(Solution) CIPS Advanced Level Module 2: Commercial Management in Procurement & Supply
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Executive Summary
For this assessment, a business report has been developed for evaluating global commercial strategy. This report focuses on S-Chem organisation. The importance of evaluating the global commercial strategy is informed by its effectiveness in guiding an organisation successful leverage on competitive advantage and dominance in their business environment. To achieve the intended business report aim, the focus areas included relationship between strategy and corporate; business and functional structures, methods of analysis of supply chain, resources management for supporting development and implementation of strategy and how costs and finances influence supply chains. Through the application of different models and theories (CIPS Module Notes), a set of findings have been generated. The key findings indicate that there exist a direct relationship of strategy and corporate; business and functional structures. In regard to supply chain analysis, various tools are applicable which are qualitative and quantitative. The findings indicate the analysis target areas of supply chain visibility, risk management, competition and improvement areas in their supply chain. Another key finding evidence effective use of resources is dependent on holistic inclusion of all stakeholders. With S-Chem being a conglomerate of various entities, implementing a global commercial strategy would mean that they reduce their costs overruns, increased profitability and dominate the chemicals manufacturing industry. This is since it is aligned to the Key Performance Indicators (KPIs) which impact the contract management and supply chain management.
In line with key findings and conclusions generated, a set of recommendations have been obtained which include;
- Embrace in technology and innovation for purpose of improved analysis of relations of corporate and strategy
- Enhance flexibility of supply chain by improving collaboration of different suppliers
- Actively involve PS&M department in supply chain analysis by predicting and satisfying customer demands
- Update the supply chain network for management of the different identified risks
Table of Contents
1.1 S-Chem Organisation Background. 3
1.2 Context of Business Report 3
2.0 Global Commercial Strategy. 4
2.1 S-Chem Organisation Structure. 4
2.2 Strategy alignment to Shem’s Objectives. 5
2.2.1 S-Chem Aim; alignment to mission and vision. 5
3.1 Supply Chain Visibility. 10
3.2 S-Chem Analysis of Supply Chain. 11
3.4 Competition within Supply Chain. 14
4.1 People, information, technology and finance. 16
5.0 Cost Management in Supply Chain. 20
5.1 S-Chem’s Financial Objective. 20
6.0 Conclusion and Recommendations. 22
Figure 1:Summary of S-Chem Products. 4
Figure 2:S-Chem Organisation Structure.. 6
Figure 3:Summary of S-Chem Mission and Vision. 7
Figure 4:S-Chem Corporate structure. 8
Figure 5:Summary of S-Chem Business Structure. 9
Figure 6:Summary of functional structure for S-Chem… 10
Figure 8:Summary of Descriptive Analysis. 14
Figure 9:Porter’s Value Chain. 15
Figure 10:Porter’s 5 Forces Analysis. 17
Figure 11:Supply chain analysis improvement and corporate objectives. 18
Figure 12:Components of MIS system… 19
Figure 13:Mendelow Matrix Analysis. 20
Figure 14:RACI Matrix Summary. 20
Figure 15:Summary of Pricing Agreements. 23
Figure 16:Impact of foreign exchange factors and volatility. 24
Table 1:S-Chem Organisation Structure.. 10
Table 2:Summary of supply chain network. 12
Table 3:S-Chem Risk Register. 15
Table 4:STEEPLED analysis summary. 22
1.0 Introduction
1.1 S-Chem Organisation Background
S-Chem is identified as one of the pioneer organisations in the development of industrial foundation of the Kingdom of Saudi Arabia particularly in the petrochemical industry (S-Chem, 2024). The purpose of this is leading the way for the private sector investment through the petrochemical industry. The organisation is comprised of the Saudi Chevron Phillips Company (SCP), Jubail Chevron Phillips Company (JCP) and Saudi Polymers Company (SPCo). The organisation has been in active operations in KSA chemicals market since year 1999 with their basic goal being production of high-level quality products with competitive costs for covering demands of the growth of petrochemicals market (S-Chem, 2024a). A summary of the organisation products is as illustrated in the following;
Figure 1:Summary of S-Chem Products
Source: (S-Chem, 2024)
1.2 Context of Business Report
A commercial strategy is identified as a detailed plan outlining objectives of organisation, practices and set measures intended to guide an organisation leverage on competitive advantage and dominate their market (Trzeciak et al., 2022). Also, this is used in guiding and motivating commercial teams in supply chain for achieving different goals, progress monitoring and measuring success. This means that commercial strategy is used for managing risks, responding to uncertainty and encountered issues (CIPS, 2024). As a result of the recent disruptions in business environment (COVID-19 and subsequent economic disruption), having a commercial strategy aligning strategic goals and addressing commercial risks is instrumental. In light of this feedback, this business report will focus on evaluating global commercial strategy for S-Chem organisation.
