“Fuel by Rail”

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“Fuel by Rail”

Oiltanking Houston, Texas, United States of America

September 15^th, 2002

by

Hein Willemse

Rijks Universiteit Groningen, Netherlands First coach Prof. Ir. A.C.Waszink

Second coach Drs. M.J. Land

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Preface

This thesis is written by the direction of the Faculty of Business Administration at the Rijks Universiteit Groningen, Netherlands. It is based on a research study of six month at Oiltanking Houston, Texas, USA.

At Oiltanking Houston I have spent the first month working at the operations department.

This meant working outdoors at the terminal itself learning as much as possible about all the different processes in an oil storage company. Gauging tanks, hooking up ships, loading railcars and handling product flow are now for me tangible processes. The following five months I have spent in the office working on my research which lead to this thesis.

I would like to thank Adrian de Monchy for all the opportunities he has given me in these months in Houston. Moreover of course many thanks to my coaches Carlin Conner at Oiltanking Houston and Troy Means at Shell Oil who gave me all openness in business.

The writing of thesis, which I have done with great enthusiasm, is the last step to graduation. I would like to express my gratitude to my coaches Drs. M.J. Land and to Prof. Ir. A.C. Waszink who has guided me by phone, many thousands of miles a way, through the process of doing research and writing a thesis.

Hein Willemse

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Summary

This research contains a process study about the loading of railcars at an oil terminal in Houston (Texas, USA) and the shipment of these railcars in to the West and Mid-West of the USA. This process is better known as the “Fuel by Rail” initiative. This initiative is accomplished by Shell Oil and Oiltanking Houston (OTH). The inducement of the research is the lack of insight in the process of “Fuel by Rail” and the amount of paperwork that is involved in this process. This research uses therefore the following research goal:

Develop a working understanding of the process of the “Fuel by Rail” initiative accomplished by Shell Oil and OTH and, based on this, develop recommendations for improvement that optimize the flow of paperwork within OTH and between Shell Oil.

Three steps have been done to develop a working understanding. First a literature study was started concerning the meaning of the word “process”, “controlling a process”,

“mapping a process” and to determine the meaning of the word “working understanding”.

Second a general description of the process has been developed. This has been done by observations at the OTH operations and traffic department and at the Shell Oil traffic department. Third a process map and description of the process of “Fuel by Rail” has been created. This has been done by interviewing the OTH schedulers and the Shell Oil scheduler and administrator.

Before the working understanding was determined the ideal picture of the future situation has been developed. By comparing the working understanding (existing situation) and the ideal situation a gap could be defined. This gap existed out of some missing requirements and problems.

To achieve the missing requirements it has been recommended to: create a process goal, create and maintain a process map, identify needs for infrastructure, let the employees take classes, identify the customer requirements and involve employees in improvement plans.

Recommendations have also been formulated for the problems that are divided into two parts.

The first part is the problem of the overlap of the planning and authority. It has been recommended to give Shell Oil the only responsibility and authority to influence the flow of railcars to the OTH terminal. An agreement should be made, between Shell Oil and OTH, about the maximum number of railcars that Shell Oil brings in. This means that OTH is responsible for the loading of the railcars. The balance between authority and responsibility is restored. Moreover this recommendation also solves the problem of the double planning which saves a sustainable amount of time for the OTH schedulers.

Besides it reduces the mistakes and misunderstandings between the OTH and Shell Oil schedulers. This will lead to a decrease in storage costs for the railcars.

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The second part deals with three problems with regard to the paperwork and data handling.

For the problem with double data handling within OTH has been recommended to create an electronic data inter change (EDI) connection between the loading rack and the schedulers of OTH. All the results would than be directly digital available to the schedulers. This recommendation saves a sustainable amount of time for the OTH scheduler and operator and decreases the chance of mistakes.

For the problem with double data handling between OTH and Shell Oil it is

recommended to send the BOL by email or EDI. OTH does not have to print and fax the BOL and Shell Oil does not have to enter the data of the BOL into the computer. This recommendation saves time for the OTH scheduler and the Shell Oil administrator and the chance for mistakes decreases.

For the problem with the abundance of the paperwork and manual entering it is

recommended to optimize the paperwork flow by decreasing the manual entering of data and decreasing the flow of paperwork. This can be done by implementing an automation system that uses electronic data interchange. Implementing an automation system creates a process with less paperwork and data handling. Besides the manual entering and the double paperwork, within OTH and between OTH and Shell Oil, is eliminated. This means that sustainable time is saved for the OTH operators and for the OTH and Shell Oil schedulers. Moreover the risk of mistakes and misunderstandings decreases.

