Analysis of different reasons for pending of invoices of Chevrons Contractors

Analysis of different reasons for pending of invoices of Chevrons Contractors

Submitted By Sadia Haque Lucky ID: 08104147 Department: BBS

Submitted To Husain Salilul Akareem Jr. Lecturer Brac Business School Brac University Dhaka.

December 26, 2011

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December 26, 2011

Husain Salilul Akareem Jr. Lecturer Brac Business School Brac University Dhaka.

Subject: Submission of Internship Report on Analysis of reasons behind Contractors pending invoices of Chevron Bangladesh.

Dear Sir, Here is internship report on Analysis of reasons behind Contractors pending invoices of Chevron Bangladesh which is requisite of four credit hours internship program of BBA curriculum. I have tried my best to gather all necessary information relevant to the area of study. I hope, with my limited knowledge this report provides a detailed picture about the relevant field. I submit this report only for my academic purpose. I would appreciate any suggestion or recommendation for further improvement to this report.

Sincerely Yours

Sadia Haque Lucky ID: 08104147 Department: BBS

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ACKNOWLEDGEMENT

During my internship period in Chevron Bangladesh, I was wondered by the deep support and respect of the Chevron Bangladesh team. Especially the Contract Analyst Masaidul Islam helped me to choose the topic of the report and to select the respondents, as he knows that who are related with the topic. I am extremely grateful to my onside supervisor Kwanjit Porntaewakul for granting the permission to do survey of the internal employees of Chevron Bangladesh and for granting the research topic. I am indebted to my project supervisor Husain Salilul Akareem for his continuous guidance and support. I am extremely thankful to my parents, family members for extending their whole hearted support though encouragement and sacrifice during the research. I am also grateful to all the respondents (internal employees of Chevron Bangladesh) for giving their responses and valuable time they have given to help me do my research report. I have enjoyed the entire time while doing the report, hope the findings of my research report will help Chevron Bangladesh to solve its payment related problems, so that Chevron Bangladesh can maintain good relationship with its Contractors.

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EXECUTIVE SUMMARY Chevron Bangladesh and its subsidiaries have been active in oil and gas exploration and production in Bangladesh for a number of years, predominantly in Blocks 12, 13 and 14 in the greater Sylhet region, located in the northeastern part of the country. Chevron supports Bangladesh's goal to reduce the nation's reliance on imported energy by actively investing in projects that deliver more gas to Petrobangla. Chevron, having invested about US$ 850 million, is one of the largest foreign investors in the energy sector of Bangladesh. Chevron's vision is to work in partnership with the Government of Bangladesh and Petrobangla, the state-owned oil and gas company, to develop the country's energy resources in a safe, environmentally responsible and efficient manner for the benefit of the people of Bangladesh. Roughly 3,000 people work directly or indirectly for Chevron Bangladesh, of which approximately 96% are Bangladeshi nationals. The objective of this report is to analyze the reasons for which most of the invoices that are submitted by the Contractors are being delayed for payment and in which stages Chevron should give more emphasis to make the payment procedure fast and error free. 40% of the respondents (internal employees of Chevron) are between 3035 years old and 33.3% of them are 35-40 years old. 73.3% of the respondents are male and only 26.7% are female. that 46.7% of the respondents have 3-5 years work experience and 20% of the respondents have more than 7 years work experience in Chevron. 73.3% of the respondents agreed that Need original supporting is creating problems for pending of invoices, so we can say that it is creating significant problem regarding with the payment and if Chevron become able to solve these then most of the problems should be solved. Charge code related problems are creating significant problem for creating pending of invoices because 86.7% respondents agreed with these reason. If rounding problem, clarification of overcharge, invoice amount & WT amount mismatch, wrongly claimed invoices, invoice currency & WT currency mismatch these problems are solved then 34.885% problems regarding with pending of invoices can be overcome. . And if Chevron becomes able to solve: contract termination & close, work ticket-insufficient fund , need Work Ticket, charge code related problem, need for original supporting, short payment, need to cancel & reissue WT these issues( these reasons are created by Chevron itself) along with component 1 then Chevron will be able to solve 77.408% of the problems regarding with pending of invoices. If Chevron implement further development in the eProcurement System, training of the eProcurement helpdesk personnel and the suppliers, employees then Chevron will bw able to resolve the problems as soon as possible for smooth operation of its day to day business, improved relationship with the suppliers and creating a sustainable position in the Bangladesh market.

TABLE OF CONTENT Page No. CHAPTER ONE: INTRODUCTION 1.1 Introduction 1.2 Background of the study 1.3 Literature Review 1.4 Purpose of the Study 1.5 Objectives 1.6 Scope of the Report 1.7 Limitations of the Study .. .. .. .. .. .. ..... .. 1-7 2 2 3-5 5 6 7 7

CHAPTER TWO: METHODOLOGY AND RESEARCH DESIGN 8-12 2.1 Methodology 2.2 Conceptual Framework 2.3 Research Design .. .. .. 9 10 - 11 12

CHAPTER THREE: OVERVIEW OF THE ORGANIZATION .. 3.1 Overview of Chevron Bangladesh 3.1.1. History 3.1.2. Founders 3.1.3. Mission, Vision, Objectives and Strategies 3.1.4. Functional Departments 3.2 Job Responsibilities 3.3 SWOT Analysis . . . . ... .

13 - 19 14 - 16 14 14 14 - 15 16 17 - 18 18 - 19

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CHAPTER FOUR: DATA ANALYSIS

20 28 29 -31 30 31

CHAPTER FIVE: RECOMMENDATIONS AND CONCLUSION . 5.1 Recommendations 5.2 Conclusion . .

References

... . 32

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List of Figures

Page No

Figure 2.1: Data Sources Figure 2.2: Reasons for pending of invoices.

................... ...................

