Category: Procurement

Introduction

The job relates to a procurement clerk to be hired within the organization. The procurement clerk will be required to compile records such as purchase orders and other information necessary for procurement of materials and services (O*NET Online para. 1).

Tasks

The procurement clerk will be required to perform the following tasks.

1. To prepare purchase orders and send them to the appropriate departments and suppliers
2. To determine whether the amount of inventory within the organization is sufficient for its operation, if not, the procurement clerk will be required to order more.
3. Contacting suppliers so as to schedule the delivery dates, resolve shortages and other problems that might arise.
4. Compare product prices and other specifications so as to determine the best bid to select from the various suppliers.
5. The clerk will also be required to respond to inquiries made by customers and suppliers. Some of these inquiries may relate to order status and possible changes.

Knowledge

1. Clerical- The procurement clerk should possess comprehensive knowledge with regard to clerical systems, clerical procedures and administrative procedures. For example, the clerk should have knowledge related to word processing, stenography, designing forms and managing files and records. The clerk should also be familiar with office terminologies and procedures.
2. English- The clerk should possess sufficient knowledge of English. This is with regard to knowledge of its content and structure. He or she should also have good knowledge of English, such as rules of composition, spelling of words and their meaning.
3. Computers and electronics- The clerk should be have knowledge on electronic equipment, processors, circuit boards, computer software and hardware, computer applications and programming.
4. Mathematics – The clerk should have knowledge of arithmetic, statistics, calculus, algebra and geometry and how they are applied.

Skills

1. Reading comprehension- Should be able to read and understand written statements related to the job.
2. Communication skills- Should be able to communicate fluently so as to convey the intended information effectively..
3. Active listening- The clerk should be attentive to other people, take time to understand what they are saying, ask questions when appropriate and should not interrupt when others are speaking.
4. Writing-Should be able to communicate effectively to the intended audience through writing.
5. Critical thinking- The procurement clerk should be reasonable in dealing with problems that arise.

Abilities

1. Written comprehension – The procurement should be able to understand and comprehend information presented through writing.
2. Oral expression- The clerk should be able to communicate ideas and relevant information by speaking.
3. Speech clarity- Should be able to speak clearly.

Work activities

1. Communicating with other parties within and without the organizations such as the government, public, subordinates, supervisors, coworkers and customers. Undertaking administrative activities.
2. Making work related decisions and problem solving.
3. Organizing, planning and executing tasks according to their priority.

Education

1. Should possess a Bachelors degree in procurement
2. Have a high school diploma in or its equivalent.

Interests

1. Should be more interested in working with data and details compared to working with ideas.
2. The procurement clerk should be enterprising. This means that that he or she will be required to make decisions.

Work values

1. Should be independent in making decisions.
2. Should be supportive to the management team and the employees.
3. Should enhance a strong positive relationship with all the stakeholders.

Wage

1. Median wage- The procurement clerk will receive an hourly wage of 6.65144 Bahrain Dinars. This is equivalent to an annual wage of 13,833.04 Bahrain Dinars.

Reference

O*NET Online. Summary report for 43-3061.00-procurement clerks. New York: Bureau of Labor Statistics.2010. Web.

Executive Summary

Driving value through procurement and supply is the aim of every firm that has mastered the market forces. Such firms know that quality of the products they deliver to their customers and the price they shall charge all depend on their procurement strategies. As such, it is important to develop techniques that can be used in acquiring raw materials to improve the benefit, especially when the implementation is to be done in the future. According to this paper, negotiation is one of the very critical aspects of procurement. The procurement department must be able to negotiate high value for the firm using a win-win strategy. The aim should always be to get the best value when sourcing raw materials. As shown in this paper, having a strong relationship with suppliers is as important as getting great value from them. The management should know the inclusions that should be made in the contract and measures that should be taken to ensure that changes in the market forces do not affect the agreements made in the contract. Effective management of the supply chain can help reduce the cost of production and in increasing value for the customers.

Introduction

In the current competitive business environment, the success of a firm is partly determined by the strategies it uses in managing procurement and supply chains. One of the ways of ensuring that a firm gets the best value in its procurement and supply chain is to use effective negotiation strategies. O’Brien defines negotiation as “a process in which two or more people with differing views, reach agreement by the use of different methods of persuasion” (67). A negotiation process can only be considered a success if the two parties reach an agreement. Not all negotiations often end up in an agreement. However, if the parties can agree on the contentious issues involved, then the process is considered completed. According to Turner, acquiring raw materials from suppliers is a process that requires negotiation (41). While the supplier may try to get as much profit from the supplies as possible, the buyer would want to purchase the products at the least possible price. These conflicting views must be addressed to make the two parties sign a contract acceptable to both of them. The management must ensure that the firm gets the needed materials within the right time and in the right quantity. In this paper, the researcher seeks to create a sourcing plan for future requirements for a mid-sized firm, which in this study will be referred to as ABC Company.

Roles of Procurement and Supply in Managing This Area of Expenditure

Acquiring raw materials is one of the most important stages in value chain management. According to Guth, the approach used in acquiring the raw materials often defines the cost and quality of the final product (38). Managing expenditures when acquiring these materials is, therefore, of great importance. It is for this reason that it is necessary to evaluate the roles of procurement and supply in managing this area of expenditure. O’Brien defines procurement and supply as “an area of management that involves buying of goods and services to enable a firm to operate” (81). It entails sourcing raw materials from various parts of the world and making them available for production. The following figure shows the stages that should be taken into consideration by the management of ABC Company when sourcing raw materials.

The process starts with need identification. In this case, it is understood that the need will arise in the future, but there is a need to make plans on how these future needs will be met. As such, the whole process should begin with a selection process. When making the plans for future requirements, the management of ABC Company must understand that it is important to select an organization that is most qualified in delivering the best value in the market. Several factors should be taken into consideration in this selection process. The first factor is how well a supplier can provide the needed product. It means that a firm will have to conduct a review of the current suppliers to ensure that they can deliver the raw materials of the highest quality.

As Guth notes, the procurement officers may need to go beyond the brand when evaluating the suppliers (74). Decisions should be made based on the quality offered, not the popularity of the brand. The second factor is the sustainability of the operations of the supplier. As stated, the planning at this stage is for the future, not current needs. As such, the firm to be selected must be in existence in the future when its services shall be needed. It is not possible to be completely certain about the future existence of the suppliers. However, their past and present records can help determine chances that they may still be available in the future to offer the needed products. Issues such as the ability of the supplier to provide the needed quantity should also be taken into consideration when selecting the supplier. At this stage, procurement and supply will help the firm to identify the most qualified supplier that will offer the best value at the least possible cost.

The next stage involves forecasting. According to Weele, when making sourcing plans for future requirements, various stakeholders should help in forecasting to ensure that a correct decision is made in the entire procurement and supply cycle (29). The market forces keep on changing and prices of the products and supplies keep on fluctuating based on these forces. It is always in the interest of a firm to ensure that its prices on the products offered to the customers remain as stable as possible. The stability of products’ prices helps in eliminating negative reactions among clients and helps fight the perception that they are being exploited. Various stakeholders will be responsible for the forecasting process. The marketing manager and the entire team in the marketing department at ABC Company will need to help predict the future relevance of a product and possible reduction or increase in its price. The product may be irrelevant soon based on the changing tastes and preferences. If that is the case, it may not be necessary to set huge resources for the product when making the plan because it has no future.

Information is critical in the decision-making process in the procurement and supply cycle. The procurement manager and his or her entire team at ABC Company will also have to be involved in the forecasting process. This team will help in determining the future availability of the needed raw materials. They will help determine if the material will be available in the future or not so that a decision can be made early enough to avoid shortages and cut down costs of procurement. The team can also help in determining whether the price of the raw materials may go up or not. When it is established that the price of these materials may drastically increase in the future, then it may be in the interest of the firm to purchase the items early enough as long as they can last long enough to be used when the time comes. The finance officer, the insurance manager, and other senior managers are other important stakeholders who should also be involved in the forecasting process to ensure that the decision made is acceptable to all the stakeholders.

When the forecasting has been made, the next step is procurement. As stated in the stage above of forecasting, the most important decision that the top managers at ABC Company will make is either to purchase the item today and keep it for future use or wait and make the purchase in the future. If the decision is made that the purchase will be made in the future, then planning shall end at that stage. However, if it is considered that it is necessary to proceed with the process, then the team may need to proceed and acquire the needed raw materials. In most cases, such a decision is made when it is determined that the items needed may be more expensive or scarce in the future in a way that their demand will outweigh the supply. The team will need to ensure that they get the best products from the suppliers at the best price possible.

After acquiring the products, the team will need to distribute and store them for future use. O’Brien says that it is always in the interest of a firm to ensure that raw materials spend the least possible time in the warehouse (110). This is so because the longer they spend in the warehouses, the more they become costly to manage. Breakage and pilferage are some of the factors that inflate the cost of these materials when they are in the warehouse. Some products may become stale when kept for a long time in the warehouses. The decision to make early purchases can only be made if it becomes apparent that the overall cost of warehousing the products is less than if the products were to be purchased in the future.

The used inventory management is the final stage in this cycle. At this stage of planning, the team can only make suggestions on how the process should be conducted, but as Weele observes, futuristic changes may require changes in the plan in line with the prevailing environmental forces (45). The most appropriate action at this stage will be to let the team involved to decide when the time comes, whether it will be necessary to change the current pattern of inventory management or not based on the realities that they will be facing in the future. It is, therefore, very clear that procurement and supply will provide the team with a clear pattern on how to behave to ensure that the best outcome is achieved when creating a sourcing plan for future requirements.

Techniques That Can Be Applied to Improve Added Value

Driving value through procurement and supply is the primary aim of this plan. The aim is to ensure that this firm can meet its future needs in the best way possible and use the least resources. For this to happen, the team involved must have proper negotiation skills that will give it an advantage and ensure that it signs a contract that is beneficial to it. The team should start by first understanding the stages involved in the negotiation process. The figure below shows the fundamental stages of negotiation.

As shown in the above figure, it all starts with preparation and planning. In this context, the firm will need to plan how it will negotiate with the suppliers that will offer it the needed materials. The team responsible for procurement should clearly understand the power of suppliers. The next step is to define the ground rules. At this stage, the two teams come together and set the rules and regulations that shall govern the negotiation process. Fairness is very important at this stage. Both teams must uphold integrity to ensure that they can develop trust with each other. Neither the supplier nor this firm should feel that the rules are set to purpose outmuscle them.

After setting the rules, the next stage will be clarification and justification. Each of the parties involved in the procurement process will be offered the opportunity to present the arguments and the terms they feel are fair. Value creation for this firm starts at this point. As Weele suggests, the team assigned this role should give a passionate and articulate definition of the need to sign the contract at given terms and conditions (87). The justification should not be seen to be self-centered because that may bring an intense argument. The team must be very convincing and the other party should feel that its interest has been taken into consideration. The next stage of bargaining and problem solving is very critical. The two parties will be making counterarguments to ensure that the final decision is as favorable to them as possible. The procurement officers at ABC Company should be keen on ensuring that through such negotiations, this company gets the best value in terms of price, quality, and quantity of the raw materials. Sometimes the negotiation may ground to a halt if the parties do not employ proper strategies that will be acceptable. Using Kilmann’s conflict-handling styles, the team responsible for the negotiation for this firm can choose any of the five options. The chosen option should be that which offers improved added value. The figure below shows the model.

Based on the importance of the relationship between the firm and the supplier, and the significance of the outcome, the team can choose any of the five options shown in the model above. The best option is often the collaboration approach. This is a deliberate attempt by the two parties to ensure that they both come out winners in the negotiation process. The firm can convince the supplier to collaborate with it and benefit from its success in the market. Sometimes one or both parties may consider collaboration as an impossible option given the prevailing circumstances. If that is the case, then the next best option would be compromising. Each of the two parties will appreciate the need to make some concessions to reach a common ground. Although the parties will not get what they exactly expected, they will come out with something valuable from the final deal that shall be made.

Under these conditions, this firm will be accepting to lose just for the sake of making the process a success. It will be making an agreement knowing very well that the supplier has come out as the winner of the process. Although it is undesirable, this strategy may be necessary in cases where the supplier has very high negotiating power and the materials it offers are not easily available in the market. In case the firm has other suppliers that can offer the same materials at better terms, then competing may be considered an appropriate option. It means that the firm will force the supplier to stick to its terms and conditions. The supplier will be offered the option of either taking the deal offered or cancellation of the entire process. The fifth option, which is the least desirable one, occurs when the negotiation is grounded. It takes place when both teams agree that the outcome of the negotiation is very important to them, but fails to agree on the terms and conditions of the deal. The team must understand that such a situation may occur, but the problem is that it does not earn the firm the much-needed value.

Inclusions That Should Be Made In Contracts Formed In The Future

Developing contracts is one of the most complex processes that require a deep understanding of the law of contracts and the reasons why a firm needs to make a commitment to another firm. In most cases, a contract often has four essential components, which include an offer, acceptance, consideration, and intentions to create legal relations. If the contract is to be executed soon after an agreement is made, then both parties will look at the present market forces and make sure that they get the best deal. They will look at the offer made and if they feel the other party is not fair in their offer, they can make a counter-offer. The process may continue until such a time that the parties reach an agreement. However, there are other cases where the parties are forced to look beyond the current market forces. Engaging in contracts formed in the future is a very complex process because market forces may drastically change and what seems to be very fair today may be unreasonably unfair in the future. Cases where the cost of the raw materials increases or decreases by as much as 25% have been witnessed in the past.

Futuristic contracts must have additional clauses that clearly stipulate how both parties should address these changes that may occur. In the spirit of utmost good faith, both parties entering into a contract agree that they intend to ensure that neither of them will be subjected to unfair conditions during the period of engagement. After signing the contract, the procurement officers at ABC Company must understand that it will be legally required to abide by the set conditions irrespective of the future market forces. As such, it is very important to make some inclusions in the contract that will primarily protect both parties in cases of environmental changes. The following are very important clauses that should be included in any contract that is expected to be executed in the future.

Indemnity Clause

The indemnity clause is one of the most important inclusions that must be clearly stipulated in a contract formed in the future. As explained above, the parties may not be absolutely sure which of them may be favored by futuristic forces. Sometimes it may be the supplier and in other cases, it may be the buyer. As such, the two parties must agree that they are committed to compensating either of them in case the future forces are not favorable to them. The indemnity clause is primarily meant to ensure that the relationship between the buyer and supplier remains fair as a way of protecting the relationship. According to Guth, the inclusion of an indemnity clause eliminates cases where one party may consider violating the terms of the contract because of the inability to execute it as per the terms specified in the past (78).

Limitations of Liability Clause

The parties involved in the contract must also state the limitation of liabilities among them based on their agreement. For instance, it may be agreed that it is the supplier that will be responsible for the transportation of the raw materials to the supplier’s premises. In the transportation process, it is possible that unexpected events may occur that may cause damage to the products. Terror attacks, piracy, arson, or natural disasters are some of the events that may affect goods while on transit. The two parties must agree on the issue of liability in case such events occur. They may jointly consider paying for an insurance cover for the period that the goods will be on transit to ensure that the liability is transferred from them to the insurance company. Lack of this clause in the contract may lead to conflicts between the parties that may affect their future relationship.

Dispute Resolution Clause

It is common for the parties in a contract to have disagreements on a number of issues, especially in contracts formed in the future. Sometimes one party may realize that the agreements made are unfair in one way or the other. In other cases, one party may feel betrayed by the other party. Whatever the case may be, once a dispute arises both parties must have a mechanism of resolving it. When signing the contract, both parties must come up with a mutually agreeable way of resolving conflicts. In most cases, the two parties may choose re-negotiation, arbitration, or mediation as the basic means of resolving the conflict. It is only when these options fail that they may consider litigation as the last resort of resolving their conflict.

Warranties Clause

When purchasing the raw materials, both parties must appreciate that mistakes may occur. Sometimes the mistake may be made by the supplier in terms of providing defective raw materials. As Guth observes, mistakes often occur even in situations where maximum care is taken to eliminate them (88). As such, it becomes necessary to have a warranty clause that expressly protects the buyer from possible losses arising from the mistakes made by the supplier. In this clause, it should be clearly stated how the supplier will compensate the firm for any defective product that it delivers. The clause may also specify the timeline within which the warranty will be applicable. Specifying the timeline in the warranty protects the supplier from instances where the buyer makes claims to damages on the products that may have occurred at the firm’s premises.

