CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Nigeria, the biggest sub-Saharan country with a populace surpassing 200 million individuals,

is the biggest oil producer in Africa and the 11th biggest producer of black gold raw on the

planet (Oyebode and Kofo, 2007). In 2006, Nigerian total oil production, including Liquified

Natural Gas and refinery gain, was estimated at 2.45million bblld. Of this, about 2.28million

bblld of the produce was petroleum crude oil according to Environmental Impact Assessment

report 2019 (EIA, 2007). According to Oyebode and Kofo, 2007) Nigeria has the biggest gas

reserves in Africa and is positioned at seventh as global gas reserves. Its Liquified Natural

Gas gas is estimated to be double its crude oil reserves holds.

In spite of this large natural resources, Most Nigerians actually live-in homes where biomass-

based fuel are still utilized as they do not have access to Liquified Petroleum Gas. Presently,

Nigeria, LPG is imported and discharged at Atlas Cove in Lagos facility. It’s also produced

in port-Harcourt at Finima, Bonny and transported to Atlas Cove, the operation facilities in

Lagos before haulage trucks (Bob tail Truck) from different parts of the state will load and

distribute across dispensing stations in the country. The movement of this LPG product from

their destination point that is, Rivers State (Bonny) to Atlas Cove in Lagos before distributing

to other part of the state creates a bottleneck which resulted in the landing cost of this product

(LPG) very expensive for end users. LPG is a conventional name associated with the blend of

hydrocarbons that changes its state gas to liquid when subjected at room temperature under

atmospheric pressure. The chemical composition of the LPG product varies but the

predominant ones known is butane (Isobutane) and propane. After fractional distillation, LPG

is separated from the raw crude oil in either gaseous or liquid state. (WLPGA, 2017).

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According to the report by WLPGA (2017), At room temperature, LPG has the property of

changing to liquid when compressed likewise at reduced pressure it changes to gas. This

makes it simple for storage and transportation. For enormous bulk mass, LPG is seaborne

transported in the liquid state and refrigerated, however on land it is transported and stored in

compressed tanks. When compared with other unsustainable biomass and fossil fuel, LPG

burns neatly. It creates no particulate matter, low discharges of carbon (IV) oxide, unburned

hydrocarbons, carbon (II) oxide and nitrous oxide, than most petroleum derivatives and

biomass. According to Antonnete et al. (2004), the energy content of LPG is higher than the

HHK currently being used for cooking. LPG cooker has about 65% higher efficiency

compared to the traditional stoves of about 15%.

O&G products is one of the world's most significant raw materials. It has been the world's

driving source of energy since the mid 1950's. The oil and Gas company is one of the main

sectors of the world economy and essentially affects the development of other different

sector. This source of energy is what provides electricity to heat water, fuel vehicles, utilized

in present day medicine, to processed extract that is; synthetic compounds used for cleaning

home items. The oil and gas industry plays an important part in driving the world economy.

Supply chain network can be characterized as the coordination, configuration and constant

improvement of a defined sequential set of coordinated activities. The objective of SCM is to

give maximum consumer service delivery at the minimum cost. (Gross, 2012).

Changes in innovation, markets and consumer needs influence the competitiveness of

organizations, which requires persistent restructuring of the strategies for positioning the oil

business. Presently, the major challenges confronting the oil and gas company is to minimize

the cost of production & distribution of refined product to end-users. An efficient supply

chain network can expand the productivity and competitiveness of an oil and gas industry and

its distribution overall. In a SCN, the O&G company is linked through the downstream

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distributors to the upstream suppliers as information, materials and capital move through the

SCN.

The challenges of SCM are very common especially in the O&G industry, notwithstanding

the significance of supply chain network management and its developing intricacy, the oil

and gas business is still in the advancement phase of proficiently dealing with their supply

chains. (Porter’s, 2011).

Supply chain Management in recent years has received a great deal of focus by researchers

and professionals. Along these lines, there are a ton of writing where thought about this issue

has been addressed. According, Hussain (2006) in his work titled Effective SCM in the oil

and gas: Opportunities and Challenges" enumerated that more proficient and cost-effective

supply chain in the oil and gas sector addresses significant elements for keeping up consistent

supplies of crude oil minimising lead times reduction and cost of distribution regardless of

the extraordinary difficulties in the oil and gas industry' SCN. In addition, there are still

avenues for improvement and cost investment along the supply chain network. He further

highlighted that oil and gas company in the oil industry made the re-evaluating thought a

stride further to team up with competitors and discovered shared solutions for their supply

chain network difficulties. This type of coordinated effort is referred to as an efficient

systematic proportional trade and this can offer organizations enormous investment funds

saving and introduce new opportunities (Hussain, 2006).

Additionally, according to Chima (2007) in his work titled: "Supply Chain network

Management in the Oil and gas sector. Expounded on the role of SCN in the oil and gas

industry, about procedures for improving supply chains in the oil industry and explained how

improving supply chain logistics and coordination's can be improve proficiency. he further

highlighted that the oil and gas industry is associated with a global supply chain network that

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incorporates international and domestic transportation, inventory visibility and ordering,

information technology and materials handling. Consequently, some O&G company offer an

exemplary model for executing SCN and its procedures.

The constant increase in global demand for oil and gas and its derivatives, like, LPG has

made organizations providing these items to reach more consumers and increase their market

profitability and share. This oil boom in global demand with respect to international trade and

flexibility involved in the O&G industry’s SCN has made its administration more complex

and really challenging. Notwithstanding the significance of supply chain management and its

developing complexity, the oil industry is continuously improving an effective way of

dealing with their supply chains. According to Serdar and Al-Ashhab (2016). overseeing the

College of Petroleum and Energy Studies at the University of Oxford, the oil and

petrochemical industry's understudying the supply chain network is constantly developing

new strategy. In any case, even with the inflexibility and intricacy involved with the

organization' supply chain network, there is a great deal of opportunity to get better and cost

effectiveness, especially in the area of logistics. In addition, SCM is the foundation of a

business where coordination’s and logistics cost can be more than manufacturing costs"

(Hussain, 2006).

The degree of supply to consumer (oil-based commodities) plays a significant role, since it

greatly affects the economics of the main industry with respect to its populace.

Simultaneously, the enormous volumes of assets utilized, the wide scope of oil-based goods,

the breadth and complexity of communications decide the significance of planning the

procurement, supply and storage of petroleum products, following the product promotion

procedure and quality of delivery with respect to transportation arrangement, considering the

amount of finance needed for this.

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Lately, there have been concerns and many have contended that the O&G industry may have

entered a time of limited supply of commodity due to quarter allocation from OPEC.

Notwithstanding, the resources are not the reason for supply limitations and constraints, given

the gigantic potential still accessible through reservoirs with increasing degree for oil

recovery from existing fields with new advances, more potential discoveries with respect to

the new frontiers of huge oil sands and oil shale reserves. Basically, according to recent

findings by some researchers that we have enough resources left to support current

production levels for the next 50 years. Subsequently, the primary challenge confronting the

oil and gas industry isn't the availability of oil and gas resources, but placing these resources

into effective production and delivery the products to buyers at a minimum cost conceivable.

In this manner, a viable supply chain management can be achieved with its objectives

(chima,2007).

Due to the oil business is global, such products as oil, gas, and LPG require specific methods

of transportation, for example, pipe-lines, vessels or big haulers, and rail lines. These

products are produced in specific and limited area of the world, yet they are requested

everywhere on the globe since they address a fundamental source of energy and raw material

for a vast number of different industries. A sound lead-time from the delivery point to the last

client’s location is exceptionally basic in this sort of industry. For instance, it requires five

weeks for the Persian Gulf's oil to advance toward the United States and up to an additional

three weeks for it to be handled and conveyed (Simchi-Levi et al., 2005). The significant

distances between the supply chain dealers present a high variability of transportation that

can hurt suppliers as regards service delivery administration. Additionally, as the

transportation process is done either by ships, trucks, pipelines, or rail lines, in numerous

instances, a comprehensive supply chain network needs to exploit different transportation

modes prior to arriving at is final destination (client's location).

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Such imperatives on transportation modes in this kind of industry initiate long lead times

from the transportation point to the last clients' location compared with different organization.

Subsequently, considering the measure of inflexibility surrounding the oil and gas demands

and its derivates while keeping up high level service and efficiency is a major challenge in

the oil and gas industry.

Opening new production locations and distribution centres nearer to dispersed clients is one

approach to reduce lead time and transportation costs. However, acquisition of a standard

facilities in the oil and petrochemical enterprises, if possible, is typically expensive and often

brings about higher operating cost with respect to inventory. Most organizations are probably

not going to embrace the huge investment expected to commence the process these variables

are pushing oil and petrochemicals organizations to either assimilate the increase in expenses

or direct the expenses to clients who are experiencing an increase in cost. (Porter’s, 2011).

Organizations have perceived that improved supply chain network will address an enormous

area for cost reduction, explicitly in the area of logistics which most organizations accept that

the supply chain network in which they partake as clients and suppliers is what brings

competition rather than individual organizations (Hussain, 2006).

The key variables for reducing expenses and expanding the organization's profits in

overseeing supply chains are essentially efficient distribution/supply of oil and gas products

to customers, better transportation planning, sound warehouse management and practicality

of information data. In conclusion, to optimally achieved an efficient SCN then all variables

should not be treated independently rather be practiced as a whole through the mechanization

of the SCN.