9 10

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List of Tables
Page No Table 2.1: Research Framework Table 4.1: Frequency of independent variables Table 4.2: Frequency of dependent variables Table 4.3: Factor Loading Table 4.4: Component Matrix .......................... .......................... .......................... ........................... .......................... ................. 12 22 24 25 26 27

Table 4.5: Correlations between dependent variables

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CHAPTER ONE: INTRODUCTION

1.1 Introduction Chevron Corporation is one of the world's leading integrated energy companies, with subsidiaries that conduct business worldwide. The company's success is driven by the ingenuity and commitment of approximately 62,000 employees who operate across the energy spectrum. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and other energy products; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels and other renewable. The Bibiyana Gas Field in Northeast Bangladesh is one of the most significant natural gas field discoveries in Bangladesh in terms of both quality and the size of the reserve. Chevron started production from the field in March 2007 following a two-year development program, which included a gas processing plant with capacity of 600 million cubic feet per day. Prior to the development of Bibiyana, Chevron conducted a comprehensive 3D seismic survey in the field which was the first of its kind in Bangladesh. This survey provided valuable information about the shape of the structure and volume of gas that the field could contain.

1.2 Background of the study Chevron's Supplier Diversity/Local Content Program achieves greater competitive advantage for Chevron by introducing diverse and local suppliers that add value to our supply chain by collaborating with internal and external stakeholders and identifying opportunities to participate in strategic sourcing initiatives. Currently Chevron Bangladesh has 159 suppliers. They provide different services and products to Chevron Bangladesh. Some of the suppliers are: Homebound Packers And Shippers Ltd., they provide courier and shipping services to Chevron, Weatherford Products & Equipment (Singapore) Pte. Ltd., Chevron buys and takes rental services of equipments from them. Ideal Tailors & Fabrics, they provide tailoring services to Chevron Bangladesh. The schedule of compensation must be clearly defined by the Department Sponsor, including a detailed Work Breakdown Structure (WBS) tables for fixed lump sum bids or detailed rate schedules for unit rate or reimbursable based bids. The schedule of compensation should also clearly spell out what reimbursable items (e.g. travel, accommodation, meals etc.) are to be provided by Contractor and Company and for whose account. The Contractor has to raise electronic invoice and then hard copy of invoices must be submitted to the finance department for payment. After 30 days of submission of invoices payments will be paid. The electronic invoices are saved in the ERP (Enterprise Resource Process) system. There are two key steps involved with getting a Contractors invoice paid: 1) The group overseeing the contractors work must verify the service has been performed as invoiced. The person with delegated invoice approval authority will approve the invoice for payment processing. This must be someone other than the person verifying the goods and/or services have been supplied. Payment authority is distinguished from an "OK to Pay" notation on an invoice which generally corresponds to acknowledgment of receipt of goods or services.
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2) The Finance Accounts Payable group will review requests for the disbursement of Company funds to ensure: Expenditure approval authority has been exercised within delegated authority limits; Amounts conform to a contract, purchase order, service order, etc., or have special approval to pay without a commitment document authorizing the expenditure; The request contains evidence that all goods and/or services were received; The request is for business expenditure within Company policy; The currency and place of payment specified on Contractor's invoice agree with contract terms. The exercise of payment approval is generally the final action that occurs prior to the generation of a cash disbursement. But in some cases Chevron cant pay its suppliers payments due to some reasons. Some reasons are created by Chevron itself and some problems are created by the suppliers. Some of the main reasons for pending of invoices are: for work ticket-Insufficient fund, need clarification of overcharge, Invoice amount & WT amount not matched. So for these reasons chevron cant pay to the invoices that are claimed for payment. The relationship with Contractor may demolish for these reason and Contractors may not get their payments on time, so that the Contractor may face cash/liquidity shortage and may face serious problems running its business. In these situations, the Accounts Payable group will find out the reason behind it and will take necessary steps to solve it. The responsible department will solve the problem and if the Contractor is responsible then the Contractor has to resubmit the correct invoice.

1.3 Literature Review Electronic invoicing is a service that allows for the abandonment of tangible matter paper. The core of the value proposition is to save time and money by fully or partly automating these purchase-to-pay or order-to-cash processes. Furthermore, it has been generally accepted among researchers that a criteria study is required for each industry, some even advocating different studies between product classes (Choffray & Lilien 1978). The Oxford English dictionary defines the invoice as A list of the particular items of goods shipped or sent to a factor, consignee, or purchaser, with their value or prices, and charges. However, an invoice is frequently more than only a list of goods and values. According to EBA & Innopay (2010) it can be generally described as a commercial document used by buyers and sellers of goods or services. The custom of invoicing has grown through time and practice. In addition to the general usefulness of an invoice, there are frequently legal requirements imposed on it. For example in Europe, there are numerous tax requirements, the most important of those being value added tax. The
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mandatory information encompasses more than only tax details, however. As a result, the invoice conveys an abundance of useful information. It must be noted that the invoice is not an isolated document but linked to trade processes: the purchase -to- pay process from the buyers point of view and order-to-payment process from the sellers point of view. These processes, in addition to invoicing, include contracting, ordering, delivering, payment and taxation in the financial supply chain. On the physical supply chain side related processes involve ordering, fulfillment and delivery. The invoice can be seen as a crucial link between the physical and financial supply chains. (EBA and Innopay 2010) An electronic invoice is the electronic equivalent of a paper invoice. According to Suomen Yrittjt (2010) an electronic invoice is an invoice that flows from seller to buyer electronically and can be processed automatically, without manual labor, in financial management software. The invoice must therefore be in structured format, as opposed to free format, to render it machine readable. In this thesis invoices that have been exchanged electronically but are in unstructured format, such as Portable Document Format (PDF), are not considered electronic invoices. It is frequently possible, however, to display an electronic invoice that is in structured form as an image resembling a traditional paper invoice. IOS for data transfer have been in use since the end of the 1960s. The first standards were developed in the 1970s. David and Greenstein (1990) define a standard as a set of technical specifications adhered to by a producer, either tacitly or as a result of a formal agreement. Eliminating the need for manual opening of mail, registering the invoices by hand, floor circulation of invoices in envelopes, as well as scanning and controlling for right content in case of semi-automated processing, is ascribed with substantial savings and immaterial benefits. As Penttinen (2008) and Capgemini (2007) recap, these come from reduced manual work requirements, greater number of payments made on time, decreased costs of paper consumption, increased accounting transparency, more meaningful work for employees, and pro-environmental image of the company. Besides the above, Dolman (2005) and Penttinen (2008) speak about a significant reduction in errors, as opposed to manual processing, real-time tracking, status notification, and instant delivery. These system features may result in reduction of costs and labour required for e.g. dispute resolution, reconciling overpayments when errors occur, follow-up phone calls, and increased return on cash as a company may receive discounts from early settlements. Dolman (2005) asserts further that electronic storage option creates savings as well thanks to elimination of warehousing and security fees, availability and easy retrievability of invoice data, and potentially lower overhead costs. Most of the above benefits is equally accredited to outgoing invoice handling, however, due to longer processing time, savings of working time and employee costs are more conservative. On the other hand, growing customer satisfaction associated with less error in invoices should overwhelm modest numbers in a long run (Penttinen 2008). There is a reduction of almost 93% in time and 87% in costs of fully automated procedure over manual processing in case of incoming invoices. For an outgoing invoice the savings of automated handling are 43% in time and 42% in costs.

