A Case Study 6.2 (Question at the end) The Importance of Sustainable Purchasing and Supply: OPITO What would happen if Christmas trees were not available until Easter? How would you feel if you tried to buy coffee at your favourite high street caf only to be told they had run out of coffee beans? Making sure the key components that a business or service relies on are available when needed is the responsibility of the purchasing role. Purchasing and supply - also known as procurement - may appear to be a "hidden" function in many organizations. In fact, procurement is a highly strategic role, whether the organization is manufacturing service-orientated, in the public or private sector, for-profit or not. Procurement is complex. It covers the full supply chain from contracts (negotiating) and procurement (purchasing) to logistics (storage/ distribution). All businesses need inputs in order to be able to operate. These might be physical inputs, such as raw materials, like engine components for a car manufacturer. They may also be service-based, such as specialist engineering consultancy when trialling new technology or distribution services for a high street retailer. It is vital that inputs not only meet the required quality and reliability standards but also that they are competitively priced. Effective purchasing. Purchasing and supply focus on sourcing, pricing, and buying the right things at the right price and right time in order to deliver a service or product. Effective purchasing can help an organization to reduce costs, maintain quality, and manage the levels of risk in its supply chain. The scale or importance of the item is relative to the level of risk to the business. Missing coffee beans will affect the day's profits; getting the wrong size of engine for a car could close down the production line. the industry which identified a sector-wide skills shortage. Oil & Gas UK then undertook a supply chain survey. This showed that there is both a current shortage and a likely future need for purchasing and supply chain specialists in the oil and gas industry. CIPS and OPITO are therefore working together to promote career opportunities and develop specialized training to meet this need. This case study explores the role of purchasing and supply in the oil and gas industry. OPITO and CIPS. The purchasing and supply role. For the oil and gas industry with its high levels of risk, the Chartered Institute of Purchasing and Supply (CIPS) is providing training to improve the efficiency and effectiveness of purchasing and supply. OPITO, the focal point for skills, learning, and development in the oil and gas industry, undertook a labour market survey of Every business, from an NHS hospital to the biggest brands in the world such as Coca-Cola or McDonalds, needs supplies. Purchasing may involve the day-to- day necessities like photocopier paper, soap and towels for washrooms, or service support for IT equipment. However, the purchasing role also covers high-tech or large-scale equipment for major projects such as the building of an aircraft carrier or the Olympic stadium, as well as the skills required to operate it. Purchasing and supply roles, therefore, require high levels of skill. CIPS is the professional body that aims to promote the highest standards of excellence in purchasing and supply management across all industries. It provides these through its professional qualifications program, focused training and education, and rigorous assessment procedures. Those involved in purchasing and supply are in a position to consider every stage of a business's processes, from raw materials to waste management. This "helicopter view" can help a procurement manager to spot ways of making efficiencies or opportunities to improve the quality of products or services bought. They can see not just internal impacts, but also what is happening in the external environment and the marketplace. This can help to generate new ideas to add value to the business, identify how it can increase competitive advantage, or improve sustainability. An example of the vital nature of the role relates to when BP needed to manage the supply chain of emergency goods following the Deepwater Horizon oil spill in the Gulf of Mexico in 2010. The supply chain team had to source Adding value to the business: everything from mealworms to feed wounded birds, to booms to prevent the oil from spreading further, to dispersant materials to remove the oil. The challenges included finding sufficient quantities of emergency goods at very short notice, as well as trying to keep budgets under control. responsibilities and expectations for both the business (the buyer) and its suppliers. A key element of the SLA is ensuring that the price quoted by suppliers will not be subject to change, thus affecting the purchasing budget. Longer-term purchaser and supplier relationships can provide stability and add value to both parties. The purchaser may be able to get the best possible terms and prices or a supplier may "go the extra mile for the business in an urgent situation. This type of collaboration builds trust between buyer and supplier, which might enable just-in-time relationship, where both parties hold minimum stock and so reduce costs. Supporting innovation: Procurement managers are also involved in researching suppliers in new markets and developing new and innovative procurement methods to improve effectiveness. They also agree and manage service level agreements (SLAs). An SLA is a contract that specifies standards, timings, and payments for the supply, along with penalties for missing targets. It sets out the Purchasing and supply in oil and gas. The oil and gas industry is divided into "upstream" and "downstream operations. Upstream involves exploring oil and gas and extracting it safely. The downstream part of the industry is concerned with refining, distribution, and sales. The supply chain: The oil and gas industry has very long supply chains. Many companies may be involved in supplying the materials, components, and services at different stages