Etihad Airways Abu Dhabi - Negotiation and Driving Value through Procurement and Supply - Case Study Example

Name Course Institution Instructor Date Procurement and Supply Table of Contents Procurement and Supply 1 Introduction 2 Negotiation in procurement and supply 3 The Procurement process. 4 Inventory. 4 Monitoring 4 General Objective of Procurement 5 Delimitations of the negotiation 6 Significance of the negotiations 6 Driving value through procurement and supply 6 Managing expenditures 8 Supply Chain in the Etihad Airways AbuDhabi 9 Supply Chain Strategies and Sourcing essentials 9 Sourcing essentials 10 The Tactical Spent Management Approach 10 Strategic Items 11 Leverage items 11 Leverage position 13 Alliance 13 Market 14 Dependency 14 Predictive, proactive, and prescriptive sourcing 14 Etihad Airways AbuDhabi Case 15 Developing contracts program 16 Phase 1: Requirements Planning (RP). 17 Phase 2: User Design. 18 Phase 3: Rapid Construction (RC). 18 Phase 4: Transition and Implementation (TI). 19 Conclusion 19 Recommendations and Suggestions for Further Research 20 Work cited 21 Introduction Take a look around the world we live in today. It is filled with different technologically convoluted devices. The use of technology has been extended not only for business processes but also for company processes, resulting for an easier transaction. With these advance technologies, a mere click on the computer can complete important processes of an organization or a department. While these technological advances are speeding along, some people believe that they are greatly impeding the promotion of emotional and psychological integrity among humans. The Department of procurement and supply serves as a principle for a walk-through to its unwavering movement to provide its-goal for quality procuring that develops the passion for Etihad Airways AbuDhabi that is strengthened and supported by a set of core values. It is a living document that is meant to vitalize their Agency and out society as a whole. It is meant to suffuse and influence the way they comport and how they find solutions to complex procuring issues. People in offices used to do their work manually especially on paper works that would lead them use so much of their time working on the papers. But when the Information Technology was introduced to the society, organizations were able to do their task more accurate and productive. Automation of the manual processes leads to the increase of productivity and efficiency especially in procurement and supply. Negotiation in procurement and supply For the past years in Department of procurement, Inventory and Monitoring of supplies and equipment is hard for the person in charge to store and keep track for the supplies and equipment because it is done manually. Actual count of items is one at a time counted but with automated system, actual count of items coming in and out will be monitored real time. The issue they are facing now is that, the office needed an accurate and automated inventory system which will provide a quick, efficient and reliable results so as to maximize time lessen errors due to human intervention for their supplies and equipment management. The problem that they encounter was data inaccuracy and they cannot track equipment in their office if it was transferred and its current status. And they said that some of the items are misplaced and are not counted in their inventory. The Procurement process. A certain department or an employee requests an item from the supply section. The system will generate a fill up form where each employee can request their desired equipment or supply. Once they have filled up the necessary information on the form, their request will be sent to the administrator for its approval and if it is approved then it will be pass to the supply officer for issuance. Once the transaction was done the system will show how to make a printable output for a hard copy reference of the items requested by a certain department or employee. The Procurement process contains the date of each transaction like when the item was requested, acquired, released, and received. Inventory. This is specially referring to supplies and equipment, is basically a systematized way of storing resources within a certain unit or department. It is basically a process of keeping track of any kind of supplies and equipment, depending on the department’s needs. Monitoring This is a system that will monitor the moving supplies or equipment, where it is designated and what its current status. Monitoring is one of the primarily activities in an agency, departments and an organization because this help the business improve their performance or operations in collecting and storing the needed information. This study aims to develop a negotiation from Etihad Airways AbuDhabi working experience that will automate the transactions inside the Supply Office and procurement Department. This includes a procurement, inventory, and supply monitoring system for accurate and faster transactions. Because of this, the negotiation aims to reduce the time of work of employees and they will be more updated on statuses of their supply. They will able to track every supply transaction done. The Procurement, Inventory, and Supply Monitoring system aimed to provide a reliable, accurate, and secured information system that will help the regional office doing the task efficiently. The negotiation will help manage all transaction and processes in the supply office and procurement department of the Etihad Airways AbuDhabi. Furthermore, the negotiation will be designed to help meet the client’s expectations through eliminating most problems that the office faces. General Objective of Procurement This study aims to develop a procurement, inventory and supply monitoring negotiations that would help manage various supplies of Etihad Airways AbuDhabi. 