Taking into account the perceived or expected benefits, most of which are discussed above, Lempinen & Penttinen (2009) develop the metrics for assessing the value of electronic invoice handling technology at a company level. For example, they speak about value added per employee that comes in form of more meaningful work thanks to automated routines, such as electronic handling of invoices. Another effect is that the image of an employer may improve which in turn may result in and can be assessed by e.g. higher user satisfaction and increased interest from younger recruits. Other variables, such as e.g. faster cycling time and less error in invoice processing, may be expressed through improved customer satisfaction, reduced number of disputes, less overdue payments and so on. Mcafee (2002), in his empirical investigation of ERP1 adoption at one of U.S. high-tech manufactures, observed that after initial drop in lead times and on-time delivery these parameters significantly improved in months after the ERP implementation and soon surpassed the pre-adoption levels. He claims the observed performance pattern cannot be explained by rival causal factors, such as production and inventory volumes, headcounts and new product introductions, but presents an evidence of the timescale over which the benefits of IT appear. Lags in value realization are also confirmed in Byrd et al. (2006), where the results suggest that the effects of IT investment may be optimized over a period of a few years, rather than at a single point in time in close proximity to the actual implementation of a technology.

1.4 Purpose of the Study To claim for payment the Contractor has to raise electronic invoice and then has to submit hard copy of invoices to the finance department for payment. Finance Accounts Payable group will review requests for the disbursement of Company funds. But sometimes they face some errors in the payment process. Some problems arise from the Contractors and some are raised by the internal employees of Chevron and different department may responsible for these. Generally Chevron pays its Contractors claimed invoices after 30 days, but if any problem arises it will take long time to end the process. By delaying the relationship with the Contractors may demolished and the Contractor may face cash/liquidity shortage and may face serious problems running its business. It will also slow down the overall workflow of the finance department and also other departments (i.e. SCM department, IT) which are related with these concerns. So, the purposes of the study are to find out the most problematic variables for which most of the problems are occurring and which departments are related with that reason, so that from the findings of these research, when making policies Chevron can focus on that departments tasks more and can take necessary steps to reduce invoice pending problems.

1.5 Objectives The objective of my study can be divided into two categories. They are given belowGeneral objective The general objective of this report is to analyze the reasons for which most of the invoices that are submitted by the Contractors are being delayed for payment and in which stages Chevron should give more emphasis to make the payment procedure fast and error free. Specific Objectives My specific objectives of this report are as follows: To understand the different reasons for pending of payment of invoices of Contractors. To find out which department is responsible for the most reasons To find out which steps/processes should be modified/improved to decrease the errors Describe a brief description about Chevrons payment procedure to Contractors in focus. To identify out which reasons are creating the most problems for pending of invoices To identify which reasons are more frequently occurring To determine the level of importance of each reason To identify which reasons are created by Chevron and which are created by the Contractor To find out which issues should be focused to minimize the payment process to Contractors To determine the ways to increase efficiency of the departments. To identify which steps should be taken to decrease the errors and make the process smooth, short-term and error free to maintain good relation with its Contractors.

1.6 Scope of the Report Most of Chevron Bangladeshs daily operations involve interactions and dealings with the supplier. Almost all the activities and dealings with the suppliers require the use of the eProcurement system. The finance department has to follow up with the eProcurement support team under the SCM department on regular basis for issues like purchase order and work ticket raising, credit memo building, invoice of payments to suppliers, etc. All these activities are necessary for timely and accurate payment to the suppliers.From this report I have tried to analyze the reasons for pending of invoices of Contractors of Chevron Bangladesh and for which reasons most of the problems are occurring. I hope that based on my survey report it will help Chevron Bangladesh to find out in which stages of their payment module they should give more emphasis and effort to minimize the errors and make the payment flow smooth.

1.7 Limitations of the Study I have faced the following limitations while conducting the research: Time Constraint: Time constraint was a big problem because an internship report requires in-depth analysis of each and every related matters and this requires a lot of time. I havent got enough time in between and after the office works to conduct my research and analysis properly. Thus the time I got for completing the internship report was not enough for me. Company Confidentiality: Chevron Bangladesh has confidentiality issues regarding surveying the employees and disclosing various kinds of company information. Choosing the topic and respondents for the report was a big challenge. Opinion Bias: Several departments are related with the issues (i.e. Supply Chain Management, finance) of the report and their might be opinion bias on their responses to show that their own department is less responsible in occurring the problem and to blame the other departments. Respondent related problems: It is another important barrier that was faced during the conduct of this study. The topic of the research is related with the Contractors and if they give their responses regarding with the problem then there might be a clear picture come out from the research findings but Chevron doesnt give the permission do to survey involving the Contractors. So, we have to do the survey with the internal employees of Chevron. Another problem is very few employees (18 employees) are related with the topic/ the research problem so the population size and the sample size are very small.