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Chapter 1 Introduction Oiltanking

In this chapter a description will be given about Oiltanking GmbH and Oiltanking Houston. To do so, first the mother organization of Oiltanking, Marquard & Bahls

(M&B) will be discussed. Afterwards Oiltanking worldwide and Oiltanking Houston will be described.

1.1 Mother Company Maquard & Bahls

When impulse grew on storage business Theodor Weisser founded the organization of M&B and constructed it into a corporation whose various subsidiaries work

independently as important companies in their own right. Now 55 years of age, M & B AG is active worldwide with subsidiaries in oil trading and commercial tank storage.

Mabanaft, Marquard & Bahls trading subsidiary, is one of the oldest independent oil trading companies in the world. In Europe, Mabanaft is a leading producer, importer and wholesale distributor. Internationally, Mabanaft is a cargo trader.

Oiltanking, Marquard & Bahls tank storage division, operates commercial storage Facilities for petroleum products.

1.2 Economical developments

The oil industry has been from the early days, a global business. The geographical imbalance between crude supply and product demand has challenged more than one generation of managers and politicians. However on oil, businesses face a new wave globalization. Reduction in refining capacity, extremely lean and just in time inventory management confront M&B with an ever greater probability of price volatility in regional and global markets, as well ad rapid shifts on global oil flows. Although extreme price volatility is a harbinger for healthy trade results, it also creates a perception of supply shortages, which encourages state interventions and promotions of alternative energy sources.

Like in most market economies, independents such as Mabanaft play an important part in national oil-supply logistics. They help safeguard the security of supply in times of crises and they are instrumental in lively competition. Although national refineries might think of independents as impediments, independents actually complement the role of national refineries.

Throughout the 55 years of the corporate history, Mabanaft had become either the leading or one of the leading independent product importers into the countries of the northwest Europe. The strength of its position today is based on the dual commitment: import supply and local wholesale distribution. In Germany alone, Mabanaft has 13 regional offices and more than 30 regular storage locations.

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1.3 About Oiltanking GmbH

Thirty Years ago, Marquard & Bahls spun of its various, mainly German based tank farms into a separate, wholly owned subsidiary: Oiltanking GmbH was born. Complete managerial segregation from the group’s other activities, coupled with the financial muscles of M&B, set the stage for their success. Nowadays, M&B focus lies on the two activities of trade and storage.

Oiltanking International Terminal system is specialized in the storage and handling of oil products and oil components. Oiltanking is a full daughter of M&B AG with its head office situated in Hamburg. In 30 years, Oiltanking has grown to a storage capacity of 9.5 million cbm. and a throughput of 70 million cbm per year, becoming the 3^rd largest worldwide provider of liquid storage. OT’s business is global, serving customers in Asia, North-South America and all over Europe.

1.4 Description of Oiltanking Houston

Oiltanking Houston is located at the Houston ship channel in Houston, Texas, USA. The ship channel is part of the largest petrochemical and petroleum refining complexes in the world. Houston, with its port facilities, refineries, chemical plants, storage and

distribution networks, provides direct access to many local and national markets as well as international marketing and distribution.

The size and scope of the Houston petrochemical and petroleum complex is enormous, Oiltanking simplifies the intricate product storage and the distribution to work on behalf of the customer.

Oiltanking operates independent bulk liquid storage facilities and has the connections to the multifaceted network of pipelines covering the Houston petroleum and petrochemical complex, the East Coast and the Mid West.

1.5 The operational field of OTH

Oiltanking is the business of bulk liquid and distribution. Being an independent liquid storage company means that it is not owned by the clients they serve and they do not own the product that is handled. The contracts are not assigned by an oil company but gained through economical leasing of services and assets. Due to this an independent terminal like Oiltanking is very different from, for example, a terminal owned by an oil company, although physical assets are very similar.

The business of Oiltanking is global, serving customers in Singapore, Houston,

Argentina, Malta, India and many locations in Northwest Europe. They were the first to earn the ISO 9002 certification of its commercial tank installation. Oiltanking’s expertise and asset position brings its customers added value and reduced logistical cost. Its clients include private and state oil companies, refiners, petrochemical companies, and traders in petroleum products and chemicals.

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1.6 Reason for existence

Oiltanking ‘s reason for existence mostly lies in the global oil trade needing storage space and distribution outlets. Another reason is the excess barrels that refineries cannot, or will not, store and the handling of product. These reasons were born mostly by the change of focus on business in the industry from maximizing integration towards more functionality and less capital investment in non-core assets.

These created possibilities for economies of scale that OTH, as a storage facility, can offer and global movement of oil by pipeline systems and/ or waterborne movement. To typify OTH, it is much more a throughput facility than a storage place for oil.