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1.1.1. Features of Supply chain Management and Logistics in the LPG Industry

Logistics represents the study of transport planning, its administration and control. It also

incorporates warehousing and any kinds of material handling operation that take place before

the products or a specific resource will be transported to the desired destination point. In the

structure of the above process, different logistical activities related to the administration of

transport, warehousing, and stocks, staff are done. Infact, logistics is required to adequately

oversee different material movement. Supply chain logistics management is highly important

to operational supervisors. The reason for logistics management is to maximize consumer

value, while accomplishing a substantial competitive advantage in the best ways that could be

possible. These approach support sound transportation network, inventory, warehousing and

finally logistics network configuration to productively interface the movement of items,

information, and finance. Most companies today can't survive without a sound SCM

arrangement. Therefore, to raise the standard to an acceptable level, all variables of SCM

must be incorporated simultaneously.

The need to improve competitiveness in relation to efficiency predetermines the drastic

reduction of production cost, the overall cost of oil refining and production. Work on the

objects of exploration and handling related also with tough prerequisites for environmental

and safety requirement. That is the reason the organization of logistics in the oil and gas

industry requires a complex, exceptional way to deal with supply chain network. The initial

process of moving goods from the starting point to the endpoint should be stringently

controlled to minimize costs. They emerge at all phases of movement of the material flow

during these stages; procurement, transportation, storage and final distribution to end users.

This logistics suggests an incorporated way to deal with issues from the angle of recognizing

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expenses and minimizing them with respect to every strategic logistics from supply to final

distribution.

These days, logistics is utilized as an essential weapon in a competitive market, since it

guarantees the quest for new source of expansion in the productivity of organization, expand

the regions for discovering reserves outside production, improving the interaction of the

constituent components of the organization asset potential. The O&G industry goes through

different phases and divisions of the business associated with the inventory, transportation,

storage and distribution, managing materials that are in three stages: solid, liquid and gases.

(Gudkov et al., 2018)

The implementation of the logistics concept targets at minimizing time loss during production

and the order of timing, materials stocks and completed products, improves development

processes and consistence with authoritative commitments, while reinforcing the integration

of all material flow in the production process. To completely reflect information by means

progressive levels of the logistics interaction process, a compelling operational

communication architect is required, reflecting the movement of material flow from the

decision of an agreement with a supplier to the moment of utilization of the final good.

Logistics activities utilizes either transhipment storage facilities or warehouses to establish a

well-coordinated network, which enables the local consolidation of transports for various

customers and from various suppliers. Through cargo consolidation, the usage of this method

for transportation can be increased, hence, transportation through all location can be achieved

through the minimum distance across different consumers. (Gross, 2012).

With respect to the aforementioned concept above, there is a need to developed an extremely

sophisticated supply chain network that can make smooth flow of information, materials and

services from inbound and outbound for the sole aim of accomplishing high consumer service

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delivery leading into sound performance outcomes. The fundamental objective of SCM is to

enhance sales, optimize cost and exploits the advantage of assets by refining cooperation and

communication between all the major players constituting the SCN. This gives a reasonable

depiction of genuine business gains as results of reliance among firms described by trade

exchange for goods and services, administrations and production network organization. The

supply chain network is a decision process that incorporates the entirety of its members and

assists with planning the essential flow of items/administrations, information and assets

(Muhindo, 2014).

1.1.2 Supply Chain in the Oil and Gas Industry: LPG Distribution

The concept of SCM in the O&G industry is a complete configuration, coordination with

respect to continuous improvement of coordinated tasks associated with upstream, midstream

and downstream respectively. Therefore, the O&G SCM have three useful segments

specifically the Upstream, Midstream and Downstream (Chima, 2007).

The downstream and Upstream are general business terms referring to an oil or gas

organization's area in the SCN. The nearer to the end user, the further downstream it is

supposed to be. Crude oil E&P are among the components of the supply chain network

viewed as upstream. The upstream companies recognize oil and gas deposit take part in the

extraction of these resources from the underground. These organizations are regularly called

E&P (Exploration and Production) companies. The downstream sector often referred to the

refiners are saddle with the responsibilities of refining the crude product (Muhindo, 2014).

1.1.2.1 The Upstream Sector

The upstream sector of the O&G industry is otherwise called the E& P referred as

Exploration and Production sector investigation and since it involves prospecting for,

recovering and producing natural gas and crude oil. Upstream O&G activities identify crude

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deposit, drill wells, and recover crude materials from underground. This area additionally

incorporates related services for example, rig tasks, extraction chemical supply and feasibility

studies. This stream has the accompanying activities included:

Exploration: seismic, Aerial review, geological and geophysical and tasks

i. Drilling: Drilling of Test well and Wild cat wells

ii. Extraction and Production

iii. Rehabilitation and Decommissioning

The upstream oil sector is about wells: where to find them; the depth and how far to drill

them; and how to configuration, construct, work and oversee them to convey the best ROI

(Return on Investment) with the lightest, most secure and smallest operational blueprint.

1.1.2.2. The Midstream Sector

Midstream includes infrastructure utilized in moving crude oil and refined products. As its

name suggests, the midstream oil and gas sector includes processes and facilities. The

activities at this sector includes storage and transportation of crude oil and refined product as

well as natural gas. Much of the time, oil and gas reserves are not situated in the same

geographic area as refining facilities and consumption area. Transportation is an integral part

of midstream activities which includes and incorporate utilizing pipelines, trucking fleets, big

hauler ships, and rail vehicles. The principal responsibility of the midstream sector is the

accessories of the gathering system which includes oil and petroleum gas storage regions

where hydrocarbons from the oil are held until they can be shipped to the refinery facility,

where they are transformed into marketable items

Hence the midstream activities include:

i. Storage

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 ii. Transportation

Processing crude oil, transportation and selling refined products produced from crude oil is

the business associated with the downstream sector of the oil and gas industry. The

downstream sector gives a large number of products to end-user consumers across the

continent. Numerous products produce during fractional distillation are gas, diesel, jet fuel,

and asphalt for road construction. Others are not as recognizable like lubricating oils, plastics,

pesticides and fertilizers.

1.1.2.3. The Downstream Sector

The downstream sector is also refereed as margin business which is characterized as the

difference between the price realized from the product produced (petroleum, petrol, kerosene

etc.) from the crude oil and the cost of the crude product conveyed to the refinery processing

plant. Downstream activities incorporate marketing and refineries. These administrative

services permit the transformation of the unrefined petroleum into usable items like gas, fuel

oils, and petroleum-based items. Marketing administrative services help move the refined

products from energy industries to both retailers or end users.

Downstream activities include:

i. Processing and refining of crude oil

ii. Trading and Supply

iii. Distribution

Therefore, considering the structure of oil industry, we can say that it is complex and requires

careful control and right arrangement that include the following:

i. Endeavor Business Solutions to oversee multi-modular transportation, asset following

cost tracking and logistic tracking.

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 ii. Accessibility of information at the right time from different partners or stakeholders.

iii. Observing the supply and demand offer available on the market that best address the

issues of consumers.

iv. Incorporating supply chain network with merchants/vendors and suppliers for every

organisation engaged with the process.

v. Accessibility of new Information and Technology solution between distributor

consumers.

Presently, information technology is of central significance for the activity of a continuous

data flow, given the intricacy of SCM in the oil industry. To enhance the method of supply of

oil products, it is important to consider all branch of supply chain of product advancement

from petroleum processing plants to commercial intermediaries that sells petroleum product

to consumer. Providing an organized network of sound communications between different

organization which comprise of trading organization, producer of petroleum products and

financial planning exist inside the system framework of joint SCN, while logistics

organizations are serving as interface bringing together all parties.

Today, there is flexibility for planning activities across a SCN even in such complex

activities as oil, as a result of improved information technology structures. Coordinating the

activities with other factors of supply chain management permits all capacities to be engaged

in the SCN board decision (Porter’s, 2011).

A comprehensive supply chain network will create a platform to give the customer

fundamental leverage for good customer service delivery care to a particular section through

reduced order cycle time and increased product availability; participate in information

delivery (inventory management techniques and forecasting concept) and structural

coordinated effort (Just-In-Time system, outsourcing and plant location); in associations with

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downstream network to develop end-customer value and minimize costs along the SCN.

Hence, the idea of SCM gets accessible to participating organizations with successful

implementation in the continuous changing global space of the business world.

UNDP and the World Bank recently sponsored a program on the Energy Sector Management

Assistance Program (ESMAP), to give technical help for environmental development, they

highlighted the following reasons why LPG use is not widely utilised (ESMAP, 2018).

i. The scarcity supply of LPG products makes individuals to utilize HHK fuel for

cooking.

ii. The lack of LPG large storage facility and inadequate transportation network design

to accommodate quick delivery of LPG products.

1.2 Statement of the Problem

LPG supply chain distributors typically need to take a drastic decision on transportation cost

and route at each phase of the SCN in other to meet the requirement of consumers demand at

the barest minimum cost. As highlighted by Uzor and Nnanna (2018) for more than a decade,

organizations, analysts and researchers neglect to take a coordinated perspective of the whole

supply network design. Hence, for an effective distribution of LPG products these two factors

must be considered:

i. The distribution planning decision which deals essentially with transportation

logistics with respect to the quantity of LPG demanded across different state.

ii. A robust SCN to achieve the feat of product scarcity and maintaining price stability

with quick response and availability of LPG product to the end user(customers)

Hence, this study seeks to fill the lacuna by introducing a logical way to minimise

transportation cost and determine the best transportation route with respect to quantity at

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 the various collection cities in order to avoid disruption in the SCN respectively. This is

accomplished by developing an optimisation model.

