(Solution) CIPS Sourcing Essentials PSE Saudi Downtown Company

Solution

• Introduction

In line with the kingdoms vision 2030 and dedicated to the Kingdoms cities, Saudi Downtown Company (SDC) is a development company that grows unique and vibrant downtown areas presenting city culture and community lifestyle which shall be one of best destination for offering work, living experience of entertainment experiences of the highest standards that are attuned to their needs (Saudi Downtown Company, 2023). The main target of SDC are improving the quality of life and achieving economic development through their projects that will provide job opportunities, commercial, investment and tourism opportunities visit that will enhance the attractiveness of these cities. Formed in early 2020, SDC is a fully owned subsidiary of the Public Investment Fund (PIF) and is undergoing a rapid mobilization to meet their mandate. This is a significant challenge, as each of the 12 sites represent 12 unique projects that must be considered separately. The mandate is to be delivered within the next 3 to 5 years, with targeted strong participation with the private sector through partnership and direct sales. The author of this report works in Procurement and Supply Department (PS&M) as a leader in strategic sourcing. Their responsibilities is ensuring overall sourcing process is not short-sighted but futuristic and prioritising on improving success of PS&M. Through ensuring SDC adopts the best practice, the author achieves in ensuring they optimise costs, mitigate risks and build robust supplier relationships to meet their procurement needs efficiently.

2.0 Category of Spend and Positioning

Today, SDC is involved in active sourcing of upto 60 distinct technological and innovative systems targeting improvement of efficiencies and lowering operational costs incurred. This is evidenced by what (https://www.arabnews.com/node/2245876/metrics/jserrors/aggregate) identify as a recent agreement with the Ministry of Communications and Information Technology (MCIT) for development of an infrastructure and communication technologies.  In SDC, determining the most appropriate sourcing strategy for their different categories of spend facilitate an appropriate management and controlling PS&M operations. The best practice can be informed by analysis carried out for SDC needs, demand and supply levels in their value chain.

3.0 Sourcing Approaches

3.1 Multiple Sourcing

Multiple sourcing is defined in (https://www.cips.org/intelligence-hub/sourcing) as a form of procurement inclusive of engagement of immense suppliers for meeting sourcing requirements of the organisation. This is best used in organisations operating in business environment categorised as open-based market allowing trading to all with suppliers equally engaging various organisations.

3.2 Single Sourcing

Single supplier sourcing is an approach used to purchase goods or services exclusively from a single supplier. Instead of engaging or inviting competitive suppliers to tender or bid. Single Source procurement method shall be undertaken as a last resort or when directed by the competent authority that is empowered to direct such actions (https://www.cips.org/intelligence-hub/sourcing/single-sourcing-vs-sole-sourcing#:~:text=Single%20sourcing%20is%20where%20a,referred%20to%20as%20monopolistic%20supplier.).

3.3 Dual Sourcing

A dual supplier source refers to procurement strategy that relies on two different suppliers for a particular product or service (https://link.springer.com/article/10.1007/s11293-023-09782-9). The objective of implementing a dual supplier strategy is to enhance supply chain resilience and mitigate potential disruptions. Having two suppliers spreads the risk and reduces dependence on a single source.

3.4 Sole Sourcing

A sole source is buying goods or services from a single supplier without soliciting bids from multiple sources. It is an exception to normal purchasing procedures and is permitted only when certain conditions are met, such as compatibility, proprietary, or uniqueness of the item or service. Sole source procurement can also refer to a situation where there is only one supplier available for the required product or service that your organisation needs (https://www.nber.org/papers/w29330).

3.1 Application of Identified Sourcing Approaches in SDC Organisation

 3.1.1 Multiple Sourcing

As identified in definitions, multiple sourcing is most appropriate for sourcing IT products and services in SDC. This is since under the umbrella of MCIT, the organisation involves various suppliers who include IBM, Apple, Google, Samsung, Microsoft and Hp (https://www.constructionweekonline.com/projects-tenders/saudi-downtown-and-lcgpa-cooperate-to-develop-local-content-in-12-cities).

