Enhancing Supplier Selection in the Oil and Gas Industry through Data-Driven Approaches

In a sector as complex and capital-intensive as oil and gas, the decision-making process surrounding supplier selection is pivotal to operational success and long-term competitiveness.

Research from Oman’s oil and gas sector published in the International Journal of Services and Operations Management highlights the need for more structured, data-driven approaches to supplier evaluation. This research explores the application of advanced decision-making techniques to improve transparency, reduce risk, and enhance operational efficiency within the industry.

At the core of this research is the application of multi-criteria decision-making (MCDM) methods. MCDM methods are analytical tools that can be used to evaluate options based on different, often conflicting, criteria. MCDM is particularly important in this industry where decision-makers must balance factors such as cost, safety, regulatory compliance, past performance, and environmental impact. Conventional supplier-selection methods often rely too heavily on subjective judgment, which can lead to the wrong decisions being made.

The findings suggest that these methods can create a nuanced framework for supplier selection. In the case study, the approach shows itself to be invaluable in cases where specific contract requirements demand a more tailored, context-sensitive evaluation of suppliers.

The researchers suggest that supplier selection should no longer be driven by price alone. The volatile nature of the oil and gas industry, shaped, as ever, by geopolitical tensions, fluctuating markets, and evolving environmental regulations, requires a broader focus. Supplier experience, commitment to health, safety, and environmental standards, and the ability to manage operational risks have become more important than initial pricing, particularly in contracts that involve sensitive operations.

The research shows that an MCDM-based framework might be beneficial not only to individual companies, but also to national regulatory bodies and tendering authorities. By embedding these methods into procurement practices, the industry could achieve greater operational resilience, better align with sustainability objectives, and strengthen its contribution to the economy.