1.3 Aim and Objectives of the Study

The aim of this study is to develop a supply chain network model for the Liquefied

Petroleum Gas (LPG) industry utilizing an advanced mathematical optimisation

model.

The objectives are as follows:

i. to determine the quantity of products to be distributed between State from every

echelon in the supply chain network with respect to the emerging and existing

markets of Liquefied Petroleum Gas (LPG).

ii. to design and develop a distribution technique within the SCN of the state across the

Federation.

1.4 Significance of Study

The research outcome will introduce a model that can be utilized by various decision makers

in the SCN organization such as distributors manufacturers and suppliers to optimise their

performance through the openness of processes to minimise total cost which will result to

enhanced product delivery time with respect to elimination and minimisation of waste

through just in time techniques with optimum material and supplier selection criterion.

This work will reveal insight into the strategies needed to be embraced by production

managers on optimisation techniques and supplier selection in order to minimise to cost.

This outcome the dissertation will shed more light on allocation techniques and facility

location to be practiced by distribution and facility managers in order to ascertain the optimal

location of storage facilities and distribution tank farms in the logistics network respectively.

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Finally, the study will add to the research area in the area of supply chain network with the

helpful information about the dynamics of present-day optimisation procedures. In addition,

it will also serve as a reference point for future exploration in the area of SCM.

1.5 Scope of the Study

This dissertation examines the distribution of Liquefied Petroleum Gas (LPG) across the

thirty-six state and FCT, Nigeria. Two (2) state was considered as the first source of

distribution (storage), then six (6) state from the geographical location will be considered as

the second phase of distribution network and finally the receiving twenty-nine (29) state was

considered in this dissertation. The time period will be limited to the recent bulletin of 2019

respectively. The investigation utilized time series information on cost of transportation per

unit, state yearly capacity and transportation cost for the period.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual Review of SCM

According to Handfield (2002), nnumerous cooperation today needs to expand their market

capitalization to accomplish massive development. Simultaneously, this cooperation should

guard their market capitalization of the overall industry from different rivals. Typically, the

test is the means by which to grow and expand the coordination’s and distribution network, in

other to transport products to the end users who request them in a fast-changing arrangement

of channels. Making the product accessible to ccustomer’s when they need them is the core

essence of strategic positioning of organization stocks(inventories).

According to Domenica (2002) who asserts that SCM should be effective, proficient and

efficient. In this concept, efficiency(productivity) denotes to minimize available resources use

to achieve explicit results. Efficiency is estimated by inventory level, product quality, the

delivery performance of the cooperation and backorders, while effectiveness is estimated by

both service needs and service quality. Competitiveness among organization relies upon how

well the organization meets customer’s need with respect to flexibility, terms of service,

quality and cost by developing a SCN, which will be more productive and effective than the

rivals.

According to Lambert et. al. (2000), to optimize this SCN, numerous approaches must be

taken and numerous coordinated activities. This requires careful administration and design of

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the SCN. The design of SCN addresses a unique method by which organizations innovate and

create value. The challenge of SCM design is in the capacity to plan, design and gather

resources, organization, abilities, and skills. It includes the management team, group,

accomplices, processes and products.

According to Mentzer (2001), the concept of SCN is broadly perceived(defined) in three

different ways:

i. the direct SCN, which comprises of an organization, the supplier, and the end user.

ii. the extended SCN, which incorporates the suppliers of the immediate supplier, just as

end users to the immediate end user.

iii. Lastly, Ultimate SCN, which incorporates every one of the organizations engaged

with both the downstream and upstream.

2.2 Supply Chain Management (SCM)

The area of supply Chain network (SCM) has generally been viewed from a myopic

perspective. While some work towards delivering a more extensive authoritative viewpoint

has been made, in any case, SCM keeps on being to a great extent varied with little

agreement on its conceptualization and exploration strategic bases. This research work tries

to explain parts of this arising point of view with respect to the distribution to LPG product

across various state.

The significance of SCM in Nigeria concerning information technology are changing step by

step. As information technology advances, firms will in general turn out to be more

incorporated. In this way, it is significant to further develop and improve the performance of

a robust supply chain integration with efficient information sharing. Inter-phasing each

echelon of SCM among Organizationn is a fundamental essential for finding and keeping up

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a competitive advantage. This could be accomplished by broad social, specialized,

administration, and financial ties in due course. We can recognize unique patterns in

developments of coordination’s arrangements in the LPG industry during the past years.

i. Expand integration of supply chain network schedules across boundaries of the

organization geared toward minimizing transportation costs which must necessitate the

requirement for closer collaboration and participation coordination with customers and LPG

suppliers.

ii. Another pattern portraying emerging supply chain structure is the developed

specialization of individual organizations. Re-appropriating of traditional approach including

logistics exercises is an illustration (example) of such pattern.

iii. The third pattern deals with innovation and change. The importance of response to

market changing requests has made organizations to be more agile and responsive.

LPG distribution have persistently re-engineered and rebuilt robust designed to iimprove firm

effectiveness and meet cconsumers need. Insufficiency of the assets and capabilities needed

to make serious progress has driven supply chain directors to look past their organizations

deficiency to evaluate how the assets of LPG distribution between consumers can be utilized

to make remarkable worth. SCM drives are the effort to arrange goals and set up objectives

across organization limits to bring better results.

2.3 Supply Chain Management (SCM) Concept

The concept of SCM is characterized as coordination of business activities. SCM is an

arrangement of various activities which begins from ordering(buying) of raw materials from

providers, then shipped to industry for manufacturing into finished product and finally

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transported to end user (ccustomer’s). The Importance of overseeing supply chains is

expanding quickly among organizations and scientists around the globe. In spite of the fact

that its far and wide acknowledgment prompts a few sorts of definitions by various

businesses and scholastics, there is by all accounts a gathering towards the focal subject of

store network the executives (SCM). Inventory network the board is a combinatory way of

thinking that deals with the progression of material and data from providers to buyer.

It would thus be able to characterize as the mix of all business activities from providers to

buyers that add value to cconsumer’s and stakeholders. SCM is a strategic synchronization of

the customary business functions within an organization and across business; the objectives is

to work on a long term performance of both organization and the chain network.

The new vision of SCM network connects every player and it involves the conversion of raw

materials into finished product before transporting the finished products to final consumers at

the perfect opportunity (time) and at the ideal spot in the most productive way. SCM can be

defined as the coordination of different activities, between and within vertically connected

organization, to serve end users at a benefit. SCM as a collective based technique to interface

between business activities to accomplish a common market opportunity. A dependence on

production and purchaser merchandise enterprises for observational just as scientific outline;

a calculated outlining of SCM generally as an interaction; a prevalence of exchange cost

financial matters and system based upper hand hypothetical establishing; the presence of for

the most part engaging sort speculations; solid positivist paradigmatic positions in the

exploration strategies utilized; and, the use of logical applied, just as exact measurable testing

and contextual analysis strategies.

2.3.1 Integration of Supply Chain

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Integration of SCM is a process of uniting the critical activities of all member of the

organization. In order word, supply chain integration is an extensive cooperation between

individuals from the network at every level of decision making in the organizational.

Integration of SCM is mainly involved with the coordination components and specifically

infers that business cycles ought to be rearranged and interrelated both inside and outside the

organization limits. The combination of production network doesn't just minimize costs, yet it

additionally worth full for the organization, and every stakeholder.

The appropriate condition is that the entire interaction across the network is planned, design,

overseen and integrated together as a unit There are primarily two sorts or levels of SCM

integration namely external integration and internal integration respectively. Internal

integration implies the integration lies within the firm that is, between different department,

while external integration is concerned with the cooperation between different organizations.

This integration of the supply chain can be classified, into six distinct forms of integration

namely, planning, consumers, suppliers, technology, inventory measurement and internal.

It is crucial to address the challenge of designing a supply chain network, as organizations

needs to improve on their network performance. Without resolving the complexity of supply

chain network gives the organizations a big challenge to effectively execution their overall

goal. In this manner, a comprehensive approach needs to be adopted by re-evaluating and

outsourcing. To move ahead, organization need to recognize that they could benefit more

from more extensive coordinated effort with both the integration of consumers and suppliers

at various stages in the network.

According to the viewpoint of supply side, assuming organizations need to minimize their

expense and improve efficiency a synergy between cooperation are necessary. On the

demand aspect, the lead time and inventories can be decreased with the assistance of fast

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response coordination’s and joint arrangement, replenishment and forecasting. The subject of

this advancement has been on the idea of combination of activities and cycles between

individuals from the network.

Most comprehensive supply chain network reviews, highlighted that, the more

integration(combination) the better the efficiency of the SCN. Nonetheless, various groups

have various assessments, some contradicted the concept of integration but rather prefer the

close collaboration with consumers and suppliers is the best approach for each situation. For

other people, concentrated coordination probably won't be in each space of SCM however it

may be in some extraordinary area like performance evaluation and quality management

while in different area it is important to have restricted integration.

As it may be seen from the review of the concept of SCM that there is insignificant evidence

of works, planning the real degree of integration among stakeholders in the network. For

example, one is not certain if manufacturers can be comfortable with restricted information

sharing among the different echelon of the SCN, or they required high coordinated effort

between consumers and suppliers. It is additionally not recognized that in which regions

manufacturers like to disseminates information to their partners and how this cooperation can

impact on performance of the whole network. The importance of information technology

should also be in cooperated. Most importantly, manufacturers need to realize that execution

of IT and cooperation with consumers and suppliers will work on the performance or not?

