-80%
Solution
Executive Summary
The core aim of this research was to evaluate the impact of Generative AI on procurement activities in Oman LNG LLC. The purpose of this research is informed by the necessity for pursuing Generative AI to assist the organisation in implementing their procurement strategies for sourcing products and services. The best practice would entail sourcing in the right time, place and product prioritised. Taking into account of the importance of the implementation of Oman LNG, the outcomes of this would include the following;
- The entire Oman LLC tenders and contracts documentation being digitised by PS&M teams and the IT departments in Oman LNG
- Taking into account of current challenges in Oman LNG suppliers-buyers relations are at its worst level, Generative AI implementation is essential for increasing their overall relations
- The existing issues in Oman LNG spend analysis would be solved successfully by application of Generative AI by inclusive of effective systems offered by Generative AI
- Through an active collaboration with different stakeholders, it would be an assurance that demand forecasting would be achieved with an appropriate bidding in the contracts and tendering process
Further, this report findings evidence that Oman LNG is pursuing iSourcing system identified as JSRS. Irrespective of its effectiveness in harnessing the organisation PS&M activities, it is deficient in some of areas in which it is adopted. Therefore, in this regard that Oman LNG has been identified as required to invest in Generative AI for their successful operations. By adopting the process, the organisation would gain from reduced costs and improved efficiencies and effective practice. By successfully integrating Generative AI in their category management would lead to a successful and efficient management of their operations with limited supply chain disruptions. Considering an organisation such as Oman LNG ought to have their priority on stakeholders and acknowledging their functions in contributions to significant organisation growth. Further, the data used in working on this project were quantitatively and qualitatively sourced by use of questionnaires and interviews. This was supported by application of secondary and desk research related to Oman LNG effective operations in their organisation. Also, different tools and techniques have been applied identifying the benefits of Generative AI in Oman LNG Procurement activities. This is with challenges of their implementation being evident with appropriate measures for their mitigation identified.
In line with the findings in this report and also the conclusions provided, various recommendations include
- In analysis of the Oman LNG current iSourcing system, the organisation is facing challenges in their successful implementation.
- The analysis of 5 Rights Procurement Model, there exist a significant disconnect of Oman LNG stakeholders and their iSourcing system current in place as they do not adopt sufficient analysis information
- In the analysis of the options, there is no internal policies set in Oman LNG with an intention of successfully integrating Generative AI as part of their Procurement activities which need to be successfully implemented
- In stakeholders analysis, the findings evidenced that there lack sufficient knowledge and skills for successful implementation of Generative AI as a new technology which is not popular.
- Setting a budget for risks evaluation within a period of 3 months to achieve 90% increased mitigation in a timely manner.
Table of Contents
1.1 Project Title (Key Terms) 4
2.1 Oman LNG Organisation Background. 7
2.2 Why the Assignment Matters and its Objectives. 8
2.3 Procurement Supply Chain Management (PSCM) Structure. 11
CHAPTER 3. CURRENT SITUATION. 14
3.1 iSourcing (JSRS) as the only current Oman LNG Procurement System.. 14
3.2 Generative AI from Oman LNG Context 16
3.2.1 Current Situation Analysis. 18
3.2.2 Current Oman LNG Procurement Portfolio. 21
3.2.3 Options for Oman LNG Modernisation. 22
3.2.4 Risks and Mitigation. 23