CHAPTER TWO: METHODOLOGY AND RESEARCH DESIGN

2.1 Methodology As, I have worked in the SCM department and my tasks were creating Work-ticket, ecatalogs and these tasks are related with the payment process to the Contractors and during my internship period Chevron faces some problems regarding with payment to Contractors so I was interested to do my report on Analysis of different reasons for pending of invoices of Chevrons Contractors. First of all I have chosen the topic of the report and made a questionnaire to take permission from my onside supervisor who is Contract Manager of SCM. After her approval I have listed the names of the employees of different department of Chevron who are related with the problems as many departments are related with the issue with the help of the Contract Analyst. Eighteen to twenty employees are related with the problem but Ive collected responses of fifteen respondents because some of the respondents denied to give responses and some of them were on leave.

Since the purpose of this study is to analyze the reasons for pending of invoices of Chevrons Contractors, the next step was to conduct an extensive review on the general subject of invoice and electronic invoice. For these issues I have gone though different journals, case studies to extensively review the topic. I have also collected data from internet, Chevrons website, and intranet and text books. Ive collected the responses of the internal employees of Chevron who are related with the topic as theyve filled up the questionnaire. The questionnaire was designed to collect information about the respondents (i.e. Age, gender, educational level, and experience in Chevron) and their responses toward different reasons that are creating invoice pending problem. To analyze the data I have used SPSS 17 version. Data was edited, coded and computerized. Some tables were done manually. I have used APA style for referencing purpose. I have used univariate method (for frequency, descriptive distribution) and multivariate method ( for factor analysis).

Primary data

The raw data- Data collected from respondents

Filled up questionnaire.

Secondary data

Information from indirect sources like: internet, intranet, journal articles etc.

Different literatures and internet surfing.

Figure 2.1: Data Sources

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2.2 Conceptual Framework

Reasons for pending of invoices

Need original supporting

For work ticketInsufficient fund

Need Work Ticket

Contract has been terminated & closed

Short payment, need to cancel & reissue WT

Need clarification of overcharge

Invoice amount & WT amount not matched

For charge code related problem

Some portion is wrongly claimed

Invoice currency & WT currency not matched

Rounding problem

Figure 2.2: Reasons for pending of invoices.

Here, reasons for pending of invoices of Chevrons Contracts are discussed. Sometimes the Finance Accounts Payable group need original supporting means they need original papers before they pay to Contractors like original contract papers, insurance papers. For work ticket-insufficient fund invoice payment can be delayed because the funds for payment are fixed but for any reasons there might be shortage of funds to pay. If work ticket (Work Ticket is electronic description of the contract where service description, quantity, price, currency all are mentioned) for any Contractor is not raised then the Finance department cant pay to the Contractors. If any Contract has been terminated or closed for any violence or expired then the invoices cant be paid. If any Contractor overcharge ant item more than the fixed rate specified in the contract then before payment they have to clarify the reason for overcharge to Chevron. Sometimes invoice amount & WT amount do not match; means the amount that is electronically saved in the
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system of Chevron doesnt match with the amount that is raised by the Contractors and if this case arises then there is problem to pay their payments. To pay to the claimed invoices the invoice amount & the WT amount must be same. There might be some error in the charge code (data that are electronically saved in Chevrons system) that can be raised for wrong input, error in system. Some portion of the invoice might be wrongly claimed in this situation there may be pending of invoices. These situations can also occur when invoice currency & WT currency are not matched. If there is any rounding problem ( the problem that occurs when wrong personnel has approved the contract/ not all the authorized personnel have signed or approved the contract) then the Contract should be proceed properly then the invoices should be paid.

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2.3 Research Design

Research Problem

Analysis of different reasons for pending of invoices of Chevrons Contractors Combination of Exploratory and Descriptive Research Design Qualitative & Quantitative (Full Population)15 respondents out of total 18 population Likert Scale Internal employees of Chevron Bangladesh Working days and working hours (Sunday to Thursday; 8.30 am-5 pm )

Research Design Methods Sample Size Scaling Technique Respondents Time

Table 2.1 : Research Framework Defining a research problem is the fuel that drives the scientific process, and is the foundation of any research method and experimental design, from true experiment to case study. Here, Analysis of different reasons for pending of invoices of Chevrons Contractors is the research problem. This research is a combination of Exploratory and Descriptive Research Design, because here a problem is formulated, isolated key variables and relationships for examination, gained insights for developing an approach to the problem and established priorities for further research (Characteristics of Exploratory Research Design). At the same time its major objective is to describe the reasons for pending of invoices (Descriptive Research Design). Both qualitative and quantitative methods are used here. Quantitative method used in terms of classify features, count them, and construct statistical models in an attempt to explain what is observed, recommended during latter phases of research projects, data is in the form of numbers and statistics, uses tools, such as questionnaires to collect data. Qualitative method used in terms of design emerges as the study unfolds; we know roughly in advance what we are looking for. We have used Likert Scale for scaling the purpose of the responses. Here, the total population size is very small; only 18 people & we are able to select 15 respondents among them, so we can say that we are able to collect information from almost 100% of the population. All the respondents are internal employees of Chevron Bangladesh. We collect the data in working days and at working hours.

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CHAPTER THREE: OVERVIEW OF THE ORGANIZATION

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3.1 Overview of Chevron Bangladesh 3.1.1. History Chevron started its operation in Bangladesh through acquisition of an existing American company. The first predecessor company of Chevron Bangladesh is named Occidental. It is an American company that started its journey in Bangladesh in the year 1999. It was acquired by another American company Unocal later on. On 2005, Unocal was acquired by Chevron and the company thereafter was named Chevron Bangladesh. It worked predominantly in Blocks 12, 13 and 14 in the greater Sylhet region, located in the northeastern part of the country. During 1998-1999, the company drilled four new exploratory wells resulting in the discovery of two new gas fields, Bibiyana and Moulavi Bazar. The company is currently producing natural gas from Jalalabad, Moulavi Bazar and Bibiyana fields. The company also holds 45% interest in Block 7, in southwest Bangladesh where an exploration well has been drilled recently named Kajal-1. Chevron supports Bangladesh's goal to reduce the nation's reliance on imported energy by actively investing in projects that deliver more gas to Petrobangla. Chevron, having invested nearly a US$ 1 billion, is one of the largest foreign investors in the energy sector of Bangladesh and supplies 45% of the countrys gas needs. 3.1.2. Founders From 2005 till now Chevron Bangladesh had 3 presidents. They are: Andrew L. Fawthorp (2005-2007) Steve Wilson (2008-2010) Geoff Strong (2011-Present)

