What is Supply Chain Management?

Supply chain management for projects in the oil and gas industry involves managing the flow of goods, services, and information from suppliers to end-users. This includes planning, sourcing raw materials, manufacturing, testing, inspection, quality control, documentation, and logistics. In pipe system supplies, installation may also be included in the supply chain. It can require additional handling, machining, and testing before products are commissioned and complete their supply chain journey. Piping systems are often complex and need to handle different conduits under demanding conditions, with little to no room for errors requiring repairs or downtime. Compromised performance anywhere along the chain can result in quality concerns, costly delays, ripple effects on dependent tasks and supplies, as well as inefficiencies that can stop or delay progress and result in loss of profits or tie-up of capital. According to Accenture, this can add upwards of $15/barrel to the cost of production.

To optimize efficiency, reduce costs, and minimize or mitigate risks, supply chain managers need to work closely with their pipe solution suppliers to better understand and include their processes and risks with those of the overall project. This involves careful planning, attention to detail, and close collaboration with suppliers across functions and geographies. In the oil and gas industry where multiple suppliers are needed, supply chain managers need to have comprehensive information about their products at every step along the value chain. They need to address product availability in the materials that they need, production to the appropriate standards and specifications, as well as the flow of logistics across shipping, storage, and handling on land, sea, and air. In addition, products have to arrive on time and in coordination with other products, labor, and equipment within the project management timelines. On facilities such as offshore rigs, storage may not be an option, and delivering materials to site can only be accepted at its allocated delivery time.

The Steps Needed for Effective Supply Chain Management

The key steps involved in the management of the supply chain for oil and gas pipe systems are:


Setting up the overall supply chain strategy and objectives. This will include forecasting demand, checking inventory levels, and developing production and procurement plans based on customer requirements as per their specific project.

Sourcing of raw materials

The first step in the supply chain management process is the sourcing of raw materials. The raw materials used to manufacture oil and gas pipes and accessories include steel, aluminum, and/or other metals and chemicals. It is important to work with reliable suppliers who can consistently provide high-quality materials across applications.


Once the raw materials have been sourced, the next step is manufacturing the pipes and fittings. This involves a variety of processes, such as welding, bending, and coating. Testing and quality control are critical to ensure that pipes meet industry standards and application requirements, and that quality is not compromised anywhere along the supply chain.


Once the pipes have been manufactured, they need to be transported. Transportation can involve different modes, such as trucks, trains, ships, or airplanes. Furthermore, documentation needs to be immaculate if products are to move efficiently across logistics hubs.


Pipes usually need to be stored at a warehouse facility before they are distributed to customers. It is important to ensure the storage facility is secure and that the pipes are stored properly to prevent damage or deterioration. A reliable supplier must have common items in stock to optimize delivery times and save on costs.


The next step in the supply chain management process is the distribution of the pipes to customers. This involves coordinating with the customer to ensure that products are delivered on time and in excellent condition.

Managing Returns

At this stage, the focus shifts to managing reverse logistics and handling product returns or exchanges where required. It involves establishing processes for handling defective products, managing customer feedback, and implementing appropriate measures for product recalls or repairs.


Next, we monitor and evaluate all the key performance indicators (KPIs) to assess the effectiveness and efficiency of the supply chain. This includes tracking on-time delivery, inventory turnover, supplier performance, and customer satisfaction. Data analysis and reporting play a crucial role in identifying areas for improvement and making informed decisions.


The final step is continuous improvement. Based on the insights gained from measuring performance, supply chain managers identify areas for improvement and implement strategies to optimize processes, reduce costs, enhance customer service, and address any bottlenecks or inefficiencies in the supply chain process.

It’s important to note that each of the above steps is interconnected, and supply chain managers must continuously monitor and adjust their strategies and operations to adapt to changing market conditions, customer demands, and technological advancements.

Collaboration and Information

With today’s volatility across markets, economies, and socio-political environments, suppliers can no longer simply act as sellers providing products to customers at an agreed time and price. In today’s markets, oil and gas projects require closer collaboration between suppliers and customers to ensure that the pipes and accessories are manufactured and delivered efficiently. For that, they need to transparently exchange information about anything that may present a risk that can cause delays or affect quality. According to McKinsey and Company, customers and suppliers need to coordinate efforts and shift mindsets:

From buying to planning

This involves identifying the specific needs of the project, such as materials, equipment, and services, and including suppliers in the decision-making stages of the procurement process.

From cost reduction to value adding

Once the planning stage is complete, the next step is sourcing. This involves working with vertically integrated suppliers who can add value to the supply chain and adopt a total-cost-of-ownership model to their KPIs and delivery models.

From functional to strategic

The procurement stage involves purchasing the goods and services identified in the planning stage. This requires managers to be involved in the early stages of planning as well as with operations and maintenance teams working on the project.

Effective supply chain management for oil and gas industry projects today relies on working with reputable suppliers who can collaborate on a project from planning through to execution. This shifts the role from traditional compliance-focused sellers to being fully integrated with the supply chain architecture and requires new levels of information sharing to mitigate risks and optimize operations through value-added services that tackle the project KPIs across its useful lifespan.

Gerab has decades of experience in perfecting supply chain management in the oil and gas industry in the middle east and beyond. In an ever-changing regulatory and business landscape, supply chain management is a never-ending task but it’s one where Gerab excel. To speak to us about your project requirements. Contact us today.