1.7 Main activities

OTH has created relationships with all major Gulf Coast refineries and with several major petrochemical companies, and has the asset base to serve them. OTH is a high volume business with a focus on pipeline and waterborne petroleum and petrochemical feed stocks. It currently performs several activities:

• Crude receipts from water and redelivery via pipeline.

• Refined product receipts and redelivery via vessel, pipeline and railcars.

• Bunker blending, storage and delivery to ships via pipeline and barge.

• Petrochemical feedstock receipts by pipeline and vessel and redelivery to customers via pipeline.

• Large volume petrochemical storage and movement via pipeline and vessel.

1.8 Physical aspects of the Terminal

The OTH office is situated on the OTH terminal and services also for Oiltanking

Beaumont Terminal. Although the physical locations of the terminals are separate, OTH and OTB are essentially managed from the OTH-office and are so close they can be regarded as one organization. In the next Chapter a description of the Terminal will be given.

1.9 Oiltanking’s structure

Oiltanking Houston gives employment to 70 people. Thirty-three people work in the office and 37 people work out in the terminal area. The communication lines are short and the atmosphere is open. At the top stands the president of Oiltanking Houston, Adrain de Monchy, his staff members leading the seven different departments. The different departments are:

• Operations and Maintenance

• Traffic

• Finance

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• Human Resources

• Marketing + Business Development

• Engineering

Below, a short explanation of the department is given.

Operations and maintenance department

Altogether 35 people work in this department. Operations works with day labors and 12- hour shift service. There are 3 shifts of 5 men and 5-day workers. They work at the terminal; manning the control room and controlling the physical flow of product at the terminal. In this way operations works 7 days a week and 24hours a day. The

maintenance department works solely during the day and looks after the preservation of the terminal. The maintenance department exists of 15 people. The safety coordinator finally organizes safety drills and controls all safety installations and equipment.

Traffic Department

Traffic, existing out of the general manager customer service and the schedulers, works in a team of three making sure every contract is scheduled into the Terminal. They are responsible for the flow of orders that the operations department gets, “inbound” and

“outbound” operations, “line displacements” and administration on the product within the terminal.

Finance and Accounting

Finance is responsible for the budgeting and total cost allocation of OTH. Also they work closely together with business development in controlling financial projections and risk analysis of projects.

Human Resources

Human Resources is concerned with the work force in terms of insurance, pensioning long term illness, and so on. It does not take care of the higher staff schedule in terms of time management. Higher staff takes care of its own agendas and relies on the back up of the executive secretaries

Marketing

The marketing department main concern is the day-to-day contacts with OTH clients and the search for new business opportunities. Taking care of ongoing contracts and

maintaining a vast network of clients, either current or possible. They work closely together with the head of operations and traffic in order to know what is possible in the terminal.

Engineering

OTH works at the terminal with a team of four engineers. Environmental issues are taken care of as well as all-technical issues within this department that arise in conducting the terminal. The engineering of projects, terminal expansion, building of new assets are

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Business development

This part of the organization, together with marketing, is always looking for possible markets and geographic areas for OTH to explore. A lot of ideas are born through close contact between Marketing and the Vice Presidents, which the business development department has to pursue afterwards. The business development department really works as project coordinator of the new identified projects/chances in the market.

1.10 The Policy and Strategy of the Company

In this paragraph the policy and the strategy of OTH is presented in the way it is described by OTH.

OTH has always been in the business to provide their customers with effective and quality service. It means constant investments in the operational team for education and training etc. In the last years the mind-set has been established: Improved service and productivity expectations from service providers. The reward to those meeting these expectations has been more business and linked operations with refineries and pipelines.

1.10.1 OTH Policy

OTH has been a beneficiary of the industry changes even though one result has been a drop in the prices for terminal services. Given the operating environment, OTH policy continues to be:

• Outstanding day to day service to their customers

• Low cost of operations through the efficient use of capital and employees.

• Aggressive pricing to capture volume

For OTH service means more than responding to customer's needs and maintaining and good personal relationships. It also means having the right assets, connections, and flexibility to provide the low cost option. Being the low cost provider does not mean low price. It means being very effective and efficient in the use of assets and matching customers and products to OTH’s capabilities It also means exploiting those opportunities where OTH has a competitive advantage.

1.10.2 OTH Strategy

OTH plans to continue extending their facilities, keeping their competitive advantages through the above stated policy. OTH already employs a long term extension strategy of building new terminals, purchasing existing ones and upgrading present facilities.

Development opportunities in target markets are analyzed. Every attempt is made to move high potential projects to successful completion. Of course OTH tries to realize this with minimum delay for the participants. To customers OTH serves as a trust-worthy custodian of valuable liquids. To business partners, the company offers the proven ability to manage terminal profitably.

