(Solution) CIPS Assessment 1 PDV- Managing Expenditures with Suppliers
- In this assessment, by selecting a category of spend, the importance to organisation stakeholders has been provided.
- The organisation of focus is Royal Commission for AlUla (RCU). Also, by carrying out brief market analysis, an explanation of the extent in which procurement function offer value for money outcomes has been produced.
- The selected category of spend in RCU is the Information Technology (IT) and cybersecurity. In particular, the IT infrastructure and equipment sub-category of spend has been prioritised for evaluation.
- In order to achieve this assessment objectives, appropriate purchasing models have been selected for application.
- These included Mendelow Matrix Analysis, Porter’s 5 Forces, STEEPLE, SWOT analysis and more.
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Description
Solution
Executive Summary
In this assessment, by selecting a category of spend, the importance to organisation stakeholders has been provided. The organisation of focus is Royal Commission for AlUla (RCU). Also, by carrying out brief market analysis, an explanation of the extent in which procurement function offer value for money outcomes has been produced. The selected category of spend in RCU is the Information Technology (IT) and cybersecurity. In particular, the IT infrastructure and equipment sub-category of spend has been prioritised for evaluation. In order to achieve this assessment objectives, appropriate purchasing models have been selected for application. These included Mendelow Matrix Analysis, Porter’s 5 Forces, STEEPLE, SWOT analysis and more.
From an in-depth evaluation by using the identified theories, it has been established that in sourcing the IT category of spend, RCU ensure that they achieve value for money outcome. It is through this that organisation has managed to leverage on competitive advantage in the tourism sector in Saudi Arabia (KSA) and market dominance. Further, by ensuring all stakeholders interests are prioritised and developing a criteria for key performance indicators, RCU manage to guarantee prioritisation of success in gaining relevant outcomes which are sustainable and futuristic.
In the entire assessment, various gaps and weak areas For improving the value for money outcomes and ensuring all stakeholders inclusion, the reccomendations provided for RCU include and not limited to;
- RCU need to expand the scope of their IT sourcing approaches by involving all their stakeholders prior selecting the best supplier
- Apart from relying on international organisations in providing their IT system, they can initiate their own systems customised to their operations by their experts to promote value for money outcomes
- Ensure provision of highly discounted costs potentially by engaging local suppliers to get the value for money attained successfully
- The challenges with cash flow resulting from COVID-19 pandemic and the conflicts of Ukraine and Russia, it is essential for RCU to increase their investment on uncertainties
- To harness the necessity for consistency in achieving value for excellence, fairness in their operations, innovativeness and honest
Table of Contents
1.1 Organisation Background. 4
1.2 RCU Organisational Structure and Procurement Department 5
1.3 Identification of a Category of Spend. 5
1.4 Brief Background/Context of Assessment 7
2.0 Importance and Impact to RCU Stakeholders. 8
3.1 Models for Market Analysis. 9
3.1.3 Porter’s 5 Forces Analysis. 11
3.2 Size of the Market and Trends. 12
3.3 Level of Competition in the Market Place. 12
4.0 Procurement function in Producing Value for Money Outcomes. 13
4.1 Suppliers Preferencing Matrix. 15
5.0 Approaches to Managing Prices and Costs for the IT system spend category. 16
5.0 Conclusion and Recommendations. 19
Appendix 1: Categorisation of RCU Categories of Spend. 23
Appendix 2: IT System Suppliers and REQ.. 24
Figure 1:Summary of RCU Practices 5
Figure 2:RCU Organisation Structure. 6
Figure 3:Category Management Strategy. 7
Figure 5:Summary of the Types of Stakeholders. 9
Figure 6:Mendelow Matrix Stakeholders Analysis. 10
Figure 7:Porter’s 5 Forces Analysis. 12
Figure 8:KSA Technology sector perfect competition. 14
Figure 9:IT Category of Spend Areas 15
Figure 10:RCU integration of Triple Bottomline. 16
Figure 11:Supplier Preferencing Model 17
Figure 12:Areas of achievement, improvement and reduction by RCU organisation. 18