1. To discuss a procurement system that will ease the process of requesting supplies and equipment of every department. 2. To help create an inventory system that will monitor and update the status of supplies and equipment that is currently used in each Office Department. 3. To discuss a system that will keep track of the issued and transferred equipment. 4. To help generate necessary reports for procurement, inventory and supply monitoring. 5. To evaluate the developed system using the following quality characteristics: a. Efficiency b. Functionality c. Portability d. Reliability e. Usability f. Maintainability Delimitations of the negotiation This study aims to develop a Procurement, Inventory, and Supply Monitoring negotiation for Etihad Airways AbuDhabi. This research will focus on transactions, operations, and processes done in the supply and equipment section of the procurement department. Significance of the negotiations These negotiations aims to discuss a procurement, inventory and supply monitoring system that monitor all the supplies for Etihad Airways AbuDhabi at procurement department to make every transaction automated. Department of procurement ICT sector. The result of this study will help the ICT Department in terms of transactions and to generate easier and faster of reports. Employees. The proposed negotiations can lessen the work load of every employee in the department and errors due to human intervention. Supply Section. The negotiation will help them in storing and monitoring their current status of the supplies and equipment wherein they can manage inventory more accurate and efficient. Researchers. This study will give additional learning to the development group as well as improve their critical thinking and decision making ability. Future Researchers. Findings of this study would be helpful to future researchers for they can use this as a reference if they are planning to conduct the same study. Driving value through procurement and supply When a certain department or employee request an item from the supply division, the negotiation will help generate a fill up form where each employee can request their desired equipment or supply. When they filled up the form with its necessary information, the system will sent the request to the supply officer to check if the stocks are available. The system will notify if the quantity reaches its lowest limit. There will be acquisition feature in the procurement, if there are no stocks available in supply division, the system will generate a purchase request form to be filled up and wait for the approval of regional director. If the request was approved the system will post the approval for acquiring supply or equipment. The posting feature also includes publishing of statuses of the request and supplier details. When the items arrived, it will be recorded in the inventory and generates necessary sticker for each item. There will be a Property Acknowledgement Receipt if the item will be released by the supply officer and indicates who receives and issues the item. The Procurement process contains the date of each transaction like when the item was requested, acquired, released, and received. The Inventory system of Etihad Airways AbuDhabi covers all office supplies and ICT equipment. The system will monitor the available stocks of each item. It can add, update, and delete an item from the stocks. Each equipment has their own depreciation value. There will be a notification when the quantity of a single item reaches the lowest limit. It will also contain the date requested by an employee and when the supply was received. Additionally, the Etihad Airways AbuDhabi system will also keep track of items transferred from the supply or its current place to where it will be designated. Moreover, it will check the status of each items from time to time. Furthermore, their system will generate necessary reports with its annual and monthly physical counts of inventories for Supply and ICT equipment. However, the bidding process will not be included in the development of the system because the Department of procurement has its own centralize bidding complex wherein it was monitored by the main office of supply. This will only focus on the supply department which primarily supervises the overall procurement, inventory, and supply monitoring transactions. The study entitled “Procurement Inventory and Monitoring System” target to give a reliable, accurate, and secured information system that will help Department of procurement in doing of their task efficiently. The proposed negotiation will help manage all major transaction in the ICT department of Department of procurement. Additionally, the negotiation will be designed to help meet the client’s suggestions and expectations. Managing expenditures Purchasing activities in managing expenditures has been increasing nowadays for either implement different projects and or purchases of