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Chapter 2 Problem definition

In this chapter the inducement of this research, the problem definition and the research set-up will be described.

2.1 The Problem Definition

Oiltanking Houston (OTH) started loading railcars at the end of 1999 under the name of

“fuel by rail”. OTH did not have to make many new investments because the old loading railcar rack could still be used for loading the railcars within all the current regulations.

OTH had started in 1999 with one vendor and, still today, there is only one vendor for the

“fuel by rail” initiative: Shell Oil. The difference today is that OTH has to be able to load a maximum of 20 railcars per day. In 1999, OTH did not have to load more than three railcars per day.

During these years, not only the maximum of loading railcars was growing but also the paperwork and coordination for scheduling and loading the railcars increased. The communications with Shell Oil, the customers of Shell Oil and the rail companies also increased.

The Traffic Department of OTH deals with the process of scheduling and managing the loading of the railcars. Although the “Fuel by Rail” is a very small part of the total of OTH’s throughput, the traffic department has to spend a large amount of time working on the paperwork of the railcars.

Since the oil business is such a turbulent business, many alterations can occur up until the very moment of loading the railcars. These changes create an enormous amount of extra work (paperwork, etc.) not only for OTH but also for their vendor, Shell Oil.

There are, of course, different ways to deal with the occurrence of these changes in the turbulent oil business. But that is beyond the scope of this research. The main concern of OTH and Shell Oil at this moment is the daily amount of paperwork that has to be done for the fuel by rail project.

Neither OTH nor Shell Oil has a description or model of the process of the “Fuel by Rail”

initiative. OTH wants to get insight in the process of “Fuel by Rail”. Also OTH would like to know if there are possibilities to reduce the paperwork within the company and between Shell Oil.

This thesis will use, therefore, the following research goal:

Develop a working understanding of the process of the “Fuel by Rail” initiative accomplished by Shell Oil and OTH and, based on this, develop recommendations for improvement that optimize the flow of paperwork within OTH and between Shell Oil.

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Boundaries of the research

As a process map or process description does not exist it is, at this stage of the research, not possible to determine the boundaries of the research. The only obvious boundary is the fact that the research must be finished after 6 months.

The boundaries of the research will be discussed again in chapter 4.

2.2 Stipulation of the Research Goal

The research goal makes clear what must be achieved in this thesis therefore a research question is not needed. But a clarification of what actually is meant by the research goal is needed. As shown below this leads to a couple of questions which must be answered by a literature study in order to be able to start the practical part of the research of the

“Fuel by Rail” initiative.

Examining the research goal more closely the word “process” needs to be stipulated.

There are a lot of different interpretations of this word. There needs to be a clear picture of the meaning of this word. This leads to the following question.

• What is the meaning of the word “process” in this research?

An important topic about process is whether a process is controlled or not. The second part of the research goal demands recommendations for improvement. These

recommendations can only be made when it is clear when a process is considered under control. This leads to the following question.

• When is a process considered under control in this research?

After these questions are answered the way to map the process should be determined.

There are many different ways to map a process. This leads to the following question.

• Which way should be used to map the process in this research?

The research goal demands a working understanding of the “Fuel by Rail” process. The meaning of the words “working understanding” can also be interpreted in many different ways. It must be clear what is meant by the words “working understanding”. This leads to the following question.

• What is the meaning of the words “working understanding” in this research?

To answer these questions a literature study has been done. In the next chapter, the research set-up is described. The research questions as stated above will be discussed in chapter 3.

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2.3 Research Set-up

In this paragraph the set up of the research is presented. It makes clear which steps must be taken to achieve the goal of the research.

2.3.1 Set-up

Basically the research goal demands a description of the present situation of the “Fuel by Rail” process and recommendations for improvements. This can be seen as a part of a change process. Many authors have written about organizational change. Beckard and Harris write in their book “Organizational Transitions” about the three conditions that need to be focused on when a change is needed. “It may be obvious to say that any major organizational change involves three distinct conditions: the future state, where the leadership wants the organization to get to; the present state, where the organization currently is; and the transition state, the set of conditions and activities that the organization must go through to move from the present state to the future state”.

(Beckard and Harris 1987) This is shown in the picture below.

Though Beckard and Harris claim that it is obvious that the change process exists out of three states, it is not that obvious to determine where to start this change process. They argue that the change process is not a neat, sequential process though it is preferred to use the following steps.

• Defining the future state (or organizational conditions desired after the change.)

• Diagnosing the present state. (in relation to the future state)

• Defining the transition state: activities and commitments required to reach the future state.

These steps can be put together in a picture to create a “map of the change process”.

(Beckerd and Harris 1987) In this picture the transition state is the gap between the future state and the present state. If the picture is applied to this research the following

conceptual model can be created.

