TMGT 4341 PURCHASING AND SUPPLY MANAGEMENT

Transcription

1 TMGT 4341 PURCHASING AND SUPPLY MANAGEMENT Spring 2016 Group Members: Azalia Barrera Allison Cavazos Pedro Diaz Erica Garcia Esmeralda Leal Zaira Tozcano 0

2 Report 5 Importance of the organization case to study Mo-Vac Service Company, Inc. provides a service to local cities and other oil field industry companies throughout the state of Texas since These services include, but are not limited to: vacuum truck service, winch truck service, pump truck service, fracture & skid tank rental, brine water sales, lease crew services, mixing plant service, mud rental & mud sales, mud disposal, produced water disposal and chemicals. In addition, Mo-Vac offers environmental services such as vacuum truck transports that are certified by the Texas Department of Transportation. The strengths of this organization is that it offers different services and products to customers. The main concern in this report is that within the purchasing process, there are loopholes and/or cracks that are being manipulated to steal thousands from Mo-Vac which will be discusses shortly. Another weakness that was reported in the inspection reports points out that out of 284 vehicle inspections, 85 were out of service, many due to lack of security and preventive measurements. At some point in time, most of us at some extent will need the services of a vacuum truck. It may not be used on small scale jobs such as cleaning a soaked carpet due to a faulty water heater, but it may be used in the streets where our children play to clean out a toxic spill within our neighborhoods. Therefore, it is crucial to city leaders that their local vacuum trucks are reliable and ready to go at short notice. Mo-Vac has proven to be in just that standing. However, in order to keep that standing secure it has to have the necessary equipment readily available to go and under various circumstances. This could vary from having the capability to dispatch 4 large trucks to a remote destination while sending another 3 to a local natural disaster within a tri-city radius such as a hurricane relief effort. We will discuss several points on the purchasing and supply chain on how, where, and even why this company is vital to our region. The owners of Mo-Vac have 1

3 been in business since 1958 in Southern Texas and we will find out exactly how the owners have ensured their place here by making wise procurement decisions, but could be even better given the suggestions we brought forth in the recommendations section. Background Mo-Vac Service Company, Inc. is a family owned business that was started in 1958 by Albert Andrews. Mo-Vac s current owner is Glynn Andrews who is son of Albert Andrews (M. R. Corpus, personal communication, February 12, 2016). The corporate office is located in Edinburg, Texas ("Locations," n.d.). Mo-Vac has seven satellite locations in Texas that are located in Alice, Kennedy, Nixon, Odessa, Dilley, Laredo and Zapata, Texas ("Locations," n.d.). Mo-Vac is currently divided into four different companies. Mo-Vac Service Company, Inc. is the umbrella of all the branches of the corporation. There is Mo-Vac Service Company of Alice, Inc. which oversees the central portion of Texas. Mo-Vac Environmental, Inc. oversees the environmental services that we provide throughout the state. Clementson, Inc. provides a service for fracking and testing at oil rigs located throughout the state as well. Mo-Vac provides the following service which includes: vacuum truck service, winch truck service, pump truck service, frac & skid tank rental, brine water sales, lease crew services, mixing plant service, mud rental & mud sales, mud disposal, produced water disposal and chemicals ("Oil Field Services," n.d.). In addition, Mo-Vac offers environmental services such as vacuum truck transports that are certified by the Texas Department of Transportation, transportation and disposal of hazardous & non-hazardous liquids and solids that are certified and monitored by the Texas Commission on Environmental Quality, water profiling, emergency response support equipment, pressure washing service, tank cleaning, oil recycling, analytical (sample grabbing), on site storage tanks, PST monitor well developing & technical support, product/water and probe detector rental, 2

4 oil and gas well site, remediation/clean-up and corrective action, product recovery systems maintenance and monitoring service, back hoe and dump truck service ("Environmental Services," n.d.). Glynn Andrews is responsible for overseeing the day to day activities which includes reviewing the purchases that are being done. The Operations Manager, Mike Flanagan, is the second in command and he reports directly to the owner. The Operations Manager is responsible anything that happens within the scope of the four businesses. The Business Manager is Sharon Weinecke and she is in charge of all the administrative duties of the company. The Business Manager has 15 employees which make up accounting, payroll, and invoicing personnel. Arnold Perez is the CEO of Clementson; Inc. his duties are composed of overseeing the daily operations of this branch. Michael Corpus is the Human Resources director, Risk and Safety Assistant whom assists in managing all the branches of the company (M. R. Corpus, personal communication, February 12, 2016). Mo-Vac s importance lies in its purchasing and supply of parts and equipment. A new purchasing and supply system was established in August 2015 due to a problematic theft within the company. Mo-Vac has implemented the new purchasing system to avoid any new incidents of theft within the company. The review of this company s purchasing and supply management is the main focus of study and how acquisition of parts and equipment, and the issues that arise with such practices are dealt with (M. R. Corpus, personal communication, February 12, 2016). Purchasing and Supply Management of MO-VAC The current system for Purchasing and Supply of parts and equipment has been effective. Mo-Vac established a new system on August of The new system has been effective due to the fact that it was built to remedy the old problems of the previous Purchasing and Supply system. 3

