(Solution) CIPS PDV Driving Value through Procurement and Supply Managing Expenditure with Suppliers
Executive Summary
In this first assessment covering modules “driving value through procurement and supply and managing expenditures with suppliers”, the focus is outlining the importance of a category of spend to organisation stakeholders. The selected category is logistic services as sourced by Saudi Arabia Maaden Petrochemical Company (SAMAPCO). In specific, the logistics services are handled by JAS Company in Saudi Arabia. Further, in this assessment, brief market analysis has been pursued with a detailed evaluation procisded on th scope of procurement and supply management (PS&M) department lead to development of value for money outcomes. At the end of this assessment, the current approaches in placxe for managing costs and prices for the logistics service spend area influencing markets in SAMAPCO has also been an area of focxus. The findings in this report are informed by various models and tools including Mendelow Matrix, STEEPLED analysis, SWOT and Porter’s 5 Forces all which evaluate PS&M functions in managing costs and operations in the highly competititve business environment.
The main findings in this assessment evidence that for the logistics service sourced by SAMAPCO, value for money outcomes is successful. In particular, by engaging JAS Company, the organisation has managed to be appropriately positioned to leverage on competitive advantage in the petrochemical industry in Saudi Arabia (KSA). Another key finding is that by setting a priority in considering their different stakeholders interest and pursuing the set Key Performnce Indicators (KPIs) and Service Level Agereements (SLAs), SAMAPCO business objecives would be sustained and successful (future oriented).
The findings and conclusions in this assessment inform on a set of gaps which could be managed by pursuing the following recommendations;
- Expansion of the best strategy in embracing on modernised technology as part of stakeholders management
- Come up with customised strategies for improving value for money outcomes unique to logistics spend area
- To involve local and regional supploers to cut costs through gaining in terms of discounted costs
- Consider re-evaluating their financial capability for an effective logistics sourcing with all uncertainities eliminated
Invest in building their excellence, fairness in engaging all stakeholders, innovativeness and honest-based operations
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Description
Solution
Table of Contents
1.1 Saudi Arabia Maaden Petrochemical Company Background. 3
2.0 Importance and Impact on SAMAPCO Stakeholders. 4
3.1 Models applied in market analysis. 6
3.1.3 Porter’s 5 Forces Analysis. 10
3.2 Market Size and Trends Analysis. 10
3.3 Level of Competitiveness in Market Environment 11
4.0 Procurement and Supply Chain Management (PS&M) function to Generate Value for Money Outcomes. 13
4.1 Suppliers Preferencing Matrix. 15
5.0 Managing Prices and Costs in Logistics Services Sourcing. 16
6.0 Conclusion and Recommendations. 19
Figure 1: Summary of Logistic Services sourced by SAMAPCO.. 5
Figure 2:Classification of Stakeholders 6
Figure 3:Mendelow Matrix Analysis 7
Figure 4:Key considerations in the procurement cycle. 8
Figure 5:Porter’s 5 Forces Analysis. 11
Figure 6:JAS Worldwide and perfect-based competition. 13
Figure 7:Competitiveness of KSA Petrochemicals industry. 14
Figure 8:Summary of SAMAPCO Logistics service categories value. 15
Figure 9:Summary of SAMAPCO Logistics service categories value. 16
Figure 10:Supplier Preferencing Matrix. 17
Figure 11:Roles and benefits of PS&M in an organisation. 18
Figure 12:Kraljic Matrix Analysis Tool 19
Figure 13:Value for Money Outcomes by SAMAPCO PS&M approach. 20
Table 1:SAMAPCO SWOT Analysis summary. 8
Table 2: SAMAPCO STEEPLED Analysis. 9
Table 3:Summary of SAMAPCO Logistics service categories value. 14
1.0 Introduction
1.1 Saudi Arabia Maaden Petrochemical Company Background
Saudi Arabia Maaden Petrochemical Company (SAMAPCO) operate as a subsidiary of Ma’aden organisation (Ma’aden, 2024). The organisation is the fastest developing mining and chemicals sector company globally and in Middle East. Today, SAMAPCO is ranked in the 10 global mining orgnosations informed by the company market capitalisation. As part of the organisatio operations, they product approximately 300,000 metric tons of ethylene dichrolined and 250,000 metric tons of caustic soda (Ma’aden, 2024a). This is with their operations in the petrochemical industry being enahced by production of high-level quality products of immense quality witht heir production in line/compliant with the global standards and overall demands. The organisation vision is “sustainable mining champion with global prescence” This is with their mission being leadership in developing the petrochemicals sector in KSA through maximisation of value of mineral resources while at the same time ensuring development of Saudi Arabia Global Mining and petrochemical giant. To achieve this, it is appropriate to identify the organisation best practice in driving value through procurement and supply and also management of entire expenditure.
1.2 Selected Service
In CIPS Module Notes, a category of spend is defined as “a form/type of products, services which are procured by an organisation” (CIPS, 2023). In order for sorucing process to be successful, financial resources are involved and impact multiple stakeholders in an organisation. The level of impact is evidenced by the category management strategy either direct or indirect products/services informed by value, suppliers engaged, form and volumes. For this assessment, Logistics category of spend in SAMAPCO has been identified. The logistic services entail a collection of operations which aid different goods and services management from the warehousing and storage solutions to the transportation management system optimising shipment rout planning (CIPS, 2023a). As a petrochemical industry company operation in different locations in KSA, Middle East and Internationaly, logistic services are instrumental for their successful operations. A major provider of their logistic services is JAS Worldwide which is an organisato providing air and ocean cargo, supply chain services and specialised market sectors by being committed to high-quality services provision (JAS Worldwide, 2024). The organisation is directly engaged specifically for the provision of the illustrated logistics services to SAMAPCO;
Figure 1: Summary of Logistic Services sourced by SAMAPCO
Source: (JAS Worldwide, 2024)
In this regard, for the different logistic categories llustrated, they are sourced for success in SAMAPCO vision and mssion. The necessity for achieving value for money outcomes cannot be understated amongst the different stakeholders. This is in their evaluation of approaches in cost management for the logistic services sourcing. Also, the relevance of the markets in securing cost savings by SAMAPCO is identified in order to manage their current 250,000 mt/ causatic soda unit and 300,000 mt/year ethylene dischloride unit which is a program initited in 2013 by the organisation (S&P Global, 2012). Also, the logistics services are critical for guiding development of an upward of 200 job opportunities which can enhance an increased gradual expansion of the organisation overall invested projects (Ma’aden, 2024a). This is in KSA, regionally in MENA and internationally.
