Scm in Petroleum Industry

International Journal of Global Logistics & Supply Chain Management. Vol. 1, No. 2, 1 November 2006, 90 – 97.

Supply Chain Management in the Petroleum Industry: Challenges and Opportunities
RAED HUSSAIN
Department of Quantitative Methods & Information Systems, Kuwait University, Kuwait

TIRAVAT ASSAVAPOKEE
Department of Industrial Engineering, University of Houston, Texas, U.S.A.

BASHEER KHUMAWALA
Department of Decision and Information Sciences, University of Houston, Texas, U.S.A.

Supply chain management in the petroleum industry contains various challenges, specifically in the logistics area, that are not present in most other industries. These logistical challenges are a major influence on the cost of oil and its derivatives. However, opportunities for cost savings in logistics still do exist. Giant oil and petrochemical companies are undertaking a “swap” practice that saves companies millions of dollars. The objective of this paper is to shed some light on the supply chain challenges and opportunities in the petroleum industry and on swap practices that have long been employed by petroleum industry’s giants around the world, such as BP, BASF, Honeywell, Nova, and much more, yet have long been ignored in the operations management literature. Keywords: Supply Chain Management, Logistics, Petroleum Industry, The Swap Practice 1. Introduction The steadily increasing global demand for oil and its derivatives such as petrochemicals has enabled companies providing these products to reach more customers and increase their market share and profitability. This boom in global demand along with the ease of international trade and the inflexibility1 involved in the petroleum industry’s supply chain has made its management more complex and more challenging (Coia, 1999; Morton, 2003). Despite the importance of supply chain management and its growing complexity, the petroleum industry is still in the development stage of efficiently managing their supply chains.

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