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A case study of Aramco

Introduction:

Procurement is the process of locating and agreeing to terms of acquiring products, services or works from an external source. According to Walker, Miemczyk, Johnsen and Spencer (2019) procurement involves the process of obtaining products and services, often for business purposes through a competitive bidding process or via tendering. Procurement is often taken up by businesses given that companies and organizations need to solicit services or purchase products on a large scale compared to other buyers (Young, 2019). However with the development of the internet and the shifting of a majority of business processes to the digital platform including supply chain management and sales, more and more companies are increasingly taking up procurement in the online platform referred to as e-procurement with the aim of impacting a competitive advantage against other companies in the same field so as to impact more productivity and profitability of their businesses. This study aims to evaluate the competitive advantage of e-procurement with Aramco a Saudi Arabian company as a case study.

Background of study

With the increasing shift of business activities by a majority of companies worldwide to the digital and online domain, business processes including procurement have also been shifted to these platforms leading to the development of e-procurement. Electronic procurement (e-procurement) refers to a Business to Business (B2B), Busines to Government (B2G) or Business to Consumer (B2C) process of requisitioning, ordering and purchasing products and services over the internet. Rouse (2018) premises that it differs from e-commerce in that it makes use of a supplier’s closed system typically available only to registered users. According to Schoenherr and Tummala (2017) the practice of e-procurement has significantly gained traction and popularity over the last decade impacting significant research with regards to the benefits and advantages it affords companies that undertake it against traditional procurement processes.

Piera, Roberto, Giuseppe and Teresa (2014) emphasize that the opportunities offered by digital technologies in enhancing deep realizations in purchase of supplies is becoming indispensable in competition amongst enterprises especially considering the various positive effects in minimizing costs for companies that have adopted e-procurement. Walker et al. (2019) cites numerous case studies in which the automation of purchase procedures through e-procurement technology enables companies to achieve a reduction of up to 12% in the total purchases. Nawi, Roslan, Salleh and Zulhumadi (2016) further highlight shorter purchasing cycles, Transparency and improved inventory control to include other benefits and advantages likely to be acquired by organizations effectively using e-procurement. These benefits afford an organization significant competitive advantage over their competitors.

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Research Problem

Nawi et al (2016) however points out that the development of an e-procurement system includes four important dimensions including Information collected, Contract negotiation, type of application as well as intelligence analysis all of which are analyzed in view of e-procurement performance. Individuals within a company involved in the procurement functions as such require a significant understanding of the various e-procurement concepts and tools in order to effectively provide input into its development, use, evaluation and refinement with an aim of improving procurement efficiency and effectiveness (Purchase and Dooley, 2010). This confirms that while e-procurement comes with significant advantages and benefits that have the potential of affording a firm competitive advantage, the development and application of the systems within the organization significantly impact its success and potential advantages over its competitors. This study as such aims to evaluate e-procurement adoption at Aramco and highlight the benefits it affords the firm that gives it a competitive edge.

Research Aim and Objectives

The study aims to evaluate the competitive advantage afforded to a company by effective and efficient application of e-procurement, especially focusing on a case study of Aramco, a Saudi Arabian Oil and Gas company.

Among the specific study objectives to be studied include:

  • To intensively evaluate literature with regards to E-procurement adoption at Aramco.
  • To determine if E-procurement can help Aramco achieve a competitive advantage.
  • To find out the benefits of the competitive advantage of E-procurement on Aramco.

Research Questions

  • How does E-procurement help Aramco in achieving a competitive advantage?
  • What are the benefits of the competitive advantage of E-procurement on Aramco?
  • How can Aramco maintain the competitive advantage of E-procurement?

Literature Review

According to Schoenherr and Tummala (2017) e-procurement often referred to as the sourcing of products and services via electronic means often through the internet has precursors that can be trace back to the early 1980’s. Some of its precursors include the evolution of the Material Requirdements Planning (MRP) in the 80s to the systems of Manufacturing Resource Planning (MRP II) and then to Enterprise Resource planning systems (ERP) in the mid 90s where electronic data interchange (EDI) appeared as the first aspect of e-procurement due to the development and use of the internet. The prospects have since developed to e-procurement with different companies developing their own internal e-procurement processes and techniques to impact their supply chain management and efficiency.

Crespin-Mazet and Dontenwill (2012) however highlight the significant aspect of e-procurement that all organizations should consider in the development of their own internal e-procurement strategies to include: e-MRO also referred to as a web based ERP, e-sourcing, e-tendering, e-reverse auction and e-informing. These include significant aspects of the eventual efficiency and effectiveness of an e-procurement process. The Web-based ERP impacts the creation and approval of purchasing requisitions, placing of purchase orders and receiving of products and services ordered via the internet technology. E-sourcing on the other hand impacts the process of identifying new suppliers for a specific category of purchasing requirements via internet technology. Schoenherr and Tummala (2017) further advance that e-tendering includes sending requests for information and prices to suppliers and receiving feedback while e-reverse auction enables a purchaser to buy products and services that are required from a number of known or unknown suppliers. E-informing also significantly impacts an aspect of e-procurment and includes the process of gathering and distributing purchase information from internal as well as external parties via internet technology.