Force Majeure Clause

In contracts made in the future, force majeure is one of the most important clauses that must be included to protect both parties in case unforeseen forces occur in a way that inhibits the ability to undertake the project. A good example is a natural disaster such as a major earthquake or a cyclone. These forces may affect either of the parties in a contract. It may be the buyer’s premises that are destroyed by such forces, making it impossible for it to receive the products from the supplier as per the agreed timeline. In other cases, it may be the supplier affected by the forces of nature or a direct attack by terrorists or criminals. In the contract, the force majeure clause will define how to address concerns arising from such unexpected occurrences.

Termination Clause

On some rare occasions, the parties may find it necessary to terminate a contract before the actual day of the execution. There may be a number of reasons that may justify the termination of a contract. It may be a case of either the supplier or the buyer leaving the local market. Whichever reason that may be given, the parties should have a clear mechanism of how the contract should be terminated. In the termination clause, interest will be to ensure that necessary compensations are made to eliminate instances where any of the parties are subjected to unfair losses. If the payments had already been made, the clause should explain how the refund should be made and if any additional compensation is necessary for a possible breach of the initial agreement. In other cases, the termination clause may explain how the responsibility and benefits may be transferred to a third party. Turner warns that in cases where a third party is introduced, their consent must be sought and they must commit themselves to the terms in the contract in writing (90). Such commitments eliminate cases where the third party may distance itself from the contract.

Measures That Can Be Taken To Select Effective Suppliers

When looking at sourcing essentials, a firm must ensure that it takes into consideration measures that ought to be taken to select an effective supplier. The process of selecting a supplier is often characterized by numerous challenges because it may not be possible to understand their ability to deliver on their promise, especially if the contract is to be implemented in the future. This company may need to assess the possible suppliers in an effort to select the one, which is most qualified in delivering the desired value. The following are some of the factors that should be taken into consideration when selecting an appropriate supplier.

Competency

The competency of the supplier is one of the most important factors that should be taken into consideration when selecting a supplier. This can be determined by looking at the records of accomplishment of the suppliers to determine how well they executed their contracts in the past. The history of a firm may define how well it is capable of meeting its present and future needs. If the records indicate that a supplier has a tendency of failing to meet the expected quality, then that is an indication that the supplier cannot be trusted.

Capacity

The second factor that should be considered is the capacity of the firm. It may be dangerous to enter into a contract with a supplier that lacks the capacity to meet the expected obligations. There are cases where such a supplier may be forced to collaborate with other suppliers to meet the needs of the firm. It means that the supplier will sub-contract other firms to deliver the products needed. Such arrangements are often dangerous and bound to give rise to disputes. As such, it may be necessary to ensure that the supplier chosen has the capacity to deliver on its promise without having to work with other firms.

Commitment

The supplier should be committed to delivering value to the clients. Signing of contract and agreeing to deliver on the promised value is not enough to convince a firm of the supplier’s commitment to delivering on the promised value. Sometimes a firm may fail to deliver on such promises, forcing the parties to go through a litigation process. According to Lewicki et al., it is not often in the interest of any party in a contract to solve conflicts in courts (71). Courts processes are expensive and time-consuming. Even if the firm wins against the supplier, it will still have to deal with issues such as failed production, disappointed customers, loss of profits, and dented image in the market. To determine the commitment of a supplier, the management of ABCCompany may need to evaluate how it handled its past contracts.

Consistency

Consistency is another issue that needs to be looked at by ABCCompany when selecting an effective supplier. It will be in the interest of the firm to ensure that the selected supplier is consistent in delivering value as specified in the contract. If the firm has been engaged in business activities with the firm in the past, it may be easy to determine how consistent the supplier is in terms of meeting its promises. It may be necessary to evaluate the culture that a firm has embraced to determine how consistent it can be in delivering on its promise.

Cost

The final factor that a firm must look at when selecting the supplier is the cost. In the current competitive business environment, every firm is keen on ensuring that they price their products competitively because customers use pricing to make their buying decisions. Given the nature of the products of ABC Company, the cost of raw materials should not exceed 50% of the total cost of production. The cost of production can be lowered by ensuring that the raw materials are acquired at the least price possible. The supplier of choice should be the one that charges the fairest price in the market.

Aspects of the Supply That May Require Negotiation

Negotiation in procurement and supply is very critical in ensuring that a firm gets what it needs in the best quality possible. The management should try to ensure that it identifies the major areas in the procurement that may need to be negotiated. In acquiring the raw materials for ABCCompany, the following are the major aspects that will need to be negotiated to ensure that the firm gets the best deal in the market.

Price

The price is the first aspect of supply that the firm will need to negotiate in an attempt to get the best deal in the market. Different suppliers charge different prices based on a number of factors. After selecting the appropriate supplier that has the most desired qualities, the firm should try to negotiate for a lower price to ensure that it remains at 50% of the total cost of production.

Quality

According to Polish and Semanik, when purchasing raw materials from suppliers, a firm should be keen to ensure that it gets the best quality (47). As would be expected, the higher the quality of the raw materials, the higher its price is expected to be. However, sometimes a firm can successfully negotiate with the supplier to get a product of high quality without its price being increased. Negotiating for higher quality helps in improving the quality of the final product that a firm delivers to its clients without increasing their price.

Quantity

Quantity is another issue that can be successfully negotiated with the supplier. Suppliers often have terms and conditions stating the number of products they are willing to deliver at given costs. However, a firm can successfully negotiate to have additional products as a bonus without having to pay more. Such strategies help in lowering the overall cost of production.

Transportation

In most contracts, it is often specified which party will be responsible for the transportation of the purchased materials from the premises of the supplier to the premises of the buyer. Not all the suppliers are often ready to meet the cost of transport. However, a firm may convince the supplier to provide it with transport services as after-sale service. It means that the company will not have to pay for the services.

Time

Time is another aspect that may need negotiation in an attempt to have the best deal possible for ABC Company. This may be done in different ways. First, a company can negotiate with the supplier to make the payment at a future date instead of paying for the products in cash. There can be an arrangement that the payment shall be made a couple of months after the delivery is made. The firm can also negotiate with the supplier to have the raw materials purchased delivered within a shorter period than is often normal. The policy may be that the materials are delivered two days after payment is made or within 24 hours.

Conclusion and Recommendations

Conclusion

Procurement and supply chain management is very the most important strategic responsibilities of top managers. These processes help a firm in accessing the raw materials needed for production. It is normal to have situations the suppliers and the buyers have varying opinions. Each will be trying to get the best deal from the engagement. As such, the supplier will try to charge high prices and avoid any additional expenses. On the other hand, the buyer will be demanding very low prices and additional after-sale services. These differences can only be addressed through effective win-win discussions. As a firm tries to acquire materials for its operations, it is necessary to ensure that it maintains good relations with its suppliers. The suppliers should not feel exploited by this company, even in cases where this firm is dealing with small and less powerful suppliers. As discussed in the paper, each of the two parties should not start the negotiation with fixed minds. The managers at ABC Company must be open to negotiation in its procurement and supply chain strategies. Having a win-win outcome to a negotiation process should be the primary aim of both parties. Sometimes both parties may need to make compromises just to ensure that the negotiation is successful.

Recommendations

The following recommendations should be taken into consideration to ensure that this firm achieves success in its procurement and supply chain strategies.

The management of ABC Company should ensure that it has highly talented and skilled officers handling procurement activities.

The company should always be ready for a win-win type of negotiation when sourcing raw materials.

There must be clear documentation of the procurement agreements to avoid cases of litigation in the future.

References

Guth, Stephen. The Contract Negotiation Handbook: An Indispensable Guide for Contract Professionals. Lulu Press, 2008.

Lewicki, Roy, et al. Essentials of Negotiation. McGraw-Hill, 2007.

O’Brien, Jonathan. Negotiation for Purchasing Professionals. Kogan Page Limited, 2013.

Sollish, Fred, and John Semanik.The Procurement and Supply Manager’s Desk Reference. John Wiley & Sons, 2007.

Turner, Robert. Supply Management and Procurement: From the Basics to Best-in-Class. J. Ross Pub, 2011.

Weele, Josephine. Purchasing & Supply Chain Management: Analysis, Strategy, Planning and Practice. Cengage Learning, 2010.

Introduction

The total contract price is the cumulative cost of completing a project. The total cost comprises the total compensation of the project cost and all the quoted amount in the proposal for the services rendered to the client. The total contract price includes all the professional fees and any other extra charges incurred during service delivery, including taxes.¹ The concept of the total contract price is applied to understand the value of a contract and revenue expectation from an executed project or services rendered. The onboarding fee, consultation fee, and any other charge incurred throughout project execution are included while calculating the total revenue. The total contract price is calculated based on the procurement methods, whether re-measurable, lump-sum price, cost plus, guaranteed maximum price, or target cost. However, adjusting the price in the contracts under English common law, UAE law, and FIDIC forms of warranty is possible.

Contract Procurement Methods

Procurement has been a norm in day-to-day lives while acquiring services and commodities. Different contact procurement methods are applied to ensure the applied manner is efficient and cost-efficient to reduce time wastage at the compensation stage. The favorable procurement method will be selected based on the requirements of the contractors and the arrangements done at the planning stage of the contract.² Before deciding on the best procurement method, the constructor should understand the needs of the client and the total cost of the project. Some important considerations while choosing the most appropriate procurement method include speed, the quality expected, project constraints, the risk associated with the project, financing, and construction materials. Through such consideration, the constructor will have the best strategy of compensation to accomplish the task.

Remeasurement Contract

In this type of contract method, the measurement is done alongside the stipulated rates—professional measures to get the value of the total project. The removal contract does not have a lump sum agreement, but there is an agreed basis used to arrive at the project’s total value. The professional analysis is expected to look back at the quantity and quality of work done and develop an analysis of the full compensation. The method applies in situations where the project details are available, but the project’s cost cannot be discussed in detail.³ An example of a work that can be valued using the remeasurement method in excavation services. It might not be easy to predetermine the number of excavation services until the job is initiated. After the project is completed, the contractor will be better positioned to determine the quantity of the excavation services and determine the value of the services. At this stage, the remeasurement is done to assess the value of the services rendered to the client.

The remeasurement type of contract is primarily used in the construction industry. Large construction companies used this method to subcontract with other companies where the services are paid based on the type of work done.⁴ The risk to the client is high, while the contractor has a minimum chance. The rates provided in the contractor’s tender are not considered until the work is done so that prices can be estimated based on the services rendered. The possibility of the work beginning before the design is completed puts the client at risk because the client does not know the project’s cost. The client might be shocked by the prices, which might go beyond the estimated budget.

The remeasurement contract is associated with advantages and disadvantages. The benefits of a remeasurement contract include; Work begins upon finalizing the actual design, reducing design cost, value engineering can quickly be done, competitive prices, and minimum risk to the contractor.⁵ The disadvantages include; it is difficult to predict the project’s final cost, delayed payment of the contractor because of the timely assessment period, the client’s risk is high, and reporting and controlling is a strenuous activity. Finally, consulting services might be required to carry out the remeasurement services. While choosing the contract method, it is essential to consider all the factors which might affect service delivery.

The provision for price adjustment allow unforeseeable ground conditions implied the undesired occurrences in the ground and were not projected by the contractor. The UAE and English law allow adjustment of the prices to cater for the unforeseeable ground conditions.

Lump-Sum Price Contract

A lump sum price contract allows the contractor to complete a project based on the agreed set price for the services rendered. The lump-sum agreement is also referred to as stipulate total. It submits the total cost of completing a project rather than valuing individual units of the project. It is generally accepted because of its simplicity and open agreement between the contractor and the client.⁶ It is essential to consider the situation of the project before choosing a lump sum price. There are various situations where the lump sum price method is the best option for both parties of the contract. In particular, the project which fits the lump sum price method has some distinctive features which differentiate them from other projects.

The projects should have a scope of work that is clearly defined and straightforward in terms of completion and execution. A relevant example is a lump builder, according to Rahmani et al. (2017, 593). A lump builder will use a lump sum contract more effectively. The drawing design remains unchangeable throughout the project, which allows the contractor to have a clear scope. The materials can be purchased once to avoid risks associated with the fluctuation of prices. In complicated projects, it might be challenging to use lump-sum pricing. Klee (2018, 27) states that the complexity of the projects might facilitate changes that were not foreseen. Best planned projects can be affected by the changing nature of the project. In a project where there are more moving pieces, the contractor will have difficulty choosing a lump sum project. Many government projects are executed using lump sum projects. The government approves this method as the best utilize taxes paid by citizens and ensure services are rendered.

Successful use of lump-sum contracts will depend on the perfect anticipation of the project schedule, the cost of raw materials, and labor costs involved in the project. The contractor is also expected to understand the profit margins incorporated while pricing the undertaking. Lack of profit margin knowledge might lead the contractor to operate on losses. The total prices set should be competitive to win the client’s confidence that the project will be completed and deliver the best results. Predetermined pricing is essential for comparison on the value of the project. There are various pros and cons associated with the lump-sum method.

The Pros of Lump Sum Pricing

The pros include simplicity, which is the simplest form of contract applied in construction projects. They are easy to understand and design.⁷ The contract documents are intended to explain the project which is in question and the standard charges involved to complete the project. The contractor prefers the lump sum pricing because of the autonomy involved in the execution of the project. The client chose this pricing method because they can understand the total cost of the project. The client can ensure the budget is constrained within the available budget. Profitability is another advantage arising when contractors use this piecing method. They can save some amount that will be used to increase the profit margin. The contractors can take insurance policies to protect them from some unseen occurrences, enabling the company to rescue its profit. If the contractor can control the overhead cost, the profit margin will be high because the yield is calculated from the total charges of the project.

The method facilitates more accessible financing as well, where the contractor can seek funds from lenders using the project documents. The loaners will be interested in knowing the total cost of completing a project and the profit margin from the project. The lender will be willing to finance such a project because the project’s scope is clearly defined in the presented documents. Further, there is little paperwork because the documentations in the lump sum pricing contract are well stipulated. The project requirements are well articulated on the papers, and the client does not need to be bothered by the material prices because the project schedule outlines every stage of the project.

There is easier management of the cash flow because the owner has a well-designed roadmap of revenue in the project. The owner utilizes this opportunity to manage the cash flow and formulate a budget that will help to complete a task. Moreover, the contractor is aware of the percentage payment at various stages of the project. The cash flow management is made more accessible by the knowledge of the deductions involved in the project. When calculating the price, the contract owner will be able to minus all the retentions. The mobilization of the initial cost will not strangle the contractor.

The Cons of Lump Sum Pricing

The contractor is at high risk- When the contractor reaches into an agreement to use the lump sum pricing, they assume all the risks involved in the project. The contractor will bear all the risks which will occur while bringing the project to completion.⁸ Although they can pay the insurance policies to cover the project, the risk might overwhelm the insurance project. If the project exceeds the available budget, the contractor pays the extra cost of running the project. The client does not pay for any additional cost, and any other price is the contractor’s responsibility.

It is relatively expensive due to the risks involved in project execution. The client understands the risk assumed in the project, and the client is expected to stretch their pockets to facilitate the contractor. The client might not get the value of the project if the risks are more than projected. Unethical contractors might buy inferior materials which are relatively cheap to increase their profit.

Legislation might change, which might lead to increased cost of completing the project. Legislations such as taxation solely rest in the hands of the sovereign government. If the government decides to raise the tax paid by the contractor, the contractor can adjust the prices in such cases. Taxation varies from one country to the other. What applies in one country might be challenging to be involved in another one. It is essential to understand the various factors that might lead to the adjustment of prices to avoid conflict between the two parties of the contract.

Cost Plus

A cost-plus contract is an agreement reached to reimburse the construction company for the cost incurred and a certain amount of profit, which is presented in a given percentage of the contract’s total price. This type of contract is used where the client assumes some of the risk involved in the contract and the contact, but there is define flexibility to the contractor. The parties in the contract think that the contractor will honor his/her part of the agreement and deliver the best results. Bailey (2011, 18) found that an organization agrees to pay more to the client when the project is completed, increasing the contractor’s profit in the long run.

Two parties can agree on the fixed cost, which does not consider the actual expenses from the contractor. The advantage of the price plus method includes removing some risks from the side of the contactor. Also, it allows the contractor to focus on the quality of the work rather than focusing on the total cost of the project. The disadvantages include battles in the process of claiming construction-related expenses. UAE and English Law and FIDIC Standard form contracts providing provisions for price adjustment under the cost plus construction procurement methods. The rules offer standards of construction contracts and ensure quality services to the clients.

