Solution
Executive Summary
This report includes an integrative report in the Corporate Award Program involving developing a negotiation plan for suppliers and Oman Air for value creation. Through a focus on inflight food products category of spend, different tools, techniques, theories, and concepts have been applied to evaluate and propose a profound negotiation plan. The rationale of selecting the category of spend is informed by the factor that, in the current COVID-19 pandemic, Oman Air is legally required to set up critical steps for forestalling the spread of the disease while maintaining quality and customer satisfaction. Oman Air guarantees that through a team of professionals, terms and conditions, and effective preparation, it has a streamlined procurement and supply chain management process. The company forecasts and plans for consumption and ensures the delivery of the products to meet the customers’ needs.
The findings reveal that Oman Air should effectively apply the seven stages of negotiations as outlined by CIPS. These include preparation, opening, testing, proposing, bargaining, agreement, and closure. The findings further reveal the importance of conducting an environmental analysis through a SWOT tool to determine the strengths and weaknesses that can be exploited and addressed to promote the negotiation process. A stakeholders’ positioning matrix has also been demonstrated as essential to enhance the negotiation process. Further, the importance of various skills and competencies, including communication, engagement, teamwork, accountability, and conflict management, has been noted to promote the negotiation process and avert potential bottlenecks.
Drawing from the findings, the following recommendations are proposed;
- Restructuring of Oman air to classify the buyers’ roles to mitigate the duplication of roles and enhance the procurement cycle.
- Adopting an outsourcing strategy for ensuring an added value for the products and saving costs.
- Developing accurate and clear specifications and including all stakeholders of Oman air in the contract development. This is vital in enhancing the procurement process.
- Enhancing the suppliers’ selection approach aby evaluating their SWOT profile to consider financial viability, evaluate the supply risks, and their competitive advantages.
Table of Contents
1.2 About Oman Air Organization. 5
1.3 Oman Air’s Categories of Spend. 6
1.3.1 Selected Category of Spend. 7
2.0 Evaluating Oman Air’ Procurement Process. 8
2.1 RACI Stakeholder Model in Oman Air Procurement Cycle. 9
3.0 Negotiation Plan for Oman Air’s Inflight Food Products. 14
3.1.2 BATNA in Negotiation Preparation. 17
3.1.3 Potential Negotiation Approaches. 18
3.4.1 Application of the 4R’s Model 22
5.0 Conclusions and Recommendations. 25
Appendix A: Oman Air Procurement Terms and Conditions. 30
Appendix B: Procurement process flow.. 34
- Introduction
Successful commercial contracts are rare in contemporary business environment. This is attributed to several areas of flaws, including stakeholder management, dynamics in price, delivery issues, quality, and payment. Besides, there are also unexpected market changes, which adversely affect the delivery of the required productions or services. According to Kinnaird and Movius (2020), a successful negotiation process is founded on effective communication and relationship between the stakeholders, including the decision owners, negotiators, and advisors. The organization should clearly outline who is involved in the negotiation process, their concerns, and the goods. According to CIPS (2021a), negotiation mainly involves profound communication between at least two parties with a common objective and desirable outcome to reach a mutual agreement. Several reasons exist for an effective negotiation process. These aspects are outlined in figure 1 below. Some of the aspects include cost management, ensuring the quality of the product or services, averting the potential sources of conflict, and addressing arising issues openly. Also, an effective negotiation process is characterized by all parties’ satisfaction and enhanced performance by meeting the key performance indicators (KPIs) and SLA’s.
Figure 1: Reasons for Effective Negotiations in Procurement and Supply Management (CIPS, 2021a)
This report entails a discussion and development of a formal commercial negotiation plan for Oman Air. The analysis and the developed approach are centered on key facts, approaches, and data from the company. Various elements are considered in the evaluation, including the quality, terms and conditions (Appendix A), delivery schedule, and communication, and stakeholder management. The report further draws from various models and concepts, including Kraljic’s matrix, 5 rights of procurement, 4 R’s, and BATNA. For the environmental analysis and how it influences the negotiation process and procurement plan, the SWOT and PESTEL analysis are applied. The report finally draws from the analysis to provide recommendations that can enhance the negotiation process.
1.2 About Oman Air Organization
Since its inception in 1993, Oman Air has significantly grown from a regional airline to operating in the global market. Today, Oman Air is acknowledged for connecting Oman to the world and has played a significant role in ensuring Muscat leads as a traffic hub in the Middle East. The airline is the flagship of the Sultanate’s Oman’s Civil Aviation. The company’s growth is reflected in supporting various activities, including tourism, commercial, and industrial (Oman Air, 2021a). Key distinguishing factors of Oman Air and other airlines are quality of services, integration of technology, and high performing workforce. Notably, the company’s fleet comprises aircraft that are modern, fuel-efficient, and with award-winning interiors. Modern equipment is also essential in ensuring the safety and performance of the company. Oman Air has been propelled to one of the leading airlines globally through product aviation, with a 5-star for quality. Another key distinguishing element is the services to customers and the quality of products during their flight, including water and eateries, informing the area of spend for this report.