other procurement requirements. In this way the organization intends to achieve high performance for the projects by contracting suppliers through partnership deeds. In the process of procurement for the company entities, the management has to consider the whole supply system structure and formulate possible strategies to be undertaken so as to accomplish the tasks of managing expenditures. Company sector’s procurement comes in the form of sourcing process whereby suppliers are selected through procurement process and final selected supplier is awarded to complete the task under competitive bid. In this essence the procurement sector or the company is saving funds, creating opportunities as well as promoting beneficial changes for the procurement development. In general, Supply chain is a series of interconnected activities which involves both upstream and downstream linkage for ensuring goods and services attains to a customer at a right time, in the right place and quality for the purpose of satisfying customers. Supply Chain in the Etihad Airways AbuDhabi Supply chain in the Etihad Airways AbuDhabi is highly concerned with the coordination of all parties of the organization involved in delivering the combination of inputs, outputs, or outcomes that will meet a specified company sector requirement. Although there is no significance difference between procurement sectors and supply sector’s focus in the supply chain in which focus much on cost saving and earning profit unlikely procurement sector which focus on provision of quality service to the intended supplier and managing expenditure. The process and management of supply chain in companies sectors is not seen vividly due to the fact that, its implementation does not impact directly to the growth or profit earned or yielding of the expenditure in terms of commercial to the procuring entity rather focusing on the quality of the service or goods being delivered for social economic objectives. Therefore it becomes a bit difficult to measure its performance in terms of expenditure rather than quality. Supply Chain Strategies and Sourcing essentials According to (Cox, 2015) there are two broad choices facing companies when they seek to improve essentials for sourcing. The currently dominant thinking used by most companies can be summarized as tactical spend management approach. The strengths and weaknesses of this conventional aggregation approach based on standardization, aggregation, supply base reduction and volume leverage and a radical approach based on the adoption of value flow management thinking. This means that radical approach uses power positioning and sourcing portfolio analysis tools and techniques to identify the scope for improved value for money from strategic supply management. This way of thinking can transform procurement sector to deliver improved value for money as well as significant reduction in costs. Sourcing essentials The Tactical Spent Management Approach This approach is based on spend management as refers to company spend for social economic benefits which is focusing primarily on the use of aggregation as the basis to improve leverage and reducing costs in procurement sector sourcing (Cox & Allot, 2015). This is achieved by standardizing all supply requirements and aggregate all similar items into the same category of spend, using supply market analysis to identify a limited number of pre-defined preferred suppliers for market test, using market competition to identify the lowest cost supplier. Or suppliers, reducing the costs of supply by using volume leverage to aggregate spend with one or the fewest number of suppliers possible and enhancing cost leverage during negotiations, and also reduce post-contractual transaction costs by awarding medium to long-term framework agreements with preferred suppliers. The Kraljic (2005) designated a model of segmentations called purchasing portfolio analysis to manage organizational supply or spent effectively. From the Kraljic’s model recommends four different sourcing strategies based on the position of the buyer relative to the importance of the supply item being purchased and the difficulty of the supply market being sourced from. According to this model, depending on the location of the category to be sourced, a buyer should follow the following simple rules of thumb, that is to say there is no way a buyer may escape from using this model when attempting to purchase. Leverage; a manager is recommended to make regular market test and bid volumes i. Strategic; a manager is recommended to develop long term collaborative relationship ii. Non critical; a manager is recommended to reduce transaction costs iii. Bottleneck; a manager is recommended to assure supply availability Strategic Items This means that, products found in this group are scarce and has larger impact for the organization hence it is difficult to find them plenty. Since the product is critical and scarce therefore purchasing managers have to establish strong and long term collaboration with suppliers so as to make ensure once product is required the organization may attain them in a required time without jeopardizing business processes. A mutual trust which is found through established long term relationship will help purchasing managers to counter balance the supply risks. An engine for a car is a good example citing strategic items because engine are scarce and