Guaranteed Maximum Price

This type of contract has a set limit or maximum price which the client is expected to pay the company without regarding the cost of completing the project. The method puts the total guaranteed price and the limit within which it cannot be exceeded. The contractor’s charge exceeds the top cap. GMP is enticing to the clients because the program shifts some risks to the contractor. Advantages of using guaranteed maximum pricing include savings incentives for the clients and accelerated schedules. On the other hand, disadvantages include increased risk to the contractor, cost reporting inaccuracy where the client wants to enjoy cost reduction. UAE and English Law and FIDIC legislations ensure a harmonious relationship between the client and the contractor through regulation of terms of services and price adjustment. The law allow adjustment of prices on guaranteed maximum price.

Various factors can lead to price adjustment in the form of variation, unforeseeable ground conditions, and force majeure. Regarding variations, price adjustment could arise from the changes that engineers or contractors initiate as a result of the complex nature of construction projects.⁹ They include work acceleration, changing quantities, dimensions, and positions, increasing work plant materials, and efficiency improvements. Unforeseeable ground conditions can necessitate price changes due to the hazards caused by geological properties of the ground and physical obstructions such as utilities constructed underground. Previous land developers might have made changes that were not physically assessed during project design. Lastly, prices could vary due to force majeure, where a project is canceled or prices changed due to defective work.¹⁰

Target Cost

The target cost contract has a reimbursable cost in which the actual price is paid to the contractor. The actual cost is defined in the work contract, and it includes the cost incurred while executing the project. Baker et al. (2009, 24) state that the total cost is subject to the target cost, which both parties formulate at the initial stage of the project. The target cost comprises; cost of physical work, profit, and the contingencies for risks that might occur in the project. The target contract has a benefit to both parties because it aligns the interests of both the client and the contractor. Both parties have a win-win situation and work together to ensure the project’s cost remains below the target amount. The law has some provisions where the prices can be adjusted. Various factors might lead to an adjustment of the fees agreed upon using target cost procurement methods. Contractor’s action such as tranfering the risk to the client can lead adjustment of the price.

Conclusion

The above analysis explains the contract procurements method and various factors that might adjust the contract price. Construction professionals should understand the various contract procurement methods used to negotiate the project’s price, cost, and value. Every contractor should know how to determine the value of a project and the best way to be applied while procuring the contract. It is highly recommended that selecting the best procurement method is the beginning of executing a successful project. Attention should be paid to this process because it is the first step towards a construction project to avoid unnecessary adjustments.

References

Bailey, Julian. Construction Contract. London: Routledge, 2011.

Baker, Ellis, Mellors Ben, Chalmers Scott, and Lavers Anthony. FIDIC Contracts: Law and Practice. London and New York: Routledge, 2009.

Farshid, Rahmani, Maqsood Tayyab, and Khalfan Malik. “An Overview Of Construction Procurement Methods In Australia.” Engineering, Construction And Architectural Management 24, no. 4 (2017): 593-609. Web.

Godwin, William. International Construction Contracts: A Handbook. Oxford: Wiley-Blackwell, 2013.

Gross, Michael. Construction Law in the United Arab Emirates and the Gulf. Oxford: Wiley Blackwell, 2016.

Jaeger, Axel-Volkmar, and Hok Gotz-Sebastian. FIDIC-A Guide for Practitioners. New York: Springer, 2010.

Klee, Lukas. International Construction Contract Law (2^nd ed.). Oxford: Wiley-Blackwell, 2018.

Footnotes

1. Michael Gross, Construction Law in the United Arab Emirates and the Gulf (Oxford: Wiley Blackwell, 2016): 9.
2. William Godwin, International Construction Contracts: A Handbook (Oxford: Wiley-Blackwell, 2013): 24.
3. Lukas Klee, International Construction Contract Law (2^nd ed.) (Oxford: Wiley-Blackwell, 2018): 12.
4. Rahmani Farshid et al., “An Overview Of Construction Procurement Methods In Australia”. Engineering, Construction And Architectural Management 24, no. 4 (2017): 593-609. Web.
5. Gross, Construction Law in the United Arab Emirates and the Gulf, 26.
6. Julian Bailey, Construction Contract (London: Routledge, 2011): 25.
7. Klee, International Construction Contract Law, 33.
8. Bailey, Construction Contract, 22.
9. Michael, Construction Law in the United Arab Emirates and the Gulf, 153.
10. Ibid, 180.

Introduction

The procurement function of a company is central to its overall performance. Subject to a company’s operating environment and needs, managers have to choose between adopting a centralized or decentralized procurement strategy. Decentralization refers to a procurement plan where individual departments of a business make independent purchases (Ketchen & Craighead, 2020). Comparatively, a centralized plan refers to an alternate arrangement where a central authority procures materials for all departments (Sinha et al., 2020). This study seeks to investigate the merits and demerits of each strategy relative to the vision of Qiddiya, which is a Saudi-based entertainment company with plans to venture into overseas markets.

Background

Qiddiya Development Company is an entertainment firm based in Saudi Arabia. Its business spans across sports, arts, and entertainment sectors. The firm is celebrated as the home of innovation and immersive experiences in the arts and entertainment sectors (Qiddiya Investment Company, 2022a). The company has five main offerings that are presented in duality. For example, sport is juxtaposed against wellness and nature with the environment (Qiddiya Investment Company, 2022a). Parks are also coupled with attractions, while motion is linked with mobility. The last cornerstone of its offerings is represented by arts, and it is juxtaposed against culture.

Qiddiya is important to the social and economic development of Saudi Arabia. It emerged as a constituent plan of Saudi Arabia’s vision 2030 plan, which seeks to make the Kingdom a self-sustaining state by diversifying the economy and reducing its dependence on fossil fuels (Qiddiya Investment Company, 2022b). The five pinnacles of entertainment highlighted above define the bases through which Qiddiya develops its products. For example, it has built family-friendly theme parks for adults with children and sports arenas for adults only (Qiddiya Investment Company, 2022c). The company has equally set up academies for sports/arts, and some of them have been venues for international competitions. These activities are part of a larger list of responsibilities that Qiddiya plays in helping Saudi Arabia to achieve its vision 2030 plan (Qiddiya Investment Company, 2022b). In this framework, Qiddiya fulfills several core tenets of the vision, including promoting economic diversification, increasing expenditure on entertainment, promoting a start-up culture within Saudi Arabia, creating jobs, and contributing to the promotion of healthy lifestyles.

Qiddiya develops entertainment content across a range of areas. However, its target population is young people who are under the age of 35. This market constitutes 67% of the Saudi population and the largest group of consumers for entertainment content (Qiddiya Investment Company, 2022b). Qiddiya was established to provide young people with job opportunities in the entertainment industry. By unlocking opportunities for growth and development, Qiddiya has gained the reputation of being a center for innovation and inspiration (Qiddiya Investment Company, 2022c). Its centrality to the success of Saudi Arabia’s entertainment and arts industry means that the firm is a transformational force in the social and cultural make-up of Saudi Arabia and, by extension, the Middle East.

Quddiya is in the process of establishing subsidiary businesses in emerging markets. It seeks to exploit the potential for new business growth in these regions because of shared customs and values with new audiences around the world (Sinha et al., 2020). My role in the business is an assistant officer to the procurement manager. Collectively, our tasks and roles in the procurement department are responsible for two-thirds of the value of materials procured in the business. Two bulk orders are made per month and 24 in a year via different groups of suppliers – materials and technology suppliers. Therefore, our functions in the procurement department are central to the running of the business.

Qiddiya’s management seeks to recruit employees who have an Information Communications Technology (ICT) background. The company’s management maintains this preference because the firm offers digital entertainment content. The company’s material resource plan is an offshoot of an integrated information management system that is controlled at the company’s headquarters in Riyadh, Saudi Arabia (Qiddiya Investment Company, 2022a). This system centralizes, integrates, and processes information in a timely fashion to help managers make purchases for their departments. The just-in-time model is central to the successful operations of its inventory and cost control department.

The present project seeks to identify an appropriate procurement strategy for Qiddiya to use in its internationalization plan. Assuming that two alternatives of centralization and decentralization are available, selecting the right plan will be important to the organization because the success of its overseas market depends on the implementation of a suitable procurement plan (Ketchen & Craighead, 2020). The current problem in choosing the best strategy stems from the uncertainties associated with adopting one procurement strategy over another.

The current analysis sparks my interest because there has been debate regarding the best procurement strategy to use in today’s volatile business environment. The unpredictable nature of the international market, which has partly been caused by COVID-19 uncertainties, economic volatiles, and geopolitical factors, is likely to affect the selection process (Sinha et al., 2020). It is difficult to implement Qiddiya’s long-term corporate plan of internationalization without addressing these issues. Indeed, the company needs to plan on how to navigate these challenges while maintaining its Middle Eastern success. Therefore, it is important to find the most suitable procurement strategy to adopt because inaction could have significant negative implications on the business’s growth.

The findings of this study will be useful in ensuring the holding firm – Qiddiya Investments Company – leverages the skills and competencies it has in Saudi Arabia on an international stage. Employing a successful procurement plan will be a source of competitive advantage for Qiddiya. For example, it will enable the company to reduce its operational costs across its value chain (Ketchen & Craighead, 2020). The outcome would be the delivery of innovative products for its audience, including improved entertainment quality (McGrath et al., 2021). Therefore, adopting a new procurement system in the organization would enhance the current localized business model to make it globally successful.

Research Objectives

As highlighted in this paper, the aim of this study is to identify the suitability of two procurement strategies for Qiddiya – centralization vs. decentralization. This aim guided the process of developing objectives for this investigation. As shown in the list below, the objectives highlight factors that influence the decision on whether to use a centralized or decentralized procurement strategy.

1. To examine the pros and cons of adopting a centralized procurement strategy at Qiddiya
2. To identify the cons and pros of adopting a decentralized procurement strategy at Qiddiya
3. To select the most appropriate procurement approach to follow based on the merits and demerits of centralization
4. To design a road map to implement the chosen procurement strategy

Justification for Topic Selection

As highlighted in this document, Qiddiya is in the process of expanding its business overseas with plans to set up new subsidiaries in overseas markets. The present study will identify the best procurement strategy to follow in implementing this plan. The insights presented in this document will be useful in positioning Qiddiya’s procurement functions in its broader internationalization strategy. Furthermore, the findings of this analysis will be pivotal in expanding the body of literature on procurement as they relate to international business development. Therefore, companies that seek to expand overseas in the same fashion as Qiddiya intends to do may learn from its experiences.

Current Situation

The current procurement functions of Qiddiya Development Company are centralized. In this arrangement, the company’s main procurement functions are done at the company’s main office in Riyadh, Saudi Arabia. The centralized department has been responsible for making purchases on behalf of all subsidiaries within the firm. This framework concentrates the powers of procurement at the helm of the organizational leadership structure (Qiddiya Investment Company, 2022a). Therefore, other ranks of employees have minimal power in influencing procurement decisions.

The current procurement environment of Qiddiya Development Company is a product of the macro-environmental dynamics affecting the business. Particularly, changes in technology, global uncertainties related to the COVID-19 pandemic, and changing consumer attitudes account for a majority of issues the company’s managers have had to review (Qiddiya Investment Company, 2022a; Qiddiya Investment Company, 2022b). Traditionally, Qiddiya has used a value-based procurement model whereby priorities are defined by the importance of the goods purchased to the business. Key considerations made under this plan have focused on protecting the interests of customers, regulators, and employees (Sinha et al., 2020). Innovation has also been a key driver of change in the firm, and it has bound the interests of the above-mentioned stakeholders.

The consequences of inaction may affect the operations of Qiddiya in varied ways. An increase in the cost of production is likely to be among the first effects observed. This is because an expansion of the company’s subsidiaries into overseas markets is likely to result in additional running costs because of varying legal costs and the price of accommodating differences in business practices (Ketchen & Craighead, 2020). Additionally, the failure of Qiddiya to exploit emerging market opportunities could lead to inefficiencies in the implementation of its internationalization plan. This outcome may suffice due to the lack of synchrony of procurement functions across different market subsidiaries. This problem is likely to increase error rates, thereby compounding the above-mentioned cost concerns.

Changes in technology and consumer preferences are external forces that affect the current procurement functions of Qiddiya. The procurement practices of the entertainment company are also influenced by the firm’s quest to maintain high standards of business ethics. In this regard, it has committed itself to engage in procurement activities to live up to these ideals (Qiddiya Investment Company, 2022b). For example, in line with its business ethical focus, the company has expressed its commitment to avoid suppliers who provide goods and services that have been obtained unethically.

Internal factors affecting Qiddiya’s procurement functions include the company’s culture and uncertainties surrounding its resource management plan. Relative to this statement, the company’s culture aims to promote inclusivity, where everyone feels welcomed and empowered to learn through the power of entertainment (Qiddiya Investment Company, 2022a). All facets of the firm’s procurement functions are designed to promote the physical, financial, and emotional well-being of its employees. An innovative and dynamic attitude that has been nurtured among employees equally enables workers to adapt to the challenges that affect their performance (Omilion-Hodges & Sugg, 2019). Therefore, the duty and roles assigned to employees may change depending on how they fit within the broader corporate vision of the firm.

The Work Undertaken – Research Methodology and Findings

In this section of the analysis, a report of the work done in this review, together with details on the types of studies reviewed, will be highlighted. The analysis is part of a larger review of methodological techniques underpinning this study. Information relating to data collection instruments, including surveys and interviews, will also be documented with justifications for the selection of each technique provided. A sample of the results will also be given, and a brief appraisal of the techniques adopted done.

Report of Work Done

The mixed methods research approach was used to conduct the present research. This technique works by combining qualitative and quantitative elements of analysis into the data collection process (Patten & Newhart, 2017). The mixed-methods technique was chosen for the study because of its exploratory nature. Stated differently, using one technique as opposed to another would have made it difficult to understand all facets of Qiddiya’s procurement strategy because it is expansive and multifaceted. In this regard, it contains both qualitative and quantitative attributes.

Given the multifaceted nature of the data collection process, the process of analyzing information also demands an equally dynamic framework of analysis. Broadly, the process was categorized into two phases, with the first one involving an analysis of primary data and the second one comprising a review of secondary information. Relative to this framework of assessment, quantitative data were analyzed using the Statistical Packages for the Social sciences (SPSS) technique. Particularly, the descriptive analysis method was adopted with inferential analyses performed to understand relationships between variables. The process of analyzing qualitative data occurred using the thematic analysis method. This technique works by identifying recurring themes or patterns of responses from a broader body of interview responses (Stokes, 2017). Six stages are associated with the implementation of this data analysis strategy (Patten & Newhart, 2017). They include familiarization with data, generating codes, generating initial themes, reviewing the themes, defining and naming them, and producing the final report write-up.

Benchmarking was done using the member-check technique. It is associated with the improvement of data reliability and credibility standards and works by verifying findings with the respondents that gave the base information in the first place (Stokes, 2017). The goal of using the member-check technique was to ensure that the information presented in the final write-up accurately represented the views and contextual meaning of the informants (Patten & Newhart, 2017). By securing this goal, areas of inconsistency were identified and corrected to represent the spirit of the informants’ sentiments.

Details of the Types of Studies Done

Surveys: Primary data was collected using surveys as the main method of data collection. This type of information is associated with the collection of non-existent data, and the process may be resource-intensive because the researcher needs to sample the views of many people at once (Stokes, 2017). The surveys were closed-ended and sought to assess the informant’s sentiments regarding various issues relating to Qiddiya’s procurement activities. Broadly, 107 staff from different departments were randomly recruited to participate in the study. These surveys were administered online and emailed to the researcher after completion. The main challenge associated with the collection of primary data is that the findings may be out of date within a short time (Stokes, 2017). At the same time, researchers claim that field research is often affected by a low response rate when emails or letters are used as correspondence (Patten & Newhart, 2017). Given these limitations of conducting field research, the researcher made extra efforts to follow up on the respondents by reminding them to submit their questionnaires on time using phone calls.

