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Solution
Executive Summary
In this integrated modules assignment, a formal negotiation plan has been developed appropriate for the Procurement and Supply Management (PS&M) in an organisation. The organisation of focus is National Unified Procurement Company (NUPCO) a leader in Saudi Arabia procurement, logistics and supply chain management for pharmaceutical, medical devices and supplies for government hospitals in Saudi Arabia (KSA). The Ultrasound Machines procurement category has been identified in this report. Through a reflection of content from driving value through procurement and supply, managing expenditures, developing contracts, sourcing essentials, negotiation in procurement and supply, relevant insights of the negotiation plan has been provided. The different tools used are STEEPLE, Porter’s 5 Forces, SWOT analysis and Mendelow Matrix Stakeholders have been adopted in developing the negotiation plan. The rationale of this has been informed by the fact that NUPCO being a procurement organisation prioritise on attaining cost spending efficiencies and improvement of the healthcare services providers to government hospitals. Post-COVID global economy downturn has contribute to a reduced government spending in healthcare sector. In this regard, the available resources in disposal for NUPCO are limited. As such, value for money outcomes as part of their stakeholders negotiation is essential. This inform on the need for working on an in-depth negotiation plan for guaranteeing a successful operation. The negotiation plan is aligned with their different sourcing approaches, set terms and conditions and stakeholders relations.
In this integrated assessment, findings and conclusions guide the need for developing the negotiation plan. This is by adequately preparing, testing, proposing, bargaining, agreeing and closing the process. The obtained findings highlight that in the various approaches of the negotiation and phases pursued, stakeholders relations is instrumental. Also, to optimum gain in negotiations for the Ultrasound Machines, NUPCO would achieve BATNA and MLA for appropriate outcomes being obtained.
In line with findings and conclusions in this report, various gaps have been identified. These gaps inform the necessity for pursuing these recommendations to manage them. They include pursuing adequate planning for including entire stakeholders with modern technology being integrated in the process. A clear documentation would also need to be included and avoid conflicts of interests. This is with customised negotiation approaches based on the market environment used in the process.
Table of Contents
1.1 Organisation Background. 5
1.2 Identifying Spend Category. 6
2.0 Rationale of Negotiation. 8
2.2 Business Needs addressed in the Negotiation. 9
3.0 Stakeholders Analysis in Negotiation. 12
4.0 Negotiation Plan Implementation. 15
4.1.1 Buyers and Suppliers in Negotiation Analysis. 16
4.3.1 Environment of Negotiation. 24
4.3.2 Importance of Contract/Category to Organisation. 25
5.0 Conclusion and Recommendations. 27
Figure 1:Procurement Cycle and Negotiations Rationale. 6
Figure 2:Different NUPCO spend categories. 7
Figure 3:Summary of products and services negotiated by NUPCO.. 8
Figure 4:Summary of NUPCO Business objectives 10
Figure 5:Kraljic Matrix Analysis. 11
Figure 6:Stakeholders categories summary. 12
Figure 7:Mendelow Matrix Analysis 13
Figure 8:RACI Matrix Components. 14
Figure 9:Negotiation strategy phases. 16
Figure 10:Supplier Preferencing Model 18
Figure 11:Porter’s 5 Forces Analysis. 21
Figure 12:Persuasion Tools Model 22
Figure 13:CIPS Notes of 5 Rights of Procurement 24
Figure 14:4R’s Model of Negotiation. 26
Table 1:NUPCO Spend Categories. 7
Table 2:Summary of potential NUPCO Suppliers 17
Table 3:SWOT Analysis Summary. 18
1.0 Introduction
1.1 Organisation Background
NUPCO was established in 2009. It is the leading company in Saudi Arabia in procurement, logistics and supply chain management for pharmaceutical, medical devices and supplies for governmental hospitals in Saudi Arabia. It was founded to achieve two main objectives which are achieving cost spending efficiency and improving the level of healthcare services providers to the governmental hospitals (Nupco.com, 2023). NUPCO finds its leverage purchasing for all governmental hospitals in Saudi Arabia. NUPCO is an organisation whose ownership is the Public Investment Fund and involved in procurement of their medical services for the Saudi Arabia Ministry of Health (MoH), National Guard, MOI, University Hospitals, and specialised hospitals.
NUPCO operates as one of the largest value-driven and customised healthcare sourcing, re-exporting, warehousing, and distributing organisation pharmaceuticals, medical equipment and supplies in the entire Kingdom of Saudi Arabia (KSA). Hence, as evidenced in NUPCO (2023) through an adoption of high-level procurement and supply system, they can venture global networks and empowering institutions in delivering exceptional, cost-effectiveness care for all. Their supply chain is currently holistic as they have managed to advance high-level quality of healthcare services by harnessing integration of technologies and increased connectivity.
Being a full procurement organisation, NUPCO organisation structure is hierarchical. The author of this report is tasked with a responsibility of managing the entire procurement and guaranteeing appropriate coordination of the supply chain network. This is while working with the rest of the team in managing a unified procurement tendering for health organisations for benefiting from quantities offered and conducting entire procurement electronically. The best practice entail registering the suppliers, tender issuance processes, tenders provision and contracting process completion. For easing the process followed in negotiations, e-Catalogue has been introduced for linking the supply contracts with operational consumables. This means that the organisation has already succeeded in modernising their procurement systems.
