-80%
Solution
Executive Summary
In this report, a supply chain map for a category of spend in Oman LNG LLC organisation has been established. The report rationale is guided by the fact that supply chain mapping is relevant to identify players in suopply chain and their interactions. Also, a success in mapping of the supply chain is core for ensuring Oman LNG LLC promote ethical best practice, identifying risks, contract management, reducing incurred costs and power distribution in supply chain. The event stand supply and installation (related to events management) has been selected as the category of spend.
In line with the analysis in this spend category, supply chain is evidenced as comprised of three main tiers. While the first one include materials, contract party controlled from the end-users, second tier include suppliers offering the goods and services with the service provider controlling this. Finally, last tier include OEMs and distributoers involved in providing the identified products to suppliers leveraging on a holistic control.
As part of this report analysis, a set of tools have been used. These include Klarjic Matrix, Porter’s 5 forces analysis, SWOT and supppliers positioning. In the evaluation of advantages and disadvantages, supply chains entail retailers, wholesalers, suppliers engaged and distributors. All these players are collaboratively engaged for success in their operations. Also, a second supply chain is inclusive of the events stands with the Oman LNG LLC procurement and management sector acticvely engaged. The advantages entail positively impacting Oman LNG LLC practices in their operations in oil and gas sector in Oman with clients needs being aligned.
The different recommendations which have been established are in tandem with supply chain analysis. These are;
- Oman LNG LLC need to integrate sustainable operations as part of their supply chain development
- As a future best practice, there is a need to target improvement of the supplier’s development, increased collaboration and innovation embraced
- The prevalent issues need to be solved to mitigate force majeure impacting the supply chain challenge of collaborative engagement and pursuing a two-way engagement
- Success in elimination of different conflicts evident from the current relations and practices
- Oman LNG LLC need to establish an appropriate supply chain integrated and holistic in end-to-end supply chain with demand captured in new tiers evidenced
Table of Contents
1.2 Selecting the Category of Spend. 5
2.0 Events Stand Sourcing Supply Chain. 6
3.0 Spend Category Supply Chain Analysis. 9
3.2 Porter’s Value Chain in context of Visibility and Supply Chain Ownership. 10
3.3 Kraljic Matrix Analysis and Position. 12
4.0 Supply Chain Strengths and Weaknesssss. 13
4.1 Supply Chain Visibility. 13
4.2 Incurred Costs in Supply Chain. 14
4.3 Evident Power in Supply Chain. 15
5.0 Impact to Business Unit and Broad Oman LNG Operations. 15
6.0 Conclusion and Recommendations. 17
Appendix 1: Oman LNG Cargo operations. 20
Appendix 2: Oman LNG Supply Chain operations. 20
Figure 1:Oman LNG Procurement process 5
Figure 2:Contractual value contrary to actual costs. 7
Figure 3:Event Stands and Installation Supply Chain. 8
Figure 4:Stakeholder Matrix (Mendelow) 10
Figure 5:Porter’s Value Chain Model 12
Figure 6:Kraljic Matrix Analysis. 13
Figure 7:Strengths and weaknesses of supply chain (visibility) 15
Figure 8:Value Addition Sources in Supply chain. 16
Figure 9:Business unit and the wider organisation implication. 17
1.0 Introduction
1.1 Company background
Oman Liquefied Natural Gas LLC (Oman LNG) is a joint venture organisation which was created as a Royal Decree in 1994 with their operations being in line with laws of the Sultanate of Oman (https://omanlng.co.om/en/Pages/home.aspx). The organisation actively engage in the operation of production and selling of Liquefied Natural Gas (LNG) and its overall by-products, Natural Gas Liquids (NGLs). Owing to the enormous operations of the organisation, they normally operate 3 liquefaction traits in their site in Qalhat near Sur with a nameplate ability of 10.4 milluon tonnes annually (mtpa). Apart from the organisation beiong the leader in the oil and gas sector, they also positively contribute to the Oman Government core objective of economy diversification. Also the Oman LNG liquefaction plant is positioned in the Coast in South Sharqiyah governorate and their head office being in Muscat.
Further, as evidenced in Oman LNG (2020), Oman LNG normally adppt a competitive tendering approach. This is with their circumstances permit, to procure required goods and services. As illustrated in figure 1, their procurement and eventual tendering follows a set of stages;
Figure 1:Oman LNG Procurement process
Through the use of their e-procurement process, it is appropriate for the organisation to operate a potential suppliers standardised web browser intended to harness business transactions from orders given by the organisation. The uniqueness of their practice in Oman LNG including smaller and distinct supplioers when they hold the ability of delivering their roles by embrace of creative practice, high-quality products and sourced services.