Interviews: Interviews were employed in the current study as an additional source of information to the surveys highlighted above. Interviews were used to gain managerial insight on procurement activities relating to the selected entertainment company. Broadly, 12 senior departmental officers in the company were sampled purposively and interviewed. The number of informants was deemed sufficient for the current review because it is consistent with the views of Stokes (2017), which suggests that interviews can be done with less than 12 respondents. Before taking part in the study, the respondents signed an informed consent form stipulating their agreement to participate in the study – subject to its objectives, guidelines, and approaches, the interview protocol highlights various “talking points” relating to the adoption of centralized or decentralized procurement plans that were posed to the informants. Key among them was the impact that each of the strategies would have on the overall performance of the business.

Secondary Data: Secondary research is associated with the process of synthesizing existing data. The main sources of materials for these types of studies often come from internal or external organizational processes (Stokes, 2017). For the secondary research part, the researcher collected credible research data from reliable sources of academic information. They included CIPS advanced practitioner models, Chartered Institute of Procurement and Supply (CIPS) knowledge area, and published business journals. Some of the materials were sourced from the Saudi digital library, and procurement practices were benchmarked with those of leading companies in the private sector. Keywords used to obtain the materials included “procurement,” “centralization,” “decentralization,” and “supply chain.” Only studies published in the past five years were considered for review.

Samples of Questions, Interview Structures, and Answers

The surveys were administered as questionnaires that were divided into two key sections, with the first one capturing the respondents’ demographic details, while the second part focused on getting their responses regarding ten items relating to the procurement practices of Qiddiya. The interviews explored key themes that emerged from the surveys to gain a deeper insight into the views of the informants. Their answers varied in scope, ranging from arguments that supported, or opposed, the adoption of a centralized or decentralized procurement strategy for the business.

Results of Works Undertaken

The findings generated from this study highlighted differences in perceptions regarding the adoption of a centralized or decentralized procurement strategy for Qiddiya. These variations in opinion were informed by the characteristics of the respondents because managers argued for a centralized procurement plan while lower-ranking procurement officers supported a decentralized one. It could be argued that these differences represent varied views from the top and middle-level employees in the organization. They could indicate different levels of access to important company information or a variation in generational views about procurement because younger workers characterized the pool of survey respondents, while older workers gave the interview findings.

Study and Appraisal of the Research Approach

The credibility and quality of a research project depend on the merits and appropriateness of techniques chosen to develop them. The present study used a blend of both primary and secondary research data. This means that its findings are holistic and provide a firm foundation for the analysis of the research topic (Stokes, 2017). The data collection process was triangulated to the extent that primary data was sourced from two sets of respondents. To recap, the first one was surveys, and the second one was interviews. Given that surveys sampled the views of low-ranking procurement officers and interviews gathered the views of high-ranking officials, the researcher was able to obtain a broader understanding of the main considerations for selecting the best strategy to use for Qiddiya’s global expansion.

Combining the primary and secondary research data sources formed the basis for the triangulation of the research data. This technique is associated with improved credibility and reliability of research findings because it allows researchers to compare the findings of one set of data with another to identify areas of consistency or inconsistency (Patten & Newhart, 2017). Based on the adoption of these measures, it can be assumed that decisions involving the select company’s procurement process were based on the project’s results.

The main strength of the study is the robust nature of its findings because the information was obtained from multiple sources. However, its main weakness is its indicative nature because the recommendations proposed at the end of this investigation merely represent anecdotal proposals for the expansion of the company’s procurement strategy and not the actual strategic direction that will be forged by the business. This statement is made by recognizing the fact that the decision-making process of Qiddiya is pilfered with multiple layers of input, some of which are not discussed in this study. Therefore, the findings of this investigation should be adopted cautiously, and with the understanding that they are only indicative of the best strategic direction Qiddiya should follow. Overall, the study provides a basis for making a reliable change in the organization because it is based on real-life estimates of the company’s procurement operations and plans.

The importance of the current study is based on the development of sound research instruments for data collection that have been used in past analyses. For example, the questionnaire was objective in sampling the views of the informants about a centralized and decentralized procurement strategy, thereby providing a balanced assessment of the general corporate direction Qiddiya should follow. Given that the questionnaires were sent out before conducting interviews, the researcher obtained adequate information regarding the procurement activities of Qiddiya that could be used as useful content for the interviews. Overall, data obtained from the respondents was accurate in the sense that the researcher obtained views about the procurement functions of the entertainment company from employees who were actively involved in the firm’s activities. The triangulated method of data collection also signified that adequate data was collected from the research process, regardless of the technique chosen.

Analysis, Interpretation, and Conclusion

Key trends and themes that emerged from the investigation related to efficiency, cost, timeliness, and alignment with corporate vision as the main considerations for selecting the best procurement strategy to use at Qiddiya Development Company. In other words, the findings derived from the investigation highlighted the four themes as the basis for evaluating the suitability of centralized or decentralized procurement plans for the select company. To recap, data was obtained from three major sources: interviews, surveys, and secondary research. The survey findings are depicted below.

Survey Findings

As highlighted in the questionnaires sent out to the respondents, the first part of the probe sought to sample the respondents’ demographic profiles. Key attributes captured in this analysis relate to the years working for an international company, location of work, specialty area working in Qiddiya, and educational qualifications. The first demographic variable investigated in the study related to the distribution of the respondents according to assigned workstations. According to Figure 5.1 below, 64.5% of the respondents worked for Qiddiya’s subsidiaries, while the rest operated from the holding company.

Table 5.1: Distribution of respondents according to work location

The second demographic variable investigated in the study related to the respondents’ positions at Qiddiya. As highlighted in Table 5.2 below, most of the respondents worked in the company’s finance department, while the second largest group of employees comprised those who worked in the project management section. Both sets of participants accounted for 48.6% and 23.4% of the total number of respondents, respectively.

Table 5.2: Distribution of respondents according to department

The third demographic variable sampled in this study related to the educational qualifications of the workers. As highlighted in Table 5.3 below, most of the participants had a high school education. Those who held an undergraduate degree formed the second highest group of informants, while the smallest group of participants was comprised of those who held a Diploma certification.

Table 5.3: Distribution of respondents according to education qualifications

Employee work experience was the last demographic variable captured in the study. According to Table 5.4 below, most of the participants who took part in the investigation had immense experience working for an international organization because 44% of the employees said they had worked between five and six years in this capacity. Those who had a 3-4 year work experience formed the second largest sample of informants, and they represented 31% of the total sample.

Table 5.4: Experience working with international companies

The second section of the survey sampled the respondents’ views regarding the procurement practices of Qiddiya and the suitability of the decentralized procurement strategy for its overseas operations as a basis for comparing the informants’ views about centralization. According to the 5-Point Likert Scale used to assess the respondent’s sentiments, the strongest views were denoted using numeric code “1” signifying a “strong agreement” with the statements posed, and numeric code 2 used to represent a “strong disagreement” with the same statements. Table 5.5 below shows the descriptive findings that emerged from the survey results, subject to the defining criteria highlighted above.

Table 5.5: Descriptive findings

According to the findings highlighted above, the respondents’ sentiments were assessed by evaluating their means, standards of deviation, skewness, and Kurtosis. The highest mean registered from the responses was “3.” This number means that most of the informants “agreed,” to some extent, that a decentralized procurement strategy would be suitable for Qiddiya. The highest mean score of “3” also refers to the optimum level of disapproval of the statements posed, which depicted “neutrality,” as the highest form of disapproval of the 10 items posed on the questionnaire. Broadly, these findings suggest that the decentralized procurement plan received widespread support from the informants.

The subsequent stage of data analysis sought to find out whether the demographic characteristics of the respondents influenced their views on the positions mentioned above. To this end, an inferential analysis was done using the one-way ANOVA technique. The inferential analysis method was employed to understand the impact that the demographic characteristics of the respondents had on their views on the research topic. In line with this goal, the impact of work positions, departmental positions, work experience, and educational backgrounds of the participants were reviewed and analyzed to understand their influence on the findings. According to Table 5.6 below, the respondents’ work location did not have an impact on their views about the research issue because none of the items appearing in the questionnaire met the significance level threshold of p<0.05.

Table 5.6: Impact of type of organization on findings

The findings highlighted above indicate the composition of the sample group because more informants worked for subsidiaries as opposed to the holding company. Indeed, 69% of the respondents were stationed in subsidiary entities – meaning that, abstractly, the views presented in the study were largely those of independent business entities. The findings highlighted above suggest that the type of organization that the employees worked for did not have a significant impact on the findings presented. Similar to the position highlighted above, the department they worked for did not have a significant impact on the findings as well. This is because, as depicted in Table 5.7 below, none of the items appearing in the questionnaire met the significance level threshold of p<0.05.

Table 5.7: Impact of employee department type on findings

The findings highlighted above are inconsistent with the extant literature, which suggests that employee careers have an impact on workplace attitudes and procedures. Particularly, scholars have mentioned differences in attitudes among “Baby Boomers,” “Millennials,” and Generation X employees (Omilion-Hodges & Sugg, 2019). These groups of people are known to have different careers and views on workplace practices (Omilion-Hodges & Sugg, 2019). Therefore, the findings highlighted above are surprisingly different from this conception.

Understanding the impact of education qualifications on the findings of the study formed the basis of the third level of analysis undertaken in this study. According to the findings highlighted in Table 5.8 below, education qualifications did not have a significant impact on the findings. This is because none of the 10 items appearing in the questionnaire registered a score of p<0.05.

Table 5.8: Impact of education qualifications on findings

The findings depicted above differ from conventional knowledge explaining the impact of education qualifications on workers’ attitudes and behaviors. In the procurement and supplies industry, professional organizations, such as CIPS, have maintained that education qualifications play a moderating role in influencing competence (Hickman, 2018). The findings of this study showed that most of the informants (41.1%) had a high school education, and those who had an undergraduate degree characterized the second most populous group. The large proportion of respondents who had basic education was consistent with the relatively young population of respondents aged between 18 and 25 years who formed the bulk of the informants. Table 5.8 findings demonstrate that their education qualifications did not influence their views on the findings.

The last demographic variable examined in the study was the informants’ work experience. Table 5.9 below shows the inferential findings that emerged from investigating its impact on the respondents’ views. The results suggested that this variable had an insignificant impact on the final analysis because only three out of ten items that appeared in the questionnaire met the significance value of p<0.05. Therefore, unlike the case with the other three demographic variables assessed in this document, work experience appeared to have a mild effect on the respondents’ views but not enough to have a significant impact on the findings.

Table 5.9: Impact of work experience on findings

The findings highlighted above are inconsistent with extant literature, which suggests that work experience has a significant impact on employee behaviors and attitudes (Ketchen & Craighead, 2020). Particularly, given that procurement is an experience-based activity, it was assumed that experience would influence the respondent’s views on the research topic. However, this was not the case because their work history had a negligible impact on the findings. The high number of employees who had less than a year of work experience could have caused this outcome. Therefore, the internal dynamics of the company could explain the difference in outcomes between the findings of the present study and those of other researchers.

Interview Findings

As highlighted in this document, interviews formed the second set of findings for the study. Twelve respondents holding senior positions were interviewed, and they suggested that foundational factors associated with the adoption of procurement plans need to be considered before identifying the best strategy to use. Three respondents mentioned that a combination of plans could be ideal for an organization, subject to the benefits it is likely to enjoy in the process.

This view is consistent with the findings of McGrath et al. (2021), which suggest that a company’s operating region/location or industry is a significant consideration in the determination of the best procurement strategy to use. Additional research shows that the type of organization – whether private or public – can also influence the best strategy to use. Given these considerations, it is important to recognize that Qiddiya has many supporters. Therefore, stakeholders play a critical role in the firm’s decision-making process.

Broadly, in the interview, informants supported or opposed a centralized procurement plan. Those who supported it believed that Qiddiya would enjoy immense benefits from controlling its costs. They believed that uncontrolled costs were a major problem for the business, especially when they had to switch suppliers on short notice. One of the employees was vocal about the need to consolidate all procurement functions in one location because it would give them a complete overview of the business – a process that would help to improve overall spending accountability (McGrath et al., 2021). He also believed that doing so would reduce the number of vendors working with each company subsidiary. If this plan is adopted, it could lead to improved economies of scale and better resource efficiency in supply chain functions (Koster et al., 2017). Therefore, the argument for a centralized procurement strategy was founded on this ground.

By giving reasons for the company to adopt a centralized procurement plan, informants were also asked to clarify why a centralized procurement plan had not been adopted in the firm if there was a compelling case for doing so. The informant answered,

“You see…the problem is not that we do not recognize the benefits of centralized procurement…Uhm… Let me put it this way, I believe there is a significant number of people in the organization who believe that the future is characterized by the use of a blend of both centralized and decentralized procurement strategies.”

Another respondent shared similar views because he believed that a centralized procurement strategy would help to manage costs, thereby approving it for adoption. However, unlike the above-mentioned correspondent, he believed that human factors would moderate the success of the plan. Nonetheless, he was confident that a centralized procurement strategy would help address at least 80% of the current cost concerns of the business, and that would be a good performance according to the business’s financial history.

In another round of questioning, it emerged that a centralized procurement strategy would increase the visibility of Qiddiya. Five of the respondents who argued that procurement, by design, has visibility on multiple business processes shared this view. They were also confident that a centralized procurement plan helps managers to see what is happening across different sides of the business. They were also sure that a centralized procurement strategy would allow parties to synchronize their tasks and business processes in a manner that would be difficult to achieve if a decentralized procurement plan was adopted.

Three respondents also argued for a centralized procurement strategy, with their main contention being that centralized procurement strategies often yield a greater volume of data than decentralized ones. The data could be useful in negotiations because it allows managers to enter into business arrangements with a higher caliber of data that they would not ordinarily have had (Zeng et al., 2018). This feature improves the quality of purchasing decisions made within the organization. This finding is consistent with the views of researchers, such as Zeng et al. (2018) and McGrath et al. (2021), who underscore the important role played by technology in modernizing supply chain processes. They opine that data generation has become easy to perform because of existing software that consolidates information and makes it easy to share.

One of the respondents supported the above view because he believed that a centralized procurement strategy eliminates the number of players involved in the supply chain management process, thereby promoting efficiency. In line with this sentiment, he said,

“Decentralization simplifies the supply chain management process by making it efficient and easy to operate because of an easy recalibration of factors that are pertinent in decision-making.”

Therefore, he believed that it is possible for managers to implement strategic initiatives in the supply-chain management plan without requiring additional resources. Alternatively, some respondents believed that a decentralized procurement strategy would be more beneficial to the organization compared to a centralized one. Seven respondents held this position because of the immense experience in procurement that some subsidiaries of Qiddiya had. One of them said,

“I do not believe that a centralized procurement system is a cure for all because more developed subsidiaries should be allowed to run their activities independently. I mean…some subsidiaries are relatively mature in the sense that they have their unique identities, structures, and systems that should guide any process they participate in.”

The association between a centralized procurement strategy and increased cost savings also emerged as a core theme in the study, but two informants disputed this view. They argued that the centralized planning structure received undue credit for generating cost savings opportunities. However, some business subsidiaries did not benefit from price reductions. One of the respondents said,

“You see…there are some departments that would benefit more from the timely replacement of materials, as opposed to getting the most cost-effective product. A centralized procurement plan does not necessarily cater to such needs. Does it?”

Despite the existence of varied views regarding the limitations of a centralized procurement strategy on the firm, all the interviewees who argued for the adoption of a decentralized procurement plan centered their arguments on a core theme of specialization. They believed that every subsidiary of the company should be allowed to grow and have a mature procurement department that caters to its needs. Therefore, they argued that the need for one centralized procurement office limits their ability to specialize in their core areas of business. In turn, they proposed that specialization should be allowed to thrive in a decentralized procurement system.

“Context” was also a core theme that emerged from the interviews because most of the respondents remarked that the decision to have a centralized or decentralized, procurement plan depended on the context in which businesses operated. Researchers such as Ahmad and Karadas (2021), who advocated for the use of company size as the benchmark for determining the strategic focus of a business, supported this view. To them, procurement is a value-adding activity for multinationals, while smaller firms look at it as a “cost-saving measure.” This position was consistent with the opinions of the informants who opposed the use of a centralized procurement plan for Qiddiya because of company size. They argued that the organization had vast operations and a centralized procurement team would not understand the needs of all its subsidiaries. Therefore, they were confident that a decentralized procurement plan would allow each subsidiary to manage its procurement needs, as opposed to seeking approval from a central office.

Overall, the respondents believed that a centralized procurement strategy is part of an evolving supply-chain management strategy where the end goal eventually becomes decentralization. Therefore, it was appropriate for companies that have procurement departments with little experience on the job, but not for more established organizations with mature identities and structures. Relative to this assertion, McGrath et al. (2021) say that companies with developed procurement departments operate like well-oiled machines where resources or people could be deployed to undertake a specialized function promoting efficiency.

