(Solution) Category & Category Management in Procurement and Supply APGM
Solution
Executive Summary
This is a business report which evaluate category and contract management using Occidental of Oman (Oxy) organisation in Oman. Specifically, the best practice in category management for harnessing project management and cost management effectiveness has been evaluated. Further, in this business report, entire requirements which guide initiation and readiness in category management, conventional-based sourcing strategies, contract management, techniques have been put into account. In this report, the findings evidence that Oxy organisation operates an effective risk management strategy in contract and category management. Further, to identify the PS&M members capacity development, they are well positioned in implementing their category management. This is with appropriate capacity development required for mitigating existing gaps in their practice. The findings similarly evidence Oxy PS&M as having been successful in sourcing the Health and Safety Equipment (HS&E). To enhance innovativeness in this area, the organisation capitalise on SLA’s and KPIs with auditing being essential for their practice. Further, through an effective use of data analytics, analysis and presenting contract management data and best management process. This enhance stakeholders collaboration and being aware of decision making promoting operations, input and suggestions made. Through stakeholders analysis, stakeholders relations are essential for maintaining stakeholder relations improving the Oxy image and overall market share.
In this report, there are identified gaps which need to be mitigated. These gaps would be managed by use of the following recommendations which are;
- Investing in blockchain technologies, cloud-based platform and L&D strategy for contract management strategy to improve entire stakeholders relationship
- Increasing budget assigned in their PS&M post-COVID pandemic economic recession
- Initiate an organisation team members to improve how they integrate and harmonise PS&M approach in the organisation
- Prioritising on increasing team-based working in their sourcing with entire vendors involved for achieving cost saving
- Engagement of various organisations to improve on skills, competency and acquiring relevant talents
- Approving budget intended to implement risk analysis for various potential risks faced
Table of Contents
1.1 Key Terms (Title), aims and objectives. 4
3.0 Business Project Background. 6
3.1 Oxy Organisation Introduction. 6
2.2 Importance of this Business Report for Oxy Organisation. 7
3.0 Requirements to initiate and prepare introduction of category management process. 9
4.0 Strategic and conventional sourcing processes and role in category management. 12
4.1 Situation, Target and Proposal (STP) 13
5.0 Tools and Technique to Map Categories of Direct and Indirect Expenditure. 15
5.2 Comparing and Contrasting different Tools and Techniques. 17
5.2.1 Situational Analysis. 18
5.2.2 Comparison and Contrasting STEEPLE and Kraljic Analysis Tools. 20
6.0 Innovative Measures for Improving Supply Chain. 20
6.1 Complexities and Volatilities Management. 20
6.2 Dynamic Supply Networks. 21
6.3 Disruptive Influence Supply Chains. 22
6.4 Automation Implementation. 23
7.0 Contract Admin and Management. 23
8.0 Risk and Implementation of Risk Management Techniques in Contracts (Category Management) 24
Figure 1:Oxy Organisation and Contract Management Steps. 6
Figure 2:Occidental of Oman Business Portfolio. 8
Figure 3:Different Change Factors. 9
Figure 4:Extent and nature of change model 9
Figure 5:Extent and nature of change model 10
Figure 6:Category Management Cycle. 13
Figure 7:Oxy Organisation summary of indirect expenditures. 17
Figure 8:Summary of Situational Analysis in Oxy Organisation. 20
Figure 9:Summary of comparison of contract admin and management 25
Figure 10:Different risks in contracts and mitigation strategies. 26
Table 1:Summary of Oxy PESTLE Tool 10
Table 2:Oxy organisation direct and indirect expenditures summary. 18
Table 3:Summary of the STEEPLED Analysis. 18
1.0 Introduction
1.1 Occidental of Oman (OXY) Organisation Background
Occidental of Oman (Oxy) is an oil and gas sector organisation in Oman. In the past years, according to Oxy (2022), the organisation has been involved in development of multiple assets, infrastructural development, expertise and technology to fuel their progress and lives quality improvement internationally. For over 100 years, the organisation has been developing extensive projects. All the projects are informed by need of ensuring that the organisation solve the most pressing global environmental challenges. By actively working in their business environment, organisations take part in production and important products for sustainability and improvement of the quality of life globally. Also, the organisation ensure they explore oil and gas wells in Oman and internationally. In figure 2, the different areas of the organisation operations is summarised;
Figure 1:Occidental of Oman Business Portfolio
Source: Oxy (2023)
By embracing Oxy global strategic supply chain, they are appropriately positioned to achieve all goals. Therefore, due to their position, global strategic supply chain is important to be evaluated and generate relevant findings for this report. These areas are importance since the organisation has been operating globally in United States (USA), Middle East, Africa and Latin America (Oxy, 2022). Being a leader in the energy sector, the organisation assume a holistic role of leading to the manner in which vigorous pursuing of viable, future-looking carbon management internationally.