Figure 13:Kraljic Matrix Model Analysis 19
Figure 14:RCU Value for Money Outcomes through PS&M Strategies. 20
Table 2:RCU STEEPLED Analysis 11
Table 3:Value for Money for the Spend Category. 15
1.0 Introduction
1.1 Organisation Background
The Royal Commission for AlUla (RCU) is identified as an outstanding natural and historical significance organisation operating from North- West Saudi Arabia. As evidenced in RCU (2022) this is by ensuring that Saudi Arabia is premiered as the destination for nature, cultural practices and heritage. Representing a cornerstone of the KSA vision 2030, RCU is identified in RCU (2021) as contributing to upto SAR 120bn for the KSA GDP development by 2035 by implementation of a series of projects which are injected by the local AlUla economy. This is through a high-level commiotment for excellence and best practice in work with other institutions globally in various fields. The scope of the organisation operations is as summarised in figure 1;
Figure 1:Summary of RCU Practices
To evidence the success of the organisation, Arab News (2021) note that the KSA government has invested upto $2 billion in the initial seed funding for developing the AlUla historical development area. Also, an upward of $3.2 billion is equally invested from public-private partnerships for prooritising on infrastructure development for the project successful implementation by year 2023. The success for this is informed by RCU (2021a) as inclusive of the fact that AlUla operates approximately 25,000 square kolometers of lush oasis valleys, sandstone mountains and ancient cultural heritage sites.
1.2 RCU Organisational Structure and Procurement Department
Procurement and Supply Management (PS&M) is an autonomous organisation department in a heirarchcial structure deartments (see figure 2). This is in the shared services department in RCU.
Figure 2:RCU Organisation Structure
By active collaboration with all the other departments in figure 2, RCU ebsure that they gain a value for money while modernising all their operations by engaging he best suppliers in the KSA and international markets. These practices are advanced through what CIPS (2022) identify as the terms and conditions assisting in minimising the contractual risks and exposure when they are pursuing their business operations and contracts advancement.
1.3 Identification of a Category of Spend
Adopting the definition of CIPS (2022a), a category of spend include logical grouping of same expenditure items/services which are elaborately identified in an organisational level. As shown in figure 3, this is advanced through a category management which considers aspects of stakehoplder engagement, market analysus, external environment, strategy and policy, risk assessment and continuous improvement.
Figure 3:Category Management Strategy
As evidenced in appendix 1, RCU procurement is categorised into development and construction, arts, wildlife and heritage, hospitality and tourism services, corporate services and community services. For this assessment, a category of spend in the corporate services and in particular the IT & Cybersecurity has been selected. The spend category in this area involve the procurement of the products and services as illustrated in figure 4;
To evidence on the importance of this category of spend to RCU operations, Gulf Business (2022) note that they have recently partnered with RATPgroup for promoting residents and visitor experiences. Further, since the emergence of COVID-19 pandemic, the organisation has harnessed the application of technology in their active operations including remote working and promoting tourists access to the protected sites.
1.4 Brief Background/Context of Assessment
By effectively using the Information Technology (IT) system in RCU organisation, this assessment has focused on evaluating importance and impact of organisation stakeholders. Also, the focus has been on evaluating how procurement function generate value for money outcomes. This is through an evaluation of the approaches for prices management and costs for the IT category of spend. The impact of markets for securing costs savings for RCU has also been evaluated in-depth. Investment in IT is evidenced in Finance Times (2022) as promoting the organisation capacity to engage upwards of 2 million visitors annually in their 9,400 hotel rooms and making a contribution of 120 billion Riyals for KSA GDP as they progress in creating more than 40,000 jobs.