Diverse administration standards, like the agile and lean have been embraced and

implemented by administration of supply chains management. The concept of SCN is a

paradigm dependent on cost minimization and adaptability, zeroed in on processes upgrades,

through the decrease or elimination of all form of waste. (Womack et al., 1991). It accepts

21
every cycle through the product life cycle, beginning with the product design to the product

selling, from the cconsumer request order to final delivery (Anand and Kodali, 2008).

An agile supply chain network means to make the capacity to react quickly and cost-

efficiency to unpredictable changes in market demands and expanding levels of

environmental impact, both as variety and volume (Agarwal et al., 2007). In any case, when

associations are dependent upon possible interruptions, brought about by unexpected and

unanticipated occasions (like financial and politic emergency or natural calamities), the lean

practices might have added to burst conditions (Azevedo et al., 2008).

In a fast-growing economy, supply chains have cross bounds of many countries and

continents, starting from the supply of raw material to the distribution of the finished

products. These activities can cause huge interruptions (Craighead et al., 2007). These

interruptions are propagated all through the chain network, causing serious consequences in

the network resulting to delay delivery. Thus, it appears that what can be acceptable

according to the ccompetitive perspective, can cause a major disruption; it might be

exceedingly worst if the firm can not be versatile and resilient enough to recuperate the

loosed competitiveness. In real competitive market, it is essential that supply chains become

more tough to disruption activities (Sheffi and Rice, 2005; Tang, 2006). Other relevant issue

in supply chain practice is the environmental sustainability. The green supply network the

board is as a significant authoritative way of thinking to accomplish corporate benefit and

portion of the overall industry goals by minimizing environmental impact and effects while

working on eecological efficiency of these firms and their accomplices (Rao and Holt,2005;

Zhu et al., 2008). As a synergistic interphase of supply chain management and environmental

natural and, the global dimension and competitiveness of these two key indicators cannot go

unrecognized by firms

22
2.4 Empirical Reviews on developed Models and Solution Approach in SCM

According to Mula et al., (2010) who developed an integrated cost-effective production and

selection decisions using a mathematical programming model for a SCN design. The result

identified that it is important to incorporate the supplier’s echelon into the SCN optimization

models. The model proved to be effective when applied in a multi-stage production company.

Mezghani et al. (2012a) design a goal programming model using a simulated environment

which introduced the management preferences into the aggregate planning program.

Similarly, Mezghani et al. (2012b) further improved on the existing model and developed a

robust HPP (Hierarchical Production Planning) to evaluate the effect of aggregate planning in

a simulated environment. They formulated a linear mixed integer model to get the optimality

using a robust optimization software. They applied it in an automobile industry considering

four (4) demand constraints

El-Sayed, et al. (2010) investigated the two- stage consumers echelon in which their demands

are stochastic and deterministic and design a multi echelon multi period reverse forward SCN

maximizing the Overall cost of the SCN system

Wang, et al. (2014) investigated a SCN design problem under certain environmental

constraints and developed a multi-objective optimization mathematical model that minimize

the total cost of the SCN subjecting the objective function to some environmental variables.

Pishvaee and Razmi, (2012) developed an multi objective optimization model to minimize

the SCN transportation cost and environment effect to solve an interactive fuzzy problem

Badri, et al. (2013) used mathematical concept based on Lagrangian relaxation approach to

solve a multi commodity model under different time horizon for tactical and strategic

decision making.

23
Wu and Golbasi (2004) developed a Multi- Facility and Multi-Item, SCN using a Nonlinear

mixed integer (NLMI) program to minimize the cost of facility location with respect to route

selection and transshipment of coal under demand and supply uncertainty condition.

Xia and Matsukawa (2014) examine a retailer/supplier network experiencing disruption in

supply under a specific time horizon and design a deterministic model to identify the key

parameter affecting SCN (Transportation cost, facility location and supply/demand rate)

Adabi, and Omrani (2015) developed a multi objective MILP model to maximize the overall

efficiency of the SCN system and minimize the cost of facility location considering multi

product

Serdar and Al-Ashhab (2016) considered a deterministic demand and supply and formulated

a mathematical model based on mixed integer linear programming to minimize the overall

cost of the SCN under demand and supply constraints

Ihemtuge and Aimikhe (2020) model and optimized a deterministic SCN on distribution of

LPG to fourteen cities (14) across the state in Nigeria with the objective of minimizing the

transportation cost with respect to the best route to each city. was not exhaustive enough

because it covered few states and at such optimization was not elaborate. An effective SCN

was not used so the distribution network was not elaborate.

2.5 Literature Review and Knowledge Gap

Ihemtuge and Aimikhe (2020) developed a deterministic SCN model on distribution of LPG

product to fourteen cities (14) across the state in Nigeria with the objective of minimizing the

transportation cost with respect to the best route to each city. Their work was not exhaustive

enough because it covered few states and at such the optimization was not elaborate. An

effective SCN was not utilized, so the distribution network was not elaborate. Presently there

are no work done to extend the SCN of LPG to other city across Nigeria

24
To fill this gap from the reviewed literature, the researcher decided to formulate a

mathematical model on the SCN to optimize the supply of LPG product across the 36-state

using a linear programming to minimize the total cost of transportation and optimally

evaluating the shortest route to deliver the LPG product in quick response time.

CHAPTER THREE

MATERIALS AND METHODS

3.1 Research Design

The primary reason with research plans is to assist the analysts with an applied structure that

will direct them to use standards of logical request to respond to the exploration questions.

Since this thesis utilized information from the current petroleum bulletin, it exists within the

real-life setting. Thus, this study employed the case-study research design to optimize an

existing supply chain network of the LPG in Nigeria.

3.2 The Study Area

This study considered the Liquefied Ppetroleum Gas (LPG) supply chain network in Nigeria.

The distribution network will involve a total of thirty-six states including FCT. The time

period will be limited to the recent bulletin of petroleum production importation and

consumption. (2019) The investigation utilized time series information on cost of production

per unit, consumer yearly interest and transportation cost for the period.

25
Figure 3.1: Map-Showing the Distribution-Of Depot in Nigeria.
Source: Pipeline Product, 2020.

3.3 Source of Data

This study employed secondary data in its analysis. Data on total production costs and

capacity, annual demand at depots, transportation costs and their distances obtained from

articles and the Petroleum Products Importation and Consumption annual reports.

26
3.4 Method of Data Analysis

A Mixed Integer Linear Programming procedure was utilized to develop solution to the

problem. The developed model was evaluated through the application of Microsoft Excel

Solver and LINGO programming software due to its significant level of effectiveness in

incorporating and solving transportation problems.

3.5 Model Specification

The Integer Linear Programming model will be developed to design an integrated supply

chain network considering some parameters significantly affecting the profitability such as

cost. The model will compose of some mathematical equations used to determine the

numerical values of some decision variables (distance, distribution centre’s capacity product

(LPG) flow rate in between echelons.

The model formulated minimized total cost by simultaneously considering the quantity and

distance travelled.

To model such as problem, the following were defined:

3.6 Model Assumptions

3.6.1 Refining and Importation Stage

3.6.2 First Echelon Distribution State (Lagos State and Rivers State)

i. Cost per unit of LPG product

ii. Capacity limit for LPG

iii. Minimum quantity supplied

iv. Unit transportation cost of LPG product

27
3.6.3 Second Echelon Distribution State (The Six Geographical State)

i. Capacity limit for storage plant for storing the LPG product.

ii. Transportation cost of the LPG product using road.

3.6.4 Final Stage (Receiving State)

i. Demand for the finished LPG product

ii. LPG product at receiving State

Minimize Transportation cost

m n n k

∑ ∑ Cij X ij+¿ ∑ ∑ C' jh Y jh ¿

i=1 j=1 i=1 j=1

Subject to:

∑ X ij ≤ ai ∀ i={1 , 2 ,3 … … … … m}(3.1)
j=1

∑ X jh ≤ a i ∀i={1 ,2 , 3 … … … … m(3.2)
j=1

∑ X ij ≤ bi ∀ j ={1 ,2 , 3 , … … … … , n }(3.3)
i=1

∑ X jh ≤ b i ∀ j={1 , 2 ,3 , … … … … ,n }(3.4)
i=1

m n

∑ ai−∑ bi ≥ 0 ∀e = {1 ≤i ≤ m }∧{1 ≤ j≤ n … … … … ,t }(3.5)

e=1 e=1

X ij ≥ 0 ∀i , ∀ j (3 ,6)

The objective function of the Model is to Minimizes the Total Cost of Transportation for the

supply chain network subject to the following constraints:

28
Equation (3.1) expresses the Supply constraints which requires that the total quantity of LPG

transported from Lagos and Rivers State should not exceed the capacity of the six (6) state in

the geographical region.

Equation (3.2) expresses the Supply constraints which requires that the total quantity of LPG

transported from Oyo, Imo, Delta. Kaduna. Adamawa and Abuja should not exceed the

capacity of the receiving state across the cities.

Equation (3.3) expresses the Demand constraints which requires that the total quantity

transported from Lagos and Rivers State should not exceed the capacity of the six (6) state in

the geographical region.

Equation (3.4) expresses the Demand constraints which requires that the total quantity of

LPG transported from Oyo, Imo, Delta. Kaduna. Adamawa and Abuja should not exceed the

capacity of the receiving state across the cities.