CHAPTER 4. WORK UNDERTAKEN (RESEARCH METHODOLOGY AND FINDINGS). 25
4.2.1 Stakeholders Management 26
4.2.2 Digitisation of Tenders and Contract documents. 28
4.2.3 Suppliers-Buyer Relationships improved by Generative AI 29
4.3.4 Management of Spend Analysis and demand forecasting by implementing Generative AI 30
CHAPTER 5. ANALYSIS INTERPRETATION. 33
5.2 Digitisation of Tenders and Contract documents. 36
5.3 Suppliers-Buyer Relationships improved by Generative AI 39
5.4 Management of Spend Analysis and demand forecasting by implementing Generative AI 40
CHAPTER 7. RECOMMENDATIONS. 46
Appendix 1: Questionnaires and Interviews. 53
Appendix 2: Oman LNG Procurement Portfolios. 57
Appendix 3: iSourcing Network. 58
FIGURE 1:PHASES OF PROCUREMENT PROCESS. 6
FIGURE 2:PROCUREMENT PROCESS BY OMAN LNG ORGANISATION.. 10
FIGURE 3:FACTORS PUT INTO ACCOUNT IN THE CHANGE APPROACH. 11
FIGURE 4:CULTURAL ACCEPTANCE FACTORS AND ORGANISATION CHANGE. 12
FIGURE 5:5 RIGHTS OF PROCUREMENT MODEL. 13
FIGURE 6:MATRIX ORGANISATION STRUCTURE. 14
FIGURE 7:CIPS CATEGORY MANAGEMENT MODEL (CIPS NOTES, 2022) 15
FIGURE 8:PRODUCT LIFE CYCLE. 17
FIGURE 9:BCG MATRIX SUMMARY. 19
FIGURE 10:KRALJIC MATRIX ANALYSIS. 21
Figure 11:FEATURES OF THE VARIOUS SOURCING CATEGORIES. 22
FIGURE 12:EVOLVING DEVELOPMENT IN MANAGEMENT (CIPS NOTES, 2022) 23
FIGURE 13:OMAN LNG SPEND CATEGORY. 24
FIGURE 14:RISKS CATEGORIES AND MITIGATION APPROACHES. 26
FIGURE 15:RESPONDENTS DEPARTMENTS OF WORKING.. 29
Figure 16:Oman LNG Investment in Generative AI 29
Figure 17:Generative AI and digitisation of tenders and contract documents. 31
FIGURE 18:IMPLEMENTING GENERATIVE AI IN OMAN LNG IMPROVING STAKEHOLDERS ENGAGEMENT 32
FIGURE 19:CURRENT ISSUES IN OMAN LNG PS&M.. 33
FIGURE 20:NEED FOR INVESTING ON GENERATIVE AI FOR MODERNISING OMAN LNG OPERATIONS 34
FIGURE 21:CHALLENGES FACED TO IMPLEMENT GENERATIVE AI IN CONTRACT MANAGEMENT 35
FIGURE 22:STAKEHOLDERS MAPPING (CIPS NOTES) 36
FIGURE 23:OMANI STAKEHOLDERS MENDELOW ANALYSIS. 37
FIGURE 24:COMPLEXITY ANALYSIS PORTERS 5 FORCES. 43
FIGURE 25:KOTTER AND SHLESINGER 8 PHASES MODEL. 44
FIGURE 26:TUCKMAN MODEL OF CHANGE. 45
FIGURE 27:BELBIN MODEL APPLICATION IN IMPLEMENTATION OF GENERATIVE AI 47
CHAPTER 1. INTRODUCTION
1.1 Project Title (Key Terms)
In the modern highly competitive business environment characterised with immense disruptions, investing in technology is critical for efficiency and management of cost overruns in procurement and supply activities. In Oman LNG organisation, this is important as the organisation is exploring more opportunities onshore and offshore to increase their oil and gas. By exploring new opportunities both onshore and offshore, the organisation has increased the number of suppliers and interested stakeholders in facilitating successful running of their operations (Figgins et al., 2018). Hence, embracing modern technologies and innovation is essential for Oman LNG successful operations. Despite of Oman LNG investing in iSourcing platform which lists all their suppliers and provide a platform for their interactions, they are yet to invest on Generative Artificial Intelligence (AI) which is part of modern organisation industry 4.0 technology investment. By investing in Generative AI, it is possible for Oman LNG to capitalise holistically on competitive advantage and the entire market dominance. This is by ensuring they source the appropriate quality, at the required time and place. For the current status of Oman LNG procurement activities, it is as shown in FIGURE 1 below:
FIGURE 1:PHASES OF PROCUREMENT PROCESS
As illustrated in FIGURE 1 stages summary, through an embrace of Generative AI, it is possible for Oman LNG to develop categories and manage their spend areas. Also, to achieve transactional procurement and procure-to-pay initiatives, the focus is on material demand and replenishment of requisition approach for their supplier’s engagement, elimination of repetition and triggering timely payments after delivery of their sourced goods and services. This represent the initial phase of determining whether they are using insourcing or outsourcing process.