3.1.3. Mission, Vision, Objectives and Strategies Mission/Value Statement Our Company's foundation is built on our Values, which distinguish us and guide our actions. We conduct our business in a socially responsible and ethical manner. We respect the law, support universal human rights, protect the environment, and benefit the communities where we work." Chevron Bangladesh focuses on 7 aspects, which defines its mission/values clearly: Integrity Trust Diversity Ingenuity Partnership Protecting People and the Environment
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High Performance

Vision Statement To be the global energy company most admired for its people, partnership and performance. Objectives: Safely provide energy products vital to sustainable economic progress and human development throughout the world; Are people and an organization with superior capabilities and commitment; Are the partner of choice; Earn the admiration of all our stakeholders investors, customers, host governments, local communities and our employees not only for the goals we achieve but how we achieve them; Deliver world-class performance.

Strategies People Invest in people to strengthen organizational capability and develop a talented global workforce that gets results the right way Execution Execute with excellence through rigorous application of our operational excellence and capital stewardship systems and disciplined cost management Growth Grow profitably by using our competitive advantages to maximize value from existing assets and capture new opportunities

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3.1.4. Functional Departments There are 9 functional departments in Chevron Bangladesh. They are listed below: External Affairs Human Resource Finance Planning and Commercial Asset Development IC & T OE/HES Legal Operations

SCM is the most important and large supporting unit that works as the intermediary between all the departments.

Supply Chain Management (SCM) The global vision of Supply Chain Management department of Chevron is to deliver value and achieve a sustained competitive advantage for the global enterprise. The SCM department is held accountable for: Ensuring safe supplier and contractor performance Delivering reliable and efficient Logistics and Procurement Operations Creating organizational value through strategic procurement processes Ensuring supplier contractual compliance

The key SCM strategies for delivering value to the organization are: Improve safety performance and ensure accountability is communicated to all levels. Create value through strategic procurement via safe and reliable decisions, effective supplier management, and leveraged opportunities throughout ASBU (Asia South Business Unit). Deliver reliable and efficient SCM procurement operations in order to ensure the correct material is delivered on time and in the correct condition. Deliver reliable and efficient SCM Logistics operations in order to ensure reliable and efficient support to ASBU operations.

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Elevate contractual compliance in order to raise awareness and develop processes that increase compliant practices throughout the BU. Enhance stakeholder communications and involvement to ensure strategic alignment in procurement operations, logistics operations, and category management. Enhance organizational capability to provide the right people with the right skills in the right place with the right responsibilities at the right time in the right numbers.

Based on these international principles, the Chevron Bangladesh Supply Chain Management is constructed with 3 sub-divisions. They are: Strategic Procurement Procurement Administration

Contracts Chevron's contracting process begins with the development of a comprehensive contracting plan that is supported by a governance structure such as a cross functional Contract Review Committee. The plan results in contracts being formulated according to established standards leading to the final stage of the contracting process-Post Award Contract Management. A contracting network has been established to be the custodian of contracting processes and has the mandate to work towards improving contracting processes through the development, deployment and implementation of standard contracting processes. This network has representation at the Corporate, Stream and BU (Business Unit) levels.

3.2 Job Responsibilities Creating e- Catalogs, checking live contracts from the original contracts, finding new contracts created by Contract Administrations price checking with original contract and prices loaded in system Creating work tickets,

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Created a database containing the containing information of the representative of the suppliers Created a database containing the third party network access status and all related information Creating power point slides for presentations Prepared electronic copies of the insurance papers of the service contracts.

3.3 SWOT Analysis Strengths Steady Financial Performance: Chevron Bangladesh is a very profitable company like all other profit centers of Chevron. The huge amount of revenue they earn also provides extra cushion to their huge costs. This also allows them to offer their employees remuneration package which is much higher than the normal market rate. This also helps them investing in health, environment and safety measures, which is an exemplary and inspirational milestone for other companies in Bangladesh business market.

High User of Technology: Chevron Bangladesh uses technology in almost every aspect of its day to day operations. It uses high class technology in its plants and also in its corporate office. It uses 2D and 3D seismic survey and many other sophisticated technologies to smoothly run the gas plants. It also uses top class technology to ensure safe and injury free work environment both in plants and office. For example it uses ergonomic chairs and keyboards for all employees; it has established a system named Workpace that enables the employees to take regular breaks in between works to avoid RSI (Repetitive Strain Injury), etc. They also have their own internal server that includes their intranet and global communicator. With this communicator a Chevron employee can communicate with any other employee working in any part of the world in Chevron. The electronic payment system they use is also another example of technology usage of Chevron Bangladesh. This heavy use of technology helps the company to be up to date and makes the regular operations run smoothly.

Weaknesses Loss from Unsuccessful Seismic Survey: Seismic survey is a procedure used by almost all oil and gas companies of the world to measure the oil or gas reserves present underground or underwater. But, seismic survey can only predict the presence and amount of oil and gas. The result obtained from this test is not absolute. This process is immensely expensive too. Thus the probability of loss from an unsuccessful seismic survey can cause a lot of damage to the company.
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This weakness is not only applicable for Chevron Bangladesh but also for all profit centers of Chevron. Weakness of Suppliers in Electronic Payment System : The suppliers Chevron Bangladesh is dealing with are companies which are not that much used to with the electronic mode of payments. Thus there are many issues relating to the improper usage of this system by the suppliers, which is causing delay in payments and other operations.