Equation (3.5) requires that the total quantity of LPG Supplied from Lagos State and Rivers

State should not exceed the Demand capacity of the receiving state across the cities.

Equation (3.6) requires that all decision variable (All variable defined are non-negative)

Where;

C ij = Is the unit Cost of transporting LPG product from source i to destination j

X ij = Is the quantity of LPG product transported from souce i to destination j

'
C jh = Is the unit Cost of transporting LPG product from source j to destination h

Y jh = Is the quantity of LPG product transported from souce j to destination h

29
Al possible transportation (ROUTE) each Bob tail Truck can take will be represented by sum

product of C ij X + ¿¿ C ' jh Y jh :
ij

Hence the Cost Function of the first term for Lagos State can be expressed as:

C 11 = The unit Cost of transporting LPG product from Lagos to Oyo

C 12 = The unit Cost of transporting LPG product from Lagos to Imo

C 13 = The unit Cost of transporting LPG product from Lagos to Delta

C 14 = The unit Cost of transporting LPG product from Lagos to Kaduna

C 15 = The unit Cost of transporting LPG product from Lagos to Adamawa

C 16 = The unit Cost of transporting LPG product from Lagos to Abuja

The decision variable (All variables defined are non-negative)

X 11 = The quantity of LPG product transported from Lagos to Oyo

X 12 = The quantity of LPG product transported from Lagos to Imo

X 13 = The quantity of LPG product transported from Lagos to Delta

X 14 = The quantity of LPG product transported from Lagos to Kaduna

X 15 = The quantity of LPG product transported from Lagos to Adamawa

X 16 = The quantity of LPG product transported from Lagos to Abuja

Similarly, the Cost Function of the first term for Rivers State can be expressed as

'
C jh= The unit Cost of transporting LPG product from Rivers State to Oyo

30
 '
C jh= The unit Cost of transporting LPG product from Rivers State to Imo

'
C jh= The unit Cost of transporting LPG product from Rivers State to Delta

'
C jh= The unit Cost of transporting LPG product from Rivers State to Kaduna

'
C jh= The unit Cost of transporting LPG product from Rivers State to Adamawa

'
C jh= The unit Cost of transporting LPG product from Rivers State to Abuja

The decision variable

Y jh= The quantity of LPG product transported from Rivers State to Oyo

Y jh= The quantity of LPG product transported from Rivers State to Imo

Y jh= The quantity of LPG product transported from Rivers State to Delta

Y jh= The quantity of LPG product transported from Rivers State to Kaduna

Y jh= The quantity of LPG product transported from Rivers State to Adamawa

Y jh= The quantity of LPG product transported from Rivers State to Abuja

Hence the first term can be expressed mathematically as:

Minimize Cost = (C 11 X 11+ C 12 X 12+C 13 X 13 +C 14 X 14+C 15 X 15 +C 16 X 16 ¿+ (C 21 X 21+C 22 X 22+

C 23 X 23 +C 24 X 24 +C 25 X 25+C 26 X 26) +…………………….+(Second Term)C '1 h Y 1 h (3.7)

31
 1
2
3
4
5
6
7
8
9
1 10
11
2 12
1 13
3 14
15
2 4 16
17
5 18
19
6 20
21
22
23
24
25
26
27
28
29
Figure 3.1: Network Distribution of LPG Products Across the States

32
 CHAPTER FOUR

RESULTS AND DISCUSSION

4.1 Input Data

Table 4.1 shows the cost of distributing LPG Products from the Lagos State depot and Port-

Harcourt depot to the six geopolitical regions namely Oyo State, Imo State, Delta State,

Kaduna State, Adamawa State and Abuja

Table 4.1: Transportation Cost of LPG from Lagos State and Rivers State to Oyo State, Imo
State, Delta State, Kaduna State, Adamawa State and Abuja
SS(DELTA NW(KADUNA NE(ADAMAW NC(ABUJA
COST SW(OYO) SE(IMO ) ) A )
SW(LAGOS ₦165,00
) ₦105,000 0 ₦120,000 ₦350,000 ₦480,000 ₦350,000
₦130,00
SS(PH) ₦140,000 0 ₦80,000 ₦450,000 ₦350,000 ₦550,000

33
Table 4.2A shows the transportation cost of distributing LPG Products from the six

geopolitical region to five (5) states namely Ekiti, Osun, Ondo, Ogun and Akwa-Ibom

respectively.

Table 4.2A: Transportation Cost of LPG from Oyo, Imo, Delta, Kaduna, Adamawa and
Abuja to Ekiti, Osun, Ondo, Ogun and Akwa-Ibom.
1 2 3 4 5
COST Ekiti Osun Ondo Ogun Akwa-Ibom
OYO ₦120,000 ₦98,000 ₦125,000 ₦105,000 ₦255,000
IMO ₦135,000 ₦245,000 ₦145,000 ₦230,000 ₦145,000
DELTA ₦145,000 ₦150,000 ₦135,000 ₦250,000 ₦140,000
KADUNA ₦690,000 ₦700,000 ₦710,000 ₦750,000 ₦750,000
ADAMAWA ₦650,000 ₦650,000 ₦650,000 ₦750,000 ₦750,000
ABUJA ₦500,000 ₦600,000 ₦550,000 ₦700,000 ₦650,000

34
Table 4.2B shows the transportation cost of distributing LPG Products from the six

geopolitical region to five (5) states namely Bayelsa, Cross Rivers, Edo, Abia and Anambra

respectively.

CONT. Table 4.2B: Transportation Cost of LPG from Oyo, Imo, Delta, Kaduna,
Adamawa and Abuja to Bayelsa, Cross Rivers, Edo, Abia and Anambra
6 7 8 9 10
COST Bayelsa Cross-River Edo Abia Anambra
OYO ₦235,000 ₦250,000 ₦225,000 ₦320,000 ₦300,000
IMO ₦125,000 ₦130,000 ₦175,000 ₦125,000 ₦105,000
DELTA ₦102,000 ₦145,000 ₦95,000 ₦235,000 ₦185,000
KADUNA ₦750,000 ₦750,000 ₦680,000 ₦755,000 ₦745,000
ADAMAWA ₦750,000 ₦750,000 ₦750,000 ₦750,000 ₦750,000
ABUJA ₦675,000 ₦680,000 ₦450,000 ₦680,000 ₦650,000

35
Table 4.2C shows the transportation cost of distributing LPG Products from the six

geopolitical region to five (5) states namely Ebonyi, Enugu, Kastina, Kano and Kebbi

respectively.

CONT. Table 4.2C: Transportation Cost of LPG from Oyo, Imo, Delta, Kaduna,
Adamawa and Abuja to Ebonyi, Enugu, Kastina, Kano and Kebbi
11 12 13 14 15
COST Ebonyi Enugu Katsina Kano kebbi
OYO ₦350,000 ₦350,000 ₦550,000 ₦550,000 ₦550,000
IMO ₦135,000 ₦155,000 ₦645,000 ₦632,000 ₦655,000
DELTA ₦175,000 ₦155,000 ₦750,000 ₦735,000 ₦725,000
KADUNA ₦735,000 ₦675,000 ₦105,000 ₦93,000 ₦145,000
ADAMAWA ₦750,000 ₦750,000 ₦150,000 ₦150,000 ₦150,000
ABUJA ₦635,000 ₦610,000 ₦350,000 ₦350,000 ₦350,000

36
Table 4.2D shows the transportation cost of distributing LPG Products from the six

geopolitical region to five (5) states namely Sokoto, Jigawa, Zamfara, Bauchi and Borno

respectively.

CONT. Table 4.2D: Transportation Cost of LPG from Oyo, Imo, Delta, Kaduna,
Adamawa and Abuja to Sokoto, Jigawa, Zamfara, Bauchi and Borno
16 17 18 19 20
COST Sokoto Jigawa Zamfara Bauchi Borno
OYO ₦550,000 ₦550,000 ₦550,000 ₦680,000 ₦755,000
IMO ₦650,000 ₦650,000 ₦650,000 ₦690,000 ₦755,000
DELTA ₦750,000 ₦750,000 ₦650,000 ₦550,000 ₦750,000
KADUNA ₦150,000 ₦150,000 ₦98,000 ₦102,000 ₦155,000
ADAMAWA ₦150,000 ₦150,000 ₦150,000 ₦95,000 ₦95,000
ABUJA ₦350,000 ₦350,000 ₦350,000 ₦350,000 ₦350,000

37
Table 4.2E shows the transportation cost of distributing LPG Products from the six

geopolitical region to five (5) states namely Gombe, Taraba, Yobe, Benue and Kogi

respectively.

CONT. Table4.2E: Transportation Cost of LPG from Oyo, Imo, Delta, Kaduna, Adamawa
and Abuja to Gombe, Taraba, Yobe, Benue and Kogi
21 22 23 24 25
COST Gombe Taraba Yobe Benue Kogi
OYO ₦700,000 ₦690,000 ₦745,000 ₦485,000 ₦350,000
IMO ₦680,000 ₦680,000 ₦735,000 ₦385,000 ₦450,000
DELTA ₦650,000 ₦500,000 ₦730,000 ₦320,000 ₦250,000
KADUNA ₦105,000 ₦165,000 ₦145,000 ₦165,000 ₦115,000
ADAMAWA ₦95,000 ₦95,000 ₦98,000 ₦145,000 ₦155,000
ABUJA ₦350,000 ₦350,000 ₦350,000 ₦350,000 ₦95,000

38
Table 4.2F shows the transportation cost of distributing LPG Products from the six

geopolitical region to five (5) states namely Kwara, Nasarawa, Niger and Plateau

respectively.