Considering the costs management, embrace of technology such as Generative AI in sourcing reduce the overall costs with more than 40% (Attaran, 2020). For optimising on operations, the generative AI infrastructure and applications lead to the organisation full transformation to become a service delivery mode. This is specifically in step 2 for commoditisation and suppliers spend analysis.
For the different activities listed in FIGURE 1, embrace of technologies positively contribute to the entire practice being prompt, less costs incurred, smart-based and responding to all clients identified as organisation management partners.
For Oman LNG organisation, albeit of their iSourcing technology, they lack a good system for pursuing a holistic spend analysis which can be relevant for aggregating, cleansing, classifying and analysis of Procurement and Supply Management (PS&M) data. In phase 3, scoring and assessing the performance ability of their suppliers, incurred costs, flexible nature and viable is instrumental for their successful operations (Sylva, 2020). Considering these findings, this final assignment is titled “Evaluating the Impact of Generative Artificial Intelligence (AI) on Procurement Activities in Oman LNG”. The outcome of this assignment findings would assist Oman LNG in successfully obtaining their different spend categories on a timely basis, in their right quality and quantity. The technology would integrate all the procurement activities listed in FIGURE 1 culminating with negotiations and contract management.
By embracing Generative AI, this would play the function of an e-gateway to commercial business practices through an inclusion of bidders, interactive scope and response for the tendering provided in Oman LNG (Bozkurt et al., 2023). This system could provide an opportunity for securing, simplifying, pre-governing and efficiency in entity tendering management and using web-oriented tools identified. The Generative AI as part of their eProcurement investment is appropriate for Oman LNG and different stakeholders to manage issues associated with access, delivery time, hardcopies and input and as such contract management costs. Therefore, there is a need for evaluation the scope ion which the technology embrace such as Generative AI is to lead to Oman LNG leveraging on competitive advantage and dominating oil and gas industry locally in Oman, regionally in Middle East and internationally.
1.2 Scope of the Assignment
As noted in the title of this assignment, it explores on the Generative AI in the different organisation procurement activities. The importance of this is for Oman LNG is guided by view that over the years, Oman LNG has been investing in integrating technologies as part of modernisation of their supply chain to ensure they are updated, modern and immense capabilities. Despite of Oman LNG having invested in iSourcing, the organisation has delayed investing in complex systems such as Generative AI as part initiating Industry 4.0 technology (Peres et al., 2020). Hence, by successfully implementing the Generative AI, the organisation would achieve in ability to leverage on competitive advantage and market dominance. By successfully achieving the identified research scope, procurement approach dynamics would be put into account. The contract management in Oman LNG would be aligned with the external business environment players and suppliers analysed in-depth. The most appropriate option include modernising their procurement strategies would be pursued with appropriate recommendations offered. The Generative AI is appropriate in areas of software management, hardware, cloud and professional-based practices (Mondal et al., 2023). The appropriate option available for Oman LNG include modernising their technology to gain in competition, streamlined operations and efficient contract management with their entire procurement approaches modernised.
1.3 External Environment
In working on this assignment, the relevance of evaluating external environment in integration of Generative AI in sourcing process in Oman LNG organisation is important. This is in line with CIPS (2021) which identify VUCA (Volatile, Uncertainties, complex and ambiguous) as being critical for investing in future-best practice. The rationale of this is that the generative AI as part of technology inclusion in the process implementation Internationally, available reports evidence that most of contemporary entities have continuously been embracing spend analytics use, eSourcing managing of contracts and eProcurement such as eCatalogs and eInvoicing. Similarly, for the organisations which have managed to invest on digital technologies in their sourcing have been well placed for advancing their organisations strategic agenda. This similarly entail ability to position procurement teams hence increased operation value (Sulaeman et al., 2019). The value is noticeable in how an organisation integrate product design, marketing approaches and sales, sustainable business practice, increase in market dominance and profitability.