1.2 Selecting the Category of Spend
In this report, event stand supply and installation (related to events management) as illustrated in appendix 1 has been selected. Specifically, the author of this report is mandated to organising all the events in their subsidiaries. Operating as an oil and gas sector, the organisation always engages in multiple events to consolidate on their operations. As part of the events organisations, the stands include sourcing of tents, chairs, communication system, refreshments, and other services such as security. Owing to the organisation business practice and its influence on Oman government, their procurement and suppliers selection is core with wrong options being cost intensive and not acceptable. For example, Practical Law (2021) note that owing to the shutdown occasioned by the COVID-19 pandemic with global oil prices reduction, the Oman Economy has been impacted. As a result of resumption of business, the organisation has been holding multiple events. The most recent event is identified in Shabaneh et al. (2020) as the engagement for raising the Oman’s LNG output to 9.9 million tonnes annually from its previous 6.6 million tonnes annually. Further, Oman LNG engages in multiple events which include OPES, IGU, Career Fairs among others.
1.3 Current Scenario
For any event stand which is organised by Oman LNG organisation, the sourced materials, products and services are sourced from multiple manufacturers and providers. This is while being engaged in sourcing various raw materials, engaging distributors, retailers, and end-users engaged as part of the supply chain. In contract implementation in Oman LNG, it takes approximately 4 years and most instances renewed for more than 2 years working in similar terms and conditions (Oman LNG, 2020). Since the introduction of their plant in the coast at Qalhat nearing Sur in South Sharqiyah Governorate and their head office in Muscat, there is an authorisation for reviewing the duration for the contract and other dynamics. A usual occurrence in the subsidiaries entail engagement of wholesalers , distributor and merchandising for delivering the events stands.
As it stands, Oman LNG organisation supply chain is categorised into various tiers in both upstream and downstream of their oil and gas processing (Oman LNG, 2021a). Additionally, various stakeholders are engaged in their supply chain playing a critical function to ensure adhering to prevalence set guidelines. This impact on the different stakeholders relationship with adhering to Standard Operating Procedures (SOPs).
For the events stand procurement, for Oman LNG, these are grouped in various sub-categories which are placed in their e-procurement amount to upto 5 million Omani rials in their overall implementation annually. The different sub-categories are;
- Tents
- Chairs
- Communication equipment
- Refreshments
- Machines
- Power supply
The overall spend budgeted in different subcategories of the entire procurement budget which account for 45% of the overall spend as summarised in figure 2;
Figure 2:Contractual value contrary to actual costs
2.0 Events Stand Sourcing Supply Chain
2.1 Supply Chain Map
As illustrated in figure 3, the events stand procurement is pursued by application of a tiered supply chain strategy. This is noted to entail inclusivity of various suppliers hierarchy involved to ensure an increase in control level for various suppliers subsidiaries in their offshore and onshore operations in refining oil and gas products (Shell, 2021). This is particularly in the Greater Barik area (Blocks 10 and 11) and also Block 12 in central of Oman. At the initial phase of the supply chain, raw materials are sourced with their entire phases entailing immense plauers with different roles engaged. Additionally, since Oman LNG prioritise on quality of oil and gas products, identifying the Original Equipment Manufacturer (OEM) in regard to the obtained products and services. According to Niu et al. (2019), the tired supply chain entail engagement of the OEM to ensure a leverage of reduced commercial relations to manage and prioritise timely procurement strategy.
In regard to Oman LNG operations, by focusing on tiered supply chain, their prevalence entail likelihood for the entity to establish long-term involved suppliers in development. Apart from connections and internets in the events, there is no direct transactions involving the OEMs.
Figure 3:Event Stands and Installation Supply Chain
In figure 3 supply chain map, due to the nature of Oman LNG operations, there are both downstream and upstream. For the downstream procurement where they oprate liquefaction, transportation and respectives sales of produced LNG, any events implemented is different. They tend to adopt a matrix structure which is a replication of their overall subsidiaries. The functions include;
- Clients (end-users)– Since the different participants in these events have their technical requirements, they are identified at this level. At tier 1, by meeting their specifications, it becomes easier to even implement the event.
- Procurement and supply chain management (PS&M)– As a best practice, procurement is positioned and inclusive of tendering, agreement, supporting contract implementation, coordination and communication.
- Accountants/budget approval– the procured events stand, and all materials are authorised for pay informed by call-off orders amongst the providers of Oracle finance teams.
- HSE for the events stands– In all events pursued by Oman LNG, harnessing the HSE standards is instrumental particularly measures of mitigating current COVID-19 pandemic
- Oman Government laws and ISO certification– Since Oman LNG is majorly owned by Oman government, there are legislations such as oil and gas law (Royal Decree 8/2011) ought to be adhered on
Further, considering the downstream supply chain operations, the three tiers include;
1st Tier- Provider of services– As part of the contract implementation, the parties control clients engagement scope. Through an increased service provisions, the installations of the tents are appropriately managed.
2nd Tier- Suppliers offer for different categories– This entail including distinct suppliers to offer the tents installation and other events reaquirements with material providers actively engaged.
3rd Tier- OEM, Distributor and Agents of suppliers– In Oman LNG operations, prodcts offered to them are directly due to the need for consistent evaluation demand a direct inclusion as opposed to including suppliers.
Prevalent relationshops with different suppliers inform the relevance of first structural plan of group. An increase in the scope of interaction lead to an increased stability and success in solving distinct types of inefficient in competitiveness. Apart from being proactice in management approaches, they similarly adopt strategic sourcing approach as illustrated in appendix 2.