Opportunities Few Competitors in Bangladesh: As we have seen from our competitor analysis that Chevron has very few competitors who actually possess a threat to this company. Because, the local competitors lack in technology and skills and thus it becomes more feasible for them to buy gas from Chevron than performing exploration activities on the gas blocks. In case of the international competitors, we have seen that the number of existing competitors in Bangladesh is very few till now. This is a huge opportunity for Chevron to grab more and more market share.

Untapped Offshore and other Onshore Blocks: Gas blocks that are on the ground are called onshore blocks and those underwater are called offshore blocks. At present Chevron is only operating in 4 onshore blocks. Thus it still has the opportunity to expand its business by operating in other onshore and offshore blocks.

Threats Gradual Decline in Gas Reserves: Gradually the gas reserves of Bangladesh is declining and this is causing in declined production for the company. This is forcing the company to think for new start ups at other blocks. But there is no certainty that other blocks will have gas reserves. Thus this possesses a threat for Chevron Bangladesh to close its operations in Bangladesh after the gas reserves are all depleted.

Entrance of new competitors: The few number of players in the Bangladesh gas market is luring in new companies into this market. For example, ConocoPhillips has signed a deal with Bangladesh government to start its operation soon. This entrance of new competitors possess threat for Chevron Bangladesh.

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CHAPTER FOUR: DATA ANALYSIS

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Data Analysis and Finding In these section data will be analyzed and the findings will be discussed. In Table 4.1 we can see the frequency of different Independent Variables that basically show the frequency of the information about the respondents (i.e. frequency of their age, gender, experience, educational level); from which we can see the frequency of the independent variables. In Table 4.2 we can see the frequency of the dependent variables. From which we can analyze the how strongly the respondents agree or disagree with each of the dependent variables. Table 4.3 shows Factor Loading and Table 4.4 represents Component Matrix of the dependent variables. From these tables we can find out which variables are creating the most problems and how much problems they are creating. Table 4.5 shows the correlation between different dependent variables, from which we can see which reasons are interlink for which reasons and if which departments are related with each other.

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Table 4.1: Frequency of independent variables Variable Age Valid 20-25 yrs 25-30 yrs 30-35 yrs 35-40 yrs >40 yrs Gender Male Female Experience in Chevron less than 1 yr 1-3 yrs 3-5 yrs 5-7 yrs more than 7 yrs Religion Islam Hindu Christian Level in organization Entry Mid Top Educational Level Undergraduate Postgraduate Professional Degree Total Experience less than 1 yr 1-3 yrs 3-5 yrs 5-7 yrs more than 7 yrs Percentage 6.7 6.7 40.0 33.3 13.3 73.3 26.7 13.3 13.3 46.7 6.7 20.0 80.0 13.3 6.7 26.7 53.3 20.0 33.3 53.3 13.3 6.7 20.0 20.0 26.7 26.7
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Analysis From Table 4.1 we can say that 40% of the respondents (internal employees of Chevron) are between 30-35 years old and 33.3% of them are 35-40 years old. 73.3% of the respondents are male and only 26.7% are female. We also can say that 46.7% of the respondents have 3-5 years work experience and 20% of the respondents have more than 7 years work experience in Chevron. 80% of the internal employees of Chevron are belonging to Islam in terms of their religion. Mid level employees (respondents) are representing 53.3% of the total respondents and 33.3% of the respondents have completed their under graduation and 53.3% of the respondents have completed their post graduation and only 13.3% of the respondents have completed Professional Degrees. 20% of the respondents have total 1-3 years work experience and another 20% of the respondents have total 3-5 years work experience. It is also seen that 26.7% of the respondents have total 5-7 years work experience and another 26.7% of the respondents have total work experience of more than 7 years.

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Table 4.2: Frequency of dependent variables Variable Need original supporting Response Strongly Agree Agree Neutral Agree Neutral Disagree Strongly Disagree Neutral Disagree Strongly Disagree Neutral Disagree Strongly Disagree Strongly Agree Agree Neutral Disagree Strongly Agree Agree Strongly Agree Agree Neutral Disagree Agree Neutral Disagree Strongly Disagree Percentage 20.0 73.3 6.7 6.7 13.3 66.7 13.3 33.3 46.7 20.0 53.3 13.3 33.3 6.7 20.0 26.7 46.7 13.3 86.7 6.7 46.7 33.3 13.3 33.3 26.7 26.7 13.3

Short payment, need to cancel & reissue WT

Rounding Problem

Need clarification of overcharge

Invoice amount & WT amount not matched

For charge code related problem Some portion is wrongly claimed

Invoice currency & WT currency not matched

Analysis From Table 4.2, it can be said that 73.3% of the respondents agreed that Need original supporting is creating problems for pending of invoices, so we can say that it is creating significant problem regarding with the payment and if Chevron become able to solve these then most of the problems should be solved. 66.7% of the respondents disagreed with Short payment, need to cancel & reissue WT with these reason, so it can be said that, this is a very less problematic variable & only 6.7% of the respondents agree with these reason. 33.3% of the respondents were neutral, 46.7% of them disagreed and 20.0% of them strongly disagreed to claim Rounding Problem as a reason for pending of invoices. 53.3% of the respondents are also neutral with Need clarification of overcharge these reason and 33.3% of them strongly disagreed with these, so that we can say that these is also a very less problem creating reason. Charge code related problems are creating significant problem for creating pending of invoices because
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86.7% respondents agreed with these reason. Invoice amount & WT amount not matched is creating moderate level of problem. Contractors sometimes wrongly claimed some portion, 46.7% of the employees of Chevron agree with these reason. Invoice currency & WT currency not matched these is creating moderate level of problems. So, from the table it can be concluded that, Need original supporting and Charge code related problems are creating significant problem for pending of invoices, so management of Chevron should focus on these two problems and when making policy they should give more priority to these two reasons to solve pending of invoices related problems.

Table 4.3: Factor Loading Initial Eigenvalues Comp onent 1 2 3 4 Total 3.837 2.057 1.455 1.166 % of Variance 34.885 18.696 13.230 10.597 Cumulative % 34.885 53.581 66.811 77.408 Extraction Sums of Squared Loadings Total 3.837 2.057 1.455 1.166 % of Variance 34.885 18.696 13.230 10.597 Cumulative % 34.885 53.581 66.811 77.408

Extraction Method: Principal Component Analysis.