The study will delve deeply into evaluating these various e-procurement features for the case study company Aramco, in order to highlight the efficiency with which the company has taken up e-procurement. Subsequently the study will then highlight the various benefits and competitive advantages drawn from the adaptation of e-procurement by Aramco Company in Saudi Arabia. Methodology Research Approach The study will utilize a qualitative research method with an inductive approach in the effective evaluation of the competitive advantages of e-procurement. According to Silverman (2016), the qualitative research is largely an explorative research that garners the understanding of the phenomenon through reasons, motivations, and opinions. It is used in availing insights linked to the research problem and helps in developing ideas concerning the research aims and objectives and as such highlights the most suitable research method for use in the current study. Saunders, Lewis and Thornhill (2009) further confirm that the inductive approach does not involve development of the hypotheses rather; the approach starts from the aims, research questions and objectives as the genesis of the research process. Notably, evaluation of literature with regards to e-procurement adoption at Aramco is constructed on the research aim and objectives, making the study approach effective for the research process.

The study will employ a systemic review of available literature regarding e-procurement techniques and strategies as well as its application within Aramco in order to identify its benefits

to the company as well as competitive advantage factors it potentially affords Aramco. A systematic review involves appraising previous studies and synthesizing findings either quantitatively or qualitatively using a systematic approach in collecting secondary data. It plays to the advantage of the empirical association where valid conclusions are effectively and sufficiently based on the findings (Heitink et al., 2016). In attempt to attain research objectives in a manner that captured all the variables and research questions, this study followed qualitative approach collecting data from secondary source through systematically reviewing existing articles

Data Analysis

Data analysis is regarded as a process meant for inspecting, cleansing, transforming as well as modeling data with the central purpose of discovering significant details, support key decisions and inform on the conclusions. While figures would be noted in some of the cases studies sampled for this research, the presumption is that the data collected will be qualitative, and therefore call for the qualitative data analysis techniques (Agresti 2013). The research will take up the use of content analysis as such in the analysis of collected information regarding competitive advantages of e-procurement. Content analysis includes evaluating the data and information captured by selected articles and documents focusing on texts, graphics, and even oral communication from each then working towards making sense of such data (Erlingsson and Brysiewicz, 2017)

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References

Agresti, A., 2013. Categorical Data Analysis. 3rd ed. Hoboken: John Wiley & Sons (etc.). Crespin-Mazet, F. and Dontenwill, E., 2012. Sustainable procurement: Building legitimacy in the supply network. Journal of Purchasing and Supply Management, 18(4), pp.207-217.

Erlingsson, C. and Brysiewicz, P., 2017. A hands-on guide to doing content analysis. African Journal of Emergency Medicine, 7(3), pp.93-99. Erridge, A. and McIlroy, J., 2002. Public Procurement and Supply Management Strategies. Public Policy and Administration, 17(1), pp.52-71.

Heitink, M., Van der Kleij, F., Veldkamp, B., Schildkamp, K. and Kippers, W., 2016. A systematic review of prerequisites for implementing assessment for learning in classroom practice. Educational Research Review, 17, pp.50-62.

Miemczyk, J., Walker, H., Johnsen, T. and Spencer, R., 2012. Sustainable procurement: Past, present and future. Journal of Purchasing and Supply Management, 18(4), pp.201-206. Nawi, M., Roslan, S., Salleh, N. and Zulhumadi, F., 2016. The Benefits and Challenges of E-procurement Implementation: A Case Study of Malaysian Company. International Journal of Supply chain Management, 6(1), pp.209-213.

Piera, C., Roberto, C., Giuseppe, C. and Teresa, M., 2014. E-procurement and E-supply Chain: Features and Development of E-collaboration. IERI Procedia, 6, pp.8-14.

Purchase, S. and Dooley, K., 2010. The acceptance and use of e-procurement systems. International Journal of Logistics Research and Applications, 13(6), pp.459-473.

Rouse, M., 2018. What Is E-Procurement (Supplier Exchange)? - Definition From Whatis.Com. [online] SearchCIO. Available at: [Accessed 5 May 2020].

Saunders, M., Lewis, P. and Thornhill, A. (2009). Research methods for business students, 5th ed., Harlow, Pearson Education.

Schoenherr, T. and Tummala, V., 2007. Electronic procurement: a structured literature review and directions for future research. International Journal of Procurement Management, 1(1/2), p.8.

Silverman D. (2016). Interpreting Qualitative Data: Methods for Analysing Talk, Text and Interaction. London: Sage Publications. ISBN 0-8039-8758-7. Young, J., 2019. Inside Procurement. [online] Investopedia. Available at: [Accessed 5 May 2020].


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