5 Mo-Vac now requires all of its locations to submit a purchase order request for equipment and/or parts every Monday by noon. This can be faxed and/or ed to the corporate office. This request is reviewed and signed by the Parts Department. Once reviewed, it is forwarded to the Shop Foreman of the company. It is his responsibility to make contact with each location and ask why the request is being made. For example, with the history of this company, mechanics in the past would order parts for repairs that were not needed. These mechanics would take those parts and do "side jobs" to earn extra money at the expense of the company. So this is why the new system in place now questions if parts for a transmission, for example, are being requested, we need to know why. Did a transmission break and/or does it need to be overhauled? Then, upon review of the order request, it is given to the Assistant Manager and the Operations Manager to sign off. Once this has been completed, a purchase order is approved and the mechanics can order these parts at their local parts store (M. R. Corpus, personal communication, February 12, 2016). Assurance/Security Issues The key issues with the previous and current systems are simple, theft. The theft is primarily focused around mechanics and the ordering of unnecessary parts for personal use. The 4

6 reason this problem even occurred in the first place is due, in part, to the prosperous market that Mo-Vac experienced in the past several years and the inability to properly keep up with the purchasing and supply management that was needed for the business. When the "boom" in the oil field industry was at its peak, Mo-Vac had so much business that it was nearly impossible to keep a track of everything that was coming and going. Now that the industry has slowed down, it gives Mo-Vac a chance to make changes to help control any loses that they may have occurred during the peak period. Checks and Balances have been put into place to make sure no one s orders equipment/parts that are not needed. Another key issue has been ordering equipment/parts that have only been approved by corporate office. This issue can be seen as a flaw in the management of the purchasing for the company. No system of checks or balances was in place to prevent such an issue from even occurring. Once a purchase ordered has been issued, it is like giving a blank check to go shopping to these mechanics. For example, it a purchase order was given to purchase 5 tires. When Mo- Vac received the bill, 8 tires were purchased instead. Mo-Vac has to ask why 3 additional tires were purchase. In addition, Mo-Vac needs to make sure these tires are still at the location where they were purchased. If Mo-Vac finds out these tires are missing, they need to recoup the cost of those 3 tires from the mechanic. Here is where the "tricky" parts come into play. Texas Workforce Commission Laws state that if the mechanic does not sign and/or give consent to reduce the cost from his paycheck, Mo-Vac cannot recoup the cost of the additional tires. Having said this, Mo- Vac has to submit to the local Justice of the Peace office small claims with charges against the mechanic. This becomes a long, drawn out battle in the courts system (M. R. Corpus, personal communication, February 12, 2016). 5

7 Analysis At the rate of constant stolen or unaccounted for parts that go missing, the bottom line can be drastically hurt. Not only will this misuse of equipment hurt the company, but it will eventually mean loss of jobs and loss of revenue and time being tied up in the courtroom procedures. Locally, Mo-Vac has a great reputation and will strive to retain that status. Mo-Vac s assurance standards support our goal of ensuring that our internal and external customers receive the quality and ontime delivery needed for successful business and field operations. There are several Quality functions within Mo-Vac Fluid Systems and within Baroid Fluid Services, including ISO9000, API registration activities, Service Quality, Operations Support Lab Quality, and Global Quality Assurance (M. R. Corpus, personal communication, February 12, 2016). Recommendations Upon analysis of the current issues at hand, our team will recommend methods of procurement that allow for less possibility of falsifications and/or thievery. The assurance is clearly outlined in an updated Agreement Contract between the supplier and the purchaser of the Mo- Vac s services, which Mo-Vac has not had any major issues, rather the internal issues are the ones that we will be addressing and rectified. Some methods that may be used may include a revised purchase order invoice, an update in computer software that prohibits alterations, a quicker legal processing method for any future thieves during prosecution, and an enhanced chain of supervision that would follow the purchasing process more closely to prevent further fraudulent activity. We are also recommending a practice that was not a part of Mo-Vac before, and that would be the implementation of trailer tracking devices. These devices have evolved into smaller, smarter and more cost-effective products than ever before. Advances in technology allow fleets to simply slap 6

8 the device on the trailer and leave it alone, with little maintenance or need to change the battery for 5 years ("Trailer GPS Tracking," n.d.). Fleets are starting to reap the benefits of these advances, including increased visibility, security and better asset utilization. Even though the price of each tracker is $279.00, over the course of a year, the units will practically pay for themselves as the drivers will make less unnecessary stops or detours which costs Mo-Vac thousands of dollars in man-hours and gas over that year ("Trailer GPS Tracking," n.d.). Finally, we have even thought of the implementation of a 4-camera DVR (on-board) video recorder. The great thing about these cameras is that they can record for up to a month ("4.3-Inch Mobile DVR for Trucks," n.d.)! This means, that the driver and office personnel will not have to worry about backing up the video feed except once a month to archive it. If the video is ever needed to review a questionable event, vehicle accident, or theft this measurement will ease the possible risk liabilities. The cost of each camera system is $849.99, but if you think about it each tractor trailer tire costs, on average, between $200 to $400 dollars ("4.3-Inch Mobile DVR for Trucks," n.d.). Again, this camera system should practically pay for itself in the course of a year. 7

9 References 1) Corpus, M. R. (2016, February 12). [ interview by the author] 2) Environmental Services. (n.d.). Retrieved April 7, 2016, from 3) Locations. (n.d.). Retrieved April 7, 2016, from 4) Oil Field Services. (n.d.). Retrieved April 7, 2016, from 5) Trailer GPS Tracking. (n.d.). Retrieved April 7, 2016, from 6) 4.3-Inch Mobile DVR for Trucks (4 Camera System). (n.d.). Retrieved April 7, 2016, from 8