Tips for steel pipe purchase manager
Before I start this article, I’d like to tell you my background career. I’ve worked for the biggest steel trading company in Korea and was in charge of pipes sales for 11 years. My customers were mainly national & private oil company, construction company, fabricators, local pipe distributors from U.S.A., Canada, Mexico, Colombia, Peru, Venezuela, Chile, Brazil, U.A.E, Iran, Singapore, Thailand, Myanmar, Indonesia, Malaysia, Bangladesh, Australia, Nigeria, Libya and etc.
I’ve been around to the above mentioned countries to meet the customers and made pipe supply contracts. The pipe suppliers were mainly from China, Korea, Vietnam, Taiwan, India.
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How to purchase steel pipe smarter by different industries
1) Oil Company
Tip1 : More potential vendors give you more chance of cost saving
If you’re a purchase manager of oil company who need to buy OCTG / Drill Pipe / Linepipes, your company might have a restricted vendor list and you might be allowed to purchase among vendors in the list.
However, restricted vendor list generally increase costs due to limited competition between pipe manufacturers. Thus it would be better to permit as many vendors as you can by making auditing process before you start purchase program.
Tip 2 : More time you have, more chances you will get competitive price
You can save budget by securing longer delivery time in purchase project. If you have very limited delivery time, you don’t have any other choice but to purchase stock pipes from local distributors. But the price of local distributors is usually 30% higher than the price of pipe factory.
Nowadays pipe factory’s production time is very short due to sluggish economy. If you have good contacts with pipe factories, it is totally possible to make factories to produce within 20~30 days. In my experience, the shortest production time was 15 days for X60 PSL2 / 8” – 1,700MT after I placed the order to the pipe factory.
In other words, if you have enough delivery time from pipe factories, you don’t need to pay higher cost to local distributors.
Tip3 : Important inspection points : Raw material, Thickness, NDT data
Of course, you should avoid unqualified pipe manufacturers by having your own evaluation criteria for pipe manufacturing facility, raw material production company, NDT(Non Destructive Test) procedure.
Most of pipe quality defects come from raw material quality, thickness and incomplete NDT procedure. For example, pipe manufacturers is very hesitant to perform hydrostatic test for all quantity of pipes if you don’t control and inspect strictly. Because it takes so long time to perform hydrostatic test and it affects the factory’s productivity.
For this reason, pipe manufactures usually don’t want to perform thorough hydrostatic test. Thus hiring 3rd party inspection company during the production process is highly recommended to prevent from any potential quality claim.
2) Construction company
Tip 1 : Check every step of production + Request for performance bond
If you’re pipe purchase manager of a construction company, your KPI (Key Performance Indicator) would be mainly cost-saving and delivery on time. Especially delivery time is the most important factor to prevent delay the whole project schedule.
So you have to check production & delivery status for every step such as raw material production, pipe production schedule, vessel arrangement, estimated vessel departure & arrival schedule. If possible, you have to ask pipe manufacturer to open the performance bond to give them more pressure on the agreed production & delivery time.
Tip 2 : 3LPE coating in overseas is okay, but if it’s FBE, consider local coating
In performing pipeline project, you have to be cautious with dealing coating on linepipe because of its easy & frequent damage on the coating surface. 3LPE coating can be safe from damages until pipes delivered to a job site as long as pipes are well handled & protected during shipment & local transportation.
But it is impossible to make FBE coating pipes arrived to a job site without any
damage. So it would be better to do FBE coating locally near the job site even though
you import the bare pipes from overseas country.
If you repair coating pipes, holiday inspection should be done after coating repair process to make sure the quality of repaired coating.
If you’re a purchase manager of fabricators, you should check if pipes to be purchased are fit for your final product. For example, if you’re a purchase manager of cold drawn tube factory and need to purchase mother tube, you have to make small quantity of trial order to verify if mother tube is fit for your production purpose.
And you have to increase the number of your approved supply sources to make them compete and receive good offer price.
Tip : Continuous trial order to develop new source & verify the fitness for usage
The reason why you should have supply sources as many as possible is that sometimes your original pipe sources might have unexpected production problem such as factory revamping, no available production capacity due to sudden large quantity of order
booking from big buyer.
[Cold Drawing Principle]
Thus it would be much better for you to have many qualified pipe factories options by continuously doing small quantity of trial order per each pipe size to prepare the future business even though when you don’t need it right now.
4) Local distributor
Tip 1 : More offers from reliable pipe manufacturers means more chances of competitive price
If you’re a purchase manager of local distributors, you might count on only 3~4
sources due to the lack of relationship with pipe factories.
However there are more than 500 pipe manufacturers in China and the number of qualified pipe factories are also more than 50. Thus it is highly important for you to receive as many offers as possible to check the range of price from different qualified pipe factories.
If you want to find a supplier with cheaper price than your current supplier, it would be better to make trial order around 100MT with several size mix to test quality and delivery
time. It is dangerous to place big order quantity to unfamiliar factory from the
Tip 2 : Finding good financing source to run business without capital burden
Also you can solve your limited working capital problem by receiving financing from big
trading company. Mostly local distributors collect payment from end-users within 30
days after pipe delivery.
If you count this period from pipes cargo vessel departure date, it would be around 60 days ~ 90 days time from B/L date. In this regards, if you can receive 60 ~ 90 days financing from your supplier, you can collect your payment without capital burden.
Usually Singapore, Korea, Japan trading companies offer low rate of financing cost with 2~3% interest rate thanks to its low rate of capital finance capability.
All these tips are from my last 11 years of experience. Perhaps some people might agree or some people might not agree. If you want to discuss this issue with me, please feel free to contact me. I really enjoy talking about this issue with other people.
And if you have questions about the article, please do not hesitate to contact.
* Email : Kenneth Kim / email@example.com