Oil and gas industry enjoys ERP great role in sustainable supply chain management Pt. 1
2019-04-29 15:04

Enterprise Resource Planning (ERP) software systems have focused on internal process integration of traditional functions, such as sales, production, and inventory management. The transaction based integrated processing provides different tools that can support supply chain integration but at the same time it has several aspects that obstruct the integration with business partners.

By gaining access to the suppliers’ production and delivery schedules, buyers can improve their own production plans and delivery schedules. Correspondingly, suppliers can use the buyer’s real time store level data to plan their inventory levels, and production schedules. Sharing order status information among the supply chain partners improves customer service quality, speeds up the payment cycle and provides cost savings. Sharing data regarding to performance metrics such as lead times, quality specifications, return status, etc., helps supply chain partners to identify and overcome the bottlenecks in the supply chain.

In this paper first we summarize the most important tools and concepts of ERP systems that help in supply chain information sharing, cooperation, and cost optimization. On the other hand Sustainable development is a process, which tries to maintain a dynamic balance state in the long run. It demands the human, financial and environmental concerns to work together to ensure ‘unending life for the human race’ in the global ecological system.

The term sustainable development in the oil and gas industry should not refer to indefinite production of oil and gas. The term refers to sustainability of human existence by carefully balancing social, economic and environmental capital in a continuously changing world. In the past, supply chain management (SCM) mostly dealt with the responsive and efficient system of production and delivery from raw material state to final state of the component. However, these days, environmental issues in a supply chain are assumed of having immense significance. The concept of sustainable development has been considered important in terms of policy and research.

In the next few decades, it will become one of the biggest opportunities in the history of commerce. As income increases, there will be a rise in the environmental standards and people will become more sensitive and concerned towards environmental deterioration. Unless the society accumulates some amount of wealth to fulfill the basic needs of human, it will not allot substantial resources towards sustainability. Sustainable practices are more likely to get implemented if there are noticeable benefits such as cost savings or product/market differentiation or risks from its inaction like reputational damage and loss of market share.

Today, we face two major global threats, which are related, and both are due to overpopulation. The first threat is the peaking of the production (tons per year) of fossil fuels. The peak of petroleum production in the U.S occurred in the year 1971. From the year 1973, oil became costly and in the October month of the same year, oil prices increased very rapidly, causing a massive energy crisis around the globe. It was then that the governments of all the nations took this issue very seriously and a need for identifying and exploring alternate sources was observed. Enormous funds were allotted for the development of these resources. Thus, this year is considered as the year of the first oil shock. In the same decade, in 1979, one more oil shock shook the world. By the end of the year 1980, the price of crude oil increased by 19 times in a span of 10 years. Global energy demand will rise by 1.2% a year through 2030 and the world will be using almost 35% more energy than it used in 2005. Also, there is a continuous increase in the prices of crude oil over the years. Supplies are decreasing, but demand is increasing and industrial society depends almost completely on petroleum. Hence, peak petroleum will quickly cause everything to peak].

It may be noted that modern agriculture is totally dependent on petroleum, so the peak of world petroleum production would definitely affect the world food production adversely. At the same time, population of the world will increase, creating a tough situation for the society. As Heinberg states, “the passing of the world peak of petroleum production will be a big milestone for the human race on the earth because it means that the tons per year of petroleum being produced all over the world will start to deplete to zero while the world population is expected to increase along with the demand for petroleum.” This process will push energy prices higher, until sustainable sources replace dependency on fossil fuels as the major source of energy. The second threat is the rapidly changing global climate. The world’s population has increased from 3 billion in 1950 to 6 billion today and is expected to reach 9 billion in 2050. The projections based on the present report of birth rates indicate that the population will stabilize somewhere around 11 billion by 2100. Sustainable practices are the solution for the two above-mentioned global threats. New strategies will be implemented in order to gain competitive advantage in the coming years by minimizing waste and promoting green design. The main reason for the change of climate is the tremendous growth rate of population, which in turn increases the consumption of the world’s resources. The past research did not throw much light on the potential benefits of gaining competitive advantage using sustainable supply chain practices. From the literature, it may be noted that the implementation of sustainable practices may solve the ecological, economic and social problems or reduce the same to a larger extent.


The oil and gas sector is classified into three sections: upstream, midstream, and downstream. The upstream consists of exploration and production. The midstream is the distribution system, consisting of tankers and pipelines that carry crude oil to refineries. The downstream includes refining, marketing, and retail distribution, through gasoline stations and convenience stores. All these sectors have shown tremendous potential for the implementation of sustainable practices. The oil and gas industry has made significant progress in decree sing the impact of its operations on the environment. The highest contributor of oil entering the global oceans is from natural seeps (46%), followed by consumers of oil by way of sewers, storm drains and water vehicles (37%), transportation of petroleum (11%) and oil and gas exploration and production (3%). The oil and gas industries are presently implementing the following practices towards sustain-ability-1. Improvement of energy efficiency in all the operations 2. Eliminating venting and flaring 3. Developing and implementing the proper technology for reducing CO2 emissions, 4. Developing trading procedures for greenhouse gases. The oil and gas industry is addressing the issue of habitat loss by the following practices- 1. Using technology to reduce the primary affects associated with oil and gas development, e. g. using inclined drilling from a central pad to decrease the footprint of the facility. 2. Reducing deforestation when making seismic surveys and constructing pipeline right of ways. 3. Restricting human use of new areas through control on access. 4. Developing best practices and tools with other stakeholders.

A sustainable organization contributes towards sustainable development by providing economical or financial, social, and environmental benefits. Increasing global concerns about environmental issues such as climatic change, pollution and biodiversity loss and about social issues related to poverty, health, working circumstances, safety and inequity, have encouraged industry inclination towards sustainability.