Solution

Executive Summary

For this assessment, focusing on sourcing essentials in procurement and supply, different approaches have been evaluated. Part of their evaluation include application in context of ADNOC Onshore operations. For ADNOC onshore organisation, they are involved in different categories of sourcing. To facilitate their operations onshore, ADNOC procures different products and services in multiple categories. The category of spend used in this assessment is the logging services. The sourcing approaches which have been identified for evaluation include sole, single, dual and multiple.

From the key findings of this evaluation evidence that sole sourcing exist when only one supplier is available and have zero choices to select from. This is with single sourcing being by choice and many being available. This is therefore a monopolistic market. The key findings on dual sourcing evidence that there are two available or more available but organisation make a choice for working with two. The final multiple selection findings evidenced that there are many suppliers in the market with choice of selection depending on the organisation. This is with the sourcing approach appropriate in an oligopolistic, imperfection and perfection.  The findings are informed by different models including Mendelow Matrix (Peter Block), supplier preferencing matrix, and Kraljic Matrix being used in this report.

Also, part of this assessment include sourcing appraisal of the logging services category of spend. The key findings evidence that sourcing appraisal assists in coming up with a highly qualified suppliers group, reduction of risks and achieve the best value for money outcomes for the logging services sourced by ADNOC.

There are a set of limitations which have been evidenced in this report evaluation. These can be managed by implementing the following recommendations;

• For logging services, a unique sourcing approach would be used different from other sourcing approaches
• The sourcing appraisal can be expanded to include more factors
• Policies and practices need to be put in place for improving sourcing process
• An improved stakeholders relations and inclusion in sourcing approach selection need to be enhanced
• PS&M team increased awareness for various sourcing approaches and using RFP, RFQ and Product Lifecycle

Table of Contents

1.0 Introduction. 3

1.1 ADNOC Onshore Background. 3

1.2 ADNOC Onshore Spend Category. 3

2.0 Identified Sourcing Approaches. 5

2.1 Sole. 5

2.2 Single. 5

2.3 Dual 5

2.4 Multiple. 5

3.0 Sourcing Approaches Evaluation. 6

3.1 Sole Sourcing. 6

3.2 Single Sourcing. 6

3.3 Dual Sourcing. 7

3.4 Multiple Sourcing. 8

4.0 Models Analysis on Sourcing Approaches Rationale. 10

4.1  Stakeholders Management 10

4.2 Suppliers Preferencing Matrix. 12

4.3 Supply Positioning (Kraljic Matrix) 12

5.0 Supplier Appraisal 14

6.0 Conclusion and Recommendations. 16

6.1 Conclusions. 16

6.2 Recommendations. 16

References. 18

Figure 1:5 Rights as Business Priorities. 5

Figure 2:Summary of the stakeholders in ADNOC Onshore.. 11

Figure 3:ADNOC Onshore Stakeholders Analysis. 12

Figure 4:Summary of ADNOC Onshore Suppliers Preferencing Matrix. 13

Figure 5:Summary of ADNOC Onshore Kraljic Matrix Analysis. 14

Figure 6:Supplier Evaluation Carter 10C’s Model 15

Figure 7:Statement and income.. 16

Table 1:ADNOC Logging Services Spend.. 5

Table 2:Summary of the Sourcing Approaches Identified.. 7

Table 3:Single sourcing justification.. 9

Table 4:ADNOC Onshore Costs-based savings. 10

Table 5:Logging Services Multiple Sourcing. 11

1.0 Introduction

1.1 ADNOC Onshore Background

Abu Dhabi National Oil Company (ADNOC) Onshore is an organisation which has been in active operations in United Arab Emirates (UAE) since 1971 (ADNOC, 2023). The organisation is involved as a leading onshore within ADNOC Group. The organisation concession area is approximately 12,000KM squared and is found operating more than 11 oil and gas fields in their 4 assets. These assets include Bab, North East Bab (NEB), Bu Hasa and South East (SE). Further, the organisation operates two different export terminals in Jebel Dhanna and Fujairah and vast pipeline network where the oils is transported form the oil fields.

The size of ADNOC spend is approximately $150 billion in next 5 years as a strategy for advancing their 5 million barrels daily in oil and gas production targeting to 2027 on back of improved market fundamentals (Upstream, 2022). Further, MEED (2022) note that their categories of spend cumulatively includer $5.3 billion in 2022. Their main categories of spend are logging services, pipeline equipment and installation, furniture and fixtures, motor vehicles, plant-based machinery, research and technologies, IT services, admin services and logistics. As evidenced in ADNOC iSourcing platform, they adopts multiple suppliers including Vallourec, Tenaris, Sumitomo, Tianjin Pipe, Hengyang, TMK, JFE and Voestalpine (Reach UAE, 2023).

