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Oil And Gas Industry: Suppliers Selection

1702 words - 7 pages



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. ...view middle of the document...

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
2012 2013
Total Sales
(Million THB) 747 780 4.42%
(Approx. 33 Million THB)
Total Purchasing
(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. The purchase amount of pipeline is significantly higher than others material. Thus, only the pipeline of ABC Company will be studied on supplier evaluation by using Analytic Hierarchy Process (AHP).

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...

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