Executive Summary
In this report, the various sourcing approaches for a selected spend category in ADNOC organisation has been identified. The spend category selected in this report is the chemicals. Apart for the chemicals spend category, other spend categories compared are valves, consumables and instruments all procured from the same department. In order to analyse the sourcing approaches, a set of tools and techniques have been used which are the Kraljic analysis, Mendelow’s analysis technique for stakeholders analysis and business hierarchy of needs. Further, by use of SWOT analysis technique, SWOT analysis tool has been used. Additionally, Peter Block Grid has been applied for further pursuing analysis of the interests of stakeholders in sourcing approaches in tandem with their position. The different approaches which have been applied include single sourcing, sole sourcing, dual and multiple.
Further, a supplier appraisal has been developed for chemicals spend category in ADNOC organisation by following Carter’s 10Cs technique. The various findings analysis evidence the need for ADNOC to holistically make an investment on strategic sourcing approaches to guarantee dominance of the entity in the oil and gas sector with profits acquisition evident. For the various sourcing approaches evidenced, Multiple Sourcing include immense suppliers inclusion with single-sourcing integrating single suppliers services. For sole-sourcing, this is inclusive of engagement of a single monopolistic supplier involved in active market practices with dual sourcing integrating suppliers with their needs conflicting.
Finally, considering the recommendations, they can entail;
- Selecting the best sourcing approach informed by the spend category different characteristics
- Prioritising on the policy development in procurement while successfully ensuring technology is integrated in their active e practices
- To simplify the entire procurement process in ADNOC by making sure stakeholders interests are prioritised
- To integrate technology and innovativeness in the different product lifecycle inclusive of their RFQ, RFP and Negotiation e-Auction. Currently, in ADNOC Ariba system, they ought to harness information flow as evidenced from their sourcing approaches
Table of Contents
1.1 ADNOC Organisation Background. 3
2.0 Selected Category of Spend and Positioning. 4
2.1 Kraljic Analysis Matrix Technique. 4
2.2 Business Hierarchy of Needs. 6
4.0 Sourcing Appraisal Checklist 12
4.1 Supplier Appraisal of ADNOC Chemicals sourcing. 12
5.0 Conclusion and Recommendations. 15
1.0 Introduction
1.1 ADNOC Organisation Background
ADNOC organisation has been operating in UAE, Middle East and global oil and gas sector in the past 50 years. It occupies the number one position in the UAE oil and gas sector with immense fleet sizes and the regional initial provider of integrating their drilling services provision (ADNOC, 2021). Its operations entails linking the upstream value chain, facilitation of ADNOC with a chance to increase their overall oil production of approximately 5 million barrels every day and to increase by 2030. In its refineries, the organisation is recorded to be producing upto 40 million metric tons of high-quality refined oil and gas products offered to global markets. The organisation leverages on a high-level capability to refine upto 922,000 barrels of crude oil and to condensate every day to form various products. The categories include liquefied petroleum gas, Naphtha, Gasoline, Jet fuel, diesel, base oil and petrochemical feedstock (ADNOC, 2021a).
For ADNOC to leverage on achievement of Vision 2030 for UAE, green practices by lowering greenhouse gas emissions (GHG) level by upto 25% by 2030, the organisation intend to expand their strategy for Carbon Capture, Utilising and Storage (CCUS) with 500% capacity. This is by leveraging on procuring high-level chemicals. Also, in current COVID-19 pandemic, interruptions in the supply chain and delivery, achieving value for money has been instrumental. The chemicals are supposed to be of intense quality, lowered risks from the competitor’s ability to seizure opportunities available. Hence, the chemicals spend category selected in this assessment is critical for ADNOC.
1.2 Scope of the Report
As evidenced in the introduction of this report, the focus is on evaluating four sourcing approaches and generating an explanation of their use in the ADNOC organisation. The organisation procurement department has a mandate to guide supply chain management to improve the supply relations and to improve sourcing strategy. This is to maximise organisation value and assigned roles in procurement of goods and services for ensuring suppliers comply with organisation policies. This is at the same time leading to an implementation of organisation most appropriate approach and a best practice for local community through obtaining in-kingdom total value added (IKTVA). In tandem with the identified sourcing approaches, a single category has been used in the supplier’s appraisal checklist.
2.0 Selected Category of Spend and Positioning
For ADNOC, considering the chemicals spend category, a summary of providers is as illustrated in figure 1;
Figure 1: Categories of Chemicals services
Hence, the noted chemicals products category of spend, use of the best sourcing approach in different spend categories evidence the presence of a high-level control of the overall supply and procurement strategies (CIPS, 2019). The various needs, demands guide the process and supporting supply process in the organisation overall value chain. By reference on Kraljic analysis and business hierarchy of needs, with sourcing approaches influencing ADNOC stakeholders interests the Mendelow Stakeholders Analysis Matrix applied.