critical for automobile, also “A” items for a manager using ABC inventory analysis as a technique for managing inventory in warehouses. These items are always scarce and critical for the organization. Leverage items This is a group of products which is plenty of suppliers with low complexity and high value items. Many procurement professionals appear therefore to have fallen into the trap of thinking that one approach is fit for purpose for all sourcing circumstances in the procurement sectors. It would appear that this thinking has had a significant impact on current thinking about best practice in supply sector procurement (Cox, 2015). Therefore, it appears that only the leverage approach in Kraljic’s model, using regular market testing with preferred suppliers, is seen as appropriate. A common strategy towards sourcing or procurement is to develop a strategic collaboration and partnership. Procurement Strategy Practices: The study established that overall; Procurement Strategy Practices were used to a very large extent by the Etihad Airways AbuDhabi as a way of managing procurement risk. To a very large extent, the staff agreed that effective sourcing had resulted in saving in revenue; transaction cost reduction and standardized procurement process. Then followed by the observation that the Etihad Airways AbuDhabi had a strategy that ensures procurement attracts the strongest possible field of tenders for goods and services. The respondents differed more on the point that the procurement plan supports delivery of the organization's vision. This study has established that there is an overall large agrees from the respondents regarding Sourcing Category Management Practices. On whether the cost of buying goods and services is well managed, followed by the observation that the range of products sold or purchased are broken down into discrete groups of similar related. On whether supplier evaluation, vendor portfolio analysis, supplier audits and supplier process failure mode effects and analysis are carried out regularly, the respondents agreed. Supplier Relationship Management Practices, In regard to whether the success of Etihad Airways AbuDhabi can be attributed to long-term strategic partner relationships with key suppliers, the answer is yes. On whether, the organization's desired quality of goods and services has been achieved and maintained by suppliers, the staff also agreed to a very large extent. Radical Approach Radical approach uses power positioning and sourcing portfolio analysis tools and techniques to identify the scope for improved value for money from strategic supply management (Cox, 2015). This way of thinking can transform company procurement to deliver improved value for money as well as significant reduction in costs. Reviewing a study done by Cox, (2014) the starting point for understanding appropriateness in category sourcing strategies is Power Positioning and Sourcing Portfolio Analysis. In this approach the main focus of analysis is the exchange relationships between buyers and suppliers, and the concepts of static and dynamic leverage in considering value for money. This implies that, in the ordinal course of purchasing, managers should consider the position of their power in purchasing functions and by so doing they consider value for money. The position that buyer should always wish to move to is to leverage items so as to maintain power for purchases. This significantly implies that, buyers will be in a better position when dominating the buying process and therefore leveraging the requirements or items. Conversely to this is buyers are not likely to be in this position because of the fear of value for money during their purchasing functions (Migiro, 2008; Cox, 2016; Marjolein, 2005). Leverage position In this position a buyer is dominating with all the powers of purchasing (purchasing power) therefore in order for a buyer to maintain value for money they need to consider their dominance when making purchasing decisions. Alliance This is the condition where both buyer and supplier have many power resources that countervailing those of the other part (Cox, 2014; 2015). Value will normally be shared in such a relationship because neither part has the upper hand. Therefore the idea here is that both supplier as well as buyer have powers to dominate and hence what they need is to share their common values, hence whatever will be the outcome means will also be shared. Market This is where the buyer and the supplier have few power resources with which to leverage the other part (Cox A, 2015). It implies that the market has low purchasing power and supplies and therefore what they need is waiting for the market outcome that will determine their values. Dependency Buyers have no value and therefore they should not opt this situation when making decisions on purchasing variables because value for money will be in the other side of supplier. Predictive, proactive, and prescriptive sourcing One suggestion that Gerard offers to adapt to the current paradigm of individual knowledge workers in our view all too often working on indirectly hoarding knowledge rather than leveraging systems and processes to share it . This concept of using data more proactively than relying on the “best practice” database as Gerard terms it ties directly to a talk I gave last Friday at an ISM conference focusing on what’s next in risk management. In my