Developing People and Implementing Change in Procurement & SCM
Developing People and Implementing Change in Procurement & SCM
Table of Contents
This analytical report required the knowledge gained in module 4 about developing people in procurement and supply change management and module 5 on implementing change in procurement and supply chain management. It focuses on implementing change in the procurement practices at the Abu Dhabi National Oil Company (ADNOC) in the area of employee transportation. In this regard, I will highlight the change management approach I would employ and justify my selection based on its suitability for the intended purpose and the expected efficaciousness to procurement effectiveness and efficiency.
Abu Dhabi National Oil Company (ADNOC) is a world-leading energy producer based in Abu Dhabi in the United Arab Emirates. Since its founding as a state corporation in 1971, ADNOC has expanded its oil and gas production capacity to over 3.5 million barrels and 10.5 billion cubic feet per day, respectively, making it a significant contributor to the Emirati economy. The company has diversified immensely in recent years to facilitate the achievement of the government’s Vision 2030, which has seen the expansion of its workforce to over 50,000 individuals drawn from multiple nationalities. The company has several offshore projects for producing oil and gas, with the Ghasha mega-project being the latest one. Ghasha in an ongoing multi-billion-dollar investment that is the largest offshore sour gas develop project globally. These offshore projects have increased the workforce traffic to and from offshore sites, placing a heavy financial burden on the company.
Conveniently, to streamline the procurement process in the highly integrated firm that operates in the upstream and downstream value chain in the oil and gas industry, ADNOC flattened its management hierarchy, increased stakeholder engagement, promoted high-performing multidisciplinary teams, and created high-performance systems for addressing suppliers and clients.
Abu Dhabi National Oil Company (ADNOC) implemented the in-country value (ICV) program in 2017 to promote its contribution to the Emirati economy. In turn, it requires that suppliers are registered and accredited with the ministry of … which has a certification and implementation component. Certified suppliers get preferential treatment from state corporations’ procurement, which promotes their likelihood to win service tenders, as indicated in figure 1. In this case, the service provider expected to provide the boat hire services for ADNOC is expected to be accredited under the in-country value program.
ADKAR Model is used to analyze the change management approach that should be employed to help ADNOC transit its transportation mode to hired boats for ferrying employees to and from its offshore oil and gas sites.
This model was selected because it focuses on the goals of the intended change rather than the process of achieving them. In this regard, the goal of the change at ADNOC is to institute a transportation procurement change in which hired boats will be adopted for transporting employees to and from offshore sites. This change is expected to institute a cost-effective and efficient transportation system into ADNOC. In this regard, by delegating the transportation component to a third-party supplier, ADNOC can concentrate on its core mandate of producing energy while contracting out non-core activities. This change is expected to deliver operational and management efficiencies, and higher competitiveness and profitability in the long-term.
To determine why change is needed, the environment in which ADNOC is operating needs to be analyzed first. Similarly, the environment surrounding the transportation industry from which ADNOC is expected to procure transportation services needs to be analyzed as well. SWOT and PESTLE analysis provide internal and external environment insights while the Porters five forces model assesses the competitive environment surrounding ADNOC that necessitates the proposed change and the transportation industry poised to provide the boat hire services (Appiah, Sedegah & Akolaa, 2021; Sánchez-Cambronero, González-Cancelas, & Serrano, 2020).
Table 1. SWOT analysis of ADNOC
|Internal||Strengths Robust financial position Highly diversified in the energy sector||Weaknesses Large number of employees to be transported|
|External||Opportunities Standardization of procurement processes across business units and subsidiaries||Threats Conflict of interest across business units and subsidiaries|
Table 2. Microenvironment analysis of ADNOC
|Political||The UAE enjoys relative political stability conducive for business. In turn, the government has created a conducive atmosphere for business operations|
|Economic||The UAE is on an economic growth path that is grounded on sound strategic vision, economic diversification, and the emiratization policy. However, the Emirati economy has been battered lately by the low oil prices and demand due to the ongoing coronavirus pandemic and economic downturn globally.|
|Social||ADNOC is a large employer of over 50,000 Emirati and foreign nationals, thus contributing to the social wellness of numerous families in the UAE. Besides, is serves numerous customers across the oil and gas value chain, thus contributing to the social wellness of many others within and beyond the UAE boundaries. The company’s keenness is promoting the social wellbeing of its stakeholders is demonstrated by its concerted public relations approaches that are tailor-made for each stakeholder segment.|
|Technical||UAE is a technically advanced nation having embraced the latest technologies, such as artificial intelligence and deep machine learning.|
|Legal||UAE has a progressive and conducive legal regime for business conduct. ADNOC is guided by an elaborate legal regime covering aspects, such as health and safety, ethical conduct, intellectual property rights, emiratization and employee rights, and contractual obligations. The government is continuously upgrading its laws to serve the business community better and help overcome the emerging challenges hindering the smooth conduct of business|
|Environmental||UAE is devoted to become leaders in sustainable business practices aimed at reducing its carbon footprint. It has spearheaded research and development in energy-saving technology and practices while investing in renewable energy sources and production. It is therefore likely to engage suppliers that employ green approaches in their models of transportation.|
Table 3. Competitive analysis of the transportation industry in the UAE
|Barriers to entry||Low entry costHigh permeation of new technologies Easy scaling up of business model||Low|
|Threats of substitutes||Numerous transportation alternatives are availableLow cost of shifting to substitute services||High|
|Buyer bargaining power||Several buyers available from public and private sectors Promoted by scarcity of large oil and gas companies in UAE||Moderate|
|Supplier bargaining power||High availability of boat hire service providersChallenged by the price sensitivity of buyers||Low|
|Competition intensity||Large number of competing suppliersLow number of large oil and gas producersExiting market challenged by high exit costsDiverse differentiation of service qualityPossibility of long-term contractual agreements||High|
This element deals with motivating individuals at ADNOC to want the proposed change. As such, the employees to be affected by the change need to be empowered and engaged to buy-in the change idea. The desire to change can only be promoted if the different between the current and expected states are identified and understood by all the stakeholders in a firm. The situation target proposal (STP) tool is selected because it addresses elements that are critical for motivating change at ADNOC. This tool can reveal pertinent information that can persuade people at ADNOC to adopt or reject the proposed change.