Two of the respondents expressed their reservations regarding the adoption of a decentralized procurement strategy on administrative grounds. They argued that a centralized procurement strategy would increase bureaucracy in the management of supply chain activities, thereby negating the progress that would be made in simplifying the company’s processes. It was also argued that a centralized procurement strategy would decrease the efficiency of operations at Qiddiya because the procurement department would have to wait for all parties in the organization to make their orders first before an order is made. This is because the process involved in approving a purchase from a central authority slows the company’s expediency in making decisions (McGrath et al., 2021). Therefore, it becomes difficult to meet the immediate needs of a department when materials are required.

Another question posed to the respondents related to the enforcement of their preferred procurement strategy. Given that nine out of the 12 respondents who took part in the interviews preferred the adoption of a decentralized procurement plan, the views given by them related to the enforcement of this strategy. The informants argued that a centralized procurement strategy was easier to enforce compared to a decentralized one. Their justification was anchored on the belief that there are fewer controls associated with a centralized procurement plan. Conversely, it means that a decentralized plan would be harder to control due to differences in implementation and systems adopted over time. This challenge has been captured in extant literature, which shows that a decentralized procurement plan is harder to manage because of varied systems and procedures surrounding their implementation (Koster et al., 2017). Therefore, the lack of internal controls would make it impossible for a central authority to manage operations. This statement means that a decentralized procurement plan is non-standardized and this structure impedes the implementation of administrative controls.

Secondary Data Findings

The third set of findings generated from this investigation related to a review of secondary literature. Given that the current probe sought to understand the application of a centralized, or decentralized, procurement plan, the literature showed that the former strategy has been traditionally associated with public companies and institutions (Koster et al., 2017). Essentially, these organizations have an inherent responsibility of purchasing goods and services that are suitable for local needs and dynamics (Ketchen & Craighead, 2020). Scholarly literature also suggested that a decentralized procurement strategy works well in business environments where the local supply chain is poorly understood (Ahmad & Karadas, 2021). This way, companies can develop local expertise to navigate the challenges associated with procurement in this uncertain setting. Similarly, it is appropriate to use a decentralized structure in overcoming local cultural barriers that may hinder a business from operating efficiently.

Broadly, the secondary research findings showed three critical areas of probe: governance, cost reduction, and efficiency. Procurement governance frameworks emerged as a core theme because they guide behaviors that would ultimately lead to the realization of project objectives (Ahmad & Karadas, 2021). This statement defines and allocates resources, activities, and communications in companies. In terms of governance and enforcement of policies by the holding company and its subsidiaries, many scholars argued that the governance frameworks adopted today differ from those adopted a few years back because of the complexity that characterizes the modern business environment (Ahmad & Karadas, 2021; Ketchen & Craighead, 2020). Traditional systems were flawed because they lacked information expediency, had high costs, and were inefficient. Modern systems rely on technological advancements to make the purchasing process more expedient.

It was also established that the governance systems adopted at national or regional levels have an impact on how businesses implemented their procurement strategies at the corporate level. The type of organization involved should inform the governance framework adopted because it defines the main stakeholders to be contacted in such plans (Koster et al., 2017). For example, public sector organizations have been criticized for failing to consider the interests of the public when making procurement decisions (Sinha et al., 2020). This problem has reduced the relevance of the policies they have developed so far. Scholars have also mentioned the institutional structure of a company as another important consideration when developing procurement governance strategies (Islam et al., 2020; Safa et al., 2021). Particularly, the degree of centralization, or decentralization, of organizational activities plays a critical role in determining the overall outlook of the procurement design plan.

Several problems have been associated with the process of implementing governance frameworks in different companies. Particularly, corruption emerged as a popular mention among most scholarly works. To address such concerns, an e-procurement strategy was proposed for adoption to mitigate the effects of human factors on procurement effectiveness (Islam et al., 2020; Safa et al., 2021). Some of the main benefits associated with an e-procurement strategy is lower costs, improved efficiency, and an increase in productivity (Sinha et al., 2020). Subject to the above findings, it could be assumed that the procurement strategy adopted by Qiddiya could be improved through automation.

Currently, some of its procurement activities have been automated but the process has not covered all key activities associated with the business. The findings highlighted above suggest that e-procurement could enhance efficiency in the production process. At the same time, this virtual framework of supply chain management could act as a platform for enforcing the governance procedures developed by the holding company to control its subsidiaries (McGrath et al., 2021). Adopting the plan would mean that the procurement functions of subsidiary entities will be synchronized with those of the holding company and standardized to minimize the occurrence of errors and eliminate inconsistencies (McGrath et al., 2021). Therefore, the platform would act as a model for merging the activities of the holding firm and its subsidiaries.

Conclusion

Overall, the insights presented in this document have demonstrated how Qiddiya could manage its procurement function for its holding and subsidiary entities. The findings have also described scenarios where the holding company could maintain control functions over its overseas without compromising on the quality of its products. The procurement strategy for managing the holding company and its subsidiaries comes from the secondary literature review findings highlighted above, which have proposed e-procurement as the desired link. Therefore, while it may be wise to acknowledge some of the limitations of a decentralized procurement plan, as highlighted by some of the respondents, it is equally critical to recognize that times have changed and technology adoption can mitigate some of the mentioned concerns. In line with this focus, the e-procurement strategy emerged as a viable platform for merging the operations of the holding company and its subsidiaries because tasks can be completed in real time. Overall, this platform is expected to accommodate a hybrid procurement strategy that contains centralization and decentralization elements in the plan.

Recommendations

Based on the insights highlighted in this paper, it is prudent for Qiddiya to adopt a hybrid procurement strategy. Indeed, given the merits and demerits of adopting both centralized and decentralized procurement plans, a hybrid model emerges as the best fit for the firm because its operations are vast and each subsidiary has unique needs that would be better conceptualized internally – within the business unit. Granted, the centralized procurement plan is likely to promote cost-savings and efficiency goals in the organization, but each subsidiary needs to be allowed to prioritize its needs, based on whether they are monetary or time-based. A decentralized procurement plan would allow each subsidiary to design its procurement plan, depending on these two orientations.

Subsidiaries that choose a monetary-based procurement strategy are likely to find that a centralized one would be more suitable for their business plans. Comparatively, subsidiaries that prioritize the expediency of company operations, as opposed to cost-savings advantages, may find that a decentralized procurement plan would be better suited for the business. Therefore, there needs to be an internal audit of the priority needs of each subsidiary to come up with such information. Eventually, the process of identifying priority needs for each subsidiary and aligning them with their appropriate procurement plans would result in a hybrid model. This framework would be responsive to the procurement needs of each subsidiary and enhance the efficiency of overall company operations.

The key to implementing a hybrid procurement model lies in striking equilibrium between the centralization and decentralization needs of the business. Stated differently, there needs to be a centralized planning structure with fillers to the decentralized framework. The centralized procurement plan will require significant management input because teams need to know the procurement needs of other departments as well. This is the only way they can oversee their buying processes because they would not know what to order if they lacked such information. Therefore, in the event that there is no specialized knowledge of the procurement needs of other departments, the adoption of a centralized strategy would be a deterrent to the running of the company’s operations. The impact would be a fragmentation of business processes from an operational standpoint and low departmental buy-in to the overall corporate vision.

Implementation Plan

As highlighted above, a hybrid procurement strategy is proposed for use in the case study. However, benefitting from this plan requires a robust understanding of activities that need to be undertaken during the implementation process. The first step in doing so involves recognizing the importance of the current situation characterizing the procurement environment of Qiddiya. Subject to this objective, the hybrid procurement strategy fits well with the current technology-laden environment that makes it possible to implement e-procurement.

The e-procurement strategy aligns well with the proposed hybrid plan. It can yield significant cost savings and efficiency gains that the current system does not offer (Safa et al., 2021). Particularly, Qiddiya can benefit by up to 15% in efficiency gains if it embraces the decentralized procurement plan (McGrath et al., 2021). Generous estimates indicate that the adoption of the e-procurement strategy could further increase this percentage to 25% (McGrath et al., 2021). Given that up to 75% of multinational companies undertake their procurement functions virtually, it would be safe to assume that Qiddiya can seamlessly integrate the procurement functions of the holding company with its subsidiaries on this platform (Safa et al., 2021). Therefore, the logical conclusion to be derived from this analysis is that significant gains can be made through the adoption of a hybrid procurement plan.

The likely success of implementing the above plan can be contrasted with the performance of other companies that have achieved success through the implementation of a similar plan. For example, compared to past performance, Qiddiya has maintained a poor relationship between the holding firm and its subsidiaries. This problem has been associated with the lack of a standardized procurement model that caters to the interests and needs of each department. Admittedly, the e-procurement platform would provide a new stage for improving this relationship. Given that the challenges affecting the company stem from poor relationships among departmental heads, the e-procurement plan would eliminate the influence of human bias in negotiations because software will be empowered to make purchasing decisions on behalf of the people involved.

Overall, in this paper, the debate regarding the adoption of a centralized or decentralized plan has depended on a contextual understanding of procurement operations for one company. Data was collected from three major sources, including surveys, interviews and secondary research. If the study were to be conducted again, the number of respondents should be increased to get a more representative sample of the views of procurement officers regarding the strategy proposals mentioned. Adopting a larger sample would have improved the credibility and reliability of the data obtained. Additionally, a case study comparison could be done in future research to compare the performance associated with the adoption of Qiddiya’s procurement strategy with other firms that share the same challenge. Doing so would provide a benchmarked understanding of strategy adoption in the procurement department of both companies.

Subject to the above observations, follow-up is required to monitor progress. Stated differently, there needs to be periodic assessments done to establish whether a hybrid procurement model would have a positive impact on the company, or not. The process may involve a quarterly, or annual review of Key Performance Indicators (KPIs) in procurement, such as cost or quality concerns, to find out the impact of the proposed procurement plan. Adopting this approach is likely to highlight gaps in implementation, which could be addressed through policy or strategy changes.

References

Ahmad, A. F., & Karadas, G. (2021). Managers’ perceptions regarding the effect of leadership on organizational performance: Mediating role of green supply chain management practices. SAGE Open, 11(2), 1-19.

Hickman, K. (2018). CIPS position statement. Web.

Islam, M. H., Sarker, M. R., Hossain, M. I., Ali, K., & Noor, K. M. A. (2020). Towards sustainable supply chain management (SSCM): A case of leather industry. Journal of Operations and Strategic Planning, 3(1), 81–98.

Ketchen, D. J., & Craighead, C. W. (2020). Research at the intersection of entrepreneurship, supply chain management, and strategic management: Opportunities highlighted by COVID-19. Journal of Management, 46(8), 1330–1341.

Koster, M., Vos, B., & Schroeder, R. (2017). Management innovation driving sustainable supply management process studies in exemplar MNEs. Business Research Quarterly, 20(4), 240–257.

McGrath, P., McCarthy, L., Marshall, D., & Rehme, J. (2021). Tools and technologies of transparency in sustainable global supply chains. California Management Review, 64(1), 67–89.

Omilion-Hodges, L. M., & Sugg, C. E. (2019). Millennials’ views and expectations regarding the communicative and relational behaviors of leaders: Exploring young adults’ talk about work. Business and Professional Communication Quarterly, 82(1), 74–100.

Patten, M. L., & Newhart, M. (2017). Understanding research methods: An overview of the essentials. Taylor & Francis.

Qiddiya Investment Company. (2022a). What is Qiddiya? Web.

Qiddiya Investment Company. (2022b). Vision 2030. Web.

Qiddiya Investment Company. (2022c). Master plan. Web.

Safa, M., Sharma, N., & Zelbst, P. (2021). Information-driven supply chain during a catastrophic event: COVID-19 pandemic. Journal of Operations and Strategic Planning, 4(1), 27–51.

Sinha, D., Bagodi, V., & Dey, D. (2020). The supply chain disruption framework post COVID-19: A system dynamics model. Foreign Trade Review, 55(4), 511–534.

Stokes, P. (2017). Research methods. Palgrave Macmillan.

Zeng, W., Tse, M. Y., & Tang, M. (2018). Supply chain quality management: An investigation

in the Chinese construction industry. International Journal of Engineering Business Management, 10(1), 1-16.

Job Brief

We are looking for a procurement manager for our friendly team at Company N selling medical devices to healthcare facilities throughout the country. Your duties will be directly connected to sourcing and purchasing different products as per the emerging requirements of the business. The principal deals will involve finding suppliers of components necessary for manufacturing the realized goods while ensuring that the operations are cost-effective and monitoring their quality (Martocchio & Mondy, 2019). You will also provide guidance to other employees in the purchasing process for maintaining the efficiency of stock optimization (Evans, 2021). In addition, you will have to adhere to the policies of our company related to supply chain management in order to guarantee compliance with corporate ethics (Martocchio & Mondy, 2019). They incorporate a variety of regulations applicable to the relationships between the external and internal participants of these operations. Moreover, the orientation on the safety of customers and their wellbeing when selecting the materials is our key priority, which should be taken into account in all deals.

Responsibilities

• Developing innovative and cost-effective approaches to implementing procurement strategies;
• Negotiating the terms of agreements with suppliers and other employees in order to ensure the future profitability of the company;
• Finding reliable vendors and other partners as per the operations connected to supply chain management;
• Monitoring the accurate performance of all tasks to ensure a positive outcome;
• Regularly revising the existing contracts with the partners in order to timely detect any issues resulting from the change of the business environment;
• Regularly monitor the changes in the existing legislation and other regulations connected to manufacturing medical devices and other similar products;
• Informing the managers of the introduction of new regulations or any other obstacles, which can potentially disrupt the production process and thereby cause financial losses to the company;
• Approving or rejecting the purchases and other related operations suggested by the company’s employees while reporting on the feasibility of such decisions;
• Controlling the company’s procurement budget in order to ensure the compliance of performed projects with available funds.

Requirements

• Bachelor’s degree in logistics or business administration;
• Product knowledge about medical devices and similar products;
• Thorough knowledge of legal regulations connected to healthcare;
• Ability to work in a stressful environment and meet the set deadlines;
• Confirmed experience of managing supply chain operations;
• Experience managing complex sourcing projects;
• Experience using procurement software, including SAP Ariba, Oracle Procurement Cloud, and GEP SMART;
• Basic technical software skills: MS Office, MS Outlook;
• General knowledge of accounting practices applicable to the responsibilities;
• Excellent leadership and management skills;
• Excellent communication and people skills for successful negotiations;
• Experience in conducting negotiations with suppliers, preparing and signing contracts, and invoicing;
• Ability to timely detect and resolve issues related to the work of supply chains;
• Ability to recognize conflicts and take timely measures for their prevention or resolution.

Where to Advertise/Post the Job Description

This job description should be posted on the platforms, which are popular among specialists in the field of healthcare and the websites for procurement workers. The former includes MedicalJobs.org, MedJobsCafe.com, and Health eCareers in the first place since the employees in this field might potentially possess the experience required for the job. In turn, the latter is Talentbin, HiringSolved, Sourcing.io, and CareerBuilder resume database. Hiring employees with the help of these resources seems an excellent solution since they are connected to both the type of tasks which are to be performed and the area of expertise in general.

References

Evans, E. (2021). What is a procurement manager? Role, responsibilities, challenges, and resources.RFP 360.

Martocchio, J. J., & Mondy, R. W. (2019). Human resource management (15^th ed.). Pearson.

Introduction

Qualification-based selection procurement is a perfect fit for design-build projects since individuals can search for professionals with specific skills and experience in working on the project they need to have completed. This type of procurement enables the project owner to assess and track the quality of the contractors’ work more accurately. Qualification-based selection for a design-build project is utilized in cases when maximum quality with optimal costs is needed (El Wardani et al., 2006). This approach involves competition among professional offers and the selection of the best one in terms of quality and price. The team is typically chosen depending on the design-builder reputation, past performance, technical capacity, and financial security (El Wardani et al., 2006). It is preferable for project owners to select the design-build team based on positive past experience of completing projects with minimal costs and within the set deadline.

