(Solution) CIPS ROSHN Syndicate Sourcing Essentials

Solution

Executive Summary

ROSHN Real Estate is Saudi Arabia’s leading provider of quality residential communities. As the company grows its operations significantly, effective procurement practices are crucial to support this expansion in a cost-effective manner while mitigating risks. One such area is sourcing vehicles to transport employees at project sites.

This report analyses the key considerations for ROSHN’s vehicle procurement category and recommends an optimal sourcing strategy. Primary research identifies key stakeholders and their requirements. Secondary research explores various sourcing approaches and their pros/cons. Potential approaches – single, sole, dual and multiple supplier options – are evaluated through a SWOT analysis. Adopting a multiple supplier sourcing approach is proposed. This diversifies supply risk while leveraging competition to drive costs down. However, risks of delayed tendering and inconsistent program management exist. To address these, a category management-aligned process is recommended involving supplier pre-qualification, technical evaluation, and commercial evaluation based on transparent criteria.

Regular monitoring of approved suppliers through a performance management system will ensure compliance with SLAs. Additionally, sourcing approaches and category specifications should be published to increase transparency with potential suppliers. Supplier engagement workshops will aid cooperation. Presenting a full case study covering strategic considerations, methodology and recommended suppliers seeks management approval. Aligning recommendations to fulfill project needs will promote successful implementation. Regular reviews will help achieve ongoing efficiency gains across vehicle lifecycles to maximise value.

In conclusion, following best practices in supplier selection through a well-defined category management process provides the most practical solution for ROSHN’s vehicle procurement needs. Adopting the multiple supplier sourcing approach and continuous performance optimization as recommended promises to meet requirements cost-effectively while mitigating risks to operations. Management approval is requested to implement this strategic sourcing strategy.

1.0 Introduction

1.1 ROSHN Organisation Background

ROSHN is a real estate developer that is powered by the Public Investment Fund (PIF), which is one of the largest wealth funds in the world. The PIF focuses on long-term and strategic investments in the Kingdom of Saudi Arabia and globally, and has the largest investment portfolio. ROSHN was founded to enhance and develop high-quality residential communities for the people of Saudi Arabia. As one of the largest real estate development companies in the country, ROSHN is committed to supporting the Ministry of Housing and the National Housing Company (NHC) to achieve a 70% home ownership rate by 2030. ROSHN also aims to work with local partners to create job opportunities for Saudi citizens, while improving the Quality of Life Program. This program was launched in 2018 to enhance the quality of life of residents in Saudi Arabia by providing them with the opportunity to become homeowners, and by offering a range of convenient amenities such as gyms, supermarkets, malls, restaurants, and much more in their communities.

Vendor Relationship Management

Corporate Procurement

Commercial Procurement

Cost Control

Contract Management

Figure 1: ROSHN Organisation Structure

Source: Summarised from ROSHN Organisation Website

Procurement in ROSHN Organisation

In ROSHN Real Estate Organisation, the procurement department operates as Commercial Department and is made of four sections. These are vendor relationship management, corporate procurement, commercial procurement, and cost control. The commercial department is normally reporting to the Chiefs Operations Officer. The Core Procurement department is accountable for sourcing goods or services for ROSHN Real Estate company. Moreover, it ensures that the core business requirements are met by forming short- and long-term contracts with suppliers. It also conducts various types of tendering, which are listed below. A summary of the identified procurement department in ROSHN is summarised in figure 2;

Summary of functions of ROSHN PS&M Department roles

Figure 1: Summary of functions of ROSHN PS&M Department roles

Source: Summarised from ROSHN Organisation

Category of Spend and Position

The selected category of spend in this report is sourcing of vehicles which are used in running the organisation operations. Today, the organisation procures an average of 500 new vehicles annually for aiding their achievement of 20% of real estate market share amidst booming KSA property industy (https://www.arabnews.com/node/2354911/business-economy). Hence, for success in sourcing the identified category of spend, it is important for the organisation to conduct good sourcing and detailed suppliers appraisals for identifying their vehicles needs.

In ROSHN organisation, the soucing approach of various categtoies of their spend facilitate a chance of management and controlling PS&M operations as illustrated in figure 1 (https://www.sciencedirect.com/science/article/pii/S1478409220300777). By identifying appropriate sourcing approach, it is possible to determine needs of an entity, demands, value chain through application of different CIPS tools and techniques (Mendelow, Kraljic, PESTEL, SWOT and others).

2.0 Sourcing Approaches

2.1 Multiple Sourcing

According to” Multiple sourcing, which is more commonly referred to as multisourcing, is a type of outsourcing used by many companies. According to (https://www.cips.org/intelligence-hub/sourcing) this is used in open-based markets with entities granted opportunity of trading and operating as suppliers for various entities.

2.2 Single Sourcing

Choosing a single supplier means selecting one provider for a service, despite having multiple options available. Single sourcing refers to purchasing from a single supplier, even when there are other providers offering the same product or service (http://dspace.vnbrims.org:13000/jspui/bitstream/123456789/4199/1/Purchasing%20%26%20Supply%20Chain%20Management.pdf).

2.3 Dual Sourcing

According to (Dual sourcing is the supply chain management practice of using two suppliers for a given component, raw material, product or service” (Diann Daniel.2017). According to (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3885147), through the use of dual sourcing, two suppliers are initially engaged to offer various required products and services. This is essential in sharing economy with suppliers risks interruption evident.