talk, I shared the term “3 P’s” – no, we are not talking about the “marketing P’s” – that I thought were defining the future of best practice: predictive, proactive, and prescriptive. As Gerard observes, the biggest danger around knowledge management is simply collecting data for data’s sake. Rather, we must think beyond data collection and prioritize the visualization, presentation, and predictive nature of what individual and combined elements in a broader data set can tell us—as opposed to relying on increasing information loads to query, “what we’ve learned in the past.” Etihad Airways AbuDhabi Case The Computerized Inventory System of Etihad Airways Abu Dhabi in United Arab Emirates is a study in response to the experience of the employees. The experience was the difficulty in product controlling, tracking, and reporting, since it is done manually. The Manual system is inefficient, time consuming and inaccurate. An example of this problem is the miscounting of products; this kind of problem is time consuming. Due to this problem, the proponents develop a “Computerized Inventory System of Etihad Airways Abu Dhabi” used in making, storing and retrieving of records for inventory. This system will replace the manual way of recording data thus eliminating human error on recording and computing. Another study about Gate Pass Management and Monitoring System of Equipment and Tools in Etihad Airways AbuDhabi wherein it will focus on Gate Pass Management and Monitoring of Equipment and Tools. The Function of the proposed system is to create, store and secure all the Gate Pass Records of the company and the second function is to monitor all the time in and time out of equipment or tools of the company Etihad Airways AbuDhabi. This is the Function the Function of the system of the proponent to eliminate the problem that they encounter when it comes to gate pass management and monitoring. Computer – Based Monitoring System of passengers Equipment was developed for Etihad Airways AbuDhabi, which uses a manual system of monitoring equipment in its daily operation. The proponents conducted a study on the existing monitoring of passengers equipment both in digital and manual procedure being used by the security officers. The proponents studied and discovered the problem caused by the existing system. With this idea, the proponents aimed to generate a computerized monitoring system that will monitor the equipment entering and leaving the airport and will also eliminate the problems prevalent in the current system. Computerized Inventory System for Etihad Airways AbuDhabi is a system has to do with business, money and most importantly securing and recording the daily inventory transactions of a company. They collect, store, modify and retrieve the inventory data of an organization. Computerized Inventory System is the backbone of an organization because they update constantly. Every establishment has to check their inventory quarterly, monthly, or weekly in order to update their inventory. Additionally, Inventory for Etihad Airways AbuDhabi will enhance the tracking of inventory transactions of the business establishments. This will automate the Inventory process of the Etihad Airways AbuDhabi. The system resolves the security issues of information of stocks and transactions and it will give faster access to the products. They derive with this system because they do inventory process by writing the details of the stocks received which will include product details. The process was manual and time consuming so they make this system for automated and faster transaction. Developing contracts program This part will adopt the developmental and descriptive method of research to achieve the desired system for developing contracts at Etihad Airways AbuDhabi. The descriptive type of research method helps the proponents in gathering data, analyzing the work flow on the department and determining the current process. Researchers are able to obtain significant information, forms, and procedures through data gathering. This method will be a great help in the realization of the proposed contract developing. Phase 1: Requirements Planning (RP). The proponents will conduct an interview about the contracts and transactions happening inside the Supply Office of Etihad Airways AbuDhabi to fully understand their business transactions and the problems they face. Currently the Supply Office is facing a problem such as Manual when it comes to documenting, they encounter a data inaccuracy, and they cannot track equipment in their office if it was transferred and its current status. And some of the items are misplaced and are not counted in their inventory. The Supply Office needed an accurate and automated inventory system which will provide a quick, efficient, and reliable results so as to maximize time lessen errors due to human intervention for their contract management. The IT Department is currently suggesting a system that will be used in Supply Office department for the Divisions of the Etihad Airways AbuDhabi. The head wants to have an automated inventory system that would help the Division to lessen their paper manual contract transactions. Also they can have a computerized inventory and supply monitoring to provide accuracy on the contract transactions happening in the Supply Office. The proponents also asked the Head of the Supply Office to cite examples of transactions or scenarios