Executive Summary
This report offers an evaluation of sourcing approaches and their use in Occidental of Oman, HSE & Chemicals Portfolio category of spend. The organisation operating in oil and gas industry has been noted to operate through a high demand of HSE and chemicals which are used in ensuring success of Occidental of Oman operations in both their onshore and offshore areas of operations. This has been comparatively evaluated with Information Technology (IT), logistics and staff uniforms. Further, after emergence of COVID-19 pandemic, the demand for safety chemicals and other products has increased in doublefold. For evaluating the various sourcing strategies, the identified tools include Mendelow technique, Kraljic Analysis technique, Carter’s 10Cs, PESTLE Analysis all used for generating appropriate insights of best practice in sourcing. The findings from this analysis has evidenced that there are different sourcing approaches which are appropriate for Occidental of Oman organisation. These have been noted as including single, sole, dual and multiple sourcing approaches.
Through the application of Carter’s 10Cs, a supplier appraisal appropriate for Occidental of Oman has been developed. The organisation has been noted to be majorly relying on multiple sourcing owing to the high-level competitiveness in supply of HSE and Chemicals portfolio spend category. There is a need for transitioning to an embrace of strategi sourcing approach for harnessing business plans in oil and gas execution and dominating this sector.
In line with the analysis of the report findings, various recommendations have been generated which include;
- Modernising their sourcing approach by embrace of technology in various phases of their product life cycle. This is appropriate for mitigating the challenge of lack of clear information sharing and holistic approach in the sourcing process
- Establishing relevant policies in the PS&M department with an intention of harnessing scope of modernisation of their sourcing approach particularly post-COVID-19 pandemic business environment
- To holistically engage all their stakeholders in the sourcing approach since they have varying capabilities and potential for guaranteeing success of the process
- Finally, depending on the category of spend, a different sourcing approaches as opposed to using a standardised sourcing approach
Table of Contents
1.1 Occidental of Oman Organisation Background. 3
2.0 HSE & Chemicals Portfolio Category and Positioning. 4
2.2 Business Hierarchy of Needs. 6
3.0 Stakeholders Relationships Management and Sourcing Approaches. 7
3.1 Mendelow Stakeholders Matrix Analysis. 7
3.2 Peter Block Grid Leaderships. 9
5.0 Sourcing Appraisal Checklist 13
5.1 HSE and Chemicals Category of Spend Suppliers Appraisal 13
6.0 Conclusions and Recommendations. 16
Figure 1:Summary of Occidental of Oman Areas of Operation. 4
Figure 2:Kraljic Matrix Analysis. 6
Figure 3:Maslow Hierarchy of Needs impact on Sourcing Approaches. 8
Figure 4:Stakeholders Analysis for Occidental of Oman Sourcing Approaches. 9
Figure 5:Peter Block’s Stakeholders Category. 10
Figure 6:SWOT Analysis of Occidental of Oman Sourcing Approaches. 11
Figure 7:Cater’s 10C’s Model 14
Figure 8:Agile Communication in procurement 15
Figure 9:3P’s of Sustainability. 16
1.0 Introduction
1.1 Occidental of Oman Organisation Background
Occidental of Oman organisation operates in oil and gas industry in Oman. Over the years, as evidenced in OXY (2022), the organisation has been engaged in developing extensive assets, infrastructure development, expertise and technology for fuelling their progress and improving lives globally. Through their active operations, the organisation is actively engaged in production of energy and essential products for sustainability and improving the quality of life in the planet. Further, the organisation is actively involved in exploring and producing oil and natural gas. A summary of their areas of operations is as illustrated in figure 1;
Figure 1:Summary of Occidental of Oman Areas of Operation
Owing to the organisation scope of operations, OXY (2022a) report identify that the organisation has achieved $2.1 billion compared to pre-tax income of the $1.5 billion for the third quarter of 2021. Further, the organisation continuous operations is approximately 1,190 thousands of barrels of oil for every day in the fourth quarter exceeding midpoint of guidance by 48 Mboed. In line with this organisation background introduction, in this report, it evaluates four sourcing approaches and to explain their relevance in category of spend in Occidental of Oman organisation. In line with the various categories identified for the sourcing approaches, a major category need to be identified to come up with an appropriate supplier appraisal checklist.
2.0 HSE & Chemicals Portfolio Category and Positioning
In Occidental of Oman Organisation, they have different sub-categories of HSE and chemicals portfolio. As evidenced in Delloitte (2022), the rationale of spending on HSE and Chemicals portfolio is informed by the need to formulate and address and contributing to reasonable applicable reduction of linked accidents. Also, it is used in managing any form of fatalities, losses (time and properties) and the occupational health. Further, for the chemicals, Occidental of Oman sources different chemicals are sourced include Tannins, different lignosulfonate salts and different phosphates and synthetic polymers including sodium poly (styrene sulfonate-co-maleic anhydride) which are appropriately applied. Particularly, for Occidental of Oman, they are involved in procurement of the partially hydrolysed polyacrymide which are similarly applied to drill fluids (King & Durham, 2017).
