Modelling Vendor Capability, Development, Satisfaction as Commitment Antecedents in Upstream Oil & Gas Industry

Abstract

According to an upstream oil and gas company’s report in Indonesia, over 80% of contractual sanctions issued stem from vendors failing to meet commitment obligations. Consequently, this study aims to provide vendor management strategy recommendations by analyzing variables significantly correlated with vendor commitment fulfillment in contracts. This paper presents an empirical investigation of variables influencing vendor commitment fulfillment in upstream oil and gas operations, including vendor development programs, technical capabilities, satisfaction metrics, and operator influence strategies. Research data were collected from 100 vendors representing diverse company classifications, business segments, and commodity specializations. Eight hypotheses were developed using prior industry studies and best practice references. These hypotheses were tested via Partial Least Squares-Structural Equation Modeling (PLS-SEM) methodology. The analysis confirms that vendor technical capabilities and satisfaction levels exhibit significant direct relationships with commitment fulfillment. Vendor development programs demonstrate no direct significant relationship; however, an indirect relationship emerges when technical capabilities act as a mediating variable, indicating that development initiatives substantially enhance fulfillment through capability improvement. The study further establishes that vendor development directly strengthens technical capabilities.