CIPS Assessment: Value Creation in Procurement for ADNOC (Oil Company)

This report is a CIPS assessment that examines the procurement function within the Abu Dhabi National Oil Company (ADNOC), focusing on how procurement drives value within the organization. The assessment analyzes the role of the Chartered Institute of Purchasing and Supply (CIPS) in optimizing procurement processes, particularly in the context of 'compress,' a key activity within the oil and gas industry. It explores the impact of compress on stakeholders and supply chain management, highlighting the importance of market analysis (SWOT and PESTEL) to assess the internal and external environments. The report also evaluates how the procurement function provides value for money outcomes, discussing cost optimization strategies and the impact of market dynamics. Furthermore, the report includes recommendations based on the analysis and provides an overview of the economic and political factors affecting ADNOC's operations and the broader oil and gas market. The report is based on the provided assignment brief, which outlines the need to identify a product, service, or category of spend, analyze its importance, and demonstrate how the procurement function produces value for money outcomes. The report also reviews current approaches to managing prices and costs, highlighting the impact of markets in securing cost savings for the organization.

Running head: CHARTERED INSTITUTE OF PURCHASING AND SUPPLY
Chartered Institute of Purchasing and Supply
Name of the Student:
Name of the University:
Author note:

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Executive Summary
The Chartered Institute Of Purchasing And Supply (CIPS) looks into the working of
other oil and gas company such as Abu Dhabi National Oil Company (ADNOC). The
organisation has several services and functions that have been taking place. In the paper,
there was a description of compress, an activity that was being carried on by the organisation.
The paper deliberately explained the ways compress had an impact on the stakeholders and
the supply chain management was helpful for the organisation as well as the stakeholders to
increase the revenue of the organisation. From the paper, it was evident that the stakeholders
are an important part of the organisation who are being impacted by the changes in the profit
of the organisation.

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Table of Contents
1.0. Introduction.....................................................................................................................3
2.0. Compress.........................................................................................................................4
2.1. How organisation (Abu Dhabi National Oil Company) has been utilizing CIPS in
compressing................................................................................................................................4
2.2. Importance of Compress in the business.........................................................................4
2.3. Impact of Compress in the organisation..........................................................................5
3.0. Brief market analysis.......................................................................................................6
3.1. SWOT.............................................................................................................................6
3.2. PESTEL...........................................................................................................................7
4.0. How procurement function (CIPS) will provide value for the organisation...................9
4.1. How the market will be impacting ADNOC cost saving:.............................................10
5.0 Recommendation................................................................................................................12
5.0. Conclusion.....................................................................................................................12
Reference list............................................................................................................................14
Bibliography.............................................................................................................................17

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1.0. Introduction
The stakeholders play an important role in the development of the organisation. There are
two types of stakeholders that are being influenced by the action that is taken by the
organisation. The internal stakeholders are the primary employees, owners, managers and the
people those who are being involved with the organisation directly. On the other hand, the
external stakeholders are the one who influences the organisation not being directly
connected to the organisation (Shulha, Searle, Poth and Chalas 2019). The success of the
organisation has an impact on both the stakeholders. The introduction or failure of a product
will have an impact on both the external as well as internal stakeholders.
Abu Dhabi National Oil Company is an oil company that has been owned by the United
Arab Emirates (UAE). From the research of Al Mazrouei, Khalid, Davidson and Abdallah
(2019), it as been found that UAE is the world’s seventh-largest reserves for oil with 97.8
billion barrels. It is an industry based on oil and gas, which was founded in 1971 by Zayed
bin Sultan. One of the famous organisation that has been producing gases and natural oil with
a revenue of US$60 billion in the year 2014 (Ameen et al. 2018). Since then, it has been
working with 55,000 employees bringing in various changes that have been influencing the
stakeholders directly or indirectly.
The Chartered Institute Of Purchasing And Supply (CIPS) is an institute that looks after
the working of the professional based industries that has been dealing with oil and gases.
According to Cordell and Thompson (2019), the organisation has been following the rules of
CIPS in compression. Compression is a crucial function that will help in the development of
the oil industry that will meet the demands of the customers, increasing the revenue of the
organisation.

