Strategic Selection and Empowerment of Supplier Portfolios Case: Oil and Gas Industries in Iran

Supplier selection and empowerment can become a competitive advantage in portfolio of projects. The general industry trends have focused recently more on consolidation and streamlining the supply base as part of overall supply chain rationalization to weed out suppliers that do not meet company needs. The strategic process of supplier management is replacing the function of purchasing. The proposed model here takes from company's strategy incorporating top level policies and requirements. This paper aims to develop a fundamental framework for Supplier Portfolio management, including supplier selection and empowerment, based on the company's corporate and procurement strategies, to combine similar requirements from various projects into attractive package of business for suppliers who are then selected not only based on their price and quality but also by strategic partnership initiatives and long-term development outlooks. In this model, outsourced items are grouped into two distinct 80-20% Pareto sets. The first set, 80% of non-critical items, with 20% price, may still be purchase with simple or traditional methods. The second set, 20% of is chosen within Supplier Portfolio methodologies looking at corporate, business, and procurement strategic elements. The model is applied to project-based Oil and Gas industries in Iran, where numerous development and expansion projects are underway using local and international suppliers for Goods, Works, and Services. Strategic Selection of supplier portfolio has saved cost and risk in overall procurement, and increased effectiveness and quality of supplies. The model may be generalized to other industries worldwide, where project procurement is on-going business for a large set of projects with common requirements.