(Solution) CIPS PDV Saudi Aramco Procurement Function Producing Value for Money

Solution

Value for money is identified through value analysis which is a “process of analysis of costs for identifying cost reduction and control opportunities for ensuring products/services production costs are efficient and maximising profits” (CIPS, 2021). For procurement function, this is done through a comparative analysis of costs and benefits of various options or alternatives, considering quantitative and qualitative factors, overall uncertainty and assumptions.  Saudi Aramco procurement function achieve this by passing invitations, evaluations, negotiations and selection strategy for identify offers representing likely value for money outcomes. In supporting this, comparing 2022 and 2023 spend value of 3PL, value for money invested can be identified;

Table 6:Value for Money by Procurement Function

Source: Summarised from Saudi Aramco internal documents

As illustrated in table 5, the major cost savings is in the sourcing and warehousing operations. In sourcing, PS&M achieve this by managing the direct costs including procurement, transportation and warehousing. This is with involving the 3PL enhancing maintenance, obsolescence for technology and disposals reduction. A summary of the savings in the Total Cost of Ownership through 3PL is as illustrated in the following;

Figure 8:Total Cost of Ownership Savings

Source: Summarised from Saudi Aramco Internal documents

Additionally,  to ensure that value for money outcomes are obtained, procurement function adopts 4P’s technique in identifying the level of customers satisfaction in line with 4C’s. This is since in the various areas where Saudi Aramco is involved in sourcing for 3PL, sustainable operations is instrumental. Also, by embrace of strategic sourcing, it becomes possible investing in modern technology and use of IT systems in their negotiation process. This also need to be integrated in the organisation ability of managing their stakeholders relations. The use of 4P’s is as illustrated in the following;

Figure 9:Application of 4Ps an achievement of 4C’s for value for money outcomes

Source: CIPS Module notes

According to Obura (2020), value for money outcomes is as a consequence of cost-benefit analysis used in the procurement cycle. In this regard, through collaboration with different stakeholders, the organisation evaluate entire costs and prices and non-price benefits with risks assessment, non-price attributes a total costs of ownership (TCO). The process followed by Procurement Function in Saudi Aramco follows the steps illustrated in the following;

Figure 10:Summary of Input of Procurement Function for Value for Money Outcomes

Source: Summarised from Saudi Aramco internal documents

Therefore, as evidenced in figure above, the strategy of achievement of value for money outcomes is initiated in the procurement cycle and progress to the end. The best strategy entail ability to balance quality, efficiencies, and economy while ensuring effective procurement decisions are made for maximum solutions supporting development of appropriate objectives.

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