1.2 Key Terms (Title), aims and objectives
The contract and category management is important for improving Procurement and Supply Management (PS&M) strategy. This is at the same time enhancing cost management in their practices. For Oxy case, part of implementation of corporate strategy is succeed in strengthening product offerings, increasing innovation, meeting entire customers’ needs promptly and partnering to leverage on existing opportunity (Oxy, 2023). Taking into account of oil and gas industry where Oxy organisation is based, being a monopolistic competitive market, the target is improving profitability while at the same time market dominance. Hence, contract management as a significant strategy for Oxy admin and management teams, this is the best practice in their operations. Today, Oxy implement Global Procurement Contracts for improving sourcing contracts, consistency in setting standards, appropriate guideline and policy development. The identified modernised strategy is not part of their entire spend areas. Therefore, in order to achieve their operations, category managers are actively involved in reviewing contracts, negotiation both commerce and legally and eventually signing off these document. From this, Oxy legal department receives an approval. Hence, through contract management adoption, this can contribute to Oxy ability to achieve competitive advantage and oil and gas in Oman venture. At the same time, a guarantee on management of contract delays, inappropriate negotiations, non-compliant and inefficiencies in getting approvals and signing their workflow. These activities are pursued in different stages;
Figure 1:Oxy Organisation and Contract Management Steps
Source: CIPS Notes
For Oxy organisation, operating different spend categories in every departments, using Procurement Contracts contribute to a successful implementation of contracts of good/required standardisation, guideline-set and policies. This is essential for success in review of contracts and negotiations for different spend categories by use of contract management, SLAs and master their plan. By using the different steps in contract management, at closing the contract, auditing is recommended for evaluating all roles, communication strategy and notifying supply chain players and requesting.
1.2 Purpose of the Project
As identified previously, this report intend to evaluate category and contract management in Oxy organisation. To achieve the intended aim, the scope of this project would include;
In overall, by successfully achieving the expectations of this report, delay in projects implemented and costs incurred in the process. Through a focus on the identified project scope, different contract management characteristics for Oxy and relations with players in their external business environment and suppliers relations prioritised. The most appropriate strategy in contract management therefore would be considered with best recommendations offered. This include risk-based contract and category management, relevant tools and supporting contract management and suppliers teams inclusion. Being the most appropriate strategy, contract management could be successfully attained.
3.0 Requirements to initiate and prepare introduction of category management process
The importance of introducing category management strategy for Oxy is guided by view that various spend categories are procured different, varying times and conditions. To appreciate the demands for initiating and preparing implementation of category management strategy, it is important to prioritise on internal and external factors (Zhang & Dong, 2020).
Considering external factors, category and contract management are important for embracing modern technology as a strategy for change management implementation. By use of PESTLE Analysis Tool (CIPS, 2023), to identify macro-environment factors directly impacting how they promote and impact change strategy by Oxy Organisation.
Table 1:Summary of Oxy PESTLE Tool
Additionally, in order to achieve internal analysis, SWOT analysis prioritising on strength, weaknesses, opportunities and threats (internal and external factors) considered. The different factors include;
Strengths– This entail Oxy following specified standardisations, guide and policies for their category and contract management process. By investing in modern technologies, Oxy is able to implement detailed reporting, plan, efficiencies and effectiveness.
Weaknesses– Oxy organisation rely majorly on conventional sourcing strategy hindering successful contract and category management. The engaged category managers for HS&E procurement area are mandated in implementing contract management dispute of insufficient appreciation and aware of the process. In Oxy case, they do not understand existing laws to implement contract management. The outcome of the weaknesses include;
- Delay in contract management implementation hence delaying project from the initial phase and organisation costs incurred
- Reduced scope of negotiations success and reworking for entire terms and conditions
- Compliance on varying challenges and barriers for poorly made performance
- Ineffective approvals and to sign appropriate workflow
Opportunities– To modernise contract and category management, Oxy organisation is supposed to holistically integrate the PCT systems in different practice segments.
Threats– Different competing parties and entities providing HS&E hence failing in providing on-time and projected offering areas with costs used.
In line with PESTLE and SWOT analysis (Widodo et al., 2023), the contract and category management is important for sourcing HS&E having enormous demand and various suppliers. Category management relevance is initiating different initiatives for effective sourcing and good image for Oxy procurement team. In overall, this contribute to leveraging on economy of scale with discounted costs and supply plan aggregated for covering multiple transactions. In CIPS (2022) report, the category management is relevant for Oxy procurement identifying, preparing, delivering and improving their operations.