2.1 Kraljic Analysis Matrix Technique
The Kraljic Matrix is an appropriate tool used in establishing incurred risks in supply of materials from suppliers in their supply chain (CIPS, 2021). This is to select the best sourcing approach for establishing the best form of stakeholders relations and ensuring risks are mitigated in an organisation (see figure 2);
Figure 2: Kraljic Matrix Analysis
Source: Summarised from CIPS (2021)
For figure 2 summary, in ADNOC organisation, the various sourcing approaches would include;
Leverage– The different suppliers in this category entail many suppliers involved in representing end product costs and lowered risks of suppliers. Considering chemicals sourcing in ADNOC, being positioned as a buyer harness presence of holistic negotiations with cost savings evident to promote procurement and shipping transported chemicals. For the identified spend category particularly in current COVID-19 pandemic and representing best future strategy, an increase in its impact on profits acquired and lowered supply risks would be in place.
Strategic– An appropriate example is the machines in onshore and offshore practices. These have immense supply risks. Therefore, sole supplier would have to be involved contrary to sole or dual sourcing use. In a more confident manner, the suppliers relations management for ADNOC PS&M is essential to embrace a locked-in sole or dual sourcing. The importance of this is ensuring less supply risks placed in the process implementation (Forbes, 2017).
Bottleneck– This entail the category of consumables involved in generating moderate profits which impact ADNOC organisation success in their operations despite COVID-19 pandemic supply chain risks. As evidenced in Ribas et al. (2021), most appropriate sourcing strategy for the identified category would reduce negative implications due to inappropriately positioning. For mitigating the evident issues in this spend category, procurement team would make sure they are engaging many suppliers.
Non-Critical– This area entail various products and services being abundant with different suppliers available to provide alternatives (Kang et al., 2018). In ADNOC operations, for the different spend categories, sourcing strategy is appropriately used. For solving the likely complexity in the different standards, modernisation of procurement through an embrace of e-Tendering such as Requests for Quotation (RFQs) and online developed specifications or emailing is relevant for the suppliers being relevant (CIPS notes 2021).
2.2 Business Hierarchy of Needs
As evidenced in the identified categories of spend strategic positioning, it is important to use business hierarchy of needs model (CIPS, 2020). The increase in demand for chemicals spend category is noted to have an intense competitiveness and costs incurred in selecting sourcing approaches. The use of Business Hierarchy of Needs (B2B International, 2020) is relevant which is developed from the Maslow’s Hierarchy of needs is relevant.
Figure 3: Maslow Hierarchy of Needs in ADNOC organisation
For the sourcing approach used in ADNOC, it is important to make sure they attain the identified needs as shown in figure 3 while prioritising on them based on the identified order. An appropriate instance is high pressure horses spend category where the quality level ought to prioritise and the level of business needs impact, minimising risks for ADNOC operations being a priority. In findings of Kraljic analysis, chemicals are evidenced as most relevant when obtained from multiple suppliers. As evidence in Duygun and Sen (2020), high buying power is holistic in its exploitation as they impact secure costs and achievement of long-term contracts for their various suppliers.
Further, appropriate supply risks management would include solutions to the existing suppliers engagement level in bottleneck items. For example, for ADNOC, by prioritising on engagement of local suppliers, they would be more relevant contrary to international suppliers. Further, contractors and vendors in different spend categories harness an increase in collaborating services, harnessing an intense partnership with UAE government admin.
2.3 Stakeholders Management
To recognise the implication of the sourcing approaches in the different engaged stakeholders analysis matrix could be used (CIPS, 2018). This is as shown in figure 4;
Figure 4: Mendelow Matrix Analysis
In line with 4 findings, the best findings in sourcing approaches entail;
High-interest and High-Power- This include the chemicals category of spend in the onshore and offshore facilities core to select the most appropriate approach followed. In regard to the management, misunderstanding of the used sourcing approaches impact on change to alter their approach.
Low-Interest and High Power- In this category, the different stakeholders include legal department, finance teams and engaged suppliers selected. Hence, it is important to be satisfied with the sourcing strategy used.
High-Interest and Low Power- The stakeholders interest include information on the best strategy for sourcing. For ADNOC P&SM, the board and management teams call for limited critical efforts despite the necessity for influencing sourcing approaches applied.
Low-Interest and Low-Power- The Admin and security teams are core for IT teams and necessity of being informed. Hence, there is a necessity for the best sourcing approach achieving different organisation needs based on their self-interest.
For the stakeholders identified, Peter Block Grid Leadership Center (Leadership Center, 2020) can at the end be applied for arranging stakeholders informed by their positioning as illustrated in figure 5;
Figure 5: Peter Block’s Stakeholder Groups
Bedfellows (High Agreement & Low Trust)- The category entail a lot of challenges to source the selection as their interest operate in a long-term commitment approach. Communication is prioritised for selecting the most appropriate sourcing strategy.
Allies (High Agreement and & High Trust)– Stakeholders are offered with immense support and sharing vision to attain their allocated vision. The best strategy entail engaging multiple sourcing approaches.
Opponents (Low Agreement & High Trust)– For this category engaging stakeholders demand a constant update and sourcing a feedback, embrace of honest dealing and to opt for the most appropriate sourcing approach.
Adversaries (Low Agreement & Low Trust)- In most instances, this category entail change process which call for ADNOC to make hard decision in their sourcing approach. Prioritisation is on distinct interests.
2.4 SWOT Analysis
To evidence on the best……….
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