Present state

Transition

state Future

state

Picture 2.1 The change process (Beckard and Harris 1987)

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The conceptual model is created by using the blueprint of the model of Beckard and Harris and by applying the research goal to it. This goal basically demands a description of the existing situation and recommendations for improvements. Improvements can only be developed when there is a description of the ideal situation.

As already mentioned in the previous chapter, in order to describe the existing and ideal situation, insight must be developed in the meaning of a process, a technique for mapping a process, how to control a process, and the meaning of the words “working

understanding”. When this is determined, these insights will be used for the description of the existing and ideal situation. After this is done the gap between the two situations can be defined. Out of this gap the concepts and ideas must arise in order to achieve the research goal. The actual improvements to recommend is the way to bridge the gap.

This is in other words also explained by Beckard and Harris. “Developing a detailed picture of the present state is a vital part of the process of managing change. The present state diagnosis should be developed after definition of the future state scenario. The two pictures determine the work to be done in “getting from here to there”, they provide the basis for defining what needs changing and what doesn’t.” (Beckard and Harris, 1987) The change process does, if approved by the organization, not end with recommendations for improvements. The actual implementations of the improvements and the struggle to come to the future state are the next hurdles to be taken. Though most interesting these steps are beyond the purpose of this research.

Meaning of a process Meaning of controlling a process Technique for mapping a process Meaning of a working understanding

Existing situation

• •

Ideal situation

• •

Picture 2.2 Conceptual model (Beckard and Harris 1987)

GAP

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2.3.2 Step-by-Step Plan

What is described in the previous paragraph can also be shown in the step-by-step-plan below. This plan will be used as a guidebook for this research.

The first three steps must be done to get insight in the situation and to create directions and possibilities for the formulation of the existing and the ideal situation.

Step 3 is a literature study in order to answer the four questions stated in the previous chapter. The four questions are further outlined in the next chapter.

After this is done, step 5, the characteristics of the ideal situation need to be formulated in order to create a fixed goal. This must be done before the existing situation is examined;

this creates the focus areas for describing the existing situation.

The next step, step 6, is the description of the existing situation. How this will be done is discussed in Chapter 4.

Step 7 is the comparison of the existing situation and the principals of the ideal situation.

In step 8 the gap will be formulated. Out of this gap the recommendations for

improvement will arise in step 9 in order to achieve the research goal. The nine steps are shown below.

1. Orient 2. Collect data 3. Analyze data 4. Study literature 5. Define characteristics 6. Describe the existing situation.

7. Compare the situations 8. Define the gap

9. Develop recommendations

In the following chapters the steps will be discussed in chronological order starting with the literature study.

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Chapter 3 Theoretical Research

In this chapter, four questions will be discussed. This will create a common picture of what is meant by processes, how they are mapped, how they will be under control and what the meaning is of a working understanding. Besides this a research will be done to define the characteristics for an ideal situation.

3.1 Process

Controlling, improving or changing an organization can be approached from two

different points of view. The two approaches are: the structure approach and the process approach. (Waszink, collegedictaat 2001)

Within the structure approach, an organization is seen as a fixed pattern, which acting is not declared by activities of separate employees. The organizational structure, the organizational charts, the management and coordination are concepts which are characteristic for this approach.

The process approach has a different point of view. The organization is seen as a social whole, which is determined by sense making processes between people. It focuses on relations between people. Employees create their own image of the reality within the company. This means that different people have different images.

Processes in companies are dependent on the way a company is managed. Insight in the processes is required in order to achieve good management. This research will use mostly the process approach, but this does not mean that processes are independent of the rest of the organization.

Before continuing, a definition must be given of what is meant by the word “process”.

This research will use the definition of Waszink: An individual process is characterized by the orderly related and mutual influential activities in order to transform input in an output. (Waszink, collegedictaat 2001)

The ISO 9000 uses the following definition: “a process uses resources to transform inputs into outputs. Processes can be social, industrial, agricultural, governmental, chemical, mechanical, electrical, and so on. In every case, inputs are turned into outputs because some kind of work, activity or function is carried out.”

Rummler and Branche have a similar but less detailed definition. Their definition of a process is: a series of steps designed to produce a product or service. (Rummler and Brache, 1995)

Rummler and Brache distinguish three different types of processes. At first, the primary processes, which is a process that results in a product or service that is received by an organization’s external customer. Second, the support processes which are processes that

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produce products that are invisible to the external customer but essential to the effective management of the business. Third are the management processes, which includes actions managers should take to support the business.

The basis of these types of processes is the same: a process can be seen as a value chain.

