Description
Solution
In Saudi Aramco current approach in management of prices and costs include use of their budget for getting the 3PL from their different suppliers in Saudi Arabia (KSA) and internationally. By ensuring they critically evaluate the budget allocation and costs of different suppliers in line with quality, it becomes possible to manage the prices and costs.
Also, the strategy adopted by Saudi Aramco include pursuing detailed negotiations by the PS&M. The negotiations targets the best suppliers in KSA of 3PL and other spend categories important for the organisation. In all their contracts, they pursue annual-based contracts to achieve value for money outcomes successfully. After COVID-19 pandemic, Saudi Aramco has been in a position of managing their costs successfully and reduced lead time (Sjödin et al., 2020). The strengths of adoption of the strategy in Saudi Aramco include;
Defining best value for money outcomes– As evidenced in the analysis, Saudi Aramco achieves a maximum balance between costs (40%), increased quality of 3PL and increased performance (60%). Owing to the complexity of 3PL, despite of the cost factor being critical, other factors including how reliable it is, innovativeness and lifecycle costs are equally instrumental. All these are captured in the Saudi Aramco strategy.
Collaborative supplier relationships– As identified in the explanation of Saudi Aramco strategy, it is anchored on collaboration with different identified stakeholders. The scope of their collaboration is intended to achieve best value for money outcomes. There is nevertheless a need for an improved stakeholders collaboration for fostering collaboration, innovativeness and continuous-based improvement. This is while embracing technologies in improved performance and address of performance demands.
For the cons, they include;
Lack of strategic operations– It is evident that the organisation is not effective in terms of effectiveness of procurement strategies for achievement best value for money in contracts management. According to Venkataraman and Pinto (2023), the strategic operations is informed by need to adopt performance-based contract models with payments aligned with measurable outcomes and performance metrics.
Ineffective total cost of ownership analysis– The total cost of ownership is identified as ineffective in regard to evaluation of entire lifecycle costs linked to procurement and ownership of assets or services in their overall lifespan (Burnham et al., 2021). There is a need to improve the TCO in order to make sure that they come up with quality decisions optimising value for money outcomes.
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(Solution) (AC4.1) Assess suitable types of contractual arrangements dependent on specific workforce need
Solution Permanent, full-time contracts Permanent, full-time contracts for delivery drivers offer both benefits and drawbacks, making their suitability dependent on ParcelCare’s operational needs and goals. Pros Permanent, full-time contracts provide job security and consistent income for delivery drivers, enhancing employee satisfaction and loyalty. This stability can lead to higher motivation and productivity, reducing turnover rates and the associated costs of recruitment and training as evidenced by Personio (2023). Full-time contracts also facilitate better workforce planning, ensuring ParcelCare has reliable staffing to meet delivery demands. Cons However, these contracts can be less flexible and more costly for the company. Full-time employees typically require benefits such as health insurance, paid leave, and retirement plans, increasing operational expenses. Additionally, the rigidity of permanent contracts may not align with fluctuating delivery volumes, leading to inefficiencies during low-demand periods. Suitability For ParcelCare, full-time contracts can be suitable if delivery volumes are consistently high, ensuring a stable workforce. However, a mixed model that includes part-time or flexible contracts might offer the necessary flexibility to adapt to changing demands while controlling costs. Part-Time Contracts Part-time contracts offer flexibility for delivery drivers, allowing them to balance work with other commitments. Drivers benefit from a stable income, albeit at reduced hours, while ParcelCare can adjust staffing levels according to demand. A significant advantage of part-time contracts is reduced costs associated with employee benefits, as part-time workers may not qualify for full benefits packages (Abogados, 2019). However, part-time drivers may lack the same commitment or availability as full-time employees, potentially impacting reliability and consistency. Zero-Hours Contracts Zero-hours contracts provide maximum flexibility, allowing ParcelCare to scale staffing up or down based on delivery demand without a fixed commitment to provide hours (CIPD, 2023c). For drivers, these contracts offer freedom to accept or decline work, appealing to those seeking flexibility. However, they also result in income uncertainty and lack of guaranteed hours, which can be challenging for drivers seeking stability. For ParcelCare, zero-hours contracts minimise costs during low-demand periods but may lead to difficulties in maintaining a loyal and consistent workforce due to potential driver dissatisfaction. Part-time contracts are most suitable for ParcelCare’s delivery drivers. They offer a stable income and consistent work schedule, which can enhance job satisfaction and reliability while allowing ParcelCare to adjust staffing levels as needed. This balance supports both operational needs and employee stability. Please click the following icon to access this assessment in full