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Leaning out the Processes at Aramco, a Saudi Arabia Oil Company

Leaning out the Processes at Aramco, a Saudi Arabia Oil Company

Abstract

This paper explores the conditions for the successful implementation of lean operations in the company Aramco in Saudi Arabia and their role in enhancing the company’s performance. The core principles of lean management include the continuous improvement of the product and elimination of waste (Fullerton et al., 2014; Aziz & Hafez, 2013). Creating favorable conditions for the employees’ involvement in the improvement processes of the company is a requirement of an effective lean manufacturing system. The company Aramco in Saudi Arabia is an example of an organization with abundant waste. Many levels of management make the process of decision making complicated and time-consuming. The employees who are not authorized to initiate any changes feel helpless, unmotivated, and disengaged. The recommendation for leaning out the company’s processes is to apply decentralized decision making processes, delegate the responsibilities, and encourage the employees to offer ways how of improving company’s processes.

Keywords: lean operations, lean management, Aramco in Saudi Arabia.

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Leaning Out the Processes at Aramco, the Saudi Arabia Oil Company

Lean operations are an effective system that allows enhancing the company’s performance and employees’ efficiency. The concept of lean combines a full range of management tactics that are aimed at making the processes within a company more straightforward and focused. Outdated systems emphasize revenues as the ultimate goal of the firm, while lean practices focus on the product value and client satisfaction. The improved quality of the end product results in increased sales and revenues.  At the same time, the improvement of the product requires reconsidering the company’s policies and practices. The most effective strategy for leaning out the processes within a company is inviting the employees to make suggestion on how their working processes could be improved. The employees can always see the ways to make their working conditions easier and improve the company’s processes at the same time. The ability and willingness of employees to generate effective solutions for their company depend upon their working conditions. The effective lean operations require appropriate work settings and improved involvement and retention of employees. The purpose of this paper is to define the main principles of lean operations, their role in the company’s performance, the conditions required for their success, and discuss the potential application of these principles on the example of Aramco, a Saudi Arabia oil company. The hypothesis is that Aramco could improve its performance by applying continuous improvement, reducing the waste of centralized and multi-level management, and creating favorable conditions for the employees’ involvement in the company processes.

The Toyota Production System as the Prototype of Lean

The principles of lean production have been developed on the basis of Toyota production system. They include two main principles of continuous improvement of products and respect for people. The Toyota production system was originally referred to as just-in-time (JIT). It is implied that the process that goes wrong should be stopped immediately so that the company could identify its weaknesses and eliminate them (Fullerton et al., 2014). According to this system, the company’s excellence is achieved through continuous improvement of product and the elimination of waste. The Toyota Production System (TPS), as the prototype for the lean operations system, consisted of a set of objectives aimed at identifying and delivering maximum value to clients (Aziz & Hafez, 2013). In pursuit of perfection, the Toyota Company attempted to organize the production as a flow and eliminate all processes, which did not generate value to the end product. The non-value adding processes included overproduction, movement of labor forces, production of products not complying with the clients’ standards, and all kinds of waiting time. The principles of continuous improvement and the elimination of waste enhanced the corporate growth of Toyota and many its successors.

The Employees’ Involvement for Lean Operations

In lean, as the global competitive standard for manufacturing processes, the corporate pursuit of continuous improvement depends on the involvement of employees in the process and their problem-solving ability. The innovation is the key source of improvement, and the employees who are engaged in the working process can suggest viable improvement strategies. A recent study by Angelis & Fernandes (2012) revealed that workers can suggest process changes mainly to improve their hard working conditions, as these improvements are in their own interests. Additional managerial efforts are required for motivating the employees to suggest improvements of the end product, not the processes. At the same time, the elimination of waste in the processes results in improved product quality. The employee involvement is an essential element of effective lean operations. Stone (2012) noted that the process improvement enhanced employee motivation is an effective strategy used in lean operations. The decentralized control of the processes helps eliminate the waste caused by miscommunications and process flaws. In lean operations, employees should have access to meaningful information on the company mission and business goals to get involved into the processes. The company should create favorable conditions in which the employees could make suggestions as to how the process can be improved and enhanced.

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Favorable Conditions for the Employees’ Involvement

The successful implementation of the principle of continuous improvement and timely response to the numerous challenges in lean management require creating favorable conditions for the employees. Bouville and Alis (2014) conducted a study which revealed that lean practices, such as delegation of responsibilities and problem-solving demand have a negative impact on job satisfaction and even health of employees. The rapidly changing work environment and the high performance work system increase work pressure and contribute to the amount of stress. Respect for people is an important principle of lean management, however, the practical application of this system can have detrimental effects on employees’ attitudes. The lean-specific work demands can have direct effects on the employee work exhaustion (Cullinane et al., 2014). The practices which focus on adding value to the end product and eliminating waste and waiting time in manufacturing can be stressful for the staff, especially during the transition period when the outdated practices are replaced with lean operations. Lean operations are associated with high-involvement and fast-paced work environment. The company should provide the employees with the resources necessary for coping with the lean-specific demands. There is evidence that quality management can potentially decrease workplace pressure and prevent employee health concerns (Bouville & Alis, 2014). Whereas the lean operations can have positive effects on the company’s performance, the lean-specific demands can have detrimental effects on the employee attitudes and willingness to stay, resulting in employee rotation and additional expenses for the company. Quality lean management strategies and appropriate resources for the employees can improve the employee ethics and prevent the negative consequences for the employees’ health.