For SDC, use of multiple sourcing is double-fold and entail;

• With IT systems available from international suppliers, engaging multiple sourcing enhance ease top handle different systems
• SDC prioritise on spreading of evident demand scope by different suppliers for achieving maximum costs and identifying appropriate supliers/vendors. In SDC, this entail enhancing awareness amongst suppliers on budgetary allocation by SDC, expected IT systems quality and prompt provision (time). The optimisation of costs and ensuring high quality after-sale services also assured

As evidenced in (https://www.tandfonline.com/doi/abs/10.1080/00207543.2019.1657244) an embrace of multiple sourcing advantages include reaching out to a broad-range of suppliers to select. Hence, a failure/inadequacy of a particular supplier in meeting SDC expectations, an alternative is involved. The outcome of this is reducing overall supply chain bottlenecks. Another advantage is that multiple suppliers lead to increasing competitiveness, innovativeness and flexibility in delivering their operations.

Nevertheless, there are equally linked disadvantages to be put into account. These include challenge to maintain data/records and SDC (BUYER) preference for multiple suppliers. This is specifically the case as SDC has not been in a position of using e-catalogues in electronic displaying of sourced products and services.

In the process of sourcing IT, multiple sourcing is essential owing to technical and operation systems quality. In SDC, involving the HSE department lead to increased safety harnessed and leveraging on supply portants and market inclusion for sourcing appropriate suppliers. The use of various sites facilitate buyer and sellers in accessing and sharing data on overall requirement and offering. SDC can potentially engage IBM, Apple, Google, Samsung, Microsoft and Hp to source their IT systems.

Further, for evaluating appropriateness of multiple sourcing for IT systems, SWOT analysis is applicable. As evidenced in (https://www.cips.org/intelligence-hub/sourcing/strategy) it evaluates strengths, weaknesess, opportuntieis and threats;

Figure 1: SWOT Analysis Summary

Source: Summarised from https://www.cips.org/intelligence-hub/sourcing/strategy

For SWOT analysis findings, SDC can get profits and dominate the KSA vibrant downtown destinations when they engage multiple suppliers to source for IT systems. Strengthening of stakeholders relations would be essential hence successful in sourcing process. The factors of IT development, support from KSA administration all inform need for engaging multiple suppliers successfully.

Further, with multipe sourcing being more relevant for organisations operating in open market, STEEPLE analysis can be used for market analysis (see table 1);

Table 1: STEEPLE Analysis

Hence, in STEEPLE analysis summary, the different factors noted are positive for the multiple sourcing. This is important for ensuring their success in the highly competitive business environment.  At the same time, they redefine urban lifestyle in the entire vibrant downtown destinations (https://saudidowntown.com.sa/en-US).

3.1.2 Single Sourcing

SDC prefer the use of single sourcing as a strategy for cost reduction, acquiring prompt feedback from engaged stakeholders, pursuing sustainable strategies and streamlined sourcing. Nevertheless, as evidenced in (https://link.springer.com/article/10.1007/s10479-022-04651-1), using single sourcing approach decision is made by prioritising on a set of aspects. These are terms and conditions, costs of different units on offer, capacity to delivery and IT systems quality levels.

For advantages of using single sourcing, they include immense costs saved and overall time used in PS&M process reduced. Further, it is associated with risks reduction with supply chain trends lacking predictability and to foster a sustainable relations among buyers and suppliers teams. The disadvantages of using single sourcing include risks linked with over-reliance with only one supplier hence disrupted operations by supply teams and lacking capacity of fulfilling expectations.

For effectiveness of SDC use of single sourcing, this is appropriate for sourcing different categories of construction materials, machines and equipments for allowing initiation of sustainable relations with different suppliers and customising the IT systems on various requirements. The outcome of this is identified in (http://www.ijsom.com/article_2816.html) as assisting balancing entities PS&M demands whule costs and products quality put into account. The single sourcing is appropriate to also source Health and Safety (HS&E) protective gear for workers in their different projects. Conversely, use of multiple suppliers could fail in facilitating custom-made provision of goods and services hence misaligned demands.

3.1.3 Dual Sourcing

The importance of use of dual sourcing is to lower risks to rely on single suppliers, cost saving by increasing competitiveness and innovativeness, and improving entity success. According to (https://www.sciencedirect.com/science/article/abs/pii/S0925527320302796) the dual sourcing facilitates an improved capacity for controlling qualities and managing on costs. Further, dual sourcing can lower risks of costs hidden since products and services volumes could be offered amongst the suppliers and hence reduced economy of scale likelihood. Nevertheless, dual sourcing is time-intensive and could lead to lacking active coordination for IT products and services quality and likely impact on economy of scale.