Oman Air procurement department comprises three levels, as shown in Figure 2. These include the company’s procurement and supply management (P&SM) at the top, affiliates and the tendering portal at the second level, and the services, indirect products’ procurement, and direct products procurement at the third level. The three levels work collaboratively to ensure a successful procurement process, which is also guided by the airline’s terms and conditions (Appendix A). Critical factors in the P&SM are the personnel’s competence in various areas, including the tendering process, engagement with the stakeholders, and applying technology to track and manage the partners.
Figure 2: Oman Air P&SM Structure (Oman Air, 2021b).
1.3 Oman Air’s Categories of Spend
Three main categories of spend exist for Oman Air. As demonstrated in figure 3, the categories are classified into direct materials, indirect materials, and services. The direct materials are primarily used in the company’s daily operations, including food products, safety equipment, sanitation, and ad packaging. Indirect materials are those essential aspects that form the foundation of the company’s operations, including spare parts, fuel, and maintenance (Oman Air, 2021a). Notably, these categories are influenced by several factors, including collaborative strategies between the stakeholders, policies and procedures, risk and obstacles management, and ensuring quality and efficiency of product and service delivery to meet the end users’ preferences.
Figure 3: Oman Air’s Categories of Spend (Source: Author).
1.3.1 Selected Category of Spend
The categorization of different spending areas as demonstrated in Figure 2 is aimed at driving value in the overall procurement and supply management process. Moretto et al. (2017) noted that distinguishing the categories allows for narrowing down the focus and ensuring that each area is accorded the deserved attention. My placement area in Oman Air is collaborating with procurement and supply management (P&SM) to facilitate the sourcing and delivery of inflight food products. Notably, this is among the core areas in the airline’s category of spend as it involves direct materials that the customers use during their flights (Oman Air, 2021a). A comprehensive evaluation of this category of spend is provided in Table 1, also showing the subcategories. An evaluation of these categories and subcategories aims to demonstrate their significance and the need for adequate policies.
| Category of spend | Sources | Examples of subcategory |
| Bakery items | Local and overseas suppliers | Whole Meal Flour, Rice Flour, Honey Portion, Gelatine, Dry Yeast, Kraftkorn Mix, Icing Sugar, Chocolate Batons Coco, etc. |
| Canned fruit items | Local and overseas suppliers | Tomato Paste, Chili Sauce, Fruit Cocktail, Broad Beans Foul Medammas, Kidney Beans, Sundried Tomatoes, etc. |
| Dairy items | Local and overseas suppliers | Cheddar Cheese Block, Butter Portion, Fresh Milk Low Fat Lit, Parmesan Cheese, Whipping Crea, etc. |
| Frozen items | Local and overseas suppliers | Beef Tenderloin premium quality, Chicken Whole, Smoked Tuna fillet, Lamb Hind Shank, Scallops, Bone Less Mutton Leg. etc. |
| Grocery items | Local and overseas suppliers | Premium Quality Basmati Rice, Sunflower Oil, Coconut Milk Powder, Pasta Shells, Toor Dal, Turmeric Powder, Sugar Sachets, etc. |
Table 1: Summary of Categories and Subcategories of Oman Air Inflight Food Items Procurement (Source: Author)
2.0 Evaluating Oman Air’ Procurement Process
An effective procurement process involves several stages aimed at ensuring quality and timely delivery of the product or service according to the firm’s specifications. CIPS (2021b) uses the procurement cycle to describe these stages and note that the stepwise approach is imperative in promoting the efficiency of the process. A key element is a need for competence in various areas by the procurement personnel to ensure every stage’s objectives are achieved. The cycle is shown in Figure 4 below. The first stage, for instance, involves defining the organizational requirements and developing specifications. During this phase, the company identifies the need and opportunity. CIPS (2021b) described this first stage as a cross-functional stakeholder evaluation and developing in-depth and high-level specifications. It also involves engaging the different stakeholders early enough to avert potential delays and bottlenecks. When developing the specifications, some of the key consideration factors are checking for counterfeit skills and people, identifying the quality needs, sustainability, effective stakeholder engagement, innovation, and the use of information and communication technology.
Figure 3: Procurement and Supply Cycle (CIPS, 2021b).
Oman Air applies the majority of elements in the procurement and supply cycle provided in figure 3. The main stages applied by the airline to enhance its P&SM process include defining the business needs, conducting a market analysis, developing an effective plan and strategy, documentation, issuing tender, performance improvement, and working out the logistics. For Oman Air, among the key aspects in the procurement strategy is the stakeholder’s input. This is reflected in the inflight food items spend. CIPS (2014) note that performing an effective stakeholder analysis is central in positioning the company’s negotiation process and enhancing the P&SM efficiency. Further, a stakeholder analysis promotes the company’s engagement with the right individuals and enhancing the sourcing plan.
2.1 RACI Stakeholder Model in Oman Air Procurement Cycle
A profound procurement and supply process is characterized by working with accountable and competent individuals across the different steps of the cycle. RACI, an acronym for responsible, accountable, consult, and inform elements, is central in identifying competent personnel in the recruitment and supply chain process and ensuring that all the tasks have been well executed. According to XpertHR (2021), the RACI model is applied to ensure all the stakeholders’ interests are identified and considered in the procurement and supplying process.