Evaluation Of Quality And Sustainability Incentives To Optimize The Indonesian To The United States Crude Oil Supply Chain

Abstract

The New York Times explained that the United States increased its dependence on oil from Saudi Arabia by more than 20 percent last year (Krauss 2012). The United States of Energy Information Administration (U.S. EIA) stated that oil from Saudi Arabia was accounted for 14 percent of the U.S. crude oil and petroleum products in 2012 ("Oil: Explained" 2012). This is problematic due to the fact that 14 percent of the U.S. net crude oil and petroleum products imports come from one country, Saudi Arabia. What happens to the U.S. economy when Saudi Arabia manipulates demand and possibly stops exporting oil to the U.S.? Governments, crude oil refining companies, and other stakeholders are finding it necessary to invest infrastructure and buy crude oil from other nations including Indonesia. The objective of this dissertation is to seek impacts of the U.S. dependency on foreign oil problems by introducing a mixed-integer programming (MIP) model that supports decisions about providing economic and environmental incentives to improve the supply chain quality of crude oil in Indonesia so that it becomes more cost effective for the U.S. to import crude oil from Indonesia as opposed to other global sources. In order to meet the objective, three specific objectives are investigated such as evaluate the supply chain factors that determine supply chain quality of crude oil production; evaluate sampling plans that balances the tradeoffs among various economic and environmental incentives for crude oil suppliers in Indonesia; and evaluate the economic impacts of inspection tools (quality) and environmental incentives (sustainability) tools on operational strategies in supplier networks. The intellectual merit of this dissertation is a mixed-integer programming (MIP) model that demonstrates the tradeoffs between supply chain quality and supply chain profit for Indonesia that can be expanded to other nations.