1.2 Scope of Assignment
In today business environment, implementation of commercial negotiations is instrumental for organisations success. As a best practice dos Reis and Gomes (2023) recommend on need for considering relationship of different stakeholders, managing of costs, quality required and value for money outcome. Through an appropriate commercial negotiation, it is possible achieving this with communication effectiveness, stakeholders relations achieved. Hence, in this integrated assessment, negotiation plan entail consideration of the different stakeholders interests, their concern and expectations. Further, Flechsig et al. (2022) recommend on the need for implementing detailed communication by involving various parties with a mutual agreed outcome achieved. In figure 1 summary, factors of importance in negotiation are highlighted which are aligned with Key Performance Indicators (KPIs) and Service Level Agreements (SLA’s) in negotiation (Bals et al., 2019).
Figure 1:Procurement Cycle and Negotiations Rationale
For this integrative report, it focus on development of a formal commercial negotiation for NUPCO organisation. This is by referencing on available data, statistics, factual information and tools. Also, the conflicting nature of procurement terms and conditions have been outlined with the best practice in negotiations identified. This is in terms of achieving the aspects of time, quality, quantity and value for money outcomes.
1.2 Identifying Spend Category
The category of spend identified for the purpose of this integrative report is Ultrasound Machines sourcing category. For NUPCO, being a procurement organisation for medical care equipment and other services in KSA, their categories of spend are categorised into direct, indirect and services.
Figure 2:Different NUPCO spend categories
The PS&M In NUPCO are involved in sourcing of the categories identified in figure 2 to influence the success of achieving value for money outcomes. This is to achieve their success in procurement, supplementary medication and medical devices for MOH, National Huard, MOI, University hospitals and specialised hospitals (NUPCO, 2023). As a leader in this area, the organisation ensure that they put in place a strong PS&M system which improve the entire procurement process achieving value for money outcomes and best products and services sourced. Hence, taking into account of the Ultra Sound Machines spend area, the sub-categories can include as follows;
Table 1:NUPCO Spend Categories
| NUPCO Spend Sub-Categories | Suppliers | Further categorisation |
| Cardiac/Cardiovascular Ultrasound Machines | International | ACUSON Origin Ultrasound system, Redwood Ultrasound system, NX2 Series ultrasound system |
| OB/GYN Ultrasound Machines | MENA region | GE Voluson high-end models, E10, 2D, 3D and 4D images |
| General Imaging Ultrasound Machines | Local in Saudi Arabia | Premium, high-end, midrange, economy and portable |
| Shared Service Ultrasound Machines | Internationally | Philips Epiq, GE Logiq E9, Phillips iU22 |
2.0 Rationale of Negotiation
2.1 Reason for Negotiation
In academic context, CIPS (2023), negotiation is identified as a process followed to achieve a mutual agreement. Hence, an effective negotiation is inclusive of a mutual agreement. In NUPCO for instance, negotiations are pursued due to a range of reasons including securing supplies, materials and services of right quality, quantity, and the right time or negotiation for the right terms on engagement. However, over the years, their negotiation strategy has gone through a series of changes with an evident shift from cost-based to current priority which are economy, sustainability and reputation factor. For NUPCO, a summary of the products and services which are negotiated are as illustrated in figure 3;
Figure 3:Summary of products and services negotiated by NUPCO
Being one of the largest medical care products and services in Saudi Arabia, a successful negotiation harness the achievement of their core target which is provision of best medical services to the patient, serving them appropriately to achieve KSA government aspirations and achieving Vision 2030 goals (NUPCO, 2023). Considering the Ultrasound Machines, the purpose of negotiations is purchasing of new items. As evidenced in Aljadeed et al. (2021), as a result of prevalence of COVID-19 Pandemic, there has been a major disruption in supply chain of global pharmaceutical. Also, KSA government has reduced the spend in public healthcare procurement owing to the reduced revenues from oil and gas. All these cumulatively have had a negative implication on KSA sourcing of Ultrasound machines and other spend categories. Therefore, through this negotiation, it would be possible for NUPCO to maintain continuity of supply of ultrasound machines and also the other categories. This is with the organisation achieving their goals in terms of increased revenues and achievement of the organisation business goals.
2.2 Business Needs addressed in the Negotiation
As aforementioned, negotiations entail coming up with a mutual agreement. It is in this light that ADR International (2023) hypothesised that irrespective of the negotiation approach adopted, the best practice entail to understand and mitigate risks in the contracts, champion sustainability by category choices, explore new contract relations and pay approaches and drive continuous improvement of suppliers costs and performance. For NUPCO business objectives, they are summarised below;
Figure 4:Summary of NUPCO Business objectives
Considering the summary provided in figure 4, through a successful negotiation process, apart from achieving value for money outcomes, these objectives would be successfully achieved. As part of NUPCO negotiation, the best practice entail ensuring it is meeting the needs of buyers and suppliers. This is by pursuing buyer-seller relationship, supplier-buyer, supplier-supplier and contract negotiation (Glavee-Geo et al., 2022). By achieving high-level specifications, the best ultrasound machines would be sourced. Further, quality/standards of the ultrasound machines would increase safety standards in the healthcare facilities they are suppliers with an improved quality of life and healthcare services provided. This is due to achieving the expected special requirements of the different healthcare facilities they work in collaboration.