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2.0. Compress
In the words of Wang and Li (2016), compress is the process wherein gas is being
compressed to oil. It is the process of compressing gas to liquid. The Abu Dhabi National Oil
Company has been dealing with various services and products that have an impact on the
revenue of the organisation.
2.1. How organisation (Abu Dhabi National Oil Company) has been utilising
CIPS in compressing
The CIPS ensures that the organisation does not face any issues that will lead to the
stagnation of the supply chain or in the procurement method of the organisation. As
mentioned by Crum, Coleman and Cherian (2019) in their paper, compression takes various
machinery, in the development of the machinery and management of the asset the
organisation must ensure that there is a great financial power that will be supporting the
organisation. Moreover, compression also helps in the development of the revenue of the
organisation.
Luzon and El-Sayegh (2016) in their paper, mentioned that with compression, there
has been increasing in the profit of the oil industry. Hence, it acts as a separate department
that will help in the development of more products brining in changes in the sales of the
product. CIPS has some principles that helps the organisation to implement its production
bringing in changes in the supply management of the organisation. Moreover, the CIPS also
helps in the development of the relationship with the suppliers being loyal and maintaining
the longevity of the relationship between the suppliers and organisation.
2.2. Importance of Compress in the business
Brostrom (2019) mentioned that taking up the activity of compression by an Oil and
gas industry is a step of achievement for the organisation, as the development of compressors

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requires a large amount of finance. Abu Dhabi National Oil Company has been using
compressing for the improvement of the production of oil. It helps the organisation to
compress more gas to a liquid that will help in the implementation of more products
increasing the sale of the product decreasing the price of the product (Brostrom et al. 2019).
In the research paper of Mogre, Lindgreen and Hingley (2017), they mentioned that
compression helps in the development of the efficiency, range and limit estimation for
machines. Hence, there will be an increase in the production and the rise in the level of
quality ensuring customers with the best quality.
2.3. Impact of Compress in the organisation
As United Emirate Arabs are one of the largest barrels that have been drilling oil in
the world, few organisations that have been compressing or refining oils. Taking the initiative
of compressing oil makes the organisation outstand in the market (Brostrom et al. 2018).
Hence, the organisation has become evident among the customers for its feature of
compression. People are more interested in its product as people know that using products of
the mother company will be more beneficial rather than other organisations.

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3.0. Brief market analysis
3.1. SWOT
Fig: SWOT Analysis of Abu Dhabi National Oil Company
(Source: Created by the researcher)
The SWOT analysis help in the determination of the internal condition of the
organisation, giving an idea of the market. From the SWOT analysis that has been carried on
helped to understand the following condition of the organisation.
 Strengths: The organisation has been one of the leading organisations in the United
Emirates Arab (Wang and Li 2016). It is the state-owned company that has been
contributing a large sum of money in the economy of the country as well as in the oil
industry. It has a field of strong exploration and capabilities. It has been establishing
its business around the world that includes refining and processing. It has a strong
grip on the local as well as global market that has been the major strength of the
organisation. Moreover, it has developed a long term and reliable partnership
(Hajizadeh 2019). It also looks into the environmental factor making it a strong
competition in the market.
Strengths Weakness
Opportunitie
s Threats
SWOT

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 Weaknesses: It has a low level of disclosure, making it an unlisted company.
 Opportunities: Establishment of business with OCI N.V. can provide the organisation
with opportunities that will help in the increase of the revenue of the organisation
(Cordell and Thompson 2019). It can develop business in the field of global nitrogen
fertiliser leader.
 Threats: With the development of other countries, there is a significant decrease in
the global market that can impact on the exploration as well as new capabilities to
other countries. The processes of shifting of renewable resources to non-renewable
resource due to environmental condition can be a great threat for the organisation.
Moreover, there is a chance of war in the Middle East region and the political
instability can lead to a decrease in the sale of the organisation.
3.2. PESTEL
Political Political stability is an important factor that will help in the
development of the business. It has been significant that the
political condition of the Middle East is not much stable (Mogre,
Lindgreen and Hingley 2017). Hence, one of the major reasons
that has been affecting the working process of the organisation
deteriorating the condition of the organisation. There are
changes in the labour laws that has been influencing the labour
pay scale that has been affecting the revenue of the organisation.
Economical The market in Abu Dhabi is being ruled by the oil organisation.
One of the world’s largest reservoir that has been helping in the
development of the oil industry of the world. Abu Dhabi has
been increasing its economic condition with the help of oil and
gas organisation (Zsidisin et al. 2019). The organisations of Abu

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Dhabi has a great impact on the global gas and oil industry.
Hence, it is evident that the market has been developing with
exploration of the market.
Social There has been great impact observed due to compression or
extraction of oil (Voinov et al. 2016). Due to extraction of
natural oil, there has been significant changes in the condition of
the environment in the oceans that has been degrading the
condition of the environment along with decreasing the natural
resources. Hence, there has been changes in the mentality of the
people to use alternative products that will bring in changes in
the environment.
Technology The supply chain has been adversely effected with the changes
in innovation in the machinery as well as in IT. Innovation will
help in the development of the business along with changes in
the revenue of the organisation (Farooqi et al. 2017).
Technology can bring in various changes that will help in the
development of the finance of the organisation. Engineers have
been developing various machinery that will help in the
development of the products brining in changes in the price of
the products.
Environment The oil and gas company have an impact on the environment.
The organisation has been draining a large amount of oil that are
non-renewable. Hence, there has been decrease in the quantity of
the product (Shqairat and Sundarakani 2018). People those who
are environment conscious will not be interested in the use of the