CONT. Table4.2F: Transportation Cost of LPG from Oyo, Imo, Delta, Kaduna, Adamawa
and Abuja to Kwara, Nasarawa, Niger and Plateau
26 27 28 29
COST kwara Nasarawa Niger Plateau
OYO ₦350,000 ₦650,000 ₦600,000 ₦580,000
IMO ₦450,000 ₦410,000 ₦455,000 ₦480,000
DELTA ₦350,000 ₦375,000 ₦390,000 ₦400,000
KADUNA ₦175,000 ₦105,000 ₦98,000 ₦95,000
ADAMAWA ₦185,000 ₦145,000 ₦185,000 ₦155,000
ABUJA ₦135,000 ₦102,000 ₦103,000 ₦150,000

39
40
4.2 Results

Table 4.3 shows the computation result of Lagos State and Rivers State distributing LPG

products to six different states in the geopolitical region. A total of twelve (12) possible route

was generated during computational evaluation. The optimize result reviews six (6) best route

at minimum transportation cost of the LPG products within the six (6) geopolitical regions.

Hence, the maximum supply limit for Lagos was estimated as 101,045,432 Litre’s of LPG

while River State was put as 101,020,432 Litre’s of LPG respectively. In addition, Lagos

State was able to distribute 17,919,045 Litre’s of LPG to Oyo State, 41,612.906 Litre’s to

Kaduna and 1,862,977 Litre’s to Abuja (FCT). River State was able to distribute to

29,519.242 Litre’s of LPG to Imo State, 29,054,245 Littre’s of LPG to Delta State and

2,821.441 Littre’s of LPG to Adamawa State. A total of 17,919,045 Litre’s of LPG was

distributed to Oyo State, 29,519.242 Litre’s of LPG was distributed to Imo State, 29,054245

Litre’s of LPG was distributed to Delta State, 41,612,906 Litre’s of LPG was distributed to

Kaduna State, 2,821,441 Litre’s of LPG was distributed to Adamawa State and 1,862,977

Litre’s of LPG was distributed to Abuja.

Table 4.3: Computational result of the distribution of LPG Product from Lagos State and
Rivers State across the Six (6) Geopolitical Region

SW(Oyo SS(Delta NW(Kadun NE NC(Abuj LPG Supply

Cost ) SE (Imo ) a) (Adamawa a) Out Limit

17,919,0 61,394,9 101,045,43

LAGOS 45 0 0 41,612,906 0 1,862,977 28 2

29,519,2 29,054,2 61,394,9 101,020,43

PH 0 42 45 0 2,821,441 0 28 2

17,919,0 29,519,2 29,054,2

45 42 45 41,612,906 2,821,441 1,862,977

41
Table 4.4A shows the computation result of the minimize cost of distribution route for LPG

distribution. Oyo State distributed LPG products to the following State. Ekiti State

(6,896,409 Litre’s of LPG), Osun State, (2,891,018 Litre’s of LPG), Ondo State, (2,445,860

Litre’s of LPG) and Ogun State (2,891,018 Litre’s of LPG) respectively, while Delta State

will distribute LPG products through the following State. Akwa-Ibom State (5,418,490 Litre’s

of LPG), Bayelsa State, (1,582,909) Litre’s of LPG, Cross-River State, 3,012,073 Litre’s of

LPG) and Edo State (11,642,549 Litre’s of LPG) respectively

Table 4.4A: Computational result of the distribution of LPG Product from the six state to
other State
Akwa- Cross-
CAPACITY Ekiti Osun Ondo Ogun Ibom Bayelsa River Edo
OYO 6,896,409 2,891,018 2,445,860 2,891,018 0 0 0 0
IMO 0 0 0 0 0 0 0 0
DELTA 0 0 0 0 5,418,490 1,582,909 3,012,073 11,642,549
KADUNA 0 0 0 0 0 0 0 0
ADAMAWA 0 0 0 0 0 0 0 0
ABUJA 0 0 0 0 0 0 0 0
6,896,409 2,891,018 2,445,860 2,891,018 5,418,490 1,582,909 3,012,073 11,642,549

42
Table 4.4B shows the computation result of the minimize cost of distribution route for LPG

distribution. Imo State will distribute LPG products to Abia State (4,264,839 Litre’s of LPG),

Anambra (11,553,400 Litre’s of LPG), Ebonyi State (7,419,791 Litre’s of LPG) and Enugu

State (6,281,212 Litre’s of LPG) respectively. Similarly, Kaduna will distribute to Katsina

State (4,913,119 Litre’s of LPG), Kano State (12,893,861 Litre’s of LPG), Kebbi State (108,954

Litre’s of LPG) and Sokoto State (174,65 Litre’s of LPG)

CONT. Table 4.4B: Computational result of the distribution of LPG Product across the Six
(6) Geopolitical Region

CAPACITY Abia Anambra Ebonyi Enugu Katsina Kano Kebbi Sokoto

OYO 0 0 0 0 0 0 0 0
11,553,40 6,281,21
IMO 4,264,839 0 7,419,791 2 0 0 0 0
DELTA 0 0 0 0 0 0 0 0
KADUNA 0 0 0 0 4,913,119 12,893,861 108,954 174,652
ADAMAWA 0 0 0 0 0 0 0 0
ABUJA 0 0 0 0 0 0 0 0
11,553,40 6,281,21
4,264,839 0 7,419,791 2 4,913,119 12,893,861 108,954 174,652

43
Table 4.4C shows the computation result of the minimize cost of distribution route for LPG

distribution. Delta State, will distribute to Benue State ( 1,807,190 Litre’s of LPG,) Kaduna

State will follow the distribution route to deliver to Jigawa (43,124 Litre’s of LPG), Zamfara

(84,723 Litre’s of LPG), Bauchi State (9,252,490 Litre’s of LPG) and Gombe State (3,175,365

Litre’s of LPG) respectively. Finally, Adamawa will deliver LPG product through the route

of Borno State with (2,761,441 Litre’s of LPG), Taraba State, 35,000 Litre’s of LPG) and Yobe

State (25,000 Litre’s of LPG) respectively.

CONT. Table 4.4C: Computational result of the distribution of LPG Product across the Six
(6) Geopolitical Region
CAPACITY Jigawa Zamfara Bauchi Borno Gombe Taraba Yobe Benue
OYO 0 0 0 0 0 0 0 0
IMO 0 0 0 0 0 0 0 0
DELTA 0 0 0 0 0 0 0 1,807,190
9,252,49
KADUNA 43,124 84,723 0 0 3,175,365 0 0 0
ADAMAWA 0 0 0 2,761,441 0 35,000 25,000 0
ABUJA 0 0 0 0 0 0 0 0
9,252,49
43,124 84,723 0 2,761,441 3,175,365 35,000 25,000 1,807,190

44
Table 4.4D shows the computation result of the minimize cost of distribution route for LPG

distribution. Oyo State distributed LPG products to Kwara State (2,794740 Litre’s of LPG),

Delta State distributed LPG products through the following State. Kogi State (4,441,084

Litre’s of LPG) and Kwara State, (1,149,950 Litre’s of LPG) respectively. Kaduna will

distribute to Niger State (2,481,025 Litre’s of LPG) and Plateau State, ( 8,485,593 Litre’s of

LPG). Finally, Abuja will distribute to Nasarawa State (1,862,977 Litre’s of LPG).

CONT. Table 4.4D: Computational result of the distribution of LPG Product across the Six
(6) Geopolitical Region

CAPACITY Kogi Kwara Nasarawa Niger Plateau Total

OYO 0 2,794,740 0 0 0 17,919,045
IMO 0 0 0 0 0 29,519,242
DELTA 4,441,084 1,149,950 0 0 0 29,054,245
KADUNA 0 0 0 2,481,025 8,485,593 41,612,906
ADAMAWA 0 0 0 0 0 2,821,441
ABUJA 0 0 1,862,977 0 0 1,862,977
4,441,084 3,944,690 1,862,977 2,481,025 8,485,593

45
Figure 4.1 shows the cost of distributing LPG products from Lagos State and Port-Harcourt

to Oyo, Imo, Delta, Kaduna, Adamawa and Abuja. It cost Lagos State ₦105,00 to transport

LPG to Oyo, ₦165,000 to Imo, ₦120,000 to Delta, ₦350,000 to Kaduna, ₦480,000 to Adamawa and

₦350,000 to Abuja. While, it cost Port-Harcourt ₦140,000 to transport to Oyo, ₦130,000 to Imo,

₦80,000 to Delta, ₦450,000 to Kaduna, ₦350,000 to Adamawa and ₦550,000 to Abuja.