Situation Target Proposal Analysis
Table 4. STP analysis of the transportation industry in the UAE
|Situation||ADNOC has high expenditure and operational overheads Dealings with numerous transportation services providersHigh costs of building and purchasing transportation infrastructure and equipment respectively|
|Target||Save transportation costs by 20%Support employee punctuality and productivity by promoting efficient transportation services delivery|
|Proposal||Analyze market to gain intelligence to inform change strategyStandardize transportation services provision across business united at ADNOCAdopt boat hire services for transportation to offshore sitesNegotiate long-term service contractsOptimize and manage performance|
It is unlikely that ADNOC has sufficiently knowledgeable workforce to effect the proposed change. Therefore, the management at the form needs to device ways of how the different individuals in the workforce can contribute to the change process. Social learning provides a fruitful avenue for spreading knowledge and creating value in the organization.
In this case, the level of knowledge regarding the procurement process in ADNOC is critical in persuading the company membership the embrace the proposed change based on its anticipated benefits. The Kraljic portfolio purchasing model and supplier perception matrix are used to provide insights into the knowledge about the suppliers already and expected to be engaged with ADNOC. The Kraljic portfolio purchasing model was selected for analyzing the supply knowledge in ADNOC because it investigates the suppliers associated with specific products and services procured by the firm (Perdana & Mulyono, 2021). Similarly, the supplier perception matrix was selected for this analysis because it provides insights into the perceptions held by the procurement department members and the entire company regarding the suitability and performance of the suppliers with the view of standardizing transportation services as part of the services portfolio at ADNOC (Hyttinen, 2018).
Kraljic Portfolio Purchasing Model
This model categorizes suppliers into four groups based on the attributes of the products/services they offer. The products/services are rated by their profit impact and criticality to ADNOC operations.
Table 5. Supplier categorization using the Kraljic Model
|Profit potential||High||Leverage High profit potentialLow supply riskMedium visibilityProne to sourcing competition||Strategic High profit potentialHigh supply riskLow visibility due to long-term contractingProne to sourcing challenges|
|Low||Routine Low profit potential Low supply riskProne to sourcing competition||Bottleneck Low profit potentialHigh supply riskProne to sourcing challenges|
Supplier Perception Matrix
Table 6. Supplier positioning based on perceptions
|Suppliers business value||High||Exploitable Expansion potential||Core Maintain business|
|Low||Nuisance Low attention||Develop Pursue short-term advantage|
|Attractiveness of suppliers account|
Successful implementation of the change process could be frustrated by barriers. In this regard, barriers to change need to be identified and addressed early to prevent them interfering with the proposed change process and outcome.
Leadership is critical for meeting this goal of ensuring that barriers are eliminated to implement change successfully.
Once the change has been implemented, the achieved state of the organization should be maintained to prevent receding to the previous state.
Appiah, M. K., Sedegah, D. D., & Akolaa, R. A. (2021). The implications of macro environmental forces and SMEs investment behavior in the energy sector: the role of supply chain resilience. Heliyon, 7(11), e08426.
Hyttinen, J. (2018). Implementing category management in procurement: a change management approach. Master’s Thesis. Lappeenranta University of Technology
Perdana, A., & Mulyono, N. B. (2021). Purchasing Strategies in the Kraljic Portfolio Matrix–a Case Study in Open Pit Coal Mining. Indonesian Mining Professionals Journal, 3(1), 45-58.
Sánchez-Cambronero, A., González-Cancelas, N., & Serrano, B. M. (2020). Analysis of port sustainability using the PPSC methodology (PESTEL, Porter, SWOT, CAME). World Scientific News, 146, 121-138.