources – The resources to develop IT systems to meet SABIC’s operational needs are readily available. This means that SABIC has the capability to implement all the IT systems required to increase its operational efficiency. 3.1.2 SABIC’s Current and Projected IT Needs SABIC deals with the manufacture of distinct and unique interrelated products from different raw materials. The products of some of the strategic business units are among the raw materials of another SBU, hence the need to accurately coordinate the processes to avoid delays. This means that decision by one of the SBU will affect the operations of the other. All these processes are coordinated through proper planning and use of telecommunication networks. SABIC has a definite IT systems that plays a vital role in enabling the management of all its operations across the globe and ensure the growth of the company. With an estimated 40,000 employees, there is an efficient telecommunication network to ensure exchange of information, ideas and technology, and coordination of different employee programs and employee teams (SABIC, 2016). With the current ever changing prices of petrochemical product there is great need to estimate the anticipated prices in advance so as to adjust effectively. Advanced IT has helped policy makers and management in effective decision making on expected price rise and fall before it occurs. The various factors that contribute to the production cost of the petrochemicals need to be monitored regularly to maintain or increase market share. 3.1.3 Challenges to Be Addressed In the Continuing Development and Implementation of IT and Related Systems In the event of continued advancement, development and implementation of IT, there is need to consider the distinct nature of activities that the system should satisfy arising from the interconnected nature of the organization. The following issues need to be addressed by SABIC in regard to IT development and implementation: i. IT services need to be developed to assist in monitoring and reporting on the Environment, Health, Safety & Security (EHSS) in different and continuously expanding regions in which SABIC operate, and tracking of other global activities for reporting purposes. ii. Providing e-commerce solution to enable customer full inventory visibility and real-time order confirmation through information technology. iii. Developing a communication hub to provide logistic services with capabilities to offer an interactive flow of information within its wider operations across the globe, so that planning and reliability are enhanced. 3.2 Environmental Management 3.2.1 Cleaner Production Cleaner production is an initiative to protect the environment with the intention to minimize environmental wastes and emissions, and maximize the output. It is a concept that is beyond just simple pollution control; it involves engaging people in research-based development into new systems, structures, materials, processes and products that are energy and resource efficient. These kind of approaches have become essential for business organizations in order to ensure there is ecological, social and economic sustainability. It requires educational training, technical assistance and management programs to accelerate the process of adapting strategies for cleaner and sustainable production by institutions, industries, governments and businesses. In order to achieve environmental sustainability, SABIC has integrated several of its prevously independent environmental management systems into a central approaach to enhance their performance and efficiency in line with use of resource materials, water, energy, and emmision of greenhouse gases. 3.2.2 Approaches to Cleaner Production In an attempt to find renewable sources of raw materials and improvement of technology SABIC has taken into consideration the manufacture of products that are friendly to the environment i.e. with minimum environmental pollution. Improving air quality SABIC has employed low-emission technology in their manufacturing facilities to reduce the emission of combustion-based particulate. For example, one of SABIC’s affiliate, HADEED, has reduced CFC gases by using safer alternatives. A de-dusting plant has been installed to counter the effects on the quality of air due to increased production. In addition, leak-detection systems and rpair-monitoring programs have been put in place to monitor and rectify the relase of volatile organic compounds into the atmosphere (SABIC, 2015). Reducing Wastewater SABIC has reduced wastewater discharge into the environment, for example, at the Saudi Kayan complex. Efforts have been made to lower the quantity of water needed in cooling processing plants using cooling towers and re-circulated water obtained from the sea. Re-Using Waste Materials SABIC recognizes the fact that the world’s natural resource is limited, and therefore, focuses on utilizing process by-products onsite as feedstock, such as steam and CO2, for raw materials to other related processes and supply other downstream industries. For example, Petrokemya, an affiliate of SABIC has a steam system with a 60% reduction of excess steam. Through its sustainability program, SABIC has come up with a meterial-loss metric a measurement to help the company in decreasing the amount of materials they dispose to the