By its contribution to the creation or delivery of a product or service, each step in a process should add value to the preceding steps. (Rummler and Brache, 1995)

3.2 Importance of Processes

Now that the meaning of the word “process” for this research is defined, it is interesting to see which role a process plays within a company or organization.

Processes play an important role in organizations. Rummler and Brache state that an organization is as effective as its processes. The organizational goals can only be achieved by logical business processes.

Rummler and Brache created a model of nine performance variables. This model

combines three levels of performance with three levels of performance needs. The levels organization, process and job are the levels of performance. The meanings goal, design and management are the performance needs. This is shown in the model below.

This model shows nine variables representing a comprehensive set of improvement levels that can be used by managers at any level. It shows that processes are related to every other part of the organization. This research will focus mainly on the process design though the process goal and process management cannot be ignored.

The three levels of Perfomance

Organization Goals

Job Goals

Organization Design

Job Design

Job Management

Process Management Process

Design

Organization Management Process

Goals

Management Design

Goals

Job Level Process

Level Organization

Level

The three performance needs

Picture 3.1 The nine performance variables (Rummler and Brache (1995))

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3.3 Controlled Processes

“To control a process, a course should be pointed out to achieve a goal, and when the direction is lost or the goal changes, we should be able to correct our course.” (Veen, 1982). This leads to certain demands named elements. The following elements need to be assured.

• An instrument that enables us to steer the process.

• The goal must be known and visible in order to determine the course.

• The starting position or the actual course has to be determined in order to define the course.

• A decision needs to be made based on whether or not a correction needs to be made on an eventual deviation of the present course compared to the original course.

• The decision made above must be achievable.

These elements are shown in the schedule below. The symbols are explained at page 23.

starting

position Goal

define course

steer

New position

adjust course

compare with goal

Continue

is the goal achieved?

is the goal correct?

stop

end

Yes

no

yes

no

Picture 3.2

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A steering process as shown above is called a back loop coupling process. A similar process is the direct steering process which steers directly back to the activity. Another similar process is the back and forward loop coupling which not only adjusts the process backwards but also corrects the products forward in the flow.

To map a controlled process, the following demands must be incorporated (Veen, 1982).

1. A clear picture of all the process steps and the products with their mutual relations.

2. All the steering loops should be mapped. This must show:

• what must be measured and where?

• the decision point

• the back and/or forward loop

3. The flow schedule must be readable without doing a deep study of symbols and structures.

Deming Circle

A similar way of checking whether a process is controlled or not is stated by Waszink in his collegedictaat. This is done by the use of a management-loop. This is also known as the Deming-circle. This management circle exists out of the following steps: plan, do, check and act. The deming circle is shown below.

These steps need to be presented in a process in order to be able to control the process.

Act Plan

Check Do

Picture 3.3 Deming Circle

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Looking at an individual process the steps can be as shown below:

If not all of these steps are represented in a process than, in most cases, the process is not controlled. (Waszink, collegedictaat) Below the steps are briefly explained.

• “Plan” means the preparation of the execution of the process, in order for a product to pass at once all stated demands. The result is a plan that presents the execution’s sequence and the verification.

• “Execute” means the application of the plan. To do this men, machines, material and resources must be available. Supportive processes are often used to do this.

• “Verify” exists out of a conformation by research and objective proof that all results meet with the demands.

• “Correct” means that adjustments must be done in order to correct the deviation or to solve the problems.

To control processes Waszink distinguishes four different instruments of control which are considered important. Most of these are already mentioned above.

• Rules, procedures and instructions. These stand for the agreements between

employees. It is preferred to make these rules, procedures and instructions based on process activities and not on functionalities from the organizational structure.

• Human resources. These exist out of employees with skills, experience and knowledge which are necessary to execute the tasks of the activities of a process

• Material resources. These contain for instance installation and equipment which are necessary for the goal and meet with the functional and technical demands

• Demands, specifications, norms, etc. These contain or subscribe bottom lines (boundaries) and conditions.

Every process must be examined individually in order to qualify it as a controlled process. But this paragraph makes clear that what is summed up before must be at least represented in a process in order to be nominated for a controlled process.

Product

Specification Plan Execute Verify

Correct Picture 3.4 Controlled Process

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3.4 Techniques for Process Mapping

By creating a process map it becomes clear what actually happens step by step in a process. A process map is particular useful when a process is complex and a lot of different actors are involved. But there are many different techniques for mapping a process. In this paragraph a number of various techniques of mapping a process will be discussed.

3.4.1 The process map by Dr. Ir. B. Veen

This technique for mapping a process is explained by Dr. Ir. B. Veen. The technique aims to create a clear picture of a process. It does not group the activities of the actors in the process. It shows the process steps using various shapes containing information. “This way of mapping a process arose because of the need for a technique that contains all necessary data.” (Veen, 1982) In order to create an orderly process map Veen uses many layout rules. The general lay-out rules are shown below. The symbols and their

explanations used for describing the process are shown at the next page.

