Identify the type of information Jeff Kessinger needs to gather

Falcon Oil and Petroleum (FOP) is one of many oil companies

operating offshore petroleum platforms in the Gulf of Mexico. The

company identifies offshore sites for exploration drilling and constructs

drilling platforms. Once exploration activities are successful, the

platforms are converted to a production platform to extract crude oil and

natural gas. FOB operates multiple platforms and an onshore facility that

serves as the primary interface between the platforms. Boats with

specialized crews provide logistics services between the platforms and the

onshore facility. The boats deliver fuel, water, equipment, and other

needed supplies multiple times a day to the platforms. Accurate and

timely delivery of materials is absolutely necessary for successful platform

operations.

FOP had traditionally focused on exploration and production

activities, paying little attention to operating costs. However, operating

costs had been increasing rapidly. A particularly significant cost was the

operating of boats and crews needed to provide logistics services

between platforms and the onshore facility.

The boats are highly specialized, with built-in storage tanks and

unique cargo space designs. The boat crews are specially trained, and

operating the boats and crews is highly expensive.

Although FOP is dependent on the boat deliveries, it does not use

the boats at full capacity, and they are often idle. Jeff Kessinger, director

of offshore operations for FOB, is now faced with the decision of how to

reduce operating costs. One option is to outsource the logistics service to

a company specializing in providing offshore logistics services. Logistics-

Offshore Inc. is such a company, owning and maintaining its own fleet of

boats and crews. Logistics-Offshore could be hired to perform this

function. FOB could sell its boats and focus on oil exploration.

Jeff is aware that outsourcing is an important strategic decision and

there is much to consider. He is not sure where to begin.

Case Questions

1. Identify the potential strategic advantages and disadvantages for FOP

in outsourcing the boat logistics service to Logistics-Offshore. Explain the

strategic implications of each.

2. Identify the type of information Jeff Kessinger needs to gather and

evaluate in order to make his decision.