environment. Material-loss metric works through identification of ways in which resources can be used efficiently (SABIC Magazine, 2010). SABIC completed a facility that converts carbon dioxide waste gas from manufactring facilities into valuable products in other processing facilities in 2015. This innovative project has significantly improved the the company’s resource efficiency, improve economic performance, reduce GHG intensity and, also provide motivation for this kind of solutions to build a sustainable planet in future (SABIC, 2014). Optimizing Transportation EMDAD is an nitiative started in 2007 for SABIC’s global supply chain to develop local logistics infrustructure around Al-Jubail. This has reduced the use of heavy vehicles on the roads. This has benefited the locals by reducing road traffic, road damage and air pollution. 3.2.3 Challenges To Be Addressed In Cleaner Production In order to improve their sustainable and cleaner production, SABIC need to address the following challenges: i. Implementation of a global corporate social responsibility strategy that is based on principles of environmental management, management of resources, and sustainable education programs in science, technology and innovation, and agriculture to meet various needs of communities. ii. Different countries in which SABIC operates have set different standards for cleaner production methods, making it difficult to have a standard technology for cleaner production. 4.0 ACTION PLAN 4.1 Action Plan for Information Technology In meeting its challenges in IT, SABIC need to implement both short-term and long-term strategic action plans. 4.1.1 Short-term i. Establish an information technology platform to monitor and manage global performance. ii. Creating a communication information technology hub and management systems for SABIC’s logistics across the globe. 4.1.2 Long-term i. Developing communication technology that can provide fast and reliable inventory visibility and tracking from the time a package is assigned a bar code to the time it is delivered to ensure that it matches the customer’s delivery requirements. 4.2 Action Plan for Cleaner Production 4.2.1 Short-term i. Creating an environment that can support development of new ideas for improvement of processes. ii. Raising awareness about current environmental challenges, e.g. resource scarcity and global warming through education and other programs. iii. Meeting all the restrictions laid down by environmental regulations on harmful substance disposal in the countries in which SABIC and its affiliates operate. 4.2.2 Long Term i. Putting up management systems for data collection to enable the organization establish its targets for intensity reductions in GHG emissions, material loss, water use and energy use. This will help to assess environmental impact of their process plants. ii. Designing, light weight, durable, easily recyclable, energy efficient and greener products with least environmental impact in their lifecycle. iii. Focus on development of new innovative technologies and breakthrough transformational changes to achieve a significant resource and material impact through motivation of innovation, science, and technology. iv. Developing, adapting and supporting renewable energy applications within and beyond SABIC’s business units. 5.0 CONCLUSIONS SABIC is a global company, meaning that its operations across different parts of the world can only be coordinated through efficient information technology systems. With the expanding global operations, SABIC has incorporated information technology in integration of the most modern communication processing technologies as well as multimedia capable technologies to be part of design and implementation of SABIC’s information management systems. The establishment of SABIC was driven by the capability to produce valuable materials using waste natural gas. This in itself, has contributed to good resource utilization and environmental sustainability within the industry. SABIC is commited to further reduce environmental impact by ensuring sustainable use of finite natural resources through their processes. SABIC has a clear vision of becoming the global leader in the manufacture of petrochemical products. To realize this vision whilst competing with its rivalries, the organization has put up strategies to enhance innovation and use of new and more sustainable technologies in its production processes. These technologies have been designed to reduce the negative environmental impacts of the materials used and the products being manufactured. However, there are a number of challenges that SABIC faces to meet its IT and cleaner production demands. SABIC is a giant multi-national organization and has the capability to meet these challenges. Implementation of both short-term and long-term plans that have been proposed in this report will ensure that all the identified challenges in regard to IT and environmental management are met. In my personal opinion as an outsider, SABIC is dedicated to implementation of advanced IT applications in its management systems, as well as implementing new and innovative technologies aimed at achieving cleaner production. I expect SABIC’s leadership to incorporate IT and cleaner production technologies in their vision to become a global leader in the petrochemical industry. References Read More