1.2 ADNOC Onshore Spend Category

For ADNOC, they pursue logging services sourcing for identifying oil and gas intervals and quantifying properties of reservoir rock through placement of different forms of sensors in boreholes (ADNOC, 2024). In financial year 2023/24, the overall budget for the logging services was at AED70 Million. A summary of ADNOC Onshore spend category is as illustrated in the following;

Table 1:ADNOC Logging Services Spend

Source: Summarised from ADNOC (2024)

In table 1, in the suppliers categories (3^rd column), there are different sourcing approaches which are applied. For example, in the various logging services categories, different sourcing approaches are engaged in the sourcing process.  The rationale of this is achieving the 5 Rights as Business priorities (CIPS Module Notes) as illustrated in the following;

Figure 1:5 Rights as Business Priorities

Source: CIPS Module Notes

PS&M teams ensure that ADNOC does not only prioritise on initial cost but also entire costs of operation. For logging services, apart from  AED70 Million cumulatively budgeted, they also incur a further AED30 Million for maintenance. For quality, PS&M ensure in every 100 units supplied, less than 2% would need to have a defect rate. This is with required quantity supplied based on purchase order, right time and onshore operations areas.

2.0 Identified Sourcing Approaches

2.1 Sole

This approach means “only one supplier (source), to the optimum understanding of the buyer/belief and sufficient/thorough research through a market survey research can be in a position of delivering product/service as required” (CIPS, 2023)

2.2 Single

This sourcing approach include “Even when different suppliers can be engaged, a specific supplier is selected by an organisation” (CIPS, 2023).

2.3 Dual

This is a strategy where “PS&M engage two different suppliers for a specific service, product, component or raw material”.

2.4 Multiple

In CIPS (2023a), this is identified as a practice where “many suppliers are involved in provision of sourced products and services”. Multiple sourcing can be involved for different spend categories or same categories.

A summary of the different sourcing approaches analysis is illustrated in the following;

Table 2:Summary of the Sourcing Approaches Identified

Source: CIPS Module Notes

In summary, for the different sourcing approaches, various levels of competition are in place.  This is dependent on the different approaches which are selected and engaged in the process.

3.0 Sourcing Approaches Evaluation

3.1 Sole Sourcing

For sole sourcing, from the outcome of detailed research and analysis, there lack another supplier or a source of a specific spend category (CIPS, 2023). As illustrated in table 2, this is used in a monopolistic competition market. In ADNOC this is preferred to source technical, specific brand option and specialised expectations. For example, for ADNOC Onshore iSourcing system, this is a development by Oracle Company. The advantage of sole sourcing is that there is awareness that Oracle has the technology hence  savings by ADNOC Onshore in terms  of costs of sourcing and time spent. According to Hu et al. (2022), there is also a guarantee of best service being sourced, fast since a single supplier is involved and reducing processes cycle. For disadvantages, sole sourcing lacks an opportunity for negotiating on prices hence costly to implement. Also, with no options to fall back on, sole sourcing is very risky particularly when a supplier see organisation as nuisance/exploit. For ADNOC for example, with better iSourcing software/systems developed, over-reliance on Oracle deny them an opportunity for getting better choices.

3.2 Single Sourcing

This is non-competitive sourcing approach used in procurement implemented after negotiation with a supplier. This means there are more suppliers in place but organisation prioritise on one (Bapna et al., 2023). The advantages of this approach include the best quality being obtained and appropriate negotiation on prices. This is while being fast to follow-up and also implement the contract. An organisation also gains from economy of scale with many alternatives in place to select from. The disadvantages include potential of encountering bias in the form of favouring a specific supplier. This is with a potential of failing to take momentum when a need arise in future for sourcing. In ADNOC Onshore, this method is specifically used in sourcing for IT system hardware used by the organisation. The process followed include analysis of the suppliers information and data based on a pre-identified criteria;

Table 3:Single sourcing justification

Source: Summarised from ADNOC Onshore operations

For ADNOC Onshoring, in their process of souring for IT hardware, the evaluation of the different suppliers based on the criteria identified Techorbit Trading LLC as the most preferred supplier. There nevertheless exist alternatives who equally had substantially performed including Atop computer, Emerald software and liberty computer system LLC.

3.3 Dual Sourcing

Dual sourcing is relevant for managing the identified challenges associated with single and sole sourcing approaches. This means that competition is possible and avoidance of over-reliance on one source since it best operate in outsourcing strategy. The suppliers also consistently develop themselves for better to avoid being edged out from the relationship with their suppliers (Zhou et al., 2023). In ADNOC Offshore for example, dual sourcing is used when they are sourcing for administration services. For example, in sourcing for front-desk reception services, they engage Leading solutions with Outsource Bigdata being used in outsourcing technology used in the organisation. A summary of these suppliers is as illustrated and the choice for dual sourcing is illustrated in the following;

Table 4:ADNOC Onshore Costs-based savings

Source: Summarised from ADNOC internal documents

As evidenced in table 4 summary, by embrace of dual sourcing, the overall cost savings was AED18 million in the front-desk reception services. The outsourcing technologies and cleaning and support services in offices overall savings was AED22 Million which is substantial for the overall budget set in this spend category.  From this, the advantages of dual sourcing include likelihood of capitalising on different alternatives in place with less costs owing to lower competitiveness in place. The suppliers relations are also improved as no disruptions can occur. Nevertheless, for disadvantages, immense time is used in their implementation. Also, failure of one of the supplier or both would lead to challenges continuing with their practice (Federgruen et al., 2022).

3.4 Multiple Sourcing

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