i

Analysis of different reasons for pending

of invoices of Chevrons Contractors

ii

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

iii

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

iv

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.

v

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 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. 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.

vi

TABLE OF CONTENT

Page No.

CHAPTER ONE: INTRODUCTION .. 1 - 7

1.1 Introduction .. 2

1.2 Background of the study .. 2

1.3 Literature Review .. 3 - 5

1.4 Purpose of the Study .. 5

1.5 Objectives .. 6

1.6 Scope of the Report ..... 7

1.7 Limitations of the Study .. 7

CHAPTER TWO: METHODOLOGY AND RESEARCH DESIGN 8-12

2.1 Methodology .. 9

2.2 Conceptual Framework .. 10 - 11

2.3 Research Design .. 12

CHAPTER THREE: OVERVIEW OF THE ORGANIZATION .. 13 - 19

3.1 Overview of Chevron Bangladesh . 14 - 16

3.1.1. History . 14

3.1.2. Founders . 14

3.1.3. Mission, Vision, Objectives and Strategies 14 - 15

3.1.4. Functional Departments . ... 16

3.2 Job Responsibilities 17 - 18

3.3 SWOT Analysis . 18 - 19

vii

CHAPTER FOUR: DATA ANALYSIS . 20 28

CHAPTER FIVE: RECOMMENDATIONS AND CONCLUSION . 29 -31

5.1 Recommendations . 30

5.2 Conclusion . 31

References ... . 32

viii

List of Figures

Page No

Figure 2.1: Data Sources ................... 9

Figure 2.2: Reasons for pending of invoices. ................... 10

ix

List of Tables

Page No

Table 2.1: Research Framework .......................... 12

Table 4.1: Frequency of independent variables .......................... 22

Table 4.2: Frequency of dependent variables .......................... 24

Table 4.3: Factor Loading ........................... 25

Table 4.4: Component Matrix .......................... 26

Table 4.5: Correlations between dependent variables ................. 27

1

CHAPTER ONE: INTRODUCTION

2

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.

3

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

4

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.

5

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.

6

1.5 Objectives

The objective of my study can be divided into two categories. They are given below-

General 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.

7

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.

8

CHAPTER TWO: METHODOLOGY AND RESEARCH DESIGN

9

2.1 Methodology

As, I have worked in the SCM department and my tasks were creating Work-ticket, e-

catalogs 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).

Figure 2.1: Data Sources

Primary data

Secondary

data

The raw data- Data

collected from

respondents

Information from -

indirect sources like:

internet, intranet,

journal articles etc.

Filled up

questionnaire.

Different literatures

and internet surfing.

10

2.2 Conceptual Framework

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

Reasons for

pending of

invoices

Need original

supporting

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

For work

ticket-

Insufficient

fund

Need Work

Ticket

Contract has

been

terminated &

closed

Short payment,

need to cancel

& reissue WT

Rounding

problem

11

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.

12

2.3 Research Design

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.

Research Problem Analysis of different reasons for pending of invoices of Chevrons Contractors

Research Design Combination of Exploratory and Descriptive Research Design

Methods Qualitative & Quantitative

Sample Size (Full Population)15 respondents out of total 18 population

Scaling Technique Likert Scale

Respondents Internal employees of Chevron Bangladesh

Time Working days and working hours (Sunday to Thursday; 8.30 am-5

pm )

13

CHAPTER THREE: OVERVIEW OF THE ORGANIZATION

14

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

15

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

16

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.

17

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,

18

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.

19

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.

20

CHAPTER FOUR: DATA ANALYSIS

21

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.

22

Table 4.1: Frequency of independent variables

Variable Valid Percentage

Age 20-25 yrs 6.7

25-30 yrs 6.7

30-35 yrs 40.0

35-40 yrs 33.3

>40 yrs 13.3

Gender Male 73.3

Female 26.7

Experience in

Chevron

less than 1 yr 13.3

1-3 yrs 13.3

3-5 yrs 46.7

5-7 yrs 6.7

more than 7 yrs 20.0

Religion Islam 80.0

Hindu 13.3

Christian 6.7

Level in

organization

Entry 26.7

Mid 53.3

Top 20.0

Educational Level Undergraduate 33.3

Postgraduate 53.3

Professional Degree 13.3

Total Experience less than 1 yr 6.7

1-3 yrs 20.0

3-5 yrs 20.0

5-7 yrs 26.7

more than 7 yrs 26.7

23

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.

