Reaching new heights
Oman Air is confident it will improve operational efficiency and reduce trading costs through Tejari’s strategic procurement services.
To succeed in the internet economy, companies need to communicate and share information with their trading partners in real-time, collaborating more effectively to deliver lower cost, higher quality products and services to the market faster. Oman Air, the national carrier of the Sultanate of Oman and the country’s fastest-growing airline, will do just this as a result of its new partnership with the Middle East’s online marketplace, Tejari.
Under the agreement, Oman Air will utilise Tejari’s Strategic Procurement Services and the company’s business-to-business (B2B) marketplace, enabling the airline to transact and strike deals for a variety of goods and services via a secured internet environment, permitting spot-purchasing and online auctions.
“Oman Air’s core attributes are punctuality, professionalism and service excellence, and Tejari’s consulting service will enhance these attributes by keeping us informed of the latest opportunities for agreements and acquisitions, and providing an insightful, long-term overview of our future growth,” says Abdulrahman Al Busaidy, CEO of Oman Air.
As a member of the e-marketplace, Oman Air can buy and sell goods and services online. The airline will be able to find, compare and procure products and services by taking part in reverse auctions, where sellers bid to supply products and services at the most competitive prices, or browsing the online catalogues of suppliers through product and solution packages designed to meet its business needs.
“The procurement process will now be much faster, and much more cost effective. We purchase many different types of goods in bulk, and in the local market we get non-negotiable prices. By putting the request for quotations on Tejari’s system, it is visible across the entire GCC region and we are able to get the best deals,” explains Habib Habib, CIO of Oman Air.
Prior to the advent of online marketplaces, organisations had to use more traditional means of communication, preventing them from being agile enough to respond to rapidly changing market conditions and taking advantage of new opportunities. The only way to enable this was with point-to-point legacy system integration between a limited number of trading partners, requiring them to integrate their different enterprise resource planning (ERP) systems together, a costly and time consuming endeavour.
Before forming the partnership with Tejari, Oman Air used to purchase goods from the local market, which meant that not only was the airline not necessarily getting the best prices, but also that all financial records had to be updated manually, a task that was cumbersome and time-consuming.
Since the company had recently implemented an Oracle financials application as part of a complete ERP solution, it had at its disposal new inventory and i-procurement tools that could be combined with the Tejari system to improve efficiency.
“All the processes are automated in i-procurement — tendering, bidding taking final decisions and payment. Now the purchasers can go through the screens and when they take the final decision, because Tejari is already integrated with the Oracle financials package, the accounts payable updates automatically,” explains Habib.
When Oman Air wants to place a tender for any goods it places the request on the Tejari exchange. When suppliers see the requirements they are able to bid for the contract, undercutting each other. The transparent reverse auction process provides Oman Air greater control and creates a fair trading environment, giving the airline the proper control and procedures to ensure a level playing field for all players.
The system allows accurate and adequate purchasing records to be maintained, logging all transactions and recording the final purchase price so that all decisions can be accounted for to Oman Air’s management. “Oman Air ensures the fairness and transparency of its procurement practices, and Tejari’s online marketplace optimises these values. Our partnership with Tejari will also help us ensure we are offering opportunities to a range of trading partners locally, regionally and on a global level,” continues Al Busaidy.
The company’s ultimate objective was to optimise its procurement process. With the strategic e-sourcing service, the airline is taking advantage of the advice of Tejari’s e-procurement specialists, who will analyse the organisation’s expenditures and identify savings opportunities to achieve the lowest total cost for the goods and services it buys.
“Strategic sourcing is a long-term, focused effort to optimise the way an organisation procures goods and services, improving results continuously by reducing the total cost and by creating and managing the portfolio of strategic partners like Oman Air,” explains Saqib Iqbal, COO of Tejari.
“Every dollar saved though strategic sourcing translates directly into profit for the private sector, or is the best value for money for the public sector,” Iqbal adds.
The role of procurement has become increasingly more strategic as enterprises try to improve their competitive position and deliver improved shareholder value. Oman Air has access to Tejari’s online procurement professionals via the internet, phone, or in person.
The support team guarantees rapid identification and resolution of any challenges the airline may face in its online trading activities by providing consulting services such as the analysis of current processing structures; help with the development of business and supplier adoption strategy plans, and full training and development support. Experts will work with the airline’s team to identify opportunities, increase efficiencies and transform its supply chain, ensuring it gains full benefit from its membership of the online marketplace.
“For us, the auction process delivers the main advantage. We shortlist three suppliers and [forward] them to the tender committee to compare prices from each bidder. The bidders go lower and lower with their estimates to out-bid one another and in the end we get the best prices. There’s no cutting corners, but we get the best deal,” enthuses Habib.
According to Tejari, organisations can spend up to 60% or more of their annual revenues on buying goods and services. Although this was not a very expensive deal for Oman Air in terms of initial layout, by reducing and controlling its spending, the company has improved its bottom line, turning savings directly into profits. Indeed, by buying in bulk and eliminating paperwork, efficiency and cost-effectiveness is being greatly improved.
In addition, because the company is based in Oman, where certain goods, such as IT hardware, are considerably more expensive, the airline will also make savings by being able to tap the cheaper Dubai distribution network. “Many businesses in this region have been able to benefit from this type of savings, and as Tejari has already established customer relationships with other leading airlines, it will be able to bring its experience of this specific industry sector to bear in this partnership. We get a good deal, and we are expecting to see a return on our investment in five to six months via our i-procurement activity savings,” he adds.
Through the partnership, the airline will be able to leverage corporate contracts and reduce contract leakage through Tejari’s range of robust self-service applications and self-guiding catalogues, increasing its negotiation effectiveness with the Tejari marketplace and supplier network.
As far as the airline is concerned there is just one minor disadvantage to the sourcing options available through the marketplace, according to Habib: Suppliers have to register with Tejari to be able to bid on tenders, but the marketplace’s database does not yet list providers based in Oman. This is an issue Oman Air and Tejari intend to manage as a team.
The two organisations will attempt to encourage even the more reluctant suppliers to sign up by promoting the benefits of online B2B trading in terms of broadening trading options. “The move should give suppliers an incentive to register for the service, and when they do, they will profit not just from our business, and that of local enterprises, but may find that companies in Dubai, and indeed throughout the region, choose to buy from Oman,” he enthuses.
Online marketplaces provide an ideal way for the Middle East to maximise sourcing options and integrate transaction routing and connectivity. It suits this region in particular rather well. Besides generating financial savings; it can significantly improve trade between the different countries in the Middle East.