2.0 Global Commercial Strategy
2.1 S-Chem Organisation Structure
In S-Chem, they operates through a hierarchical organisation structure. According to Abbe et al. (2021) this is characterised by different levels of authority with a chain of command linking different management levels in the organisation. It is most appropriate for larger organisations. As illustrated in the following structure, with different organisation levels engaged, they are best positioned to ensure employees re in alignment if mission and goals;
Figure 2:S-Chem Organisation Structure
Source: Summarised from the organisation internal documents
As evidenced in the organisation structure, the authority flows from the executive president (SPC, JPC & SPCO) to different general managers in every department down to their employees. The outcome of this is the existence of a coordinated strategy which handles all the challenges hindering the organisation success in KSA and international petrochemicals industry.
The key corporate objective of S-Chem is to produce high quality products while at the same time being accountable to all their stakeholders (S-Chem, 2024a). To achieve this, the structure (figure 1) has 5 different managers (purchasing, finance, tax and compliance, information technology and digitisation product). They coordinate all stakeholders towards a common goal. This is while being efficient in making decisions with a reduced costs of operations.
2.2 Strategy alignment to Shem’s Objectives
2.2.1 S-Chem Aim; alignment to mission and vision
The main aim of S-chem is leading the way for the private sector for investing through the petrochemical industry. This is evidenced by their $2.67Bn market cap and being 3,766th most valuable organisation by market cap internationally (Company Market Cap, 2024). A summary of the organisation mission and vision is illustrated in the following;
Figure 3:Summary of S-Chem Mission and Vision
Source: S-Chem (2024b)
According to Fitzsimmons et al. (2022), there is a potential downfall of an organisation whose aim is not coordinated with mission and vision statements. In S- Chem, achievement of their aims is driven by their mission and vision. For instance, with more than 800 employees RocketReach (2024), S-chem appreciate need for being an employer of choice. This is while coordinating partnership with all stakeholders (partners and community) while managing sustainable growth. Hence, it is appropriate noting that S-Chem aims represent roadmap adopted to inform and guide navigation of their mission and vision. For an effective alignment of aims with mission and vision, S-Chem can leverage on an increased embrace of technologies and innovation.
2.3 Strategy Relationship
2.3.1 Corporate
Corporate structure identify how different departments /business units within an organisation are organised (Shestakov et al., 2020). Hence, S-Chem corporate structure is as illustrated in the following;
Figure 4:S-Chem Corporate structure
Source: Generated from Organisation Structure
As aforementioned, the core corporative strategy is “leading the way for the private sector to invest through petrochemical industry”. As such, their corporate structure (see above illustration) is not only one-dimensional. Nevertheless, they focus on leading others in areas of management of their employees/human capital, sustainable environment, transparency, embracing technology and manufacturing. Hence, similar to Kim and Mauborgne (2009) findings, S-Chem corporate strategy mirrors corporate structure.
2.3.2 Business
This represent legal structure of S-Chem influencing their day-to-day operations (CFI, 2024). In their organisation structure, this is under the operations as illustrated in the following;
Figure 5:Summary of S-Chem Business Structure
Source: Summarised from organisation structure
With S-Chem main business being production of benzene (835), Cychohexane (355), and Gasoline Components (804), their business strategy is aligned towards achievement of this strategy. This is by leveraging on uncontested markets and existing business operations. This is even evident by the organisation international market venture having Saudi Chevron Phillips an ownership of ACP and SIIG both at 50% market capitalisation (S-Chem, 2024).
2.3.3 Function
The functional structure in S-Chem is primarily comprised of the technical and maintenance. Hence, they are tasked with ensuring efficiency for success achievement of the corporate strategy. The functional structure include the following components;
Figure 6:Summary of functional structure for S-Chem
Source: Summarised from organisation structure
Hence, by active coordination of the managers in technical and maintenance departments, the end products is assured of being of high quality. This lead to having products and services which meet ISO 9001, 14000, 45001 and Halal certified company.
2.3.4 SWOT of Structure
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(Solution) CIPS Advanced Practitioner Corporate Award (APDP)
- Within six months, PS&M personnel will be provided with chances for capacity building through partnerships with educational institutions to gain knowledge and skills for implementing category management.
- The PS&M would become more motivated in the long run by providing recognition and benefits for pursuing category management implementation.