24

Table 4.2: Frequency of dependent variables

Variable Response Percentage

Need original supporting

Strongly Agree 20.0

Agree 73.3

Neutral 6.7

Short payment, need to cancel & reissue WT Agree 6.7

Neutral 13.3

Disagree 66.7

Strongly Disagree 13.3

Rounding Problem Neutral 33.3

Disagree 46.7

Strongly Disagree 20.0

Need clarification of overcharge Neutral 53.3

Disagree 13.3

Strongly Disagree 33.3

Invoice amount & WT amount not matched Strongly Agree 6.7

Agree 20.0

Neutral 26.7

Disagree 46.7

For charge code related problem Strongly Agree 13.3

Agree 86.7

Some portion is wrongly claimed Strongly Agree 6.7

Agree 46.7

Neutral 33.3

Disagree 13.3

Invoice currency & WT currency not matched Agree 33.3

Neutral 26.7

Disagree 26.7

Strongly Disagree 13.3

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

25

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

Comp

onent

Initial Eigenvalues Extraction Sums of Squared Loadings

Total

% of

Variance Cumulative % Total

% of

Variance Cumulative %

1 3.837 34.885 34.885 3.837 34.885 34.885

2 2.057 18.696 53.581 2.057 18.696 53.581

3 1.455 13.230 66.811 1.455 13.230 66.811

4 1.166 10.597 77.408 1.166 10.597 77.408

Extraction Method: Principal Component Analysis.

Component Variable

26

Table 4.4: Component Matrix

Table 4.5: Correlations between dependent variables

1 Rounding problem

Need clarification of overcharge

Invoice amount & WT amount not matched

Some portion is wrongly claimed

Invoice currency & WT currency not

matched

2 Contract has been terminated & closed

For work ticket-Insufficient fund

3 Need Work Ticket

For charge code related problem

4 Need original supporting

Short payment, need to cancel & reissue

WT

Correlations

27

Or_Sup Tic_Ins Work_Tic_Err Contact_Ter Short_Pay Rounding_Prob Overch_Cl Inv_WT_Match Charge_Prob Prop_Claim Cur_NMatch

Or_Sup Pearson

Correlation

1 -0.31 -0.18 0.088 -0.49 -0.42 -0.206 -0.38 -0.105 -0.321 -0.46

Sig. (2-

tailed)

0.258 0.514 0.755 0.063 0.117 0.462 0.16 0.71 0.244 0.084

N 15 15 15 15 15 15 15 15 15 15 15

Tic_Ins Pearson

Correlation

-0.312 1 0.456 .538* 0.376 0.015 0.477 -0.01 0.196 0.014 0.011

Sig. (2-

tailed)

0.258

0.087 0.039 0.167 0.956 0.072 0.967 0.484 0.961 0.97

N 15 15 15 15 15 15 15 15 15 15 15

Work_Tic_Err Pearson

Correlation

-0.183 0.456 1 0.402 0 0.254 0.1 0.191 0 0.227 0.175

Sig. (2-

tailed)

0.514 0.087

0.138 1 0.36 0.722 0.496 1 0.417 0.534

N 15 15 15 15 15 15 15 15 15 15 15

Contact_Ter Pearson

Correlation

0.088 .538* 0.402 1 0.444 0.061 0.274 0.031 -0.086 0.146 0.042

Sig. (2-

tailed)

0.755 0.039 0.138

0.097 0.828 0.323 0.914 0.76 0.605 0.882

N 15 15 15 15 15 15 15 15 15 15 15

Short_Pay Pearson

Correlation

-0.492 0.376 0 0.444 1 0.237 0.183 0.07 0.151 0.187 0.182

Sig. (2-

tailed)