As illustrated in figure 3 illustrating the organisation supply chain map, it entail suppliers-buyeers and end-users strategy with OEM included. In this approach, Oman LNG procurement and management department integrate IT and technologies in their supply chain lowering overall incurred costs. According to Lisitsa et al. (2019), the arrangement ensures the supply chain is in detail part of meeting the gap of suppliers and end-users which entail the engagement of suppliers and buyers. In both downstream and upstream of Oman LNG, the multiple subsidiaries, they have recently started to implement a set of partnerships and joint ventures featured actively in second-tier programs and holistic inclusion. The success of this is informed by the organisation involving a hjolistic inclusion in successful supply chain development implementation.
3.0 Spend Category Supply Chain Analysis
3.1 Stakeholder Analysis
The importance of noting stakeholders in supply chain highlight the scope of interaction identified as both internal and external (CIPS (2021). Through pursuing stakeholder analysis, it is possible to note on all risks in the supply chain developed (See figure 4);
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Figure 4:Stakeholder Matrix (Mendelow)
Source: Summarised from CIPS (2021)
In line with the identified stakeholders, strengths and weaknesses influence the Oman LNG downstream and upstream put as an emphasis;
Low Influence, low Interest– For Oman government, admin and managemen teams, they have a reduced interest and influence to supply chain impact. They ought to engage in overseeing supply chain map integration
High-influence, low Interest– Finance, accountants and the IT teams are characterised with an increased scope of influence on their practices
High-influence, High Interest– Procurement and supply chain management, teams and supplioers have a sighificantly high influence while maintaining interests of supply chain. This is to dictate costs incurred in supply chain and power distribution.
High-Interest, Low influence– these stakeholders with high interest are involved in operations of various subsidiaries onshore and offshore. This is for sourcing the events stands with legal departments having the mandate to guide supply chain initiatives.
3.2 Porter’s Value Chain in context of Visibility and Supply Chain Ownership
In CIPS notes, the Porter’s Value Chain is noted as core to appreciate practice adopted in an entity, products and services offered in the noted category of spend. The model evidence the distinct concepts in the model as evidencing cost visibility aspect and supply chain ownership. Hence, alignment of value chain factors with supply chain, it is possible to highlight the implication of business unit and overall orgabisation operatons (see figure 5)
Figure 5:Porter’s Value Chain Model
Source: Eling & Lehmann (2018)
Primary Activities
Inbound Logistics- This entail sourcing and to share the events stand from OEMs and distributors, suppliers, engaged suppliers, agents and stores. This is for harnessing operation costs and integration.
Operations- As a best practice, this entaul engaging all subsidiaries in the whole organisation with promptness of feedback sourced
Outbound logistics- Suppliers of events stands and other groups harness diversity roles offering requests for entire materials to promote supply chain visibility
Marketing and Sales- This is inclusive of the distinct items not included in part of service agreement to leverage on competitive advantage on costs
Services- The events stands demand after installation support process and after-sale services all integrated in the entire costs incurred.
Support Activities/Secondary Activities
Infrastructure- This entail employment laws issues, health, and safety (HSE) legislation, approaches of management and approved by Oman government
Human Resource Management (HRM)- HR represent end-users for events stands with quality scope depending on the employee’s involvement in their activities
Technology Development- HR represent end-users of the event as they facilitates the engagement with all the other stakeholders. Their satisfaction is hence instrumental
Procurement- This entail sourcing of all the materials for the event, delivery and procurement of all the materials needed
3.3 Kraljic Matrix Analysis and Position
As evidenced in CIPS (2021a), the Kraljic matrix is applied to classify the products and services sourced from different categories informed by spend value and supply risk as illustrated in figure 6;
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Figure 6:Kraljic Matrix Analysis
Source: CIPS (2021a)
- Leverage products (low risk and high value)- Resources availability with an increased control of various partners such as installation and maintenance of the event installations. Costs are reduced evidencing lowered procurement.
- Strategic items (High value and High Risk)- Critical relations with different suppliers with OEMs provide core services to lower risks of supply, collaboration with service providers.
- Bottleneck Items (a low value and high risk)- The event installations are provided in various OEMs and access products and services for supply risks reduction
- Non-critical items (low risk and low value)- The event stands are characterised by a low-level impact and can be sourced from multiple suppliers including auditing and products provision
3.4 SWOT Analysis
As evidenced in Gurl (2017), SWOT analysis entail internal and external aspects for appropriate plan in an entity. Strengths and Weaknesses represent internal factors while opoirtunities and threats being external factors.
Strengths– eProcurement system of Oman LNG and other various technology used in their supply chain harness reports, plans, efficiencies, providing the installatioons and supply chain practices.
Weaknesses– Oman LNG internal stakeholders in downstream and upstream ensure a coordinated operations in achieving thejur performance scope
Opportunities– Oman LNG practides in the oil and gas industry globally leverage from a high HRM demand and procurement strategies for increasing flexibility in services provision in their different tiers (1&2)
Threats– Various competitors of the suppliers in event installations fail in provision of their services on time. This is a loss to Oman LNG organisation.
4.0 Supply Chain Strengths and Weaknesssss
4.1 Supply Chain Visibility
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