Essay On Strategic Sourcing

Generally, under the current economic condition, IOCs look for divestments and/or mergers whereas NOCs, Independents and Conglomerates aim for expansion. PEIs, on the other hand, focus mainly on taking advantage of economic opportunities with a short-term vision. Chapter 2: Strategic Sourcing

Strategic sourcing is defined as a systematic and based on facts method that optimize and improve the organization’s supply base and overall value proposition, respectively (Loftin 2011). In the oil market, there are many sourcing practices, and this paper will focus and explore approaches adopted by global IOCs and PEIs and benchmark Saudi Aramco’s sourcing practices against key global players.

1. Saudi Aramco’s Sourcing Background:

Up to 2010,

According to Mark Gottfredson (2005) in Strategic Sourcing: From Periphery to the Core, there are many companies have transformed its businesses through means of globalization and technologies, which eventually increase their competitiveness level in the industry. Saudi Aramco shall focus on its core strategic capabilities, which differentiate its uniqueness and empower it to stand out from the crowd. Through the transformation, Saudi Aramco is in need to elevate its sourcing strategy that will support its ability to control and make the most of its critical

joint ventures to provide critical functions that will allow to enhance its core capabilities that drive competitive advantage in the industry. To further ensure (i.e. continuity) more decisions are made objectively and based on factual basis, the company must look at the three stages:

1. Components Identification of Core of the Core

These components show what the company does better and cheaper than its competitors. Thenceforward, whether an ability was proprietary and if it was common that 3rd parties could achieve the intended scale. To define the appropriate proprietary value for Saudi Aramco, there is a need to find out if each capability that generated more value than the company’s rivals could be realized. Furthermore, contingent upon the company, there is a potential of experiencing a significant level of strategic damage if others could imitate that particular proprietary. Saudi Aramco has to identify capabilities in which outside suppliers were advanced and well-established across their industry, or even across several industries, because these common business processes or capabilities could pose an immediate and/or future threat to cost position. The below figure of sourcing opportunity map, can help to allocate proprietary