2.0 Importance and Impact to RCU Stakeholders
According to CIPS (2021) stakeholders are individuals possessing significant influence on the scope in which an organisation is run and successful operations. A summary of the classification of the stakehodlers is as illustrated in figure 5;
Figure 5:Summary of the Types of Stakeholders
Hence, for the RCU and the IT system spend category their different stakeholders are categorised in these types. For the sake of evaluating their power and interest, the Mendelow Matrix is applicable. According to CIPS (2021) through a categorisation of these stakeholders into various quandrants, the procurement professionals recognise the scope of engagement that is essential and the level of information to be shared. This is as illustrated in figure 6;
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Figure 6:Mendelow Matrix Stakeholders Analysis
High Power and Low Interest– This category include the society where RCU operates (North-West), regulatory bodies in Tourism sector and governments who exercise immense power in ensuring value for money is attained. Further, the core interest is their success in this area with effective stakeholders relations attained.
Low Power and High Influence– This category include the IT department and also the administration of the organisation. By leveraging on reduced power and interest, their impact and influence on stakeholders relations is instrumental.
High Power and High Influence– This include the suppliers procurement and supply and finance team whose operations influence success stakeholders relations and their operations. For success in their operations, they promote collaboration level, consultations and exchanging knowledge and awareness.
Low Power and Low Interest– Considering the board of management and also the legal teams, they have low power and interest in the overall IT system procurement process. The importance of this is harnessing relevant legislations, policies and alignment with the set best practice being pursued in line with the organisation direction.
3.0 Market analysis
3.1 Models for Market Analysis
According to CIPS (2021a) which provide information on procurement and supply cycle and illustrated in figure 3, the rationale for market analysis in procurement and supply is to develop effective procurement strategies for successful planning for strategic procurement.
3.1.1 SWOT Analysis
This tool is an abbreviation of Strengths, Weaknesess, Opportunities and Threats. As evidenced in CIPS (2022b), the strengths and weaknesess are internal to the organisation with opportunities and threats being external to the organisation. The analysis is as shown in table 1;
| Strengths
· All stakeholders in RCU are collaborative · RCU is a government institution fully funded hence readily available resources |
Threats
· Lack of qualified IT experts to utilise the Western technologies · Russia and Ukraine conflicts complicating their ability to source for the IT systems |
| Weaknesses
· Slow government funding hence reduced innovativeness and technology embrace · Lack of economies of scale in their procurement of the IT systems |
Opportunities
· Leveraging on the opening back of economies and tourism sector after COVID-19 related closures · Leverage on technologies in systems implementation |
3.1.2 STEEPLED Analysis
This is defined in CIPS (2022c) as a strategic planning methodology which is applicable across different business functions. This is for discovering, evaluating, organising and tracking external risks. As part of RCU IT system procurement, there are risks which would be encountered which would be enumnerated by STEEPLED Analysis summarised in table 2;
| STEEPLED Factors | Description |
| Social | · Need to regenerate vast swathe of north-west KSA to lead global destination for cultural and natural heritage
· Cultural heritage majority of visitors are students, learners and young people |
| Technology | · RCU invests immense resources in IT systems and innovation embrace
· COVID-19 pandemic has informed need for new systems use |
| Economy | · Ukraine and Russia conflicts affecting KSA economy
· COVID-19 pandemic significantly disrupted KSA economic wellbeing |
| Environment | · Green policy systems has a direct impact on scope of regeneration of the northwest region
· RCU need to ensure job creation, entrepreneurship and anti-smoking campaigns as part of its CSR |
| Political | · Confrontation of Iran and KSA impacting regional and international Islamic organisations |
| Legal | · 2019 amended procurement laws in KSA impact IT systems PS&M operations |
| Ethical | · Embrace of honesty, mutual understanding and justice instrumental for organisations success in their practice in KSA |
| Demographic | · Population increase in KSA means more inhabitants to North-West |
In summary, as illustrated in table 2, the issues with social factors, technpology and economy are in favour of RCU investment on IT systems. Specifically, to compete in the opening economy after COVID-19 and balance the Russian-Ukraine conflicts, RCU would need to modernise their operations by investing in modern technologies. This is while political, legal and ethical aspects influencing their successful management of their operations.
3.1.3 Porter’s 5 Forces Analysis
This tool is identified in CIPS (2022d)….
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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
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2.1 Introduction of the Required Change Process
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| 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. |
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