CHAPTER 2. BACKGROUND
2.1 Oman LNG Organisation Background
Oman Liquefied Natural Gas LLC (Oman LNG) operates as a joint venture in Oman. As evidenced in Oman LNG (2021), this was as a result of Royal Decree in 1994 with their practice being in tandem with legislations and policies initiated by Sultanate of Oman. The scope of their operations is processing and selling Liquefied Natural Gas (LNG) with their products being generally classified as the Natural Gas Liquids (NGLs). Due to their immense practices in the active organisation operations, they currently have 3 liquefaction characteristics in their site in Qalhat near Sur with their capacity inclusive of production of 10.4 million tonnes every year (mtpa). Other than the organisation leading in oil and gas industry, they similarly make a significant input in the Oman Government main objectives intended for promoting their economy diversification. Further, Oman LNG liquefaction plant is strategically positioned in Coast of South Shargiyah governorate, and their head office being based in Muscat (Oman LNG, 2021a).
Additionally, Oman LNG tend to follow a competitive tendering strategy. This is with their situations allowing procurement of demanded goods and services. In order to achieve the organisation purpose, they follow the procurement and tendering process as illustrated in FIGURE 2:
FIGURE 2:PROCUREMENT PROCESS BY OMAN LNG ORGANISATION
By leveraging on the application of iSourcing strategy, Grela (2020) note that the organisation is appropriately positioned in establishing a framework in the form of a web browser required for promoting the transaction process of entire orders offered. This is pursued through a holistic adherence to the Oman ICV content which ensures that the citizens are the preference in being offered with procurement and supply operations. The uniqueness of this is the Oman LNG being appropriately positioned in involving various suppliers upon demonstrating the capacity to delivery scope of embracing creativity, increased quality and obtained products and services. To integrate all these demands and requirements, the organisation adopts contracts agreements which are comprised of terms and conditions defining on the risk and power distribution (Zheng et al., 2020).
2.2 Why the Assignment Matters and its Objectives
In this assignment, the main aim is improving procurement practices in Oman LNG for the purpose of increasing their performance onshore and offshore. In this case, this assignment intends to make sure that the approach pursued entail investing in generative AI technology to ensure improved procurement strategy. As a best practice, improving this process would be through a focus on the different products and services to facilitate their expansion both onshore and offshore. This is in terms of the used hardware, software, opportunities, efficiency, automation and integrating entire systems. To inform change need, strategies for change management as illustrated in CIPS notes has been applied. In line with FIGURE 3 summary, the various factors ought to entail environmental, market demands, business imperative, organisation and cultural imperatives. Apart from this, the leadership and employees behaviours and mindsets would be prioritised as explained herein;
FIGURE 3:FACTORS PUT INTO ACCOUNT IN THE CHANGE APPROACH
Additionally, for embracing eProcurement approach, Oman LNG could pursue different cultural acceptance aspects. In line with Balogun and Hope Model (CIPS Level 6 Notes), the change process would be incrementally implemented. The outcome of this would entail a successful adaptation and evolution process (Ellram et al., 2020). The manner in which the operations are changed with significant implementation as summarised in FIGURE 4:
FIGURE 4:CULTURAL ACCEPTANCE FACTORS AND ORGANISATION CHANGE
The approach of change is informed by the fact that for Oman LNG organisation practices as evidenced in background section, efficient process and on-time decision making include the necessity for identifying the key influence of generating revenues and costs overruns management (Cabrera et al., 2019). Over the years, Oman LNG has been leveraging on application of traditional sourcing approach which has been faced by immense challenges in cost saving and operations optimisation. This is the challenge to Oman LNG as it has not invested appropriately in technology or using emerging and mature technology for accelerating their value increase and clear roles differentiated.