Therefore, considering Occidental of Oman operations, the most appropriate sourcing approach for the various spend categories imply they have a significant control of their supply and procurement processes.
In this regard, considering the Occidental of Oman organisation most appropriate sourcing strategy, various spend categories imply they are holistically controlling the entire supply and procurement approaches (CIPS, 2017). This is informed by essential need, demands and evidencing supply chain in an entity value chain. For evaluating the appropriateness of the spend category, various tools would be appropriately adopted.
2.1 Kraljic Matrix Analysis
The relevance of this tool is identifying risks in procurement and supply of materials from different suppliers as part of their supply chain. As evidenced in CIPS (2018), the importance of this is assisting in classification of relevance of suppliers products and services highlighted in the supply chain weaknesses, supporting strategy development while minimising the supply disruption (see figure 2).
| Risk Impact |
| Low |
| Cost Impact |
| High |
Figure 2:Kraljic Matrix Analysis
In summarising the figure 2 illustration, for Occidental of Oman organisation, the best practice in sourcing approaches entail;
Leverage- Since this category include an immense competitiveness in sourcing, multiple suppliers existing are to the advantage of the buyer (Occidental of Oman). Hence, for the HSE and chemicals spend category, it is appropriately classified in this quadrant. Being a buyer, Occidental of Oman is mandated with the role of ensuring that they assume a strong power in this relation. The risk of cost overruns is hence appropriately managed with less costs incurred in the process implementation. Post-pandemic, OSHA (2022) identify that organisations are increasingly concerned with their emploeyes exposure, risks of exposure, implementation and making sure there is an appropriate hierarchy of controls for managing exposures.
Critical Items- In both the onshore and offshore operations by Occidental of Oman in processing of oil and gas, they sue machines and vessels which use engines and optics. Hence, they are classified in this category owing to the immense risk of suppliers. Hence, a single supplier is involved as opposed to a leverage on sole/dual sourcing approach. Here, Occidental of Oman PS&M make sure that they harness all their suppliers relations in a confidential manner. This is particularly in regard to the area of locked-in sole and the dual sourcing approach. As a best practice, Baldwin and Freeman (2021) note that the supply risks are reduced successfully.
Bottleneck Items- For IT system spend category by Occidental of Oman, they are characterised with less profit implication for successful organisation operation having immense risks in supply chain. For this spend category, the best sourcing strategy would have to make sure the entire negative impacts due to bad positioning adequate positioning being relevant. The best practice here is what Deng et al. (2018) identifying as multiple suppliers being involved by the PS&M department of the organisation successfully.
Non-Critical Items- As illustrated in Paik (2021) report, for this category, it include multiple supplioers available and offerin demanded product and readily offered al,ternaties. Considering the Occidental of Oman organisation, for the categories of spend, the most appropriate approach entail single sourcing. This is with the relevant application of technology through facilitating the E-tendring approach including all specifications online resourcing including E-tendering and E-RFQs) with elaborate specifications and shared with entire skills put into account.
2.2 Business Hierarchy of Needs
By quoting CIPS Notes, Bals et al. (2019) noted that this model is applicable in souircing approach is relevant in identifying the best sourcing apooproaches as achievement of basic business needs and satisfaction, business wants ends up becoming more relevant. For instance, considering HSE and the chemicals spend category, motivation of their supply lead to the demand for sourcing more products and services for managing the risks of supply (see figurer 3).
Figure 3:Maslow Hierarchy of Needs impact on Sourcing Approaches
Considering the summary in figure 3, for Occidental of Oman sourcing approach, they make sure they achieve varying needs as a priority which are a reflection of the Maslow Hierarchy of needs. At the top is design and strategy with supplier and management second all which influence risks and quality improvement. Linking this to the Kraljic analysis model, it can be argued that the HSE and chemicals sourcing are best offered by multiple suppliers. According to Craig et al. (2021), a holistic exploitation of the overall buying power is evident as it impact cost reduction and establishment of sustainable contracts by suppliers selected. For instance, in sourcing the groves and protective equipment’s in their production facilities, Occidental of Oman involve locally generated sourcing support as opposed to engagement of international suppliers. This is replicated in all their subsidiaries with quality assurance being assured by the institutions in the country.
3.0 Stakeholders Relationships Management and Sourcing Approaches
3.1 Mendelow Stakeholders Matrix Analysis
For recognition of the sourcing approaches influence on the various stakeholders, it is important to use the Mendelow Stakeholder’s Analysis Matrix (CIPS, 2019). This is as illustrated in figure 4;…………………..
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