This technique uses the following general rules (Veen, 1982):

• Use only the symbols that are shown below.

• Place the symbols in columns.

• Use the same width for the columns.

• Draw the process flow from top to down and keep as much left as possible.

• Draw a steering process right of the process flow.

• Draw data and file keeping right of the steering process.

• Draw process and product flow in a different color than the information flow.

• Give every symbol a number.

• Keep space between the symbols.

• Avoid crossing lines as much as possible though keep it logical.

An extra general rule is added:

• Draw the input left and the output right of the process flow.

This extra rule is added, if this technique is used, because this will create a more

standardized view and makes the map easier to read. The symbols (shapes), used for this technique are presented at the next page.

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Document Process

Data

Measuring

Connection Terminator

Decision

This symbol represents any kind of processing

function.

This symbol represents a decision or switching type

function.

This symbol represents human readable data, such as printed output.

This symbol represents data.

This symbol represents an assignment of where to measure a parameter of a

product or process and compare this with the fixed

requirements.

This symbol represents the start or end of a

process flow.

This symbol represents a connection. It is connected to a symbol with the same

code .

Data handling Order

This symbol represents an order. It often contains an adjustment to a process like "adjust throughput".

This symbol represents the handling of data. For instance the periodic

summary.

Arrow Connecting line

This symbol represents a connecting line. The normal directions are from up to down and from left to

right.

This symbol represents an arrow. This is used when the oppisite direction is

meant..

This symbol represents crossing lines. Crossing lines do not influence each

other.

Production split

This symbol represents a split into two production flows. The centre of the symbol is analog to the decision symbol though a little smaller. It is called an

or/or symbol.

List of symbols used for mapping the process

Crossing lines

This symbol represents storage

Storage

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3.4.2 The process map by Rummler and Brache

Rummler and Brache use in their book “improving performance” a way to map processes. Though they do not describe the technique very detailed, it shows in their examples a clear picture of the process. Rummler and Brache shortly discuss the

technique. The mapping process starts by identifying the entities involved in the process, listing them on the left-hand axis, and drawing a horizontal band for each. The process, of converting the input through all the intervening steps until the final required output is produced, must be traced. The map must show how all functions that are involved as the order is processed. “This mapping format allows the researcher to see all the critical interfaces, the time to complete various sub processes on the map, and identify

”disconnects” in the process.”(Rummler and Brache 1995)

This way of mapping a process is different of the technique used by Veen. The main difference is that when various functions are involved in the process the technique of Rummler and Brache creates a better oversight. This is also why some of the lay-out rules of the process map determined by Veen cannot be used in the technique used by

Rummler and Brache. The steering process is drawn in the same column as the activities and the process map does not show input and output of the activities.

Besides these differences, the technique used by Rummler and Brache uses the same basic rules like the same column width.

3.4.3 The actor activity diagram

The actor activity diagram (AAD) is a mapping technique that mainly focuses on activities and actors within a process. This technique of mapping contains similarities with the technique used by Rummler and Brache.

The basis of the map contains vertical lines that represent the actors in the process. On these vertical lines all the activities of the actors are shown in a chronological way. Every activity is drawn as a little grey block with next to it the accompanying small explanation (verb and substantive). (Dr D.J. Schaap 1997).

This way of modeling has less similarity with the technique used by Veen. The symbols used for mapping and the lay-out are different. Besides this Veen does not distinguish different actors by grouping their activities.

The AAD technique can of course only be used in case of various actors. The AAD tends to have a disturbed oversight if the process contains many different activities and

decision points. This because all activities have the same shape.

3.4.4 The flow chart

The flow chart is a mapping technique explained by Dr. J.A. Edosomwan. This is the simplest form of mapping discussed in this paragraph. This technique is mainly used to get a basic understanding and which is easy to read. All the activities from all different actors are mapped in the sequence they occur. When the bottom of the page is reached, the process continues with a large vertical arrow at the top of the page.

“It provides the basis for understanding the standard process and the work to be done”(Dr. J.A. Edosomwan 1996).

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3.4.5 The detailed flow chart

The detailed flow chart is also a mapping technique explained by Dr. J.A. Edosomwan.

This way of mapping has similarities with the technique explained by Veen. It also does not group the activities of the actors like Rummler and Brache and Schaap. “It provides very specific information about the process flow. At it’s most detailed level, every decision point, feedback loop and process step is represented.”(Dr. J.A. Edosomwan 1996) The layout rules are not determined in the detailed flow chart technique. Therefore the technique causes a chaotic oversight of the process.