For Oman LNG best strategy, they have encountered a lot of cost overrun issues leading to increase in their sourcing costs, delayed suppliers’ inclusion and lack of coordination in their contract management (Oman LNG, 2022). Also, albeit of the PS&M executives in Oman LNG recognising on the potential gains of the organisation from investments in Generative AI, they lack essential confidence and capacity for implementing the strategy, talent and competency placed to leverage on all the gains. Therefore, it is essential for Oman LNG to harness their engagement to integrate best technologies as a main segment of their sourcing approach for improving the relations with entire partners and leverage on competitive advantage. From the point of Oman LNG failing to exploit robust systems and policies, it is evident that there is a huge gap in procurement system transformation agenda and digital transformation in their enterprises. Currently, desk research from Oman LNG evident that approximately 10% of all organisation resources are used to set approaches for digitisation and investing in technology.
Further, considering current Oman LNG non-trading spend categories is currently placed to be still in infancy phase of growth. Albeit an increased development of Oman LNG in their trading supplies (oil and gas and other materials), growth of the non-trade items is non-sustainable. However, there are expectations of continuous future growth and development. Hence, this is essential for establishing an increase and detailed sourcing partnerships (Bals et al., 2019) with Oman LNG and increasing strengths of their sourcing background and stakeholders’ relations. This similarly has a direct impact on harnessing their procurement and supply agenda and transformation. The relevance of this is appropriately illustrated through the application of 5 Rights of Procurement strategy (Monczka et al., 2020).
FIGURE 5:5 RIGHTS OF PROCUREMENT MODEL
In summary, for the 5 Rights Model for Oman LNG strategy, it is important for the company to make sure they involve right suppliers for non-trade items part of their operations. This can be based on the supplier’s scope of being compatible with Oman LNG approach for credible, reliable and potential innovativeness and development. This is at the same time having the will to leverage on an increased commitment for consistency in improving and development of sustainable relationships (Sharma et al., 2021).
2.3 Procurement Supply Chain Management (PSCM) Structure
Procurement and Supply Chain Management (PS&M) can be structured by considering the spend categories, work done (Purchase Inventory vs services and subcontracting, onshore/offshore and project), clients and their location (Sajjad et al., 2020). Oman LNG follows a matrix organisation structure (see FIGURE 6);
FIGURE 6:MATRIX ORGANISATION STRUCTURE
The different procurement categories could similarly be characterised with sub-categories allowing appropriate monitoring for spend categories. In CIPS Category Management Model (CIPS Notes 2022), Oman LNG is offered with an opportunity for starting, preparing, delivering and aligning/improving the process as illustrated in FIGURE 7;
FIGURE 7:CIPS CATEGORY MANAGEMENT MODEL (CIPS NOTES, 2022)
In summary, in line with FIGURE 7, for Oman LNG, their sourcing strategy include the application of Request for Proposals (RFP) with the services assuming a strategy of Request for Quotation (RFQ) (CIPS, 2021a). The sourcing organisation can make a decision of sub-contracting a different organisation for executing the suppliers evaluation process and selecting them. This has a positive impact of time savings in evaluating contract documentation and improving quality of identified suppliers as experts are appropriately informed with industrial practices with keenness in selecting experienced, technology compliance and financial capability. For Oman LNG Procurement Department, time would be saved with continuously supplying items achieved. The different policies in the organisation procurement would be followed strictly for ensuring legal compliant, consistent, fairness and equitably treating all suppliers and gaining value for money.
For customers, they are the primary stakeholders and must be prioritised from the start of the procurement activity. This is by consulting them in regard to expected quality, quantity and deliveries and technical nature of items and services. Hence, user department in Oman LNG is mandated with a role of developing a specification document for use by PS&M in quotations. The internal customers would play the role of internal consultancy working for contracting (listen to needs of users and developing credibility) hence encouraging customers to highlight on expected results from interventions, negotiations of agreement, proposals, data gathering on issue at hand, understanding and feedbacks.
CHAPTER 3. CURRENT SITUATION
3.1 iSourcing (JSRS) as the only current Oman LNG Procurement System
Please click the icon to access this assessment in full