Supply Chain Network for LPG Distribution

550,000

450,000

350,000

250,000
Cost(Naira)

150,000

50,000
SW(OYO) SE(IMO SS(DELTA) NW(KADUN NE(ADAMA NC(ABUJA)
A) WA
SW(LA 105000 165000 120000 350000 480000 350000
GOS)
SS(PH) 140000 130000 80000 450000 350000 550000

State

SW(LAGOS) SS(PH)

Figure 4.1: Graphical illustration for cost of Transporting LPG from Lagos State and Rivers
State to the six (6) geographical locations (Oyo, Imo, Delta, Kaduna, Adamawa and Abuja)

46
Figure 4.2 shows the distribution of LPG Products to Lagos was estimated as 101,045,432

Littre’s of LPG while River State was put as 101,020,432 Litre’s of LPG respectively. In

addition, Lagos State was able to distribute 17,919,045 Litre’s of LPG to Oyo State,

41,612.906 Litre’s to Kaduna and 1,862,977 Litre’s to Abuja (FCT). River State was able to

distribute to 29,519.242 Litre’s of LPG to Imo State, 29,054,245 Litre’s of LPG to Delta

State and 2,821.441 Litre’s of LPG to Adamawa State

LPG Distribution across the six Geopolitical State

65,000,000

55,000,000

45,000,000

35,000,000
Capacity(Litres)

25,000,000

15,000,000

5,000,000

SW(OYO) SE(IMO SS(DELTA NW(KADU NE(ADAM NC(ABUJ LPG OUT

) NA) AWA A)
SW(LA 17919045 0 0 41612906 0 1862977 61394928
GOS)
SS(PH) 0 29519242 29054245 0 2821441 0 61394928

State

SW(LAGOS) SS(PH)
Figure 4.2: Graphical illustration of Lagos State distributing LPG to Oyo, Delta, Kaduna and
Abuja while Rivers State distributing LPG product to Imo, Kaduna, and Adamawa
respectively

47
Figure 4.3 shows the optimal route for distributing LPG products from Oyo State to Ekiti,

Osun, Ondo and Ogun while Delta State followed these routes to distribute to Akwa Ibom,

Bayelsa, Cross River and Edo respectively.

Distribution of LPG Product from the six geographical

State to other state
13,000,000

9,000,000

5,000,000

1,000,000
Capacity in Litres

Ekiti Osun Ondo Ogun Akwa- Bayelsa Cross- Edo

Ibom River
OYO 6896409 2891018 2445860 2891018 0 0 0 0
IMO 0 0 0 0 0 0 0 0
DEL 0 0 0 0 5418490 1582909 3012073 11642549
TA
KAD 0 0 0 0 0 0 0 0
UNA
ADA 0 0 0 0 0 0 0 0
MA
WA
ABU 0 0 0 0 0 0 0 0
LPG Distribution by State
JA

OYO IMO DELTA

KADUNA ADAMAWA ABUJA

Figure 4.3: Graphical illustration of Distributing route for LPG product from the six State
(Geopolitical Region) to other states

48
Figure 4.4 shows the optimal route for distributing LPG products from Imo State to Abia,

Anambra, Ebonyi and Enugu while Kaduna State followed these routes to distribute to

Katsina, Kano, Kebbi and Sokoto respectively.

Distribution of LPG Product from the six geographical

State to other state

13000000

9000000

5000000

1000000
Capacity in Litres

Abia Anambra Ebonyi Enugu Katsina Kano Kebbi Sokoto

OYO 0 0 0 0 0 0 0 0
IMO 4264839 11553400 7419791 6281212 0 0 0 0
DELTA 0 0 0 0 0 0 0 0
KADUNA 0 0 0 0 4913119 12893861 108954 174652
ADAMA 0 0 0 0 0 0 0 0
WA
ABUJA 0 0 0 0 0 0 0 0

LPG Distribution by State

OYO IMO DELTA

KADUNA ADAMAWA ABUJA

Figure 4.4: Graphical illustration of Distributing route for LPG product from the Six State
(Geopolitical Region) to other states

49
Figure 4.5 shows the optimal route for distributing LPG products from Delta State to Benue.

Kaduna distributed through the following Jigawa, Zamfara, Bauchi, Gombe while Adamawa

State followed these routes to distribute to Borno, Taraba and Yobe respectively.

Distribution of LPG Product from the six geographical

State to other state

8500000
6500000
4500000
2500000
500000
Capacity in Litres

Jigawa Zamfara Bauchi Borno Gombe Taraba Yobe Benue

OYO 0 0 0 0 0 0 0 0
IMO 0 0 0 0 0 0 0 0
DELTA 0 0 0 0 0 0 0 1807190
KADUNA 43124 84723 9252490 0 3175365 0 0 0
ADAMAW 0 0 0 2761441 0 35000 25000 0
A
ABUJA 0 0 0 0 0 0 0 0

LPG Distribution by State

OYO IMO DELTA

KADUNA ADAMAWA ABUJA

Figure 4.5: Graphical illustration of Distributing route for LPG product from the six State
(Geopolitical Region) to other states

50
Figure 4.6 shows the optimal route for distributing LPG products from Delta State to Kogi

and Kwara, Oyo State to Kwara, Kaduna distributed through the following Niger and Plateau

while Abuja followed these routes to distribute to Nasarawa respectively.

Distribution of LPG Product from the six geographical

State to other state

8500000
7500000
6500000
5500000
4500000
3500000
Capacity in Litres

2500000
1500000
500000
OYO IMO DELTA KADUNA ADAMAW ABUJA
A
Kogi 0 0 4441084 0 0 0
Kwara 2794740 0 1149950 0 0 0
Nasarawa 0 0 0 0 0 1862977
Niger 0 0 0 2481025 0 0
Plateau 0 0 0 8485593 0 0

LPG Distribution by State

Kogi Kwara Nasarawa Niger Plateau

Figure 4.6: Graphical illustration of Distributing route for LPG product from the six State
(Geopolitical Region) to other states

51
4.3 Discussion

4.3.1 Lagos State and Rivers State distributing LPG to the Six (6) Geopolitical Region
Table 4.3 shows the computation result of Lagos State and Rivers State distributing LPG

products to six different states in the geopolitical region. A total of twelve (12) possible route

was generated during computational evaluation. The optimize result reviews six (6) best route

at minimum transportation cost of the LPG products within the six (6) geopolitical regions.

Hence, the maximum supply limit for Lagos was estimated as 101,045,432 Litre’s of LPG

while River State was put as 101,020,432 Litre’s of LPG respectively. In addition, Lagos

State was able to distribute 17,919,045 Litre’s of LPG to Oyo State, 41,612.906 Litre’s to

Kaduna and 1,862,977 Litre’s to Abuja (FCT). River State was able to distribute to

29,519.242 Litre’s of LPG to Imo State, 29,054,245 Litre’s of LPG to Delta State and

2,821.441 Litre’s of LPG to Adamawa State. A total of 17,919,045 Litre’s of LPG was

distributed to Oyo State, 29,519.242 Litre’s of LPG was distributed to Imo State, 29,054245

Litre’s of LPG was distributed to Delta State, 41,612,906 Litre’s of LPG was distributed to

Kaduna State, 2,821,441 Litre’s of LPG was distributed to Adamawa State and 1,862,977

Litre’s of LPG was distributed to Abuja.

52
4.3.2 The Six (6) State in the Geopolitical Region distributing to the rest of the State

4.3.2.1 Oyo State, Imo State, Delta State, Kaduna State, Adamawa State and
Abuja as distribution Tank farm for LPG Products
Table 4.4A shows the computation result of the minimize cost of distribution route for LPG

distribution. Oyo State distributed LPG products to the following State. Ekiti State

(6,896,409 Littre’s of LPG), Osun State, (2,891,018 Littre’s of LPG), Ondo State, (2,445,860

Littre’s of LPG) and Ogun State (2,891,018 Littre’s of LPG) respectively, while Delta State

will distribute LPG products through the following State. Akwa-Ibom State (5,418,490 Litre’s

of LPG), Bayelsa State, (1,582,909) Litre’s of LPG, Cross-River State, 3,012,073 Litre’s of

LPG) and Edo State (11,642,549 Litre’s of LPG) respectively

Table 4.4B shows the computation result of the minimize cost of distribution route for LPG

distribution. Imo State will distribute LPG products to Abia State (4,264,839 Litre’s of LPG),

Anambra (11,553,400 Litre’s of LPG), Ebonyi State (7,419,791 Litre’s of LPG) and Enugu

State (6,281,212 Litre’s of LPG) respectively. Similarly, Kaduna will distribute to Katsina

State (4,913,119 Litre’s of LPG), Kano State (12,893,861 Litre’s of LPG), Kebbi State (108,954

Litre’s of LPG) and Sokoto State (174,65 Litre’s of LPG)

Table 4.4C shows the computation result of the minimize cost of distribution route for LPG

distribution. Delta State, will distribute to Benue State ( 1,807,190 Litre’s of LPG,) Kaduna

State will follow the distribution route to deliver to Jigawa (43,124 Litre’s of LPG), Zamfara

(84,723 Litre’s of LPG), Bauchi State (9,252,490 Litre’s of LPG) and Gombe State (3,175,365

Litre’s of LPG) respectively. Finally, Adamawa will deliver LPG product through the route

of Borno State with (2,761,441 Litre’s of LPG), Taraba State, 35,000 Litre’s of LPG) and Yobe

State (25,000 Litre’s of LPG) respectively.

53
Table 4.4D shows the computation result of the minimize cost of distribution route for LPG

distribution. Oyo State distributed LPG products to Kwara State (2,794740 Litre’s of LPG),

Delta State distributed LPG products through the following State. Kogi State (4,441,084

Litre’s of LPG) and Kwara State, (1,149,950 Litre’s of LPG) respectively. Kaduna will

distribute to Niger State (2,481,025 Litre’s of LPG) and Plateau State, ( 8,485,593 Litre’s of

LPG). Finally, Abuja will distribute to Nasarawa State (1,862,977 Litre’s of LPG).