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Component

Variable

2 3 4

Rounding problem Need clarification of overcharge Invoice amount & WT amount not matched Correlations Some portion is wrongly claimed Invoice currency & WT currency not matched Contract has been terminated & closed For work ticket-Insufficient fund Need Work Ticket For charge code related problem Need original supporting Short payment, need to cancel & reissue WT

Table 4.4: Component Matrix

Table 4.5: Correlations between dependent variables

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Or_Sup Tic_Ins Work_Tic_Err Contact_Ter Short_Pay Rounding_P Or_Sup Pearson Correlation Sig. (2tailed) N Tic_Ins Pearson Correlation Sig. (2tailed) N Work_Tic_Err Pearson Correlation Sig. (2tailed) N Contact_Ter Pearson Correlation Sig. (2tailed) N Short_Pay Pearson Correlation Sig. (2tailed) N Rounding_Prob Pearson Correlation Sig. (2tailed) N 15 -0.312 0.258 15 -0.183 0.514 15 0.088 0.755 15 -0.492 0.063 15 -0.422 0.117 15 15 0.456 0.087 15 .538* 0.039 15 0.376 0.167 15 0.015 0.956 15 15 0.402 0.138 15 0 1 15 0.254 0.36 15 15 0.444 0.097 15 0.061 0.828 15 15 0.237 0.395 15 1 -0.31 0.258 15 1 -0.18 0.514 15 0.456 0.087 15 1 0.088 0.755 15 .538* 0.039 15 0.402 0.138 15 1 -0.49 0.063 15 0.376 0.167 15 0 1 15 0.444 0.097 15 1

-0

0.1

0.0

0.9

0.2

0.0

0.8

0.2

0.3

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Overch_Cl

Pearson Correlation Sig. (2tailed) N

-0.206 0.462 15 -0.382 0.16 15 -0.105 0.71 15 -0.321 0.244 15 -0.46 0.084 15

0.477 0.072 15 -0.01 0.967 15 0.196 0.484 15 0.014 0.961 15 0.011 0.97 15

0.1 0.722 15 0.191 0.496 15 0 1 15 0.227 0.417 15 0.175 0.534 15

0.274 0.323 15 0.031 0.914 15 -0.086 0.76 15 0.146 0.605 15 0.042 0.882 15

0.183 0.514 15 0.07 0.803 15 0.151 0.59 15 0.187 0.505 15 0.182 0.517 15

.5

0.0

Inv_WT_Match Pearson Correlation Sig. (2tailed) N Charge_Prob Pearson Correlation Sig. (2tailed) N Prop_Claim Pearson Correlation Sig. (2tailed) N Cur_NMatch Pearson Correlation Sig. (2tailed) N

0.4

0.1

-0

0.7

.81

.83

*. Correlation is significant at the 0.05 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed). Analysis From Table 4.3 & Table 4.4 it can be said that, component 1 is creating 34.885% problems regarding with pending of invoices & component 1 to component 4 are creating 77.408% problems together. So, if rounding problem, clarification of overcharge, invoice
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amount & WT amount mismatch, wrongly claimed invoices, invoice currency & WT currency mismatch these problems are solved then 34.885% problems regarding with pending of invoices can be overcome. These reasons are created by both the internal employees of Chevron and also by the Contractors of Chevron. But these problems are mainly created by the Contractors. And if Chevron becomes able to solve: contract termination & close, work ticket-insufficient fund , need Work Ticket, charge code related problem, need for original supporting, short payment, need to cancel & reissue WT these issues( these reasons are created by Chevron itself) along with component 1 then Chevron will be able to solve 77.408% of the problems regarding with pending of invoices. Then Chevron will be able to pay its Contractors payments within a short period of time by running a smooth payment cycle. So, it can be concluded that both internal employees and Contractors are creating pending related problems and Chevron should focus on both the parties training, improvement, skill development regarding with the payment module and electronic invoicing to solve the problems. From Table 4.5, we can see that, there is a correlation between original supporting and work ticket insufficient fund as the significance between them is 0.258 as it is less then 5; considering 10% significance level. Contract termination & close and need work ticket these two variables are also correlated as because the significance is 0.138. Short payment and work ticket insufficient fund these two variables are correlated because if there is insufficient fund then there will be shortage of payment to the claimed invoices. Rounding problem and need for original supporting are strongly correlated with each other, it is also correlated with need for WT and short payment these two variables. Overcharge clarification is related with rounding problem, contract termination and close with these two variables. Wrongly claimed portion these variable is related with need for original supporting. Invoice amount & WT amount mismatch theses variable is also related with need for original supporting. So we can say that most of the variables have correlation with need for original supporting; with this variable. If original supporting i.e. original contract papers are issued and maintained properly then pending and payments problems can be easily solved.

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CHAPTER FIVE: RECOMMENDATIONS AND CONCLUSION

5.1 Recommendations As the pending of invoices are created by the internal employees of Chevron specially the Contracts department and also for the lack of knowledge of Contractors about the electronic invoicing systems, so it is necessary for Chevron to focus on both the parties

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development when making policies and training programmes to make the payment module fast and hassle free and maintaining good relation with its Contractors. Keeping all the problems discussed above in mind I suggest the following initiatives which Chevron can implement to fix the invoice pending problems of Contractors of Chevron: Further Development in the eProcurement System: Chevron has developed this eProcurement system by buying the Ketera, ARIBA and JDE systems from third parties. They should follow up with those third parties regarding further development of these systems which will include new options that can fix the problems faced by Chevron at present.

Further training of the eProcurement helpdesk personnel: A system development will automatically require further training of the personnel working in the eProcurement helpdesk. It is needed to provide them training about the new options included because they give support to all the profit centers and business units of Chevron across the world and all the employees working under Chevron will get to learn from them afterwards.