2.0 Importance and Impact on SAMAPCO Stakeholders
In line with the CIPS Module Notes, a stakeholder “is a group, people or organosations with specific interests/expectations in making of decisions or practices pursued in an organisation/project” (CIPS, 2024). A summary of the different stakeholders (Internal, Connected and External) is as illustrated in the following;
Figure 2:Classification of Stakeholders
Source: CIPS Module Notes
Hence, taking into account of SAMAPCO logistics services sourcing, their different stakeholders can be analysed by applicatin of Mendelow Matrix analysis tool (CIPS, 2024).
Figure 3:Mendelow Matrix Analysis
Source: Summarised from CIPS Module Notes and SAMAPCO Internal documents
High Power; Low Interest- The KSA population where SAMAPCO has based on their operations has a major influence on the sourcing of the logistic services. Also, the government authority mandated with regulating the organisation operations has high power. This is snce they must approve the quality of the logistic services which are sourced from JAS Worldwide organisation. Their primary interest is to ensure that SAMAPCO is successful in sourcing the logistics with sustainable relations established in place.
Low Power; High Influence- This is a category which include the logistics management teams, accounts/finance department which exercise lower power and high influence. This is since they determine the budgeted resourced for the process implementation and the specific logistical services which are required/demanded.
High Power; High Influence- Taking into account of the different suppliers, JAS Worldwide Inc, PS&M Teams in SAMAPCO and their clients capitalise on high-level power which influence the entire stakeholders relations. Their role is influencing team-based working, consultations pursued and knowledge exchanges and information sharing all critical for successful stakeholders relations.
Low Power; Low Interest– The board of management of SAMAPCO and also the law/legal departments have low power and also interest in the logistics sourcing and award of JAS Worldwide with the contract. The importance of this is ensiring critical laws, policies and alignment with best practice in line with organisation success is attained.
3.0 Market Analysis
3.1 Models applied in market analysis
As part of market analysis, it is important to put into account of the Market Analysis process which guide development of a holistic sourcing strategy in strategic sourcing process (Smerichevska & Postnikov, 2024). The procurement cycle is identified in CIPS (2024a) as being comprised of different phases as illustrated in the following;
Figure 4:Key considerations in the procurement cycle
Source: CIPS Module Notes
3.1.1 SWOT Analysis
Starting with internal analysis, this tool focuses on strengths, weaknesses, opportuntiies and threats (CIPS, 2022). In this context, the SWOT analysis is appropriate for SAMAPCO as part of sourcing for logistics services spend category. A summary of the analysis is illustrated in the following;
Table 1:SAMAPCO SWOT Analysis summary
Source: Summarised from internal documents
In summary, an improved stakeholders relations would ensure that the strengths such as collaboration, optimum resources utilisation are achieved. This is while ensuring they invest in appropriate strategies meant for effective logistics management challenges and mitigating emergin conflicts. It would be better to leverage on the identified opportunities when stakeholders relations are appropriate and positive.
3.1.2 STEEPLED Analysis
In CIPS (2024b), STEEPLED analysis is identified as “strategic planning methodology applied in the entire business functions in discovery, evaluation, organising and tracking external-based risks”. In SAMAPCO organisation case, their STEEPLED analysis is illustrated in the following table;
Table 2: SAMAPCO STEEPLED Analysis
Source: Summarised from internal documents
In summary of the STEEPLED analysis, it is important to note that they positively impaxt SAMAPCO practces in KSA petrochemicals sector influencing their management for value for money otucomes. In particular, the technology, economy, political and laws are positive justifying SAMAPCO competitiveness in their industry of operations. This is with their relationship with different stakeholders guided by these factors including ethical and honesty in all dealings with demographic stratification equally put into account. The need for reviewing their budgetary allocation and also the technology magement in stakeholders relations is noted.
3.1.3 Porter’s 5 Forces Analysis
This model is defined in CIPS (2024c) as “market anlysis tool applied in ascertaining the industry attraxtiveness and levels of competition in the industry”. The relance of this model for SAMAPCO can be attributed to the ability of evaluating how they relate in their business environment for all buyers satisfaction and pursuing market development needs. The analysis is as illustrated in the following;
Figure 5:Porter’s 5 Forces Analysis
Source: CIPS (2024c)
In summary of the Porter’s 5 forces analysis, SAMAPCO capitalise on the low bargaining power amongst the logistic services supplier (JAS Worldwide). This represent a significant advantage in negotiation plan. Also, for new entrants, a significant amount of time would mean optimum resources use in sourcing of the logistic services. This is with high competitive rivalry affecting ability to leverage on value for money outcomes and increasing overall loyalty, how experienced they are and capital-based investments. Part of this assessment recommendation would include setting priorty to leverage on bargaining power of their buyers by continuously switching to different stakeholders and effectively managing different market suppliers.
3.2 Market Size and Trends Analysis
The market size evaluation is by setting priority on the macro and micro environment aspects……..
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