For success in implementation of dual sourcing, SDC is supposed to harness effectiveness of sourcing strategy and prioritising on collaborative practice with procurement influenced by their demands (https://www.cips.org/intelligence-hub/sourcing#:~:text=Strategic%20sourcing%3A%20this%20approach%20is,to%20meet%20your%20organisation’s%20needs.). The process is specifically relevant for bottleneck categorised items noted as gaining less profits and immense risks linked to ordering a lot. Conidering IT category of spend, SDC ought to prioritise on dual sourcing to work with various competitors for cost efficiency improved.

 3.1.4 Sole Sourcing

SDC could be required to apply a sole sourcing approach to procure machines and equipments to enhance redefinition of urban lifestyles in their vibrant down. The uniqueness of these equipments and machinery is essential owing to need for branding, technical requirements prioritised and specified use expectations.

For sole sourcing, one of the advantage include simplified procurement strategy through a prioritising on single supplier/vendor (https://journals.vilniustech.lt/index.php/JCEM/article/view/11659). Besides, the sole sourcing has disadvantages which entail limited competitiveness level impacting quality levels, how reliable the process is and sustainable supplier inclusion. Further, when sole suppliers lacks the capacity of delivering products and services, delayed provision and less quality offering resulting.

For SDC, sole sourcing is applied in an event physical data/information and documents are required in the process. The organisation need to embrace technologies including Blockchain technologies for streamlining orders made and tendering.

3.2 Kraljic Analysis

For success in assessing risks linked to sourcing IT systems in SDC from different suppliers and to integrate them in supply chain, Kraljic Matrix is applicable (https://www.csupom.com/uploads/1/1/4/8/114895679/jscom19n2p04.pdf). This is relevant for identifying best sourcing strategy for establishing relations form and reducing organisation supply risks as illustrated below;

Figure 1: Summary of Kraljic Matrix

Source: Summarised from https://www.csupom.com/uploads/1/1/4/8/114895679/jscom19n2p04.pdf

Further, Kraljic Matrix analysis tool can be described to entail;

Leverage suppliers- For this category, the best practice would be to identify multiple suppliers for spend category for negotiations of good quality and reduced costs. This is relevant in SDC in IT products and services assisting them in reducing overall risks in supply and capitalising on the buyers power in this relation. The multiple sourcing strategy (https://www.suppliergateway.com/2021/04/07/multi-sourcing-everything-you-need-to-know/#:~:text=Multi%2Dsourcing%2C%20also%20known%20as,of%20using%20traditional%20single%20sourcing.) their spend area for achieving cost-based saving and reduce suppliers risks. Post COVID-19 and as a future-best strategy, spend on IT would be impacted by high-leve, impact in profitability and risks affecting the organisation right for less risks leading to SDC to appropriately source strategies in the spend area which is IT.

For SDC, equipments and machines applied in varying culture and different locations to source for strategic surcing process.

Bottleneck suppliers– This category is inclusive of the products and services having moderate implication and profits as part of SDC practices despite of linked with immense supply chain risks. Hence, suppliers could assume a lot of power owing to scope of control of prodsucts and services provision. For addressing likely challenges linked with spend categories, it could be relevant for procurement departments of embracing diversity in suppliers and mitigating negative implication on reliance on single sourcing. This is noted in (https://www.mdpi.com/2227-9091/9/1/16) as assisting reduction of risks linked to reliance on single suppliers for their critical items.

Non-Critical Items- This category is made of goods and services existing from different multiple suppliers and as such inadequate in posing similar risks for bottleneck items. With the technical and commercial prioritisation essential for the identified items, it is appropriate using single sourcing approach for streamlining their operations with complexities lowered. For SDC practices, using modern tools which are ARIBA, Oracle and SAP for enhancing standard critical items by electronc tendering strategyincludin E-RFQs and entire specifications done online. The strategy in line with CIPS  Notes in 2023, this harness modernisation of PS&M strategy with efficiencies enhanced.