Difference Between ‘Best Value: Total Cost’ and ‘Best Value: Fees’

In the ‘best value: total cost’ approach, total cost consists of the proposed funds spent on materials, equipment, team members’ salaries, and other work expenses. This procurement method aims at searching for a contractor who offers the best overall cost for the project (Adamtey, 2020). The ‘best value: total cost’ approach is well-suited for large projects where the owner can receive a lower overall cost through effective resource utilization. The project owner procures with the aim of obtaining the maximum possible quality for a certain amount of money.

Meanwhile, ‘best value: fees’ is a procurement method based on searching for a contractor who proposes the best cost-quality balance. This approach includes all the funds the project owner spends on purchasing goods, materials, equipment, and staff salaries (El Wardani et al., 2006). The goal of this procurement type is to gain the maximum possible benefit for the project owner in terms of cost savings. This method enables the owner to receive a high-quality project at an affordable price. Both types of procurement are beneficial to the project owner, as they provide the latter with the opportunity to obtain the services or goods offered at the most advantageous prices. The difference between them is that the first procurement type evaluates the quality of the contractors’ work while the second type provides the maximum savings for the project owner.

One-Step Best Value

The ‘one-step best value’ is a specific procurement method in which the buyer seeks to purchase a product with the aim of obtaining the maximum benefit. In such cases, a single-stage approach should be used when the buyer requests products and services at the same time and stage, and the suppliers offer their prices (Adamtey, 2020). This procurement approach implies the presence of one offer that is the best of all. This method is suitable for projects when the owner wants to receive the best offer within the shortest time.

Conclusion

The ‘two-step best value’ is a procurement method in which the buyer submits an application for the purchase of goods or services, and then the suppliers participate in an auction. In such cases, a two-stage approach should be used: the buyer requests prices for goods and services first in the first stage and then holds an auction in the second stage (El Wardani et al., 2006). This approach implies two stages: the first stage assumes the selection of the best offers, and the second involves a detailed comparison of prices and quality of suppliers. This method is suitable for projects when the owner wants to gain the best price-quality ratio through a detailed analysis of offers.

References

Adamtey, S. A. (2020). An empirical study to assist owners in selecting the right procurement method for design-build projects. International Journal of Construction Education and Research, 18(1), 1–18. Web.

El Wardani, M. A., Messner, J. I., & Horman, M. J. (2006). Comparing procurement methods for design-build projects. Journal of Construction Engineering and Management, 132(3), 230–238. Web.

Introduction

Procurement has become one of the essential requirements when building or setting up a certain project. Procurement involves the processes or activities that are required to ensure that a certain product or service meets the threshold or the requirement of the user.

I have been accorded the opportunity to prepare a report that covers on various aspects related to procurements and in particular the procurement to build a new auditorium at the Heriot Watt University in Dubai campus.

The auditorium will comprise 800 seats, high specification technology, multimedia theatre with air conditioning, and a comfortable tiered seating that provides excellent visibility. The auditorium will also feature a full sise interactive screen and computer driven presentation facilities, perfect for conferences, lectures, and presentations.

Strategic Approach to Procurement

In such a project, strategic approach to procurement is vital in ensuring that the project is concluded as required. This approach is appropriate for the Heriot Watt University because it will ensure achievement of money value. Appropriate procurement measures are critical in ensuring that the project is well managed and completed within the stipulated time using the available resources.

This project is a long-term one because of the complexities involved in it. Therefore, the statement of the program activities, all actions, and other initiatives that Heriot Watt university wants done must be well stated and included in the procurement documentation.

Furthermore, this strategic approach will provide in detail the delivery model that shows how the actions will be done to ensure a smooth implementation of the project and its understanding. In this stage, all the activities that have already been cleared or approved by the university will be noted down and appropriate models applied to ensure that the project becomes a success.

Furthermore, appropriate models to maintain an efficient and effective experience will be documented and looked into at this strategic approach stage (Yeow, & Edler 2012, p. 472). Documentation of the relevant issues pertaining to the project will be undertaken by competent procurement managers to plan and organise all the materials and resources required for completion of the project.

This information will be used for future referencing and accountability on the use of materials during the building process. It is also important to note that every procurement activity approved by an organisation has some negative implication on the environment.

Developing a strategic approach to set up the required auditorium makes the university have a chance of spending its money wisely while at the same time putting considerations on environment. Therefore, to ensure that procurement is done in the right way, I would develop my strategic approach by first identifying and gaining a full understanding of the activities that are required to be done.

This will come at the planning stage whereby, as indicated, I will identify the specifications or the requirements of the auditorium. After gaining understanding of what is required, I will then consider or think about the suppliers of the materials that the project will consume for its completion.

Being aware of the suppliers is important in the whole process of procurement because it will determine whether the project will be completed within the stipulated time using the available resources. It will give an overview of whether there is need for addition of more resources.

The next stage is to reflect on the associated risks and nature and quality of the building itself. The risks that may interfere with successful completion of the project will be factored in to determine how they will be handled. Materials should be of high quality to meet the standards of the university. These very important issues will be put into consideration during the process of strategic approach to procurement.

Critical analysis of alternative procurement routes/types for the proposed project

For a project to be successful, selection of proper procurement route is necessary. In the selection of a procurement route, various issues are considered. These include the contract regulation, pre-qualification of the contractor, procedure of procurement, contract model incentive mechanisms, and the compensation model. There are various alternative procurement routes for the proposed project.

One of the alternatives is the selection of a procurement route based on the recommended practices. This requires the owner to identify the procurement route used. This kind of selection of a project is good because it influences the level of cooperation between the contractor and the owner of the project. This route ensures that the individual responsible for a certain risk is quickly identified.

Therefore, this helps to avoid any blame game in the organisational context. For instance, in this proposed project, the owner of the project, Heriot Watt University, can enter an agreement with the contractor-the individuals required to set up the projects.

Therefore, in case the project becomes impossible to complete or simply stall, the blame can be directed to any of the party perceived to be the cause of the risk. Another alternative is whereby the owner makes decisions based on those things or ideas he/she feels or deems to be important. This therefore leaves the discretion of making a decision to the project owner.

In this project, the best procurement route to be used is the Private Financial Initiative /Public-Private Partnership. In the recent past, the Private Financial Initiative has broadened into a wider spectrum to public –Private partnerships.

This route is one of the complex and most innovative in the procurement process. It involves two entities, a public sector body and a private sector consortium reaching a consensus agreement. In this case, Heriot Watt University will have to enter an agreement with the company that will put in place the infrastructure needed.

In this route, procurement of services that the company will provide is made and not the buildings or infrastructure. Therefore, Heriot University will have to procure the services that it needs to be done. The agreement will therefore be based on the services and not the building.

The private finance initiative/ public-private partnerships scheme that will be reached will involve the construction of infrastructures and buildings to facilitate the private sectors to provide or offer the services that are required by Heriot University. This arrangement may last for a long period averaging to between 20 to 30 years.

Therefore, Heriot Watt University will use this route because it ensures that all the requirements are available until the project is completed within the stipulate time. The private sector, which will be required to complete the project, therefore, will have to form a project consortium that will be specific and aimed at organising the financing, the designing, and finally, the construction of the auditorium.

Like any other project, choosing either of the two has some challenges that one needs to expect. In this case, the owner of the project is the university, which has the discretion to select a project that best appeases it and one which can be completed within the stipulated time (Sandra 2012, p. 96).

Examination of advanced procurement practices suitable for the project procurement process is very important in the smooth operation of the business. Some of the considerations when it comes to effective and advanced procurement practices include consideration of integrity, fairness, competition, and transparency. The process of procurement should be transparent, fair, and open to boost the confidence and truth of the contractors.

For this to be achieved, rules and procedures should be established to guide the process of procurement. These rules should apply to all the parties or competitors who have developed interest in the project. Without such considerations and arguments, it means that their will be still a lot of mix up between the owner and the contractors (Sandra 2012, p. 96). Furthermore, the project should demonstrate economy and effectiveness.

It should provide solutions to the organisation’s needs in terms of quality, quantity, and the time span, all of which should be right and to the set standards. The overall costs of carrying out the project should also be calculated, as well as the time, which the project should come to conclusion. Economy is vital since it helps to protect the interest of the budget owners.

On the other hand, effectiveness is vital because it helps in achievement of the interests of the users or the owners of the project. Therefore, in this project, the contractor and the manager should reach a decisive conclusion. Other suitable advanced procurement approaches suitable for the project is putting into consideration any potential conflicts present in the guiding principles.

Even though these principles are important when they enhance/promote provision of services, sometimes, individuals may clash hence requiring management and professional management to intervene in the situation. This conflict may arise due to the failure to honor the agreements in the contracts or due to misunderstanding between the various parties involved in the procurement process.

Therefore, it is imperative that such factors are considered when engaging in procurement to ensure that transition period is effective and efficient (Kedar, Faith, Berit 2011, p. 73). The project also requires segregation of duties among different employees to ensure that the project is completed within the required time besides achieving its required standards.

Segregation of duties ensures that every individual is responsible for the mistakes made. It further helps to provide professionalism in areas that an individual is trained in to avoid any conflict of interest. This advanced procurement approach is of significant contribution in this project. For instance, the work of building the auditorium involves many other things that construction specialists may not perform.

Therefore, these areas should be assigned to other individuals who possess relevant skills in those specific areas. Delegation of authority is yet another advanced procurement practices that can be adopted in this proposal. Delegation of duties is a form of power granted to someone to give directive that a certain group is supposed to obey.

The project manager or the contractors will assign some of the responsibilities to the contractor to ensure that the project is finalised within the stipulated time. Delegation is also important in procurement because it ensures that materials are available within the right time hence making the progress of a project smooth.

An evaluation of what factors would influence the development of an appropriate Procurement strategy and its implementation

Various factors would influence the development of an appropriate procurement strategy. One of these is transparency of the tendering process. When the procurement process is more open, transparent, impartial, and cost effective, it ensures that the process is competitive, free, and fair. All the interested parties are given equal chances to bid for the projects.

Therefore, the best contractor can win the contract in a fair way (Kedar, Faith, Berit 2011, p. 74). This can be implemented in the organisation through restructuring the process of procurement and coming up with new policies and rules that can foster or promote transparency. In case the project is very complicated, it requires a lot of scrutiny and screening of various applicants to determine the best contractor to carry out the project.

Other factors include the skills and knowledge of the contractor, the person presenting a proposal, or the person to be assigned the duty of procuring materials for the project. Procurement is a vey length process that requires an individual procuring such like a project of building an auditorium to have enough skills, knowledge, and even experience about it.

The process of procurement is also lengthy, as it involves various things such as planning, which involves identification of any issues concerning the project. Therefore, a contractor should understand the various stages that are involved in procurement to tender an application for consideration.

This can be implemented in various organisations by requiring that any applicant or a person procuring such projects should satisfy the things, for instance, having adequate experience in building besides being a critical thinker. Another factor is operation and improved communication. In the day-to-day activities, people fail to meet their objectives and goals due to the failure to engage in communication.

Communication is the medium through which individuals communicate and share their ideas, views, and opinions. Therefore, in projects, setting up communication is essential and therefore needs to be used appropriately by the people. When communication between different parties in the project is perfect, the whole process of procurement is likely to be a success (Adomavicius, Gupta, Sanyal 2012, p. 199).

For instance, communication between the contractor and the owner, procurement officer and the contractor, and the staff should be understood and enhanced to foster unity and teamwork for the tasks assigned to be completed quickly. This can be implemented in the organisation setting if it is absent through education and creating awareness among procurement officers.

Another factor that would influence the development of an effective procurement strategy is the level of training of the parties involved in the process of procurement. Training is important in ensuring that an individual can perform tasks in accordance to the expected standards. This can be implemented by training those who might not have attained sufficient training on procurements and or issues relating to procurement.

Furthermore, enhanced accountability through work delegation is another factor that can influence or affect the development of an effective procurement strategy.

When people in an organisation are accountable, they behave in different ways for the fear of facing harsh treatment. This is likely to ensure that work and tasks are well performed. This can however be implemented in any relationships between the contractor and the supervisors systematically until the task ends.

Potential benefits of adopting alternative procurement strategies

Several benefits result from adapting various alternatives of procurement strategies. One of the benefits is that it helps the procurement officer to adjust the strategy besides making it fit certain requirements to meet certain desired outcomes. For instance, an organisation may have different plans, which may then be changed or improved to change or enable the realisation of the intended objectives.

For instance, in this case, the procurement manager may opt to use negotiation. The owner approaches the procurement officers or department without having to advertise for tenders from other procurement officers. Biding can also be used whereby the owner and procurement officers or departments engage in talks with the winner of the tender getting the opportunity to carry out or continue with the project.

Alternative procurement strategies help to ensure continuous improvement in the procurements functions of an organisation (Walker, Brammer 2012, p. 256).

The plans that are produced by changing or alternating these procurement processes help in continuous improvement in terms of procurement processes, which are critical in advancing the process of procurement within an organisation or between the contractor and the owner of the project. They also help to maintain effective risk management.

In any procurement process, various inherent risks exist that the whole process faces concerning ethical, legal issues, and transparent among many other important issues (Adomavicius, Gupta, Sanyal 2012, p. 199). By adapting alternative procurement methods and processes, such risks are mitigated.

For instance, in this case of building an auditorium house, the contractor may not be aware of the various risks such as the attitude of the staff, which may at some point cause them to lower their tools hence affecting the overall functioning of the procurement departments. Such issues can be solved by opting for other new procurements processes that can provide positive results to enhance cooperation.

Another potential benefit is that the plans help to create an understanding of the nature of activities that are performed or carried out within a certain period. The level of complexity of the issue at hand, the scale or the size of the activity, and the scope of the clarity of the project can be identified and corrected. Therefore, to this end, it is imperative for procurement officers to carry out their tasks diligently to achieve the desired goals.

Conclusion

In conclusion, the procurement process of building the auditorium has some challenges. I have learned that the only way that a procurement process can be achieved satisfying the two parties-the owner of the house and the contractor-is through a clear communication. The procurement steps are many and should be accomplished one by one to ensure that the goals of an organisation are achieved exemplarily.

Any approved procurement strategy should employ a mix of approaches to meet the outcomes or the goals of an organisation to meet the value of money objective.

It is also vital for the approved organisation to use the available information on its outcomes to determine the characteristics of the procurement program and its environment for any medical consequences. Therefore, the report has tabled the necessary issues that any organisation needs to consider in its procurement process in case of any project as the one discussed in the paper.

References

Adomavicius, G, Gupta, A, & Sanyal, P 2012, ‘Effect of Information Feedback on the Outcomes and Dynamics of Multisourcing Multiattribute Procurement Auctions’, Journal of Management Information Systems, vol. 28 no. 4, pp. 199-230.

Kedar, U, Faith, E, & Berit, B 2011, ‘EIA and green procurement: Opportunities for strengthening their coordination’, In Environmental Impact Assessment Review, vol. 33 no. 1, pp. 73-79.

Sandra, C 2012, ‘Risk aversion and asymmetry in procurement auctions: Identification, estimation and application to construction procurements’, In The Econometrics of Auctions and Games, Journal of Econometrics, vol. 168 no. 1, pp. 96-107.

Walker, H, Brammer, S 2012, ‘The relationship between sustainable procurement and e-procurement in the public sector’, In Sustainable Development of Manufacturing and Services, International Journal of Production Economics, vol. 140 no. 1, pp. 256-268.

Yeow, J, & Edler, J 2012, ‘Innovation procurement as projects, ‘Journal of Public Procurement, vol. 12 no. 4, pp. 472-504.

Properly managing a business is a complicated task as it involves many processes that often co-occur. Procurement is among the essential aspects as it allows a company to receive the required goods or services from other organizations. Eatough (2014) states that executives often underestimate the importance of procurement, however, “69.9% of corporate revenue is directed toward externalized, supplier-driven costs” (para. 2). Thus, a procurement manager should understand the basic principals of this business aspect to help enhance the organization’s operations. This paper aims to examine the project procurement process, identify the most valuable output, study contract types, and develop a project monitoring process.

Project procurement involves acquiring the needed resources for a particular operation within a company. According to Wilson (2015), any company needs human capital, materials, equipment, and finances. Those are required as without them an establishment would not be able to perform its daily operations. Once a project manager has identified everything that will contribute to completing a task, he or she utilized the services of the procurement department. The primary objective of the employees from it is to ensure that everything is delivered on time and at the lowest price. Therefore, procurement contributes significantly to project completion within an organization.

