Essay PreviewMore ↓
Over the last decade, the supply chain management has influence to business all over the globe. Purchasing is one function within supply chain which becomes the most important element to establish value-added products or services. The major aspect of purchasing is supplier selection. It is recognized that selecting appropriate supplier is one of the key success factors of a firm. Selecting the right supplier is always a difficult task for purchasing manager (Liu et al., 2005). Right suppliers selection can lead the company to success and achieve the objectives. On the contrary, wrong supplier selection can lead the company to financial problem. Therefore, purchasing departments need to emphasize about supplier performance evaluation which not only concern one criterion such as price, but also consider of multi criteria for evaluating suppliers in order to select the right supplier.
1.1 Background of the Study
Nowadays, oil and gas industry plays a major role to driving the business in both local and global level. It provides energy and essential chemical for industry, homes and transport which is increasingly consumed by user every day. There are around fifty oil and gas companies located in Thailand and ten out of fifty are ABC Company’s customer. The ABC Company is one of the leading trading, stockist, sole distributor and engineering company who supply industrial process equipment of piping materials for instance pipeline, flanges and fitting. The company was established in May, 1998 with 100% Thai shareholder. The company caters the materials and supply to oil and gas industry in order to construct and maintenance for transmission pipeline project and shutdown plants.
Figure 1.1: Piping Material of ABC Company
Source: ABC Company
The company is growing gradually 4.42% in trading materials likewise the purchasing amount is also incessantly increased 11.87%. The increasing in purchasing is from the company committed to stock the material in order supply anytime when customer needed to fulfill the customer’s satisfaction. Table 1.1 shows the comparison of sales data and purchase data from 2012 to 2013 of the ABC Company.
Table 1.1: Sale and Purchasing data of the ABC Company
Year % Increase
(Million THB) 747 780 4.42%
(Approx. 33 Million THB)
(Million THB) 438 490 11.87%
(Approx. 52 Million THB)
Source: ABC Company
During the year, the ABC Company has to purchase piping materials which compose of pipeline, flanges and fitting as the proportion shown in figure 1.2.
Figure 1.2: Purchasing proportion of the ABC Company
Source: ABC Company
Source: ABC Company
From figure 1.2, the amount purchase of ABC Company from year 2012 to 2013 of pipeline, flange and fitting are approximately equal 68%, 18% and 14% respectively.
How to Cite this Page
"Oil and Gas Industry: Suppliers Selection." 123HelpMe.com. 16 Feb 2020
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- Overview of Environmental Concerns related to Oil and Gas Fracking As long as the world continues to need energy from fossil fuels, the oil and gas industry will develop new techniques for maximizing recovery of deposits in the ground. Fracturing, a relatively expensive new process for accessing major oil and gas formations across the US and other energy-producing nations, is at the center of an important ethical and environmental controversy. Hydraulic fracturing (“fracking”) and unconventional shale gas recovery are processes for speeding up the production and harvesting of natural gas and/or oil in underground formations.... [tags: Natural gas, Petroleum, Shale gas, Oil well]
1673 words (4.8 pages)
- Oil and gas stocks in Canada for Q3 2016 Industry overview and what companies to keep tabs on “The volatility of oil prices means that it is still virtually impossible for buyers and sellers to agree on what assets are worth, which means that acquisition and equity markets will likely remain subdued in the near future.” – Tom Pavic, President, Sayer Energy Advisers Oil and gas, Canada’s lifeblood. It is an industry near and dear to our heart, and one that provides plenty of highs and lows for our economy.... [tags: Natural gas, Petroleum, Peak oil, Renewable energy]
1598 words (4.6 pages)
- Oil and gas are the lifeblood of modern society. The United States Energy and Information Administration 's records show that world oil consumption has increased by an average of one thousand barrels a day each year since 2010 (EIA) . In 2014 "61% of primary energy consumed in the United States was from oil or natural gas” (EIA). In addition natural gas consumption is on the rise as the United States, everyday less and less coal is used to generate electric power and more natural gas is. Even as the price of crude oil drops and the opportunity for employment diminishes; petroleum engineers are still needed to find ways to continue to produce the resources that are needed for everyday life.... [tags: Petroleum, Natural gas, Oil well]
1008 words (2.9 pages)
- Until recent years, the United States had not been a major topic of discussion in the global production of oil and natural gas. However, advancements in exploration and production technology have revolutionized U.S oil and natural gas production; the effects have been recognized on a global scale. An article titled “Hydraulic Fracturing: Unlocking America’s Natural Gas Resources” states, “Hydraulic fracturing and horizontal drilling are safely unlocking vast U.S. reserves of oil and natural gas found in shale and other tight-rock formations.... [tags: Petroleum, Natural gas, Oil well, United States]
