RP Turner Corp. makes pipeline valves for the oil industry in western
Canada. It buys materials from Japan, the USA and eastern Canada,
manufactures valves in Edmonton, Alberta and ships the finished products
to oil fields in the North.
The company grew by emphasising the high quality of its products, which
work reliably in the harsh weather conditions of the Arctic. Transport to
remote customers is expensive, and in 2000 the company looked for ways
of reducing the cost of logistics. It soon found that separate functions
worked more or less independently. This was sometimes all too obvious
when the three main departments – Marketing, Production and Finance –
were in different locations. Production was in Edmonton, as the nearest
major city to the oil fields; Marketing was in Calgary near to oil company
headquarters; Finance (including procurement) was in Vancouver near the
port and financial centre. To appreciate the potential problems, you have
to remember that Canada is a big country, so Production was a thousand
kilometres away from Finance, 500 kilometres away from Marketing and
over two thousand kilometres from delivery points.
The company was rewarding different departments for different types of
performance. Not surprisingly, when the departments were asked for their
priorities, they had different views
RP Turner Corp. makes pipeline valves for the oil industry in westernCanada. It buys materials from Japan, the USA and eastern Canada,manufactures valves in Edmonton, Alberta and ships the finished productsto oil fields in the North.The company grew by emphasising the high quality of its products, whichwork reliably in the harsh weather conditions of the Arctic. Transport toremote customers is expensive, and in 2000 the company looked for waysof reducing the cost of logistics. It soon found that separate functionsworked more or less independently. This was sometimes all too obviouswhen the three main departments – Marketing, Production and Finance –were in different locations. Production was in Edmonton, as the nearestmajor city to the oil fields; Marketing was in Calgary near to oil companyheadquarters; Finance (including procurement) was in Vancouver near theport and financial centre. To appreciate the potential problems, you haveto remember that Canada is a big country, so Production was a thousandkilometres away from Finance, 500 kilometres away from Marketing andover two thousand kilometres from delivery points.The company was rewarding different departments for different types ofperformance. Not surprisingly, when the departments were asked for theirpriorities, they had different views
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