2.4 Sole Sourcing

According to SUNY Oswego Sole source procurement is one in which only one supplier can provide the commodity, technology and/or perform the services required”. Therefore, according to (https://www.cips.org/intelligence-hub/sourcing/single-sourcing-vs-sole-sourcing#:~:text=Single%20sourcing%20is%20where%20a,referred%20to%20as%20monopolistic%20supplier.), this imply that it is not a single provider or manufacturer of particular product or service exist in a business environment.

3.0 Application of Identified Sourcing Approaches in ROSHN

Multiple Sourcing

Since ROSHN sources different types of vehicles used in offroad, towns, on-road, trailers, buses and more, this sourcing approach is used. They hence engage different vehicles dealers in Saudi Arabia including Al Yemni motors, universal premium motors agencies, UNTC, Zahid tractors among others. These dealers have vehicles from top global manufacturers including Toyota, Nissan, Chevrolet, Audi and Mercedes.

For ROSHN, the motivating factors of application of multiple sourcing entail;

The locality of the vehicles to be supplied to the organisation with consideration including ease of use and their access
Due to the necessity of spreading demand tom different suppliers for cost savings with best vendor engaged. This is in line with ROSHN budget for the vehicles, quality and timeline to get these vehicles. The outcome is costs optimisation with best vehicles out there procured

The advantages of use of the multiple sourcing entail having broad categories of choices to consider (https://jiem.org/index.php/jiem/article/view/3391). Hence, with one supplier failing in required delivery, a different supplier is engaged assisting in reduction of supply chain network bottleneck. Another advantage include inceased competitiveness, innovativeness and flexibility in access of spend categories.

The disadvantages of multiple sourcing however include challenges in maintenance of records and cost intensive to match the buyers expectations by multiple supplier. This is specifically in an event e-catalogues ae not being used for ROSHN case. Further, it can be cost-intensive to review and research on appropriateness of all multiple suppliers to determine their authenticity and capability.

Multiple sourcing is most appropriate in ROSHN sourcing of the vehicles owing to technical and operationalised system quality. For the different dealers of vehicles, the transport department in collaboration with PS&M and operations department could review and benchmark on other oganisations to get the most qualified suppliers.

Single Sourcing

For ROSHN, this has been a popular sourcing strategy when need arise to lower costs of operations, access to prompt feedback from various players, sustainable strategies and streamlining of PS&M stategy. Similar to (https://onlinelibrary.wiley.com/doi/abs/10.1111/poms.13139) recommendations, the single sourcing decision is arrived at through putting into account of terms and conditions, unit costs, delivery capability and IT system level of quality. The outcome of this include lowering implication of unpredictability of supply chains trends and harnessing long-term based and trust-based relations with all suppliers and buyers.

Further, single sourcing could lead to saving of costs and limited time used in PS&M operations. Besides, a significant disadvantage entail over-reliance on single suppliers hence likelihood of getting disrupted in their operations due to a failure of such a supplier. For ROSHN case, the single soucing is approptiate in sourcing of IT system, machines and sensitive constuiction materials in their sites. This is for harnessing sustainable relations with suppliers and getting custom-made products (https://pubsonline.informs.org/doi/abs/10.1287/msom.2019.0843). The outcome of this include gaining in value and also costs management. Also, by using single sourcing, ROSHN would gain from establishment of sustainable elations with all their suppliers teams. This is different from multiple soucing where direct link with the suppliers is lacking hence no customised alignment of entity demands.

Dual Sourcing

The advantages associated with use of dual sourcing entail less risk of reliance on a single supplier, saving costs by increasing competitiveness and innovativeness and improving overall growth and development (https://www.e3s-conferences.org/articles/e3sconf/abs/2021/29/e3sconf_eem2021_01057/e3sconf_eem2021_01057.html). Further, this represent an opportunity of an effective quality contols and managing costs while lowering any unforeseen costs. This is since volume of the products and services have a potential of shaaring amongst suppliers hence lowering economy of scale. The disadvantages of this method include immense time used and often lead to uncoordinated operations in PS&M. Also, the costs reduction which is necessitated by economies of scale is not possible in dual soucing.

For ROSHN, Dual sourcing is moist appropriate for ensuring that in sourcing of spare parts of their vehicles, priority is on collaboration influenced by their demands. This is since the spare parts for these vehicles does not directly influence profits but has very high risks due to failue of success in the organisation operations.

Sole Sourcing

This is an appropriate method by ROSHN in sourcing of various machines used in their real estate construction sites such as cranes, heavy forklifters and other specialised equiplement. This is owing to the demand for their uniqueness in terms of technical, operationalisation and customised use in the organisation operations.

A main advantage of sole sourcing include simplification of PS&M strategy by prioritising on interests of a single vendor/supplier (https://onlinelibrary.wiley.com/doi/abs/10.1111/poms.13746). Conversely, for disadvantages, they do not encourage competitiveness hence potential of compromising quality levels, how reliable in supply and sustainable engagement. Further, when sole supplier is lacking in offering specific products and services, it lead to delaying and reducing quality of provided sevices.

For ROSHN, as part of the recommendation, there is a need for increasing leverage on technology in ensuring harmonisation of their sourcing strategies. A case example is using AI in streamlining of their entire ordering and facilitating tender issuance and management.

3.1 Kraljic Matrix Analysis

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