Lean and Green Practices

Lean production focuses on eliminating all kinds of waste, including time waste, abundant operations, and the waste that pollutes the environment. Respect for people as an essential part of the lean management philosophy implies care for future generations and eliminating the harmful effects of production on the environment. The study conducted by Dues et al. (2013) demonstrated that the lean and green practices are interdependent and can be mutually beneficial. On one hand, lean manufacturing facilitates the implementation of green practices. On the other hand, green practices can have a positive effect on lean operations. The combination of the two approaches might have synergistic effects on the company’s outcomes, serving as catalysts for each other. It is important to note that the environmental practices are linked to the organizational performance (Hajmohammad, 2013). The main environmental practices, including the pollution prevention and control through recycling or using renewable resources, in the long run result in cost reduction and additional resources for the company. The principles of lean operations and the principles of environmental practices are not identical, but lean operations apply the environmental practices, and the two approaches can be synergistic if combined and used simultaneously.

Main Weaknesses of Aramco

An example of a company which undermines the importance of lean operations in Saudi Arabia is Saudi Aramco, a well-known oil company. The launch of the company dates back to the year 1936 when the Arabian American Oil Company (Aramco) first started (Anderson, 2014). The company invited American citizens to take managerial positions in the company. The main weakness that prevents the application of lean operations in Aramco is the numerous levels of management and bureaucracy of the company. Due to the company organization, the employees feel helpless and unmotivated. The employee involvement, which is essential to lean processes, is complicated due to the hierarchical decision making processes (Piercy, N. & Rich, 2015). One of the main complaint and the major reason for the high rates of the employee turnover is the authoritarian and outdated management style. The staff is not invited to initiate changes for the purpose of continuous improvement. The employees who attempt to improve the workflow see the resistance of the middle management and decide to stop their attempts or leave Aramco for another company. The lack of promotion, combined with low involvement in the working processes, discourages the work force and has negative effects on the company’s performance.

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Sources of Waste in Aramco

The numerous levels of management reduce the company’s responsiveness to the challenges of the changing environment. Every query and every offer for improvement have to pass the numerous levels of management before a solution can be approved. Thus, some solutions, which might be beneficial if adopted in time, are outdated and ineffective (Amin & Karim, 2015). The lack of dynamic development is a significant hurdle for the continuous improvement in Aramco. Even though the modernization strategies can be initiated by the top management, before practical application the strategies can be significantly modified and not adapt well to the real life work settings. The employees perceive the existing procedures as ineffective and unsatisfying. The complicated managerial style and the lack of opportunities for the employees to suggest measures for continuous improvement create waste in the company’s processes, reducing its effectiveness. Despite the relatively high salaries in the company, the employee dissatisfaction and lack of motivation result in high turnover rates. Aramco management style causes significant waste, in the form of meaningless interruptions of the working flow, which do not contribute to the value of the end product and make the working conditions harder.

Change of Management Style at Aramco

The first step to leaning out the processes in Aramco is to change the management style and take measures aimed at improving the employees’ involvement in the continuous improvement of the company. To lean out the process, Aramco should delegate the responsibilities and create conditions for the employee involvement in the continuous improvement of  the processes. The company should consider the employee feedback on the current procedures (Rahani & al-Ashraf, 2012). The managers should be allowed to delegate their responsibilities and take the responsibility for certain decisions. The simplified and lean decision-making process could facilitate the changes in the company and make the management more flexible and responsive to the manufacturing needs. The bureaucratic system and the hierarchy of management levels impose processes which do not add value to the end product (Wahab et al., 2013). The numerous stages of the decision-making process and the lack of authority of subordinate employees and middle managers hinders the company’s development. A shift in the managerial style and the changes in the decision-making procedures should encourage the employees to initiate changes and improvements. Using this approach, the employees who feel valued and appreciated can identify themselves with the company and become proactive in the continuous improvement of the products and processes.

Favorable Conditions for the Employees in Aramco

The next step to more effective lean practices in Aramco should be creating favorable conditions for the employees and providing them with the necessary resources to cope with the work-related stress. The transition from the outdated procedures to lean practices can be stressful to the employees (Sternberg et al., 2013). The increased demands and extended responsibilities, which are characteristic of the lean practices, can increase the workload and worsen the working conditions. Only quality management can alleviate the detrimental effects of the transition stage. Thus, the appropriate training for the managers, who are accustomed to the old-style procedures, is an essential tactic for leaning out the processes, eliminating waste and enhancing the company’s effectiveness. Well-trained managers and a relaunch of the organizational culture could revolutionize the decision-making process in Aramco. Instead of feeling helpless and undervalued, the employees would feel their authority and realize their important role in the continuous improvement of the products and procedures (Herzog & Tonchia, 2014). The employees who understand that their concerns and suggestions matter can offer creative solutions for making the processes simpler. Only the stages that are necessary for adding value to the end product will remain. Creating favorable conditions for realizing the potential of employees and improving their loyalty and engagement is an effective strategy for leaning out the processes at Aramco and enhancing the performance of the company.

Conclusion

The lean practices, which are based on the Toyota production system, focus on the continuous improvement of the product and adding value to it. According to the lean approach, all the processes within the company should serve a single goal of generating value for the end product and increasing client satisfaction. Any processes which are not aligned with this goal should be eliminated whenever it is possible. The successful application of lean operations depends on management strategies and the involvement of employees in the continuous improvement process. Companies should encourage their employees to make suggestions on how the company’s processes can be improved and simplified. The employees’ opinions can be a valuable source of ideas for leaning out processes. For example, in Aramco, a Saudi Arabia oil company, the hierarchical and authoritarian management hinders the application of lean policies. The changes in the management style can enhance the performance of Aramco.

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