Rigorous periodic training of the suppliers: This is the most important and necessary step that Chevron Bangladesh should follow to reduce its system related problems. The suppliers create the biggest problems in this case. Thus it is absolutely necessary to provide them training periodically and intensely. Especially trainings related to raising Contract WT and Purchase Order & not using zero priced and non-catalog items are the most important ones. Every year Chevron does contract with many new suppliers. So, supplier training is a must for reducing the damage caused by these system related errors.

Periodic training of the Chevron Bangladesh employees: The responsible personnel (The contracts team) who oversee the contracting and eProcurement systems in Bangladesh should organize periodic training sessions for all the employees of the company to educate them about these systems and its usage. Especially the contract owners should get special attention.

5.2 Conclusion Chevrons business in Bangladesh has been very successful so far. They have ensured this success through various best practices in every aspect of business-starting from its base business to the safety measures they follow. The company is also very concerned
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about its costs and community relations. The system error and other problems that I have identified as weak links are not only costing the company a lot but also hampering its community relationship because a healthy relationship with the suppliers is also a part of it. It is also harming the good image that chevron has in the market as a timely payer of its suppliers. Thus, it is very important for Chevron to follow up with these problems and resolve them as soon as possible for smooth operation of its day to day business, improved relationship with the suppliers and creating a sustainable position in the Bangladesh market.

References Byrd, T.A., Thrasher E.H., Lang T., Davidson N.W. (2006) A Process- Oriented Perspective of IS Success: Examining the Impact of IS on Operational Cost. Omega, Vol. 34, pp. 448-460.
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Mcafee, A. (2002) The Impact of Enterprise Information Technology Adoption on Operational Performance: An Empirical Investigation. Production and Operation Management, Vol. 11, No. 1, pp. 33-53.

Lempinen, Heikki (2009). Building Metrics for Assessing the Business Value of Electronic Order-to-Payment Cycle. Masters Thesis at Helsinki School of Economics. Available online:http://www.hse.fi/NR/rdonlyres/EC133 454-EA4B-4839-8256 93A3892FA1B8/0/Lempinen2009.pdf

Lempinen, H. and Penttinen, E. (2009). Assessing the Business Value ofElectronic Order-to-Payment Cycle. 17th European Conference on Information Systems. Manuscript ID: ECIS2009- 0177.R1

Dolman, R. C. (2005). Is Now the Time to Adopt Electronic Invoice and Payment Systems? White paper, Business Technology Consultants, Inc. Available online: http://btciweb.com/EIP_White_Paper_ BTCinc_Feb05.pdf

Penttinen, Esko (Ed.) (2008). Electronic Invoicing Initiatives in Finland and in the European Union Taking the Steps towards the Real-Time Economy. Helsingin Kauppakorkeakoulun julkaisuja, B-95.

Penttinen, E. et al. (2009). Impacts of the Implementation of Electronic Invoicing on Buyer-Seller Relationships. Hawaii International Conference on System Sciences (HICSS), Waikoloa, Big Island, Hawaii, USA, January 5-8, 2009. Available online:http://www.hse.fi/NR/rdonlyres/17ECE 0CE-7E10-46D5-A3C1E05E11DCFB6D/0/PenttinenHallikainenS alomki2009.pdf

Capgemini (2007). SEPA: Potential Benefits at Stake. Available online: http://ec.europa.eu/internal_market/payments/docs/sepa/sepacapgemini_study final_report_en.pdf

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David, P. A., and Greenstein, S. (1990). The Economics of Compatibility Standards: An Introduction to Recent Research. The Economics of Innovations and New Technology, pp. 3-41.

EBA and Innopay (2010). E-invoicing 2010, Available on-line http://www.innopay.com/node/221

Choffray, J., & Lilien, G. L. (1978). A new approach to industrial market segmentation. Sloan Management Review, pp. 17-29.

European Commission and Asia Investment Facility. Guidebook for European investors in Bangladesh. Retrieved from http://www.eudelbangladesh.org/en/ (n.d.) Jaccard, M., Khan, M. R., & Richards, J. (2000). Natural gas options for Bangladesh. Retrieved from http://www.iubat.edu/cpr/pdfs/GasDetails.pdf Saleque, K. A. (2009). Bangladesh Natural Gas Situation. Energy Bangla. Retrieved from http://www.energybangla.com/

Retrieved from http://myinside.chevron.com/ Retrieved from http://www.chevron.com/

Retrieved from Read more: http://www.experiment-resources.com/

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APPENDIX

Survey Questionnaires (The questionnaire is designed for the research paper on Analysis of different reasons for pending of invoices of Chevrons Contractors. The broad objective of the research is to analyze the reasons for which most of the invoices that are submitted by the
35

Contractors are being delayed for payment and in which stages Chevron should give more emphasis to make the payment procedure fast and error free. The information provided by the respondents will not be disclosed to any third party and will be used only for this specific research.) Name: Designation: Respond to the questions by placing a tick () on the appropriate box. Age group: 20-25 Years 25-30 Years 30-35 Years 35-40 Years more than 40 Years Gender: Male Female

Experience in Chevron: Less than 1 year Total Experience: Less than 1 year Religion: Islam Hindu Christian Buddhism Other 1-3 years 3-5 years 5-7 years more than 7 years 1-3 years 3-5 years 5-7 years more than 7 years

Level in organization: Entry Educational Level Under graduation Post graduation Professional Degree Mid Top

* Please indicate how strongly you agree or disagree with each of the variables by using the following scale: 1 = Strongly agree 2 = Agree
36

3 = Neither agree or disagree 4 = Disagree 5 = Strongly disagree

Reasons for pending of invoices Need original supporting For work ticket-Insufficient fund Need Work Ticket Contract has been terminated & closed Short payment, need to cancel & reissue WT Rounding problem Need clarification of overcharge Invoice amount & WT amount not matched For charge code related problem Some portion is wrongly claimed Invoice currency & WT currency not matched

Ratings : 1 2 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2

Rate 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 5

BIBLIOGRAPHY Abbreviation Meaning

37

WT ERP PO CA -

Work Ticket Enterprise Resource Planning Purchase Order Contract Administrator

38