Conclusion

It depends on the characteristics of a process which technique of mapping is the most suitable. If several different actors are involved in the process, it will create a better oversight to use the technique of Rummler and Brache or the AAD technique explained by Schaap. When the process also gets complicate the technique of Rummler and Brache is preferred above the AAD technique.

If a process is rather simple and only one actor is involved the technique of the flow chart by Edosomwan can be used. If the process gets more complicated or the process map must show all the details than the technique of Veen can be used.

The detailed flow chart technique of Edosomwan will not be used because of its limited layout rules.

3.6 Working Understanding

The research goal demands a working understanding of the process of the “fuel by rail”

initiative. This chapter has focused mainly on the meaning of a process. But before starting with the practical part of this research, it is necessary to define what is the meaning of a working understanding in this research.

3.6.1 Model Working Understanding

The research set-up states that the existing situation of the “Fuel by Rail” process needs to be described. By doing this, a working understanding of the existing situation is developed. But it still needs to be stipulated what, in this research, is meant by a working understanding.

The working understanding of the process exists out of three parts. First a process map of the “Fuel by Rail” process. Second a description of the process as an explanation of the process map. Third, a general description about the “Fuel by Rail” initiative.

The existing situation, also called reality, must be described by using a methodology in order to create a working understanding. This is shown in picture 3.5 at the next page.

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The process map and the description of the process have been discussed in the previous paragraphs.

The general description of the fuel by rail initiative is not yet discussed. The parts about the process map and the process description will answer questions about what and how the process is executed.

The general description must give more insight in why things are done in this way in the fuel by rail process. The general description is the part of the working understanding that is less tangible than the other two parts. This is for instance the relations between the departments. The process of the fuel by rail crosses different companies and departments.

These departments will use different norms and values in their execution of the process.

In this way, the general description creates a broader understanding of the fuel by rail process.

Howards and Levinson discuss in their book “Diagnosis for organizational Change” the importance of a comprehensive grasp that is needed for a diagnosis. This can be created

Reality

Working understanding

Process map Process description

General description

“Fuel by Rail”

Methodology

Picture 3.5 Working Understanding

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feelings about the organization and coworkers, help and training of the employees, performance evaluation, benefits, rules, time pressures, communication, sources of information about the work and the future of the department. (Howards and Levinson 1994) The general description will contain these subjects in order to create a working understanding.

3.6.2 Different Perceptions

For all of the parts of the working understanding, it is important to realize that the information used as input for the methodology is a perception of the reality. Every employee has a different perception of the process.

In the theory of K.E Weick (Weick 1977), this is applied to processes. This is explained below.

Processes contain individual behaviors that are interlocked among two or more people.

The behaviors of one person are contingent on the behaviors of another person(s), and these contingencies are called interacts.

The unit of analysis in the organization is the contingent response patterns, patterns in which an action by actor A evokes a specific response in actor B (so far this is an inter act), Which is then responded to by actor A. (This complete sequence is a double interact)

Weick’s definition of organizing is as follows: A consensually validated grammar for reducing equivocality by means of sensible interlocked behaviors. This is shown in the picture below.

“Equivocality”(E) stands for the perceived amount of equivocality in input.

“Rules” (R) means the number of rules used to assemble the process.

“Interlocked cycles” (C) means the number of interlocked cycles assembled into process and applied to input.

Equivocality(E)

Rules(R) Interlocked

cycles (C)

Picture 3.6 Elements of Organizing

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The picture can be explained by the following.

The relationship between perceived equivocality and the number of rules used is aimed to be an inverse one. The greater the perceived amount of equivocality, the greater the number of rules

The next important relationship is the one between the number of rules activated and the number of cycles selected for application to the input. If the number of rules is small, a large number of cycles will fulfill these primitive criteria and will be included in the process. However, as the number of rules increase, the number of cycles that will fit all the rules decreases. Stated more precisely, the relation between the number of rules and number of cycles is also inverse.

The third important relationship is the one between the number of cycles applied to the input and the perceived amount of equivocality that remains in the input after the cycles are applied. The relationship between cycles and perceived amount of equivocality is assumed to be inverse. The greater the number of cycles applied to the input, the smaller the perceived amount of equivocality that remains. The fewer the number of cycles applied to the input, the greater the perceived amount of equivocality that remains.

Weick’s theory helps to realize that, with a large amount of equivocality, employees can have a different perception of the process. Realizing the possible different perceptions, the methodology must be able to create a working understanding that is close to the reality. How this will be done is discussed in chapter 4.

“Fuel by Rail”

“Fuel by Rail”

Preface

Summary

Table of Contents

Chapter 1 Introduction Oiltanking

Chapter 2 Problem definition

Chapter 3 Theoretical Research