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product instead will find for something better that will not have
an impact on the environment. Hence, there will be an impact on
the business of the organisation.
Legal In running an oil and gas industry, various laws have an impact
on the working of the organisation. The laws have an impact on
the revenue of the organisation directly or indirectly (Luzon and
El-Sayegh 2016). For instance, the labour laws will bring in
changes in the act that is being performed by the labour there
will be changes in the time of working or payment that will
directly or indirectly have an impact on the revenue of the
organisation.
Table 1: PESTEL Analysis of Abu Dhabi National Oil Company
(Source: Created by the researcher)
4.0. How procurement function (CIPS) will provide value for the organisation
The environment that both gas and oil companies operate in is very complex; the workers
have to face constant changes and challenges especially in the grounds of supply and
demand. It is important to evaluate the supply chain, procurement costs and techniques of a
gas and oil company in order to know how the stakeholders are impacted by the procurement
function. It is important to note that Oil and gas companies should not only focus on the
product supply chains, but it is of utmost importance that they also focus on the non-
hydrocarbon supply chains that manage the materials, services and parts which are necessary
to run their business (Yared 2018). The Chartered Institute of Procurement and Supply is
such a professional body working globally for the purchasing and the supply professions.
They have an objective to lead with excellence in the area of supply and procurement. The
CIPS is an institution that helps in the procurement of the supply chains when every other
option fails to provide the proper good.

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As a matter of fact, Abu Dhabi National Oil Company or ADNOC has awarded $3.6
billion’s worth of contracts for the intention of driving value with the help of smart
procurement program. The program’s intention is to facilitate the ADNOC with some growth
plans that are not only ambitious but also upstream. The way ADNOC is planning to do so is
by increasing their conventional drilling by 40% by the year 2025. Amidst all these, they are
also planning to expand their production from some sources that are unconventional in
nature. This kind of a change will have some impact on the stakeholders of the company in
definitive terms. An increase in the drilling and that too by 40% is bound to impact both the
internal as well as the external stakeholders of the oil company. The internal stakeholders like
the employees, the managers and others will have to face the consequences. With an increase
in the drilling, the employees will have to increase their effort 40% more as well; the mangers
on the other hand, will have to rethink about hiring more employees, since 40% increase is a
huge effort that needs to be done collaboratively. However, more recruitment would mean
more wages that have to be paid and initially it would provide losses to the company.
External stakeholders like the suppliers would have profits when more materials will be
demanded for the increase; on the other hand shareholders like investors and more may leave
the company by looking at the extra cost that has to be invested (Kashif 2018). The
stakeholders are basically those assets of an organization who can identify any problem that
can potentially trouble the company and continue with provision through the procurement
process. Any kind of change in the price or the supply chain can create issues for the
company which would in turn greatly affect the internal and external stakeholders; internal
stakeholders would have to suffer through the losses, whereas the external shareholders can
decide against helping the company through the procurement process.

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4.1. How the market will be impacting ADNOC cost saving:
The supply chain has an adverse effect bringing in changes in the product that will
have an impact in the market; which in turn will have an impact on the stakeholders of the
organization. From the following points it will be evident how the supply chain management
will have an impact on the ADNOC cost saving. It is well known that if the demand of a
product increases and the supply is low, the price of the product increases in the market; on
the other hand, if the supply of any product is ample but the demand is not as per the supply,
then the price of the product decreases in order to cope up with the competition of the market.
The position of an individual’s place in the market does not matter as much as the
performance of the supply chain; this performance is directly associated with the success of
the business. In order to avoid corporate failure, the poor performance of the supply chain
must be avoided (Choudhary 2014). Therefore, when the suppliers of ADNOC increase the
price of the raw materials, it compels the organization to increase the price of their product;
this impacts their market in two ways: firstly, if the price of the product increases, the
organization can potentially lose its customers; however, if the quality of the product is intact
and better, the customers who maintain a brand loyalty will stay with the organization.
Secondly, if the price of the raw materials is decreased because of a low demand, the market
of ADNOC will have their profit percent increased and have more revenues to invest on other
factors to strengthen their position in the market.
When such changes prevail in the market due to the supply chain performance, it
imposes visible impact on the stakeholders of the organization as well. First of all, there will
be changes in the management style depending upon the change that arrived in the market
due to the performance of the supply chain; the manager will decide if the number of
employees are apt to cope up with the demand in the market or any loss of employment will
have to be taking place keeping in mind with the organization’s profit (Chang, Tsai and Hsu