Natural Gas and Oil

EXXON Upstream Division: ExxonMobil Although ExxonMobil remains a successful company, like all oil and gas organizations, it remains highly dependent upon market conditions, including shifts in the price of crude oil and natural gas. "A decline in oil or gas prices lowers ExxonMobil Upstream business profit margins, whereas an increase in oil and natural gas prices lowers ExxonMobil Downstream and Chemical business profit margins" (Miglani, 2016, par.14).

While the size and diversification of the Exxon Corporation has permitted it to mitigate the severity and degree to which such conditions impact its profits on one hand, on the other hand, it still must review its operations and total quality management (TQM) policies to ensure that it is maximizing its opportunities as an organization. Inputs and Outputs ExxonMobil is one of the largest and most famous oil and gas companies in the world.

Its upstream segment engages in the exploration of and the production of crude oil and natural gas (Priester, Hopson & DeMetz, 2015, par.2). Although it is also involved in so-called downstream operations, including the production of petroleum-based retail and chemical products, its upstream products are integral to its success as an organization. However, the return on upstream investments are always somewhat uncertain as well as are very costly.

According to analysts at the business evaluation site Seeking Alpha, the Exxon corporation must be "flexible in their operation through their diverse upstream portfolio of opportunities that includes both conventional and unconventional plays, deep-water, shale gas, natural gas, liquid natural gas, heavy oil, and sour gas" (Priester Hopson & DeMetz, 2015, par.2). These outputs are likely to expand in the future, given the rapid changes in technology and ability to use different types of fuel.

Regardless, even though it has diversified investments, the input costs of experienced and technically skilled manpower; the necessary equipment for extraction; and even the legal challenges of ensuring continued access to existing and future areas for extraction are significant. The significant costs incurred to survive in the oil and gas industry are one of the reasons the behemoth-sized Exxon has become so dominant. The difficulty of entering the marketplace and competing with Exxon and overcoming such logistical and regulatory barriers ensures Exxon's likely future success as a company.

Customers and Suppliers The majority of Exxon's customers come from the United States, Germany, South Korea, India and France. Some major customers in its diverse portfolio include Metwood, Inc., a "manufacturer of commercial and residential mixed-material structural products" and Osaka Gas Co. Ltd. "one of the oldest and largest energy suppliers in Japan with seven million natural gas customers in the country" (MacDonald, 2016, par.1-2). Exxon also serves the largest suppliers of gas in France and Italy. Thus its international presence is significant.

As well as having a wide outreach of customers, Exxon has similarly tried to cultivate a significant base of suppliers. According to its own website, it notes: "in areas where we are growing our business, we conduct business process training covering topics such as health, safety and security; business ethics; costing and tendering; finance and credit; and international standards and codes" ("Supplier Development," 2017).

Suppliers are often located in areas of the world such as Russia which may have substantially different business ethics and practices than those embraced in the United States and Exxon strives to bridge the gap with such educational programs. Customer Value Exxon's primary value it can offer its customers is access to a corporation of vast size and operational outreach. It can operate on significant economies of scale and has the resources to swiftly transport its raw materials whenever and wherever they may be needed.

Although the supply of crude and Exxon Upstream's many products may still be contingent upon Exxon's ability to find, develop, and mine a naturally occurring, nonrenewable source of fuel, the company offers reliability and value because of its history and technological capacity. Mission As noted by Miglani (2016), the mission of ExxonMobil's Upstream division can be understood as comprising three core components: that of exploration, development and production.

Exploration involves identifying new potential sources to mine for oil and gas; development involves the actual drilling as well as creating the necessary platforms to process, store, and transport the raw materials; production involves the actual extraction of the oil and gas to the surface (Miglani 2016). At all levels of the company, sophisticated and technical knowledge is needed for workers, from operating machinery to advancing the production of crude oil through superior technology.

In some instances, sophisticated and technical legal knowledge is needed to navigate the regulatory landscape regarding the transportation of crude. TQM Principles Exxon was one of the earliest organizations to embrace the philosophy of total quality management. TQM principles are applied to every facet of the organization. These principles do not simply affect traditional areas such as the development of the actual products sold by the organization and development, but also the management of the product via transportation channels, system management, and sales ("Global Product Quality Management System," 2017).

There is ongoing monitoring and training of personnel to ensure compliance and plans are put into place to prepare for failures of quality assurance ("Global Product Quality Management System," 2017). Exxon also pledges to ensure that its third-part suppliers conform to TQM standards set by the company. Given that Exxon has, in the past, been associated with a number of notable scandals regarding the quality of its delivery systems, this component of its company philosophy is essential.

Decision Criteria When selecting a location for company facilities, it is paramount that the location is convenient to the location of the extraction. The actual location of the raw materials determines where the company will first base its operations as "geologists and geophysicists search for oil and gas by studying rock samples, seismic surveys data, and a variety of other techniques. This helps them determine the size and location of possible oil and gas reservoirs" (Miglani, 2016, par. 3).

Drilling for oil can take place both onshore and offshore, depending upon the location and the regulations determining extraction. In terms of the upstream components of Exxon's processing, "production function normally terminates at the outlet valve of the field storage tank," although downstream refining usually takes place elsewhere, shipped via pipeline or other means (Miglani, 2016, par. 5).

The ExxonMobil Pipeline Company alone "transports over 2.7 million barrels per day of crude oil, refined products, liquefied petroleum gases, natural gas liquids and chemical feedstocks through 8,000 miles of operated pipeline" and the product is also transported via rail and sea (Miglani, 2016, par. 5). But in all instances, the original location of the operations is determined by the location of the natural resource itself.

Supply Chain of Exxon Exxon's Upstream division has a supply chain that consists of an international network of suppliers, beginning at the level of crude extraction and extending to the very beginning of Exxon's Downstream production.

According to its website, Exxon exercises a great deal of diligence in ensuring that its suppliers adhere to its ethical standards, noting: "ExxonMobil works with more than 165,000 suppliers of goods and services, and we develop relationships with suppliers that uphold our commitment to safety, the environment and human rights" and when there are deviations from these standards, Exxon pledges to work with suppliers to rectify them ("Supplier Development," 2017).

Exxon bases its supply chain standards on the United Nations Guiding Principles on Business and Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work, once again underlining its global principles and perspective as an organization ("Supplier Development," 2017). JIT Principles Just-In-Time principles refers to the approach used to inventory originally pioneered at the major Japanese automotive facilities which have since become popular at many other organizations.

The JIT concept refers to keeping inventories extremely low and relying upon a tightly-managed supply chain to ensure that suppliers are able to offer needed inventory very quickly when the supply drops below a certain point. Keeping inventories low ensures that inventory does not needlessly build up, often resulting in waste from unusable products. For a company such as Exxon, applying JIT principles is essential.

First and foremost, it means that the company can be responsive to shifts in the prices of crude and its other raw materials on the open market. This may determine the extent to which it wishes to invest in further extraction and refinement. It can cut back on the machinery it purchases and the other input costs of production or it can increase it relatively quickly. It can also shift its production intensity based upon the availability of the natural resource itself.

Out-of-the Box Thinking and Innovation One inevitable concern which must arise for Exxon in the future is.