1429 words (4.1 pages)
- The oil and natural gas energy industries have their share of marketing challenges. Scenes from Gasland when Director Josh Fox uses a lighter to set water on fire, exasperated the public about how O & G companies are operating their businesses with concerns of the harmful and unsustainable effects to local and regional communities. The documentary FrackNation debunks the majority of the misrepresentations of Gasland, but the scenes are unsettling and the harm has been done. It takes time to build a sustainable reputation and it can be destroyed in a few minutes of video.... [tags: Water resources, Water supply, Shale gas]
953 words (2.7 pages)
- The nature of the oil and gas industry is one that lends itself to intense competition between rivals. Gone are the days when oil and gas conveniently seeped out of the earth or were accidently discovered during other drilling operations. These days, due to the industry’s reputation of providing enormous profits, there are a plethora of companies in the industry that are engaged in exploration, development, acquisition or exploitation of oil and natural gas. Over the years, as the amount of companies in the industry has increased and drilling for oil has gotten more complicated, competition has stiffened and companies are left to find creative ways to gain and maintain a competitive advant... [tags: Petroleum, Natural gas]
900 words (2.6 pages)
- The Prirazlomnoye field was discovered one year later in 1989 . This oil reserve is estimated to contain 72 million tons of oil. Like the Shtokman field, it still under development which began in December 2013. Drilling operations on the field takes place on a single ice resistant platform. The platform contains storage tanks which in total can hold up to 113,000 cubic meters of gas. To transport the gas, tankers must sail across the sea to a different oil platform. The gas is then processed on the Belokamenka platform.... [tags: Petroleum, Natural gas, Transport, Russia]
712 words (2 pages)
- Brazil Oil and Gas Production Reach Record Highs In September (Cifuentes, 2016) The Brazilian government reports oil and gas production reached new record highs in September, 2016. The 2.67 million barrels per day (bpd), in September are representative of a 2.4 percent increase monthly and an 11.5 percent increase annually according to energy regulators, Agencia Nacional de Petroleo. The increased production comes from the offshore, Lula oil field, run by Petrobras, in the Santos Basin of Brazil.... [tags: Natural gas, Petroleum, Fossil fuel]
731 words (2.1 pages)
- ExxonMobil is a multinational oil and gas company with its headquarters offices in Irving, Texas. It was formed in 1999 through a definitive agreement between Exxon Corporation and Mobil Oil Corporation to merge and create a new company. In essence, the corporation produces, distributes and sells oil and natural gas across the world. The structure and culture help it survive the price burst which often occurs in the global oil market. Notably, among its largest competitors, ExxonMobil generates high revenue and produces large volumes of oil for every penny it spends.... [tags: ExxonMobil, Petroleum, Exxon Valdez oil spill]
1470 words (4.2 pages)
- the aim of every business is to create market efficiency by distributing economic prosperity equally among all the members of the society that encompass the buyers, sellers, producers and even retailers. However, this is usually not the case because most businesses end up benefiting a few and oppressing the others just as depicted by the presented article. The article highlights about the growing production of Shale oil in U.S and how this new trend will affect the producers, energy markets as well as geopolitics (Friedman & Faucon, 2015).... [tags: Supply and demand, Marketing, Peak oil, Producer]
710 words (2 pages)
1.2 Statement of the Problem
Evaluation is the method of measurement. The effective of supplier evaluation should concern on several criteria such as pricing, delivery, quality and service. Therefore, in every business where there have purchasing functions or especially trading company, supplier evaluation method is essential to measure and monitor the performances of supplier in order to ensure that products or service will be right in material at the right time at the right price and in the right place.
Aforementioned, the ABC Company has the highest purchase on pipeline which is around 68% of the total purchasing from year 2012 to 2013. The company has three suppliers who supply pipeline which using for oil and gas industry. All suppliers are based in oversea such as Korea, Singapore and China. At the present, criteria that company used to select supplier is only price by regardless attention to others criteria. The supplier who offers lowest bidding quotation will be the source which the company selected to purchase with. Therefore, currently method which is concern only on one criterion is insufficient to select the right supplier. Regard to the historical data year 2012 to 2013, the rejection report of pipeline from two major cause are defect pipeline such as crack, dent, and wall thickness not meet with standard, and penalty from late delivery to client which normally is 0.2% of the purchase order amount, the indicated lost values are 3.8 Million THB and 4.6 Million THB or 0.87% and 0.94% of total purchase respectively.
