Reference no: EM131228427

Boseman Oil and Petroleum (BOP) 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. BOP 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. BOP 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 BOP 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 BOP, 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. BOP 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 BOP 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.