and across the various processes involved in extracting, refining, and distributing oil and gas. Procurement becomes even more important in this type of global operation. A company such as BP sources services and supplies from many different countries. These range from mechanical and electrical parts to professional services such as project management or legal expertise for drawing up contracts. Reliability is a crucial factor in supply, in terms of both quality and timing. If supplies are of poor quality, delivered late, or cost more than was agreed, this will affect productivity and profitability. If production is delayed or faulty products need to be scrapped, this can reduce profits. Poor quality inputs could also affect the safety of the process - a major consideration in the oil and gas industry. For example, to help improve safety and quality of supply, BP is introducing safety performance indicators into contracts of suppliers involved in high-risk activities. Suppliers who do not meet these standards may be removed from contracts. As part of this safety focus, BP is also planning to reduce the use of agency staff in procurement roles and boost its in-house expertise in supply chain management. the rental period, with repairs and maintenance being the responsibility of the owner. Buying outright might cost more initially, but the company has the benefit of the asset. However, it also has the issues and costs of maintenance and, ultimately, disposal. Purchasing managers work with operational managers to consider these issues and find the most cost-effective and efficient solution for the business. "Make or buy": Sustainable procurement. An important decision for many businesses is whether to carry out a particular part of its process itself ("make") or buy in the components or expertise it needs. This decision might depend on, e.g., whether the skills and capacity are available in-house, whether there is a need for high security of supply, or whether it is simply cheaper to outsource. For example, an oil company could choose to rent or own an oil platform. If it rents, its costs are limited to Other key factors to consider when choosing a supplier include their ability to respond quickly to changing customer needs and how well they can help toward meeting a business's sustainability goals. CIPS offers a structured online audit process to help to purchase managers map their organizations' purchasing systems against best practices. This enables them to assess how energy efficient and sustainable their purchasing processes are. Benefits of sustainable sourcing: Sustainable procurement is a high-profile matter for businesses today. It can help save money, reduce waste, improve competitiveness, and build a business's reputation. As part of their sustainability programs, many oil companies have invested in local transportation networks or built schools. They provide jobs and, by sourcing supplies locally, help to develop the local economy. The global oil industry has a responsibility to the countries in which it operates to manage its operations as sustainably as possible. A purchasing manager might want to consider whether the supplier behaves responsibly, e.g., adhering to ethical standards or sourcing raw materials in an ethical way. For example, Shell is working with its existing suppliers to implement the Shell Supplier Principles. These set out the minimum standards which Shell suppliers need to meet. These include using energy and natural resources as efficiently as possible to minimize the impact on the environment and covering health and safety issues. Efficiency: Other aspects of sustainable business include managing waste effectively and reducing the company's carbon footprint. This can be improved by choosing suppliers who also take their responsibilities toward environmental impact seriously. For example, Marks & Spencer made 70 million of efficiency savings during 2010/11. Alongside reductions in waste and packaging and increased energy efficiency, the company is working with suppliers to reduce carbon emissions in the supply chain by improving the efficiency of deliveries. lawyers, accountants, geologists, electricians, plumbers, crane drivers, mechanics, divers, and designers. Roles in purchasing and supply cover all levels, from operational ones such as buyers and store managers to strategic ones such as in supply chain analysis or strategic sourcing, so there are opportunities for everyone. Entry levels vary. Many people join oil and gas companies after having worked in other industries. Some young people join the industry straight from school; others after a college or university course. For example, Hannah has a degree in mathematics and economics. Roles and skills. Although engineering and technical roles are crucial in the oil and gas industry, oil companies also require I wanted a career that would offer variety and challenge. As a purchasing manager, I have both. My job has given me a detailed knowledge of different parts of the oil and gas industry, plus a significant amount of responsibility. carries a potential risk to the company and the continuation of its operations. reduce costs and improve profitability - bulk buying can provide economies of scale; Purchasing and supply is a powerful and highly responsible role, dealing with high-value contracts. The real satisfaction I get is from seeing what I do make a huge difference. I really enjoy my job and see my long-term future career in this industry. reduce waste by selecting inputs that generate less waste (and also lower costs); manage demand, e.g., through just-in-time supply; Conclusion. improve cash flow by securing favourable prices and payment terms; Well-managed procurement ensures that supplies of the required quality are available at the right time, place, and cost. Supply chain managers help to: improve efficiency by making sure suppliers hit deadlines; and

Question: Explain how can the frameworks be tailored for managing the procurement and supplier relationship specifically in the oil and gas sector within 1000 words.