Figure 1.3: Comparison value between Purchasing and Rejection of Pipeline of the ABC Company
Source: ABC Company
While the percentage of rejection comparing with purchasing is not statistically significant, but it is significantly loss when the company considers in term of monetary value. Therefore, it is necessary to apply the appropriate methodology which can help the ABC Company to select the right supplier based on using Multiple Criteria Decision Making (MCDM). In MCDM, the several conflict factors are the problem which affect in supplier selection. So the managers need to analyze and trade-off among the several criteria, and it is also rely on the purchasing situations which the various criteria need to weight in order to select the critical one to consider to purchase.
Reference to available literature, Analytic Hierarchy Process (AHP) is one of effective MCDM which is wildly used successfully in multifactor decision making circumstance where all criteria are weighted based on pair-wise comparison. This kind of method has ability to structure complex, multi-attribute, multi-person and multi-period problems hierarchically (Yusuff, PohYee & Hashmi, 2001). The AHP can be useful when it involves in several decision makers with the various conflicting objectives to work out as consensus. The AHP method is recognized to assist in decision making resolve the supplier selection problem in selecting the optimal supplier combination (Yu & Jing, 2004). Hence, this study aims to find out the problem of “How would the ABC Company apply the AHP to identify the supplier selection criteria?” From this study by using AHP to evaluate the supplier criteria selection, it would help the ABC Company completely understand the perspective supplier’s performance then the company can apply to select the right supplier.
1.3 Research Objectives
This study is attended on three objectives are:
1.3.1. To identify the essential criteria for pipeline supplier selection for ABC Company.
1.3.2. To apply Analytic Hierarchy Process (AHP) model to assist the company makes a decision involving with a Multiple Criteria Decision Making (MCDM) in order to enhance efficiency of decision maker.
1.3.3. To analyze the optimal supplier base on AHP method.
1.4 Scope of the Research
This study focuses on evaluation of multiple criteria by using AHP method to evaluate the various criteria for supplier selection of ABC Company. The selected evaluation is from the highest monetary value purchase item which is pipeline. The study is regardless to focus on customer satisfaction, increasing in sale value or decreasing inventory. There are three suppliers out of five pipeline supplier base on Pareto Analysis will be evaluated and scoring. All multiple criteria will be weighted score by pairwise comparison by purchasing manager, sale manager, quality control manager and logistic manager. In computation process, the rounding function in Microsoft excel with 4 decimal will be applied.
1.5 Significance of the Research
This study aims to apply AHP method to improve supplier selection process by muti-criteria decision for ABC Company. The AHP is logically evaluation method to select the appropriate supplier lead to increase customer satisfaction and company’s revenue. Therefore, the result of this study will benefit to the company not only for pipeline product but also apply to use with the others kind of high value products. Besides, this study will be benefit to the company in the way that it provides better method than the existing, and also serve the company as the basis of systematic method and a theoretical model for future analyze and selecting suppliers based on multi-criteria decision making.
1.6 Limitations of the Research
This study is primarily limited by the information database of ABC Company. Unfortunately, in year 2011 SAP system of the company has failed result in all recorded data has lost and the system could not recovery the data. Thus, in this study will bring the available recorded data only from year 2012 onward to 2013. Secondly, almost all pipeline suppliers are supply at oversea country, thereby the monetary unit will not be the same and also the currency exchange was fluctuating over the year 2012 to 2013. Lastly, the study pertains only to pipeline supplier selection criteria for ABC Company. The criteria evaluated result may difference depend on management, type of products and business style of each organization.
1.7 Definition of Terms
Pipeline is the pipe used for transport liquids and gases.
Flange is a plate to form a rim of pipeline to fastened with another pipeline.
Fitting is used to connect the straight pipe, to adapt to difference size and shapes
Shutdown is the oil and gas plant allow all components to be properly checked and serviced.
Supplier performance evaluation is a process used for measure and approving potential supplier
Pipeline rejected is the pipeline which is under quality detected by quality control of the company, such as dent, rough surface, crack and under size of wall thickness.
Supplier Selection is the process which the company identify, evaluate and contract with suppliers
Purchasing is the activity of ordering to obtaining goods or services to achieve the objectives of an organization.
Multiple Criteria Decision Making (MCDM) is consider more than one characterized as a choice among alternatives factors.
Trade-off is a situation which two factors need to be chosen only one regarded as more necessary.
Analytic Hierarchy Process (AHP) is the method based from mathematical, allow to solve with multi-criteria situation by weight score on the considered criteria.
Pair-wise comparison is the process to comparing and evaluate alternatives or a group of items by assigning weights on decision making criteria.