Figure 2:Category Management Cycle
Source: CIPS.org/category-management-cycle
For identifying the requirements to initiate and prepare introduction of category management process, figure 6 first and second steps which are initiate/prepare and identifying and prioritising opportunities can be put into account.
Scope of the Category
To start with, the scope of the category is identified. To identify the required capacity development strategies for the PS&M teams for success in category management
- Being in a position of identifying critical success factors (CSF) which are strategic and modernised contrary to conventional sourcing strategies and category management
- Initiate appropriate KPIs being important tools to map various categories directly and indirectly in their expenditures
- Innovativeness in improvement of their supply chain networks
- Administering and managing contract existing differences
- To assess overall risks and initiate appropriate management strategies as part of category management
Key Stakeholders
After identifying the scope of the category management, the subsequent step is identifying the key stakeholders. To identify the stakeholders, Mendelow Matrix Analysis can be used as illustrated in the following;
Figure 7: Mendelow Matrix Analysis in Oxy
Source: Summarised from Oxy Organisation internal data
Keep Satisfied- In category management implementation, HSE departments and Oxy management would elicit less influence and interest. In category management, they would need to be kept satisfied with category management.
Minimal Effort- Oxy community in Oman and society of operation, have minimal effort in category management selection. Their involvement scope is in costs setting, aligning all logistics and L&D strategy.
Key Player- Oxy finance, P&SM and suppliers are engaged in influencing decision making. The scope of their inclusion is ensuring category management is in line with their expectations and set needs.
Keep Informed– Oman government and areas of venture has high-level interest and low influence on the category management process. This is since they manage the organisation wellbeing and best strategy to guarantee track of information availability.
Problems to be addressed
Currently, Oxy organisation has noted Health and Safety (HS&E) spend category does not use Global Procurement Contracts (PCT) in their active practices in contract management. This is in line with standards, guidelines and policies initiated. The outcome of this would include;
- Lowered scope of delays in contract implementation hence delay in projects and costs used
- Inappropriate negotiation quality and re-evaluating suppliers contract terms which lead to inconsistencies in Oxy laws and compliance
- Compliance and failing to successfully implement the contract owing to poor performance roles
- Inefficiency in gaining an approval and to sign their workflow
Support for the work, resources and skills required
In Oxy organisation case, for optimised practices, category and contract management is supposed to be prioritised with improvements achieved. Hence, this report will lead to establishment of an effective/appropriate PS&M strategy in Oxy. By considering HS&E category of spend, effective project and costs management would be improved with the set objectives noted. In order to evidence the essential for change implementation, various change management approaches as illustrated in Modules in CIPS would be prioritised. The factors for Oxy organisation which would be considered would include environment, market-based demands, imperative of business practice, cultural strategies.
Figure 3:Different Change Factors
Source: CIPS Notes
Also, for embracing category and contract management change for Oxy organisation, success to transition to different cultural acceptance needs would be important. The strategy is supported by Balogun and Hope Model (By, 2015) evidencing on change strategy success. Therefore, change practice would contribute to successfully adapting to the process and holistic evolution. This provide a good guide to alter their practice gradually illustrated below;
Figure 4:Extent and nature of change model
Source: CIPS Materials
Clear about High-Level Benefits and Risks
For Oxy case, their operations is informed by the fact that part of their background information is ensuring they are efficient and effective in their different sectors. The outcome of this is noting on major influence on generating revenue and cost management. This is at the same time making sure traditional sourcing process, costs saving and optimised practice is attained (Rubel, 2021).
4.0 Strategic and conventional sourcing processes and role in category management
4.1 Definition of strategic and conventional sourcing
In CIPS (2023a), strategic sourcing is defined a “process of creating efficiency in the overall spend categories, minimising supply risks with an improved supplier selection and giving visibility to pricing and forecasting”. This is by formalising gathering, analysis and use of information for assisting Oxy organisation to align procurement strategy with goals and secure best positive value. Conventional sourcing on the other hand is defined as sourcing goods and services at the lowest possible cost per unit. Hence, conventional sourcing prioritise on supplier pricing with price being regarded as the only component of strategic sourcing (CIPS, 2023a).
4.1 Identification of approaches to sourcing; alignment to Oxy categories
With the two strategies being the same since they need to make sure cost savings is attained and achieve cost-based saving and source high-level quality of their procurement. Nevertheless, they are distinct in various dimensions.
Strategic Sourcing……….
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