It is essential to understand the course of project procurement to be able to utilize it in practice. Diagram 1 displays the five primary steps required for successfully initiating and completing the work. The project procurement planning process describes how a department makes decisions when fully filing a plan. The first step is to identify goods or services that will be purchased and request prices and terms from a contractor. For it, requests for proposal (RFP) and request for quotation (RFQ) are typically utilized (Wilson, 2015). Those are standardized approaches that help a manager locate an offer with the best price and the best conditions. The second step involves evaluating different proposals and selecting an appropriate one. Both companies have to sign a contract that would identify responsibilities, timeframe, and financial agreements. Next, the procurement department should ensure that the process is carried out correctly, thus monitoring is required. At times changes should be applied to previously signed contracts, which is the responsibility of the procurement manager. The final step once the previous requirements are fulfilled is closing the project.

The most valuable output of the plan procurement process is selecting an appropriate contractor. The step involves risk management and proper calculations to ensure that the company receives what it needs to finalize a project. Thus, if a manager chooses an inadequate organization to work with, the rest of the process and project completion will be compromised. An employee should evaluate whether the chosen company is reliable as any delays or insufficient quality of items would set back the entire operation.

Acquiring a legal agreement that would identify each party’s responsibilities is necessary for procurement. According to Wilson, contracts are a “form of obtaining resources” that a company can use (p. 5). Clearly stating essential aspects of an agreement helps to minimize possible risks for both parties. Fixed-price contracts are aimed at receiving the products or services regardless of the time needed (Wilson, 2015). Thus, the client pays a set financial compensation, while the contractor may have to exert more efforts to deliver the order, which would not influence its price. Wilson (2015) states that a variation of this agreement can be in place, which is referred to as cost reimbursement. In this case, the customer pays for required items, and an additional fee for work is added. Finally, there is a time and materials contract, which includes a payment from the customer for both utilized materials and efforts that the contractor spent on completing the project (Wilson, 2015). Thus, a variety of options exists that one can choose from to ensure the best financial outcomes of operations.

Risks are associated with every type of contract; however, for each of them, a different party has more to lose. In fixed-price agreements, the seller has the most risk when unexpected issues occur during the fulfillment, as the company will not be able to receive financial compensation. A cost reimbursed agreement can be applied to mitigate this issue as it requires additional payment for the seller. Time and materials payment has the most risks for the buyer as in case the contractor needs extra time to complete the project the total price increases. To mitigate those risks, a manager should adequately evaluate the criteria for the products and services that are required, review RFP, and RFQ and choose an appropriate contract.

The project monitoring process helps track the procurement of orders for the project. According to Wilson (2015), the manager should oversee the contract, suppliers, and their performance. In general, the process should consist of planning, creating appropriate documentation, signing contracts, and approving changes to them is the beginning of the monitoring process. Additionally, the employee should monitor the performance reports and data to ensure that the task will be completed by a deadline (Wilson, 2015). Tools and control systems should be applied to fulfill this task.

Specific selection criteria that describe general requirements can be applied to each project. Project Management Institute (2017) states that a manager should review a company’s management approach, their understanding of need reflected in RFP response, time, cost, and quality of products. Additionally, a capability to fulfill an order with regards to human resources should be studied. Another important aspect is their risk response strategy, business type, and past performance (Project Management Institute, 2017). This is a basic checklist that helps identify whether a contractor is reliable and safe.

Ethical concerns should be considered when identifying source selection criteria for procurement, especially regarding human resources outsourcing. Firstly, it should be based on “fairness, integrity, and transparency” (United Nations, n.d., para. 4). A professional should adhere to the firm’s standards as well as generally accepted moral principles. Additionally, such work can be associated with ethical risks such as conflict of interest, corruption, collusion, coercion, and fraud (United Nations, n.d., para. 4). The objective of a procurement manager should be to avoid such issues and report them when necessary to the company’s executives.

Risk management should be applied to the procurement planning process to ensure the final result and minimize possible financial losses. Wilson (2015) states that risk is a “potential influence producing a positive or negative outcome” (p. 3). It can be argued that most of a company’s operations involve the aspect, thus, correctly understanding how to manage possible outcomes is necessary. The basic approach to the issue is monitoring the processes throughout order fulfillment (Wilson, 2015). Additionally, adequately chosen contract type and company that corresponds to selection criteria help ensure positive outcomes.

Overall, procurement management is among a company’s essential processes. The factor ensures that project managers receive the resources they require to complete a task. There are various risks associated with procurement, some of which can be mitigated through proper contracts. Additionally, adequate selection criteria should be applied to ensure positive outcomes. Finally, a procurement manager should monitor the process and comply with ethical standards in his or her work.

References

Eatough, M. (2014). Leaders can no longer afford to downplay procurement.Harvard Business Review. Web.

Project Management Institute. (2017). A Guide to the Project Management Body of Knowledge (PMBOK Guide) (6th ed.). Newtown Square, PA: Author.

United Nations. (n.d.). Ethics in procurement. Web.

Wilson, R. (2015). mastering risk and procurement in project management: A guide to planning, controlling, and resolving unexpected problems. New Jersey, NY: FT Press.

Executive Summary

The following paper is a presentation of procurement strategies as well as procurement tools within a selected organisation in the logistics industry. The paper begins with a detailed profile of the procurement process and function in the organisation as informed by a number of documents on the company obtained through relevant databases over the Internet. The paper also includes an analysis of the research materials in an attempt to establish solutions to some of the challenges in the company’s procurement configuration.

The findings of research into the company’s procurement process establish that even though the company has invested in a number of techniques to facilitate the same, several challenges still exist. These challenges include the absence of a clear outline of the procurement strategy in the organisation and a detachment of the several units and departments involved in procurement, thus causing delays and inefficiencies.

In addition to the above problems, there is an apparent disconnection between customers and the production process, thus causing delays in the final product reaching the intended consumers. This paper covers several sections that allow easy interpretation of the procurement process in the selected organisation.

It begins with a background of the organisation with the inclusion of the several changes in its procurement functions. The presentation of a detailed strategy and operations in the firm follows before concluding with the recommendations section. The selected company is United Parcel Services (UPS).

Background of UPS

UPS was founded in the 1907 and it has grown from its original coverage of the US to cover more than half of the globe courtesy of having services in over 200 countries around the world. With its headquarters in Atlanta, the company has been the leader in package delivery with millions of parcels and documents being delivered daily. The company has also grown in revenue over the period it has been in existence and it is listed in the New York Stock Exchange (NYSE).

The company has presence in all the continents with coverage of almost all the regions of the world. There is also diversification in the company, which allows easy courier and distribution functions in the industry. The major divisions formed since its inception includes the UPS Mail Innovations, UPS TeleService, UPS Aviation, UPS Air Cargo, UPS Capital Corporation, and UPS Professional Services among others. These have constantly changed over the years with the functions remaining within the organisation and addition of others.

The company uses its characteristic brown fleet of vehicles and aircrafts to deliver parcels and packages. According to the UPS Supply Chain Solutions (2012, p.9), ‘the company spent billions of dollars in a state-of-the-art tracking system and in the investment of some of the latest technologies in the industry’. The update of its technological capability is also reported to cost it more than the operation of the aircrafts and the courier vehicles.

For a proper analysis of the company’s performance, the operations can be grouped into domestic package that the company runs in the US, International package for its international market, and the non-package sectors.

A historical performance index reveals that the organisation has a performance of approximately $24 billion in 2002 revenue for the domestic package: $4.7 billion in international trade and $2.7 billion in revenue for the non-package section. This performance was an improvement in revenue from the previous year’s performance where all the sections recorded lower revenues.

However, by the year 2012, the company had grown to a total of US$ 54.1 billion, with an operating income of US$ 1.343 trillion and a net income of US$ 807 million (UPS Supply Chain Solutions 2012). The company has also grown from employment of handful employees to have over 397,000 employees in all the branches worldwide (UPS Annual Report 2012). The company also has over 8.8 million customers worldwide, who are served by the over 70,900 retail outlets in different parts of the world.

There are also over 100,000vehicles forming its delivery fleet (UPS Annual Report 2012).Some subsidiaries have also been added to the original components of the organisation. The company has expanded its operations with the domestic market still constituting the largest share of its operations. However, in the recent past, the company has set to strengthen its international presence with the opening of several new branches across the world and introduction of the Internet-based trade.

Analysis of UPS’s Procurement Function

In the process of procurement, an organisation should ensure that the acquired goods and services are appropriate with the best cost attainable and in the appropriate quantity, location, and time. UPS has a basic procurement process utilised by most organisations, which takes the standard route with the customers being the final recipients of the products and suppliers being at the beginning of the chain.

In this section, the main areas of focus in the procurement process for UPS are global sourcing, supplier and collaboration, e- procurement and information, and cost reduction systems.

Global sourcing

Global sourcing is an important part of any organisation and especially that of the size of UPS. According to Quintens et al. (2006), international purchasing cannot be excluded from any organisation that has the desire to succeed at the international front. UPS has set up effective measures of global sourcing, which contribute to its current state of success globally. Wynstra et al. (2003) posit that there is a need to integrate the purchasing process and product development.

Some researchers have suggested that outsourcing leads to negative effects on the performance of a company, but this aspect is dependent on the specific industry (Dabhilkar et al. 2009).Alternatively, if outsourcing is applied with the right initiatives, there is a high probability for positive results. In the case of UPS, global sourcing contributes significantly and the same has grown exponentially over the last decade as domestic competition increases.

UPS has also applied strategic purchasing methods in these levels, with global sourcing being a key pillar of the strategies. Paulraja et al. (2006) classify strategic purchasing into three basic levels. The company has managed to integrate the supply activities between the organisation’s customers and the external suppliers who form the largest part of global sourcing in many organisations (Paulraja et al. 2006). UPS recognises the importance of global outsourcing, which has been placed central to its procurement strategy.

As Trautmann et al. (2009, p.205) state, ‘companies engage in global sourcing for a variety of reasons, not just to achieve economies of scale’. Some of the reasons of global outsourcing as recognised in UPS include the sharing of knowledge and the provision of the organisation with the best practices in its engagement with customers (Monczzka et al. 2002).

Danese (2013) also stresses the importance of global outsourcing, as it improves the performance of any organisation that is in a position to establish itself in this field. UPS has made clear policies on outsourcing and specifically global sourcing. Through these policies, the company has been in a position to achieve international cooperation and partnerships and the same translating to improved returns and ease in the logistics industry.

Supplier and collaboration

UPS has collaborated with a number of companies, both in the past and recently, with some examples being companies such as IBM and Oracle. This move has enabled to company to ease its international and local presence with outlets for its services increasing with such partnerships. The collaboration has also seen the company take on the Internet space and diversify its services to the specification of the customers.

Researchers have established a relationship between the successes of a company with the collaboration that it can achieve in the industry that it is situated. According to Claycomb and Frankwick (2010, p.256), some of the benefits include ‘information exchange and conflict resolution mechanisms’.

However, others have reported negative effects of collaboration between companies with the suggestion that organisations should strive to be specialised in only one sector (Weele 2010). Given the logistics in the industry that UPS is located, collaboration is a significant part of existence and this view has informed the collaboration with suppliers and distributers.

Supplier collaboration is also a significant contributor to cohesion within an organisation (Daspit et al. 2013; Lysons & Farrington 2000), and UPS enjoys the same since its inception. The company has also managed to build trust between it customers and its suppliers with little negative incidents in its procurement process being reported in the period it has been in existence.

In a study that examined the effects of trust between organisations in the supply chain, Stuart et al. (2011) proved that basic trust is necessary for effective collaboration. Collaborative networks are also important in the industry and UPS has built a large network in the courier industry where its service can be found in many parts of the world.

Relational marketing literature also emphasises on the importance of building collaboration amongst companies (Stanko et al. 2007), and thus UPS has entered into partnerships with key industry players to ensure that competition is reduced and bridges built. Over the past decade, the company has proceeded to acquire a number of related companies to expand her territories. The culture of organisations is also important to consider, as some of these organisational cultures may influence the outcome of collaboration.

Claycomb and Frankwick (2010, p. 252) support this view by stating that some of the important aspects of a partnership in any industry ‘include information exchange and conflict resolution mechanisms’. Some of the issues that have arisen in the procurement process in UPS have emerged from failure of mechanisms set in place to ensure easy flow of information between some of its partners.

Despite the support accorded to the supplier collaboration with an organisation, some researchers state that supplier involvement in the process of procurement and product development may be harmful to an organisations performance (Wynstra et al. 2001).

The researchers continue to state that few of the organisations have thus ventured in to the involvement of suppliers in their production process (Wynstra et al. 2001). Interestingly, UPS has continued to experience growth in the presence of collaboration with its key suppliers over the last century of existence.

E- Procurement and information

UPS has invested in e-commerce in a number of ways. The company remains the first in the industry to utilise the Internet as a tool in its procurement process after investing billions of dollars every year for the last number of decades.

The investments into cyberspace and information technology have exceeded the operational costs for the vehicle delivery and the air delivery services. As Qrunfleh and Tarafdarstate (2013) posit, information system in the current century is inseparable from the supply chain and application of the same in any supply chain can boost its performance.

The company has a number of uses for e-procurement. Cisco, which is an affiliate company of UPS, is reported to sell approximately 90 percent of its products online with the special requests and specifications being made the same way (UPS Supply Chain Solutions 2012). The clients are also allowed to easily check the product quality and test it via the same route, thus allowing them to confirm the details of delivery.

The clients can now perform transactions at any time of the day and night, and UPS is notified of its product status through the same mode (UPS Supply Chain Solutions 2012). The company then uses the Internet to crosscheck the details of the orders and then due process is followed to the appropriate customers.

Another example of the Internet use by UPS to link clients and provide efficient services is that of ScubaToys.com and its interaction with UPS OnLine (UPS Supply Chain Solutions 2012). The company is in a position to deliver the toys in a matter of hours to the rightful customers with shipment to different times only taking a number of days.

The companies have managed to use the Internet to link the supply and customers directly, which facilitates trade and profitability. The payments for the services are also made electronically and clients can track their orders using a mobile phone software application called UPS Mobile (UPS Supply Chain Solutions 2012).

The healthcare sector is a key part of UPS, which forms an integral part of its supply chain. With growing concerns over the safety of the supply chain, UPS has moved to ensure that the industry is safe by initiating measures aimed at temperature control and safety of medical appliances and drugs during transit. The Arizona State University (ASU) is also a beneficiary of the UPS Store, which is a franchise of one of UPS subsidiaries.

The institution had a challenge of safely delivering mail to its large body of students before the company simplified the process and used technology for the same. The institution can now keep track of the mail.UPS, through its Customer Solutions section, also offered solutions to the challenge of goods damaged during transit for Plow & Hearth. UPS was in a position to develop an economical solution to ensure that Plow& Hearth customers were satisfied. They were also in a position to reduce transport costs and increase returns.

Greve and Davis (2012) also offer solutions to some of the logistical problems that companies face and they use the model of UPS as an efficient logistical company. Vivo Technology, which is a company dealing in laptop parts, also had challenges with the efficient delivery of the parts to the markets and UPS offered solutions to the company by ensuring improved delivery efficiency.

Cost reduction systems

UPS has invested in a number of ways to ensure that the costs of doing business are reduced. Proper procurement strategies are some of these measures and the company has managed to stay competitive. As Glock and Hochrein (2011, p.173) state, ‘purchasing organisation is important for the competitive success of the purchasing department and the firm’. UPS has ensured that the purchase of the relevant services and goods in its line of trade are properly done. One of the measures applied is the use of e-commerce as highlighted above.

Another of these measures is the collaborative effort put in place, thus ensuring that it is in a position to attract other likeminded companies towards the goal of efficiency. Anderson and Katz (1998, p. 1) support this assertion by noting that the ‘cost of cutting alone has been a disappointing means of improving profits’.

Svahn and Westerlund (2009) also established the use of collaborative networks as another way or reducing costs in the operation of companies. UPS has invested in cheap ways of transporting and delivering documents and parcels, and these methods include bulk shipping and chattered flights. The services have ended up being cheaper and competitive with the resultant goods being affordable. Karjalainen (2011) also states that such means of reducing pricing is the most effective.

Recommendations

Prioritisation of procurement process – There are a number of possible recommendations for UPS in its procurement process. The first one is that the company should attempt to redefine its organisational structure to ensure that procurement is made a priority. A representative of the same function should be appointed to handle the department, and this individual should be answerable to the CEO and the Board members only. The strategy will ensure that the procurement process in the company is swift and efficient.