where the process of procurement, inventory, and supply monitoring took place. The Division will send a request for a supply or equipment to acquire their needed items and wait for the approval from the Head of the Supply Office. The process will end up by the time when the item was approved and recorded in the inventory and will be ready for issuing. Upon identifying and understanding the problems that agency’s facing, the proponents identified and created the proposed system’s objectives and scope that will help in developing contracts. Phase 2: User Design. Upon deep understanding and analyzing the problems, based from the data gathered in the office and sample transactions we gathered inside Division, the proponents recognize the functionalities and what the system must do. Then we developed a Data Flow procedure of the current process inside the Supply Office in order to illustrate the process and understand what the flow is and what to develop in the contract system. The proponents designed the Data Flow procedure (DFP) of the proposed system which includes all flow of the business transactions of the agency with necessary inputs such as equipment and supply information. For the inventory of the supplies and equipment, depreciation value is needed in order to see which items are near to be replaced or needed to be replaced. Through deep analysis of the information gathered, the researchers developed the design of the database and logical design of the proposed system to be used. In developing the proposed system, database will serve as the foundation and finishing the design of the database will be critical. Designing the interface and coding of the proposed system was also developed in this phase. Phase 3: Rapid Construction (RC). The proponents will use the most applicable languages such as JavaScript, PHP, MySQL, HTML and CSS for the design. In Department of procurement and supply, it is really the appropriate languages to use in order to clarify the suggestions and make it happen. Due to MySQL can store a big information and its compatibility to any kind of browsers, the proponents decided to use it. We arrived at this requirements in order that the system will perform fast and smoothly. In order to develop a system, some applications needed to be installed in the computer because some applications and database contains large memory. This phase focuses on testing the system whether the functionalities of the system are working right. Error, glitches and bug will be determined, it will be the top priority for debugging and also to check some possible errors and as well as future errors in the system. The intricacy of the original design would come out and the proponents will find ways to fix the errors. User privileges for users, admins, and super admin are also included in this phase. Phase 4: Transition and Implementation (TI). The developed system in the Rapid Construction becomes functional in the Implementation stage. This time, the developers input the existing data for the new system and train the users to operate the new application. In this phase the errors, glitches, and bugs are already determined and fixed to maintain the accuracy of the system. Conclusion In relation with the above statements, reviewed literature and studies from both local and foreign authors were collected to relate their significance with the work of the present researcher. We found out from the gathered studies that those researches are resources that made these present study easily understood. The present study is not exactly identical base from the study above. It has been found that, for procurement sectors there is an opportunity of leveraging items when a buyer want to optimizes cost as well as maintaining value for money. The Kraljic matrix delivers details on possibility of competitive bidding and negotiations which are the features of procurement purchases. By doing so a buyer will reduce unnecessary costs and through power matrix as a buyer dominates resources there is a possibility of maintaining value for money because buyer is able to control the market. Recommendations and Suggestions for Further Research This study recommends the following measures to ensure continued improvement in procurement performance: The managements of the Etihad Airways AbuDhabi should keep on doing regular risk assessments in their supply chains as a way of averting adverse effects of uncertainty. The firms can also benchmark themselves against supply chain risk management practices. Etihad Airways AbuDhabi should endeavor to understand the procurement risk management practices fully to drive them to the undisputed performance of their supply chains. Further research on the same study can be done in other companies to establish whether implementing Negotiation in procurement and supply practices can yield the same effect on supply chain performance of companies. Work cited Malakooti, Behnam (2013). Operations and Production Systems with Multiple Objectives. John Wiley & Sons. ISBN 978-1-118-58537-5. McCrudden, Ch. (2004): Using public procurement to achieve social outcomes. Natural Resources Forum, vol. 28, pp. 257–267. Cox, A. (2016). Sourcing Portfolio analysis and Power positioning: towards a "paradigm shift" in category management and strategic sourcing. Emeralds, 717-736. Lyson, K. &. (2003). Purchasing and Supply Chain management. London: Prentice Hall. Read More