0.063 0.167 1 0.097

0.395 0.514 0.803 0.59 0.505 0.517

N 15 15 15 15 15 15 15 15 15 15 15

Rounding_Prob Pearson

Correlation

-0.422 0.015 0.254 0.061 0.237 1 .572* 0.414 -0.073 .815

** .835

**

Sig. (2-

tailed)

0.117 0.956 0.36 0.828 0.395

0.026 0.125 0.796 0 0

N 15 15 15 15 15 15 15 15 15 15 15

28

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

Overch_Cl Pearson

Correlation

-0.206 0.477 0.1 0.274 0.183 .572* 1 0.031 0.345 0.51 .603

*

Sig. (2-

tailed)

0.462 0.072 0.722 0.323 0.514 0.026

0.914 0.208 0.052 0.017

N 15 15 15 15 15 15 15 15 15 15 15

Inv_WT_Match Pearson

Correlation

-0.382 -0.01 0.191 0.031 0.07 0.414 0.031 1 -0.355 0.427 0.506

Sig. (2-

tailed)

0.16 0.967 0.496 0.914 0.803 0.125 0.914

0.194 0.113 0.054

N 15 15 15 15 15 15 15 15 15 15 15

Charge_Prob Pearson

Correlation

-0.105 0.196 0 -0.086 0.151 -0.07 0.345 -0.36 1 0.016 0.075

Sig. (2-

tailed)

0.71 0.484 1 0.76 0.59 0.796 0.208 0.194

0.954 0.79

N 15 15 15 15 15 15 15 15 15 15 15

Prop_Claim Pearson

Correlation

-0.321 0.014 0.227 0.146 0.187 .815**

0.51 0.427 0.016 1 .665**

Sig. (2-

tailed)

0.244 0.961 0.417 0.605 0.505 0 0.052 0.113 0.954

0.007

N 15 15 15 15 15 15 15 15 15 15 15

Cur_NMatch Pearson

Correlation

-0.46 0.011 0.175 0.042 0.182 .835**

.603* 0.506 0.075 .665

** 1

Sig. (2-

tailed)

0.084 0.97 0.534 0.882 0.517 0 0.017 0.054 0.79 0.007

N 15 15 15 15 15 15 15 15 15 15 15

*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).

29

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.

30

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

31

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

32

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

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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

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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

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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-A3C1-

E05E11DCFB6D/0/PenttinenHallikainenS alomki2009.pdf

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final_report_en.pdf

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David, P. A., and Greenstein, S. (1990). The Economics of Compatibility Standards: An

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

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

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

35

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

36

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 1-3 years 3-5 years 5-7 years more than 7 years

Total Experience:

Less than 1 year 1-3 years 3-5 years 5-7 years more than 7 years

Religion:

Islam Hindu Christian Buddhism Other

Level in organization:

Entry Mid Top

Educational Level

Under graduation Post graduation Professional Degree

* Please indicate how strongly you agree or disagree with each of the variables by

using the following scale:

1 = Strongly agree

2 = Agree

37

3 = Neither agree or disagree

4 = Disagree

5 = Strongly disagree

BIBLIOGRAPHY

Abbreviation Meaning

Reasons for pending of invoices Ratings : Rate

Need original supporting

1 2 3 4 5

For work ticket-Insufficient fund

1 2 3 4 5

Need Work Ticket 1 2 3 4 5

Contract has been terminated & closed 1 2 3 4 5

Short payment, need to cancel & reissue

WT

1 2 3 4 5

Rounding problem 1 2 3 4 5

Need clarification of overcharge 1 2 3 4 5

Invoice amount & WT amount not

matched

1 2 3 4 5

For charge code related problem 1 2 3 4 5

Some portion is wrongly claimed 1 2 3 4 5

Invoice currency & WT currency not

matched

1 2 3 4 5

38

WT - Work Ticket

ERP - Enterprise Resource Planning

PO - Purchase Order

CA - Contract Administrator