Figure 4.1: Graphical illustration for cost of Transporting LPG from Lagos State and Rivers

State to the six (6) geographical locations (Oyo, Imo, Delta, Kaduna, Adamawa and Abuja)

Figure 4.2: Graphical illustration of Lagos State distributing LPG to Oyo, Delta, Kaduna and

Abuja while Rivers State distributing LPG product to Imo, Kaduna, and Adamawa

respectively

Figure 4.3: Graphical illustration of Distributing route for LPG product from the six State

(Geopolitical Region) to other states

Figure 4.4: Graphical illustration of Distributing route for LPG product from the six State

(Geopolitical Region) to other states

Figure 4.5: Graphical illustration of Distributing route for LPG product from the six State

(Geopolitical Region) to other states

Figure 4.6: Graphical illustration of Distributing route for LPG product from the six State

(Geopolitical Region) to other states

54
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings

A total of twelve (12) possible route was generated during computational evaluation. The

optimize result reviews six (6) preferred route with respect to minimum cost of transporting

the LPG products within the six (6) geopolitical regions. Hence, the maximum capacity and

supply limit for Lagos was estimated as 101,045,432 Littre’s of LPG while River State was

put as 101,020,432 Littre’s Litres of LPG respectively. In addition,

i. Lagos State was able to distribute 17,919,045 Litres of LPG to Oyo State, 41,612.906

Litres to Kaduna and 1,862,977 Litres to Abuja (FCT)

ii. River State was able to distribute to 29,519.242 Litres of LPG to Imo State,

29,054,245 Litres of LPG to Delta State and 2,821.441 Litres of LPG to Adamawa

State.

iii. Oyo State distributed LPG products to the following State. Ekiti State (6,896,409

Litres of LPG), Osun State, (2,891,018 Litres of LPG), Ondo State, (2,445,860 Litre’s

of LPG) and Ogun State (2,891,018 Litres of LPG) and Kwara State (2,794740 Litre’s

of LPG) respectively

iv. Imo State will distribute LPG products to Abia State ( 4,264,839 Litre’s of LPG),

Anambra (11,553,400 Litre’s of LPG), Ebonyi State (7,419,791 Litre’s of LPG) and

Enugu State (6,281,212 Litres of LPG) respectively

v. Kaduna. will distributeto,) Kaduna State will follow the distribution route to deliver

to Jigawa (43,124 Litres of LPG), Zamfara ( 84,723Litres of LPG), Bauchi State

(9,252,490 Litres of LPG) and Gombe State (3,175,365 Litres of LPG) respectively.

Kaduna will distribute to Katsina State (4,913,119 Litres of LPG), Kano State

55
 (12,893,861 Littre’s of LPG), Kebbi State (108,954 Littre’s of LPG) and Sokoto State

(174,65 Littre’s of LPG)

vi. Delta State, will distribute to Delta State will distribute LPG products through the

following State. Akwa-Ibom State (5,418,490 Littre’s of LPG), Bayelsa State,

(1,582,909) Littre’s of LPG, Cross-River State, 3,012,073 Littre’s of LPG) and Edo State

(11,642,549 Littre’s of LPG), Benue State (1,807,190 Littre’s of LPG), Kogi State

(4,441,084 Littre’s of LPG) and Kwara State, (1,149,950 Littre’s of LPG)

vii. Adamawa will deliver LPG product through the route of Borno State with (2,761,441

Littre’s of LPG), Taraba State, 35,000 Littre’s of LPG) and Yobe State (25,000 Littre’s

of LPG) respectively.

viii. Abuja, will distribute to Nasarawa State (1,862,977 Littre’s of LPG), Niger State

(2,481,025 Littre’s of LPG) and Plateau State, (8,485,593 Littre’s of LPG respectively

5.2 Conclusions

This dissertation work introduced a multi echelon supply chain distribution network for the

distribution of LPG product across the cities in Nigeria.

The first stage of the echelon used Lagos state and Port Harcourt as the point of LPG

distribution. The second phase of the supply chain network proposed six states namely Oyo,

Imo, Delta, Kaduna, Adamawa and Abuja to stand as an intermediate distribution Centre. The

final phase was the distribution of the LPG product to the other state using the most cost

effecting route across the cities. The proposed network design showed a cost-effective

distribution across cities in Nigeria. The network was well structured in a way as it caters for

every state through its geographical location. The developed network succeeded in reducing

the transportation cost of every region. The introduction of two echelon stage has help

overcome the challenge of transporting LPG from Lagos and Port Harcourt to every city

56
across the cities, the introduction of six (6) state as an intermediate has helped buffer the

transportation cost to far North East, North-West and North-Central respectively while still

waiting for the Federal Government to overall the Kaduna refinery. The proposed network of

distribution of LPG can stand as an effective substitute while still waiting for the three

refining to bounced back to full operational used.

5.3 Recommendation

The huge cost of constructing an LPG pipeline route could be seen as a long-term goal due to

the cost implications. The demographic specific and environmental factors must also be

considered following our past experience in the Niger region. However, notwithstanding the

security challenges, an appropriate measure can be taken to mitigate against insecurity. Most

importantly the provision and increase utilization of LPG product for domestic uses across

cities in Nigeria still remain a viable source of energy still under-utilized.

Crude oil has been a major source of income in Nigeria but the gas sector has not been fully

harnessed but the course is changing due to the huge demand of LPG product. This suggests

that the environment is friendly for gas production, exploration and distribution in Nigeria.

Hence, more research work to consolidate this task should be supported. The Petroleum

Industry Bill (PIB) isn't abandoned in this pursuit, consequently, more laws to ensure the

venture of gas use is additional encouraged.

5.4 Contribution to Knowledge

The study developed multi-echelon supply chain distribution network model for optimization

supply chain management in Oil and Gas industry in particular for Optimal distribution of

LPG products across the cities in Nigeria. It reveals that the use of SCN Model in LPG

products distribution across states in Nigeria results to 69.03% transport cost reduction.

57
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 APPENDIX A
Petroleum Products Import and Consumption for the 36 States

61
FIGURE A1: Abia State Consumption of LPG Products for third(3rd) Quarter

62
FIGURE A2: Adamawa State Consumption of LPG Products for third(3rd) Quater

63
FIGURE A3: Akwa IbomConsumption of LPG Products for third(3rd) Quater

64
FIGURE A4: Anambra Consumption of LPG Products for third(3rd) Quater

65
FIGURE A5: BAUCHI State Consumption of LPG Products for third(3rd) Quater

66
FIGURE A6: Bayelsa State Consumption of LPG Products for third(3rd) Quater

67
FIGURE A7: Benue State Consumption of LPG Products for third(3rd) Quater

68
FIGURE A8: Borno State Consumption of LPG Products for third(3rd) Quater

69
FIGURE A9: Cross River Consumption of LPG Products for third(3rd) Quater

70
FIGURE A10: Delta State Consumption of LPG Products for third(3rd) Quater

71
FIGURE A11: Ebonyi State Consumption of LPG Products for third(3rd) Quater

72
FIGURE A12: Edo State Consumption of LPG Products for third(3rd) Quater

73
FIGURE A13: Ekiti State Consumption of LPG Products for third(3rd) Quater

74
FIGURE A14: Enugu State Consumption of LPG Products for third(3rd) Quater

75
FIGURE A15: FCT State Consumption of LPG Products for third(3rd) Quater

76
FIGURE A16: Gombe State Consumption of LPG Products for third(3rd) Quater

77
FIGURE A17: Imo State Consumption of LPG Products for third(3rd) Quater

78
FIGURE A18: JIGAWA State Consumption of LPG Products for third(3rd) Quater

79
FIGURE A19: Kaduna State Consumption of LPG Products for third(3rd) Quater

80
FIGURE A20: Kano State Consumption of LPG Products for third(3rd) Quater

81
FIGURE A21: Katsina State Consumption of LPG Products for third(3rd) Quater

82
FIGURE A22: Kebbi State Consumption of LPG Products for third(3rd) Quater

83
FIGURE A23: Kogi State Consumption of LPG Products for third(3rd) Quater

84
FIGURE A24: Kwara State Consumption of LPG Products for third(3rd) Quater

85
FIGURE A25: Lagos State Consumption of LPG Products for third(3rd) Quater

86
FIGURE A26: Nasarawa State Consumption of LPG Products for third(3rd) Quater

87
FIGURE A27: Niger State Consumption of LPG Products for third(3rd) Quater

88
FIGURE A28: Ogun State Consumption of LPG Products for third(3rd) Quater

89
FIGURE A29: Ondo State Consumption of LPG Products for third(3rd) Quater

90
FIGURE A30: OSUN State Consumption of LPG Products for third(3rd) Quater

91
FIGURE A31: Oyo State Consumption of LPG Products for third(3rd) Quater

92
FIGURE A32: Plateau State Consumption of LPG Products for third(3rd) Quater

93
FIGURE A33: Rivers State Consumption of LPG Products for third(3rd) Quater

94
FIGURE A34: SOKOTO State Consumption of LPG Products for third(3rd) Quater

95
FIGURE A35: TARABA State Consumption of LPG Products for third(3rd) Quater

96
FIGURE A36: YOBE State Consumption of LPG Products for third(3rd) Quater

97
FIGURE A36: Zamfara State Consumption of LPG Products for third(3rd) Quarter

98
FIGURE A37: Total Consumption of LPG Products for third(3rd) Quarter

99
Table A1: State Distribution of truck out volume of LPG for 3rd Quarter of 2019

100
101