Supply Chain Management of BHP Billiton - Case Study Example

Supply Chain Management of BHP Billiton By: Institution: Course: Instructor: Date of submission: Introduction BHP Billiton is a leading international resources company. Although it is headquartered in Melbourne, Australia, the company controls 25 locations in 25 nations. A merger between Billiton and BHP in 2001 led to the creation of the company. The company is among the leading global producer of various commodities including metallurgical coal, uranium, iron ore, and copper. Additional, the company has the interest to expand its portfolio to energy coal, oil, and gas. The company's strategy is to own, as well, as operate upstream assets characterised by low cost as well as long life. It has expanded its portfolio comprising of assets of high quality and this helps the company to be resilient as well as flexible to enhance value all through the commodity cycle. The company's purpose is to build long-term value of the shareholders through the natural resources' discovery, acquisition, development, as well as marketing (BHP Billiton 2015, p. 1). The paper will aim at looking at the competitive strategies of BHP Billiton Company, how it manages its supply chain risks and its involvement in global supply chain. Supply chain competitive strategy It is estimated that global competition will be on a rise. As a way of attracting new capital, BHP Billiton has embraced on a global competitive regime of taxation, meaning that the company needs a competitive rate of taxation. Apart from that, the company has embraced a system based on simplicity, fairness, stability, transparency, and sustainability principles. These principles have helped the company to improve its tax system, and this has enhanced the continued productivity as well as the growth of the company (BHP Billiton 2007, p. 1). There is a need for the Australian system of taxation to continue applying the tax that will ensure that there is value in Australia along with the international supply chain. The company makes a profit from a value chain creation namely exploration, mining, extracting process, drilling, shipping, as well as marketing. The tax application principle where there is the addition of value is essential and works in the favour of Australia. Last year, for instance, the company paid over $8.7 billion royalties and taxes in Australia. For 15 years, the company has been revealing its tax payment to the government and this has earned the company recognition by the Transparency International as a leader in transparent disclosure as well as reporting (BHP Billiton 2015, p. 2). The company's long-term strategy is to own as well as operate large, low cost, as well as low-cost upstream assets diversified by geography, commodity, and market. The company's portfolio high-quality opportunity for quality growth opportunities for growth ensures that since the company operates in a vibrant external environment, the company has been able to perform strongly with time. This in turn strengthens the creation of long-term value of sustainability for its customers, employees, the communities in its area of operation, and the shareholders. The company's aim is to deliver the long-term value of sustainability rather than putting a focus on returns that are short term. It is guided by the Charter values of integrity, sustainability, respect, simplicity, and accountability. As a way of executing the company's strategy, the company's management committee strongly focuses on several strategies (BHP Billiton 2008, p. 1). The company is also putting more efforts on world class basins where it can enjoy the economies of scale as well as a competitive advantage. It focuses on four main areas of business namely copper, iron, petroleum and potash, and coal. The company is also planning to demerge various BHP Billiton's metals of high quality namely coal, manganese, aluminium, silver, and nickel to ensure that there is the creation of one independent worldwide metal as well as the mining company. In addition, the company has reduced exploration and capital expenditure by approximately 32 percent as well as maintained a solid A credit rating. The company's competition strategy is founded on diversification by market, geography, and commodity. To remain competitive, the company has a workforce that reflects its values (BHP Billiton 2008, p. 1). Supply chain risk management The core of the company's strategy is sustainability. The company has ensured that it has integrated health, environmental, safety, economic, and social factors when making a decision. The company's priority is the identification as well as the management of the material risks in the company. Additionally, the company ensures that there is a safety of its workers, contractors, suppliers, as well as the community. BHP Billiton has made a commitment to remain steadfast in the minimization of the environmental impacts. The company's sustainability value also puts health as well as safety as a number one priority (Bsi 2014, p. 1). Matter of supply chain risk management is taken seriously because the nature of the company's operations means that the incidents of healthy, safety, environment and community (HSEC) has the capacity of having adverse effects on the company's business, people, as well as the host community. Such an approach ensures that the company remains sustainable. Through the company's system of business, there is detailing of all the aspects of work and this includes the relevant critical controls' operations. In this fashion, the critical activities of HSEC are built into the work planning and become part of work management (McAloon 2014, p. 1). The company employs critical controls to manage any form of risk. It believes that risk identification, as well as management, are essential to achieving the corporate purpose of the company, which is creating long-term value for the shareholders. Risk can influence the environment, health and safety, and the financial performance. Successful management of risks is one of the options to achieving competitive advantage. Using group-wide basis, there is the viewing as well as the management of the risks. The key elements in the company's risk management approach include the geographies, the natural diversification of the company's commodities' portfolio, assets, and currencies (BHP Billiton 2015, p. 1). Fluctuation in the prices of the commodities, as well as impacts from the ongoing worldwide economic unpredictability greatly, influences