Question:
You are required to select an example of a category of procurement of a product, service or works bought by
your organisation.
You are required to:
(a) Research the market of your chosen category and review its size, scope and extent of competition
(b) Summarise the demand and supply factors that impact on the chosen category of procurement
(c) Explain the current pricing mechanism applied to the category and assess the factors that impact on the
pricing of the category
Solution:
Executive Summary
Worldwide oil production is concentrated in certain reservoirs, particularly in Middle Eastern countries where production has remained high. In the Middle East, 80% of the world’s oil production occurs, with 65% focused in members of the Organization of the Petroleum Exporting Countries (OPEC, n.d.). OPEC countries include Baghdad, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Indonesia, Libya, UAE, Algeria, Nigeria, Ecuador, Gabon, and Angola (OPEC, n.d.). These countries have proven oil reserves (OPEC, n.d.). One of the main companies in Qatar is Dolphin Energy, which was founded in Qatar. Dolphin Energy specializes in the production of natural gas and subsequently supplies it through joint Qatari-UAE water to the UAE.
The main differentiating factor between Dolphin Energy and its competitors is that it is involved in every step of the oil production chain- upstream, midstream, and downstream. For its Qatar operations, it is involved in the production of gas in the wellhead, the processing of gas onshore, the removal of valuable by-products, and the subsequent transmission of natural gas by export through pipeline to the UAE and then its distribution to customers across the UAE and to Oman (Dolphinenergy.com, n.d.). On the other hand, for its UAE operations, its processing plant in Ras Laffan distributes natural gas across the UAE and Oman in a manner that is reliable and safe (Dolphinenergy.com, n.d.).
Clearly, Dolphin Energy’s distribution and supply chain is
the backbone of its business and its core competency. This is why its
competitive advantage is its supply chain. It must be said, therefore, that
supply chain management should be improved upon if Dolphin Energy is to remain
as competitive as it is in the present in the face of oil devaluation that is
set to occur in the future give the threats to oil production.
Introduction
Dolphin Energy is unique compared to other natural gas companies because it involves all three main stages of the production chain, which are the upstream, midstream, and downstream. The focus of this paper is to discuss the roles of procurement and supply, and the applicable techniques in managing a certain area of expenditure improvement. It also tackles the future inclusions in the contracts of Dolphin Energy, measures to take in choosing their suppliers, and other aspects that need purchase/supply negotiation.
Procurement is a difficult process to define, manage, and understand at times. To properly management the process, it needs to be understood; to understand the process, there needs to be a definition (Novack and Simco, 1991). There have been a developing consensus for the past years on the proper way to define competence in procurement and supply management. According to Cox (2001), this competence can be labelled as integrated supply chain management (ISCM). It is mandatory that companies have to serve the needs of the stakeholders by giving an assurance that their expectations and needs are met. Managing the project calls for enthusiasm and commitment given by stakeholder energy sources in an energy grid that can lead to a positive or negative trajectory (Walker, Bourne, and Steve, 2008). A project that fails to meet what stakeholders expect is regarded to be unsuccessful, even if it still follows the projected timeframe, scope, and budget.
The techniques that can be applied to expenditure to improve added value requires a specific approach to cost analysis to determine the kind of cost that should be applied in a certain expenditure. There needs to be a framework development for purchase classifications, cost analysis discussions, and strategic cost management techniques (Ellram, 2006). These techniques are all factors in decision making because they impact how companies will approach certain expenditure issues in the company.
Companies tend to change and diversify through time, which means that there could be new contract inclusions in the future. Economists recognize that long-term contracting while under varieties of price and non-price provisions may be an effective response to small bargaining problems (Hubbard and Weiner, 1990). The oil industry is a well-suited example for contracting since there is a small number of buyers and sellers in every market. The large capital commitments are needed from transacting parties at the movement of the contract. There is a model presented for bilateral bargaining, and a given initial price that may change in the future as prices can fluctuate. This can happen to Dolphin Energy as changes in prices happen over time.
There are a variety of methods that companies follow for selecting suppliers, which the Dolphin Energy Company can also do. Considerations are made from simple techniques to difficulty approaches to programming and these models are mainly focused on supporting decisions in different phases. Applying support methods for decision making can improve the supplier selection process. The last stage of the method calls for the necessity to consider the selection process from a holistic point of view (Ceyda Güngör Şen, Selçuk Şen, and Hüseyin Başlıgi, 2010). This means that the individual case is not the most significant factor that affects the decision. Certain decisions are processed not independently of others but should take into account the implications of other cases on the decision (Emerson, 1983).
There has been a research on the specific purchasing approaches done by companies. Coming from the simple idea that decisions on which activities should be practiced within the company and which should be contracted out can be crucial to business effectiveness (Ford and Farmer, 2002). Over the years, management of purchasing and supply has met an increasing interest from managers. A lot of the top managers have become aware of the money involved in purchasing decisions and large investments go to investment goods. Companies put their focus on the main activities to gain a competitive advantage (Weele, 2010). This is where the importance of negotiation comes in.
2.0 Market of the chosen category and a review of its size, scope and extent of competition…………………………………………………………………………………………………………Please contact our team to receive guidance and support on this assessment based on your organisation background and selected category of spend
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