Close supplier involvement – UPS should ensure that the suppliers are involved directly in the development of any new services and [products. To this effect, a supplier development team should be formulated, with the functions including quality assurance for the suppliers.

Effective supplier interaction will see the company rank among the most successful in the industry. The team should also facilitate knowledge sharing between the suppliers and the company’s clients. This will provide them with the opportunity to interact with the procurement process, increasing returns for the company.

Industry Takeover – The company also needs to show more collaborative efforts with the smaller companies in the industry. The other way to ensure collaboration with suppliers is through appropriate service provision where the company offers reduced charges for customers of certain organisations if they use UPS delivery systems.

This aspect would increase the volume of trade that the company handles, thus increasing the profitability. One other way that the company has a chance of improving collaboration in the industry between it and other companies is through the promotion of services offered by these partners and engaging in joint product marketing.

In the use of e-commerce, the company has demonstrated certain strengths; however, a number of recommendations are plausible. One is that the company should enable full electronic payments for all its customers, as this move would allow more accountability and price controls. It would also reduce some of the operational costs incurred through increased staffing to take care of the manual financing still evident in the organisation.

The company should also rebrand its website and ensure that customers have access to the various services through the website. Customers should also be in a position to predict the delivery time of products through information provided over the website. UPS should also keep up with technology through investment in the latest communication systems in the market with the creation of more mobile applications to facilitate transactions.

In the cost reduction strategy, the company should diversify the products and series that it offers to complement each other to ensure that they are in a position to cut the operational costs. An example is the airline industry that the company invested in, which has allowed it to transport more parcels at a cheaper price.

The company should also invest in cheaper transport means for its packages and parcels by investing in cleaner technologies such as the electric propulsion system. In a bid to reduce operational costs, the company could also shift its operations from the United States to areas where there is cheaper labour such as the People’s Republic of China.

Reference List

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Executive Summary

This report considers the four main sourcing approaches for procurement and supplier appraisal criteria. The example used in the research is the Abu Dhabi National Oil Company (ADNOC), and the analysis is performed using relevant literature and company data. Before choosing the type of sourcing for a particular product, the organization has to consider the state of the market for this good and determine its competitiveness, quality and cost margins, and significant players. Then, the appraisal of internal stakeholders has to be conducted to determine whose input into the discussion and implementation is the most valuable. The four methods of sourcing are single, sole, dual, and multiple, each having their own benefits and drawbacks.

In this case, ADNOC uses multiple sourcing due to its growing demands and high risk of disruptions in production. To select suppliers, ADNOC has to retrieve such information as sellers’ certification, financial statements, environmental policy, experience, and workers’ capabilities. These questions are included in the company’s pre-qualification questionnaire. In post-award discussions, the focus has to be shifted towards deadlines, delivery milestones, and feedback channels. ADNOC should review its system to enhance suppliers’ data security. The main limitation of the project was the lack of available financial information about the company and suppliers.

Introduction

The company under analysis is the Abu Dhabi National Oil Company (ADNOC). According to the latest annual report, the total amount of direct costs in 2018 reached $4,9 billion (Abu Dhabi National Oil Company, 2019). Some typical categories include pipeline equipment and installation, furniture and fixtures, motor vehicles, plant machinery, research and technology, IT services, administrative services, and others, reaching the total number of ten or more. ADNOC works with both local and overseas suppliers, but the full list of suppliers and dollar spend is unavailable. For most needs, ADNOC employs the multiple supplier approach, working simultaneously with several vendors such as Vallourec, Tenaris, Sumitomo, Tianjin Pipe, Hengyang, TMK, JFE, and Voestalpine (McAuleu, 2016). Other methods are not as appropriate for the company’s size and needs.

The oil company conducts the spend analysis using the 7-step strategic sourcing process (Supply Management, 2011). First, ADNOC profiles the category, for example, cleaning services which are employed to maintain the office buildings or development sites. To complete the investigation, the company has to understand the current state of the category’s contents owned by the firm as well as how and for how long the services can be used. Second, the market of potential suppliers is reviewed to locate local vendors that are suitable for the contract. Abu Dhabi and other cities where cleaning services may be needed have a broad selection of cleaning service companies. As a result, the company chooses a sourcing process, typically resorting to large tender projects. Suppliers that applied are appraised and selected according to their experience, quality, bid, and negotiation results. The chosen partners are contacted and implemented into the chain, and the company tracks their progress and ensures that all deals are finalized.

Sourcing Approaches

A vital part of choosing the most suitable suppliers lies in their evaluation. To understand which companies are the most appropriate to work with, ADNOC has to consider significant amounts of information about their financial records, experience, and sustainability. As an initial step, the market (for example, consisting of cleaning companies) is assessed using the PESTLE framework, Porter’s Five Forces, Product Life Cycle, and Competition analysis (CIPS, 2017). These steps show whether the segment is characterized by monopoly, competition, high or low quality, and specific demands to buyers. These criteria also help the firm understand which category should be used to source a particular material or service. If the market segment is monopolized by one company, their quality and pricing make the sole supplier approach the most suitable (CIPS, 2017). In contrast, if there exists healthy competition, the buyer can look and different services and choose a single or multiple supplier strategy. ADNOC utilizes tenders with specific requirements to select from firms that can handle the amount of work necessary for the corporation and its branches.

In procurement, key internal stakeholders are procurement managers, senior management, as well as managers and workers of units that interact with the acquired materials or services. These employees may include storage and distribution operators, sales and technical unit members. According to Mendelow’s Matrix, all stakeholders can be separated into four categories, depending on their level of power and interest (Figure 1). Senior management is in Category 1 since its members possess significant control over operations, but the amount of their duty does not allow them to pay much attention to each process. Procurement managers are in Category B because tenders are one of their primary responsibilities. Sales and technical managers need to be informed about all operations because they can contribute to supplier assessment. Finally, mechanical and office workers are Category C stakeholders since their input is minimal – they deal with the implementation and distribution of new materials, but their autonomy is limited to managers’ requests.

The procurement process in ADNOC follows multiple steps to select options and regulate operations. First, the need is identified by reviewing benchmarks of current performance and materials’ availability. This responsibility falls on the procurement unit, and such procedures are performed regularly. Next, the contract terms are developed using the standards outlined by the company. The market is searched using ADNOC’s new Internet database – ADNOC Commercial Directory system. It invites potential suppliers to register and undergo a pre-qualification process to enter the database for future products and receive notice of new tenders. The appraisal of suppliers during bids’ placement is also completed using this system as it compiles all data in one place and uses standardization to guarantee that all valuable information is entered and considered. This database allows the company to instantly see what selection of supplier is available and make a decision regarding the sourcing approach.

A team consisting of sales, technical, and procurement managers defines specifications, sources the market, and appraises suppliers. All negotiations and awarding are performed by the procurement board. For most resources, competition is advantageous to keep the prices stable and enhance the quality of the services or goods. ADNOC does not choose single or sole sourcing in most cases since the number of its offices and development sites is high. The involvement of stakeholders is essential because their contribution increases the transparency of the company’s needs. For instance, technical and sales managers value different information about the supplier – quality of the services and cost. Their collaboration is necessary to pick firms with good offers while keeping the prices low.

The four sourcing approaches are single, sole, dual, and multiple. The first two, sole and single, refer to cases where a company established a relationship with one supplier for a type of goods or services. A major difference between these methods is that sole sourcing implies that the buyer does not have a choice of suppliers and has to pick the organization due to the lack of options. This situation may arise if the market is monopolized by a large company that offers the best products and price. Alternatively, sole sourcing is possible in niche market segments that do not have strong or stable competition. Single sourcing, on the other hand, is the company choosing a supplier from a range of firms based on their specifications and bids.

The primary benefit of the sole sourcing approach is that the choice of the supplier is easy to make, thus saving time on company appraisal and market analysis. Negotiations may also be simple and quick, although their results are not always positive for the buyer. In sole sourcing, the supplier possesses an unbalanced level of authority over the discussion and can demand a high price for its services, putting a financial strain on the company. The lack of choice also does not guarantee that the supplied goods will be of good quality or be delivered on time since the seller will not be encouraged to compete with others. In this case, the market of cleaning services is full of companies competing for corporate contracts, thus eliminating the option of sole sourcing and increasing the benefits of multiple sourcing.

Single sourcing has similar risks, although the ability of the buyer to choose another option increases the responsibility of both parties. Here, the relationship between the supplier and the procuring side can be based on mutual trust and respect, thus affording both companies an ability to make bold decisions or ask for favors that would otherwise be impossible. Working with one supplier, the company may also reduce administrative costs and maximize system integration and delivery size control. Nonetheless, any problems with the supplied goods or their manufacturer will cause the buying firm to stop or delay its operations. Therefore, in times of crisis, the company will have no protection or a second option that would let it maintain the same level of productivity. Such lack of security is a major drawback of both sole and single sourcing options. In the discussed company, these methods are avoided due to the size of the firm.

The two other options – dual and multiple sourcing – refer to cases where the relationship is established between a company and several suppliers (two and more than two, respectfully). Within the organization, these strategies, especially multiple sourcing, are used for the majority of categories of spend. In the mentioned above example, cleaning services are asked to work in different buildings, depending on the offices’ location and size. Here, the benefits depend on the market’s characteristics – if the market has several businesses with similar products, a professional relationship with multiple suppliers can help the buyer to take advantage of the competition. Moreover, as cleaning services are often tied to one place (city or neighborhood), multiple sourcing is vital for large firms such as ADNOC (Jensen, 2017).

If the procuring firm has a significant influence in the industry or can offer much to the bidders, it possesses a substantial chance of assuming some degree of control overpricing. Moreover, multiple sourcing provides security for the buyer in emergencies where one of the suppliers is unable to deliver the goods on time. Demand fluctuations are also easier to manage with several suppliers that can adjust their volumes according to negotiations. Natural events, financial issues, and other problems of suppliers become less damaging in multiple sourcing in comparison to single sourcing.

Nonetheless, some drawbacks of using these strategies exist as well. While it may be easy to share information and negotiate new deals with one supplier, it is challenging to preserve straightforward relationships with a number of firms. Furthermore, if selling companies do not feel responsible for their share of the service, they may not be as strict in following the standards of quality. Small order volumes also lower the bargaining power of the buyer and limit the chances for beneficial deals and cost-saving. In emergencies, less involved suppliers may not respond to the buyer’s request. Finally, with the increase in information sharing, negotiations, meetings, and quality checks, the company also needs to invest more in the management of these processes. This means that more resources (human and financial) are required to maintain a system of relations with several suppliers.

Using a database for supplier selection and appraisal, ADNOC also gains the advantage of developing effective ITTs. All tenderers receive the same document and are offered similar opportunities, timescale, and pricing. The base increases the confidentiality of bidders and ensures that all enlisted companies agree with the terms of the contract. Firms complete a pre-qualification procedure – all businesses that do not have the necessary characteristics are excluded automatically. These qualities make the digital system reliable, safe, and easy to use for both parties. The evaluation of suppliers follows the scale shown in Figure 2. The Pre-Qualification Questionnaire (PQQ) is a tool that is embedded in the ADNOC Commercial Directory system. The provided examples show which areas of inquiry can be addressed in the PQQ, but this list of questions is not exhaustive (Figure 3).

The commercial evaluation of the involved supplies is completed automatically in the installed system. Its award criteria calculate the quality of goods, cost presented in the bid, as well as a range of characteristics derived from the PQQ. A simplified version of the algorithm is shown in Table 1. Since the company primarily employs the multiple sourcing approach, this framework is used to choose a number of firms with the best characteristics, including the most balanced price-quality ratio. If the table were used for dual sourcing, then companies A and B would be chosen. In cases of single sourcing, company A would present the best coordination of costs and quality.

Table 1: Award Criteria for Suppliers.

E-catalogs can be used in all four sourcing approaches – using them, suppliers show their qualification and service types – carpet cleaning, window washing, and other examples. They are especially advantageous for single, dual, and multiple sourcing since a buyer can quickly find all necessary information about the market segment. On the other hand, potential purchasers lack authority over choices which may be detrimental in sole sourcing or significantly damage the efficiency of multiple sourcing. Supplier portals and market exchanges are beneficial for single and sole sourcing because they are easier to use for one-on-one trades than complex connections between several suppliers and buyers. Online supplier evaluation data is helpful for all approaches- it simplifies market assessment. E-Auctions may be used for all strategies, and their competitive nature is useful for all but sole sourcing types. Finally, E-Tendering provides the buyer with the highest level of authority, which can help in multiple sourcing but is unnecessary in sole sourcing.

Supplier Appraisal Checklist

The process of supplier appraisal is vital to the establishment of long-lasting and trustworthy relationships between the supplier and the purchaser. It assists the company interested in acquiring goods and services in understanding the market, including the established standards of quality and average prices. Moreover, supplier appraisal eliminates or lowers risks related to fraud, corruption, unfair competition, and poor working conditions. The steps of this procedure are to evaluate the suppliers’ stability, experience with similar products, comments from customers, and required certifications.

The products are categorized depending on the impact that they have on profit and the supply risk. The Kralkic matrix demonstrates which items require a more attentive approach to supplier selection – strategic items, for instance, determine the success of the company and are difficult to acquire (Figure 4; CIPS, 2017). Leverage items are similarly important to the firm’s operations, but their abundance makes all transactions less challenging. Non-critical items are both easy to acquire and substitute – the market is usually full of competitors that have low prices and a large selection of goods. Finally, Bottleneck items are difficult to find and purchase but are not as essential to the company’s performance.

The chosen category of services (cleaning) falls under the category of non-critical items – the selection of companies producing these parts is extensive, and the services are not expensive or challenging to perform. Nonetheless, the procurement of these services can be considered a part of supplier management because the quality of cleaning may affect the performance and the status of the company. Moreover, the use of sustainable practices and products during the cleaning process has to align with the company’s goals.

The procurement team has to evaluate the quality of suppliers and monitor their performance to ensure safety and efficiency. The supplier appraisal has to be conducted on both pre- and post-award stages (Rezaei and Fallah Lajimi, 2019). During the first step, ADNOC has to ask potential sellers for necessary certifications as well as their service types and materials used. Cleaning services are needed in all locations that are involved in office work, storage, and development. Thus, a global agreement requires a standard set of KPIs to ensure timely delivery and stable results. Post-award evaluation incorporates onsite checks and discussions about KPIs for different types of facilities.

The appraisal criteria for the pre-award stage is mentioned above – cost-quality balance, annual reports, reviews, previous customer experiences, certification, and environmental policy. Post-award aspects include the time in which the services have be delivered, minor details about specific activities, number of necessary workers, contract requirements, quality checks, and regular reporting. For example, in the case of cleaning services, suppliers such as Spring Cleaning have to be able to work in the location of the office and have enough workers to supply multiple firms under ADNOC (Adma-Opco, Zadco, Adco). Therefore, the workforce capabilities of suppliers are investigated closely to determine the share that they can take out of a tender. Appraisal methods for these criteria combine data acquired through the company’s database and site audits.

The pre-award supplier appraisal checklist includes all mentioned above questions such as the presence of the necessary qualifications and certificates, annual statements, financial information, and environmental policies (Figure 5). It is vital to address the questions presented in Figure 3 and perform ration calculations. If the company meets all criteria, it receives the highest mark, while other companies rank lower. The chosen supplier for ration calculations Is Spring Cleaning (2019) – a Dubai-based company providing cleaning services in multiple locations (Table 2). For a post-award assessment, the purchasing company should focus on planning and process evaluation (Figure 6).

Table 2: Ratio Calculations for a Cleaning Company for 2018.

Conclusion

To sum up, the choice of a sourcing method depends on the size of the purchasing company and its needs. Each approach is also linked to the state of the market since suppliers’ competition determines prices and goods’ abundance. Supplier appraisals help businesses to decide which firms are suitable for a shot- or long-term partnership. They are conducted to see the extent to which competition is present in the industry segment. Moreover, the clarity and transparency of appraisals enhance the standards accepted by both suppliers and buyers. This module helped me understand how to analyze the market with the intention of finding suppliers and which aspects of their performance I should focus on to create strong and reliable connections.

Recommendation

The sourcing process seems to cover all factors that impact further collaboration. The supplier appraisal process at ADNOC is fully automated, with the unified database compiling all essential information into one place and helping the company to make quick decisions. However, the potential risk of information security being compromised still exists for the organization. It is vital to ensure that all data shared through the system is safe and protected by mutual agreements. The improvement of authentication procedures may lower the risk of a data breach.

Reference List

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