3.3 Hierarchy of Business Needs

It is essential to apply business hierarchy of needs tool to prioritise on the different spend categories position strategically (https://www.emerald.com/insight/content/doi/10.1108/IJQSS-02-2020-0016/full/html). The rationale of this is the IT products and also machinery spend is immense in terms of costs and core consideration to select the appropriate sourcing strategy used. The different business hierarchy of needs model are adopted in line with Maslow Hierarchy of Needs as illustrated in the following;

Figure 2: SDC Maslow Hierarchy of Needs Summary

Source: Author

Considering sourcing approach by SDC, prioritising on organisation needs is essential. For instance, to source IT, produdcts and services quality would be a priority and considered based on their contribution on business needs and reducition of risks linked to SDC prctices. In Kraljic Matrix analysis outcomes, the IT would be obtained by involving multiple suppliers required for a thorough engagement, timely and cost impacts prioritised in line with needs of the organisation.

For solving the overall supply risks, it could be appropriate establishing relations with immense suppliers inclusive of local-based choices. In SDC case, the organisation involve local-based suppliers as opposed to reliance on international players solely. Further, contractors/vendors could enhance active colllaborations with others for improving services provision (https://onlinelibrary.wiley.com/doi/abs/10.1111/JSCM.12248).

3.4 Management of Stakeholders

As a best practice to appreciate implication of different sourcing strategy on different stakeholders, Mendlow Stakeholders Analysis Matrix is applicable (https://www.cips.org/intelligence-hub/managing-stakeholders). This is as illustrated in the following;

Figure 3: Mendelow Matrix Analysis

Source: https://www.cips.org/intelligence-hub/managing-stakeholders

For the different sourcing strategies, the SDC stakeholders would influence the following;

High-Interest and High-Power- The sourcing of IT products and systems would be comntroled by stakeholders with high-level interest and turnover. The best practice is to misunderstand or inappropriately source approaches leading to immense implications praricularly for their areas of operations.

Low-Interest and High-Power- For suppliers, end-users and finance teams would need to have an optimum satisfaction with different suppliers. This is in regard to ensuring their satisfaction and involvement of stakeholders.  These stakeholders would need a satisfaction with identified souercing strategy where products and services leverage on low interest and high-level power.

High-Interest and Low-Power- Having high interest and low power, stakeholders would basically have interest to information on sourcing strategy. The 12 Saudi Cities and regulatory institutions would need minimal efforts for influencing sourcing strategy to be used.

Low-Interest and Low-Power– The sourced products and services leveraging on less interests and power, it is essential ensuring IT teams, admin and all stakehodlers are aware of the sourcing strategy considering it attain different needs. They possess self-interests on most appropriate sourcing.

Peter Block Grid Leadership Center is relevant for planning the different stakeholders involved by their position (https://www.leadershipcentre.org.uk/artofchangemaking/theory/stakeholder-analysis/). This is important for understanding varying needs and interests of various stakeholders.

Figure 4: Peter Block Stakeholders Analysis

Source: https://www.leadershipcentre.org.uk/artofchangemaking/theory/stakeholder-analysis/

“Bedfellows”- With high agreement and low trust levels, it is a challenge engaging this stakeholders to select most appropriate sourcing strategy. The priority is for long-term based commitment and communication in selecting best sourcing strategy. All needs would need to be prioritised with decision making strategy informed by their interests.

“Allies”-  For highly selective and supportive stakeholders, they ought to be supported and collaboration achieved for common vision achievement. This is important when multiple sourcing strategy is being used.

“Opponents”-  In selecting the best sourcing strategy, regular feedback would need to be offered. This is honestly and selecting the best practice with trust levels.

“Adversaries”– For these stakeholders with low agreement and trust, stakeholders would be opposed to change process success. Hence, such an organisation would require making challenging decision on sourcing approach appropriate for their operations.

4.0 Sourcing Appraisal Checklist

Supplier appraisal checklist is appropriate for different suppliers evaluation in terms of their appropriateness (https://www.cips.org/intelligence-hub/managing-suppliers/supplier-evaluation). This is important in ensuring strategic souring, management initiatives and competitive advantage is attained.

4.1 IT Systems suppliers appraisal

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