- Within a year, an effective change management strategy would be pursued, focusing on tracking the change and spotting change resistance
1.0 Introduction
1.1 ADNOC Organisation Background
In this report, the organisation of focus is Abu Dhabi National Oil Company (ADNOC). This is for understanding the impact of contract terms and conditions on distribution of risk and power with their suppliers. This is an organisation which began its operation in 1971 and today is ranked as the leader in diversified energy group which is owned by Abu Dhabi Government (ADNOC, 2022). The organisation network of holistically integrated business has based their operations across the entire energy value chain assisting their capacity for meeting overall demands of the consistently changing energy markets. For remaining competitive, the organisation has allocated $15 billion for advancing and accelerating lower-carbon solutions, investment in new energy solutions and decarbonisation technologies for lowering their carbon intensity with 25% by 2030 and successfully facilitating their NetZero by 2050 target. The company has a network of fully operational companies that operate throughout the entire hydrocarbon value chain, handling tasks including exploration, production, processing, storing, refinement, and supply in addition to manufacturing a wide range of petrochemical products. I work as a Contract Engineer for ADNOC Offshore, one of the company's divisions. The offshore division of ADNOC is responsible for the delivery and development of oil and gas resources in the waters surrounding Abu Dhabi. With OPEX and CAPEX, ADNOC Offshore spends over 3,000 million dollars annually. The organisation structure is as illustrated in figure 1; Figure 1: ADNOC Organisation Structure1.2 Identified Category Management
The deployment of the iSourcing system, a technology-focused procurement procedure, was chosen as the category management in this study. The need for oil and gas has significantly expanded in the modern era since the Covid-19 epidemic. As a result, ADNOC is forced to spend money on equipment to help them process and refine more oil and gas products. In light of this, the team leader's responsibility is to see that an iSourcing system is in place and can be utilised to purchase the new machines that the company needs to upgrade its operations. Locally in UAE, regionally in the Middle East, and internationally in Western nations, this would apply. This project aims to produce a report outlining the implementation of the change approach. This is done while ensuring the team members and leader have the necessary abilities to carry out the plan successfully. Implementing the new category management strategy is the kind of change being sought. The learner will be the team leader throughout the full category management process since a team has been chosen to oversee the deployment of iSourcing. The practical approach would be utilising various tools and strategies that demonstrate leadership and best practices in change management, along with a focus on the category management data from the ADNOC firm.2.0 Change Management Approach
2.1 Introduction of the Required Change Process
In its Procurement Supply and Management (PS&M) budget, ADNOC had allocated roughly 10 million UAEis before the COVID-19 epidemic. Up to 5,000 domestic and foreign providers are currently utilised in this. Because of the significant financial allocation in PS&M, the ADNOC sourcing method is crucial to their operations in this scenario. Logistics, equipment, and facility administration are all purchased separately by the organisation, all of which fall under the organisation's primary spending categories of computers and technical systems. As a result, they lack a centralised system that would allow all departments to be involved in aiding the procurement procedure (CIPS, 2020). The Burke-Litwin Model (Coruzzi, 2020) can pinpoint the internal and external factors that contributed to the identified change. This model ranks the many change drivers according to their importance and provides evidence of each one in figure 2; Figure 2:Drivers of Change Model When taking into account the ADNOC organisation and indicated change, these elements have the following effects, as stated in Table 1: Table 1:Summary of the Drivers of Change in ADNOC Organisation| Factors of change | Explanation |
| External environment | Supply chain networks have been significantly impacted since COVID-19. ADNOC's ability to replenish stock, equipment, and machinery has been affected. Therefore, ADNOC would participate in strategic alliances by including diverse actors and intermediates in the complete value chain through iSourcing |
| Individual and oganisational performance | ADNOC's investment in iSourcing would reduce PS&M turnover, everyone's performance, and supply chain network satisfaction. |
| Leadership | To ensure iSourcing success, the PS&M will lead and manage efficiently. This inspires and guides other organisations to iSourcing success. |
| Mission and strategy | The achievement of ADNOC's aim to provide high-quality oil and gas products would be ensured by the deployment of iSourcing. The justification for this is to quickly and effectively engage highly qualified vendors. |
| Organisation culture | Implementing iSourcing would promote the collaborative and teamwork-oriented organisational culture of ADNOC. This is due to the platforms offered by iSourcing that provide suitable options for teamwork and collaboration. |
| Task requirements and individual skills | Employees at ADNOC lack the knowledge and skills necessary to deploy iSourcing. This deficit might be filled by offering possibilities for professional advancement. Implementation of the change would be successful. |
| Employee motivation | This report's proposal suggests that providing monetary and non-monetary rewards is necessary to encourage people to adopt iSourcing. This is for employing remarkably contemporary systems of practice. |