the company's asset value and cash flow. The prices for the company's products are linked to the global prices of the same products, meaning that there is substantial volatility of the market prices. Commodity price fluctuation can occur due to the shift in price, reflecting essential global geopolitical and economic factors, technological change, and industrial demand, among other factors. Volatility in the growth of the global economy can negatively influence future prices and demand for commodities. As a way of reducing the volatility effects, the company has diversified its commodity portfolio, geographies, as well as its currencies. Also, the company uses cash flow in the analysis of risks to monitor volatilities as well as key financial ratios. Regarding operational risks, the company ensure that it is maintaining adequate operating margins through its strategy to own as well as operate large, low cost, as well as long life resilient upstream assets. The concentration effort of the company to reduce the cost of operations as well as drive the improvement of productivity has led to tangible results. There has been a reduction in controllable prices. The continuous refinement of the company's operating model has enhanced the capacity to sustain improvement in sustainability. The design of the operating model is such a way that it is delivering a simple as well as scalable organisation, ensuring that there is competitive advantage through the definition of work, organisation, as well as performance measurement. There has been the establishment of the international sourcing arrangements to ensure the supply continuity as well as a competitive cost for key inputs of supply (McAloon 2014, p. 2). Through the application of processes of managing risks, the company has been able to identify appalling operational risks, as well as implement performance requirements and critical controls to maintain the effectiveness of control. Consistent with its approach o portfolio risk management, the company has been able to continue being self-insured for any loss arising from the damage of property, construction, or business interruption. The company has also put in place the IT security controls to ensure that there is the protection of the IT infrastructure, communication networks, and the business applications. To maintain adequate protection levels, the company has continued monitoring any threat that may develop in the external environment. Apart from that the company also assesses the means of responding to these threats (Bsi 2014, p. 1). Global supply chain The international supply chain or services and goods support the company's operations. This consists of supply of direct and raw materials, skilled labour, as well as the supply of various services. As the growth of China move away from exponential to fortunate, with the prices o the commodity following suit, geography, and geology will not guarantee the ongoing growth of Australia. As a way of lifting productivity in Australia, BHP Billiton has embarked on ensuring that there is access to capital essential to apply new technology as well unlocking new resources (BHP Billiton 2014, p.3). BHP Billiton has for instance implemented MySAP supply chain management in its aim of managing its global business. The key capacity of mySAP SCM will ensure that BHP Billiton is managing all the features of its worldwide supply chain, ensuring that there is visibility in its operation, integrated planning, and flexible decision-making. This is essential in reducing inventory as well as transportation cost. The company's vision is becoming a company driven by demand as well as moving the processes of an enterprise to an approach that focuses more on customers while reducing costs as well as improve profitability. The inclusion of mySAP SCM is essential in increasing the flexibility of the company to respond to the changing demand of the customers. Additionally, the use of mySAP SCM will ensure that there is a realisation of significant savings in the company's worldwide supply chain ensuring there are handling and inventory cost reduction. Although the mySAP SCM is specifically for Manganese, the company is in the process of extending the present supply chain management solution model to planning, transportation, and execution. The company has selected the Scheduler's Workbench and SAP Trader's workbench (SAP TSW). This enhanced model will later include all the commodities of the company including coal and iron ore. SAP has adopted the inventive approach of adapting SAP TSW functionality that was initially developed for the purpose of the petroleum companies but closely fit the mining companies' needs (McAloon 2014, p. 3). Critical issues and the recommendations There is many complex as well as interrelated challenges in the world today. The company faces the challenge of climate change. The company has addressed this challenge by improving the greenhouse gases emission and energy management. The company has consistently aimed at reducing the emission of the greenhouse gases. The company, for instance, works closely with International Atomic Energy in coming up with international principles of mining. The company has also taken action in reducing the emission of greenhouse gases. Also, the company has taken the necessary measures to reduce the emission of greenhouse gases. The company target to reduce the greenhouse gas emission at 6 percent in every unit of production (BHP Billiton, 2005, p. 2). Conclusion BHP Billiton is a global leader in resources. The company can pay taxes to the Australian authorities on the profits from the value chain activities conducted in Australia. The company has continued focussing on the material risk management and these include process safety, aviation, as well as explosive events and fire related to the underground operations of mining. The diversification of the company's portfolio helps in the reduction of the overall volatility of the cash flow. BHP Billiton, the leading global diversified resource company, joins the growing list of companies that have leveraged mySAP SCM, the leading solution for supply chain management. Bibliographies BHP Billiton. 2008. Sustainability summary report. Melbourne, [s.n.]. retrieved from http://www.bhpbilliton.com/home/investors/Pages/default.aspx. BHP Billiton. (2005). BHP Billiton sustainability report: summary report. Melbourne, Vic, BHP Billiton. BHP Billiton. 2014. Annual report. 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