Further, in order to evidence the importance of success of the negotiation to meeting NUPCO business needs, Kraljic Matrix analysis is applicable (CIPS, 2023a). This is a tool used in classification of the importance of negotiation in the products and services to note supply chain weakness, supporting strategy development, and minimising supply disruption.
Figure 5:Kraljic Matrix Analysis
High profit impact/ high supply risk (Strategic Items)- Ultrasound machines are significantly costly due to their high complexity in use as medical devices requiring technology advancement and components for producing high-level quality images. Hence, they have a significant impact to organisation profitability and risks. Negotiations are hence instrumental to align the business bottom-line.
High Profit Impact/Low Supply Risk (Leverage Items)- For NAPCO, IT tools and systems which are sourced lead to a significant financial implication to the organisation. Since they are readily available locally in KSA and in international markets, their negotiations is not in-depth as it is the case for ultrasound machines. Negotiations only suffice in execution of competitive bidding as core area of overall strategy.
Low profit impact/high supply risk (Bottleneck Items)- NUPCO similarly sources for medications for different hospitals. There are different manufacturers of these medicines and other products which are of low financial risks. In this case, their negotiations prioritise on alternative options. This is while negotiations nurturing relations with suppliers while pursuing an exploration and development of alternative supply sources.
Low profit impact/low supply risk (Non-critical items)– These have less financial and supply risks hence negotiations revolves around reduction of necessity and using the supplies. This is with appropriate strategy decision made and improvement of the financial relations.
3.0 Stakeholders Analysis in Negotiation
Stakeholder management identify the strategy used in organising, monitoring and improving the relations with different stakeholders. According to McGovern and Rubenstein (2020), it entail a systematic identification of the different stakeholders, analysis of needs and expectations, plan and implement different tasks for their engagement. These stakeholders are identified by CIPS (2023b) as people or organisations who affect the outcomes of the negotiation process. These can be defined as internal, external or connected.
Figure 6:Stakeholders categories summary
Considering the different stakeholders identified in figure 6, it is worth noting that they would influence outcome of the negotiation plan. As evidenced in Suzuki et al. (2022), the scope of their influence determine the success of the negotiation process and how the different stakeholders are satisfied with the outcome obtained. This is while managing complexities which are linked with the process of negotiation depending on the source of their power either in a permanent or temporary manner. Hence, as part of the negotiation process, it is essential for involved teams to set elaborate priority for possessed interest to ensure all stakeholders actively engage in organisation operations. To achieve this, a summary of stakeholder analysis is carried out by use of Mendelow Matrix Analysis (see figure 7);
Figure 7:Mendelow Matrix Analysis
High power/high interest (manage closely)– For the finance teams and radiography departments in different hospitals, they influence their capacity for sourcing for the ultrasound machines. Their power is permanent and sourced from the demand of patients in KSA based on the trend in medicine.
High power/less interest (keep satisfied)– For the suppliers of ultrasound machines, community in KSA and regulators of the ultrasound machines must be kept satisfied. Their power is derived from the occurrences in business environment such as COVID-19 pandemic which largely impacted the demand for ultrasound machines and available resources for their sourcing. Hence, they must be satisfied with the quality and quantity of the ultrasound machines from the initial phase of the negotiation.
Low power/high interest (keep informed)– The departments of the ultrasound machines and competing suppliers indirectly impact on the relations with the different stakeholders. Their source of power is from their role in evaluating appropriateness of the sourced ultrasound machines. This would need to be captured in the negotiation process holistically.
Low power/less interested (monitoring)– For the government and PS&M teams, their roles are primarily facilitative. In the negotiation process, they are tasked with the responsibility of ensuring the process is successfully implemented without immense hindrances. Their source of power is the teams involved in the negotiation process as they ensure fully aligned terms and conditions and that battle of forms does not negatively affect the organisation.
Further, in the negotiation process, for the different identified stakeholders, their roles would be as illustrated through the application of RACI Framework (Alberto, 2023). This include Responsible, Accountable, Consulted and Informed.
Figure 8:RACI Matrix Components
Responsible- In the negotiation process, the PS&M teams would be primarily responsible for the process. They would ensure that all important players of the ultrasound machines are adequately consulted to stipulate on their specificatioons, requirrments and all terms and conditions.
Accountable- The core purpose of negotiation is to ensure sourcing of Ultrasound Machines is not limited to unitary decision making (Bals et al., 2019). Nevertheless, for NUPCO case, working with the different departments would ensure the best decision is made. This can entail successufl inventory planning and managing PS&M negotiations on terms and conditions to be followed. The ultrasound machines would need to meet entire specifications as stipulated by PS&M.
Consulted-
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