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Saudi oil chiefs unconcerned by SCM

Oil chiefs in Saudi Arabia fail to recognise importance of supply chain management, says report.

Oil and fuel industry chiefs in Saudi Arabia are failing to recognise the importance of supply chain management, a recent survey has shown.

The results from the Saudi Arabian Supply Chain Intelligence Report (SCIR) 2008 showed that most respondents considered marketing and sales and HR more important to their businesses.

Supply chain management is defined as the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. It is also designed to reduce unit costs through more efficient allocation of resources.

“While companies in the oil and fuel industry may recognise the value of supply chain and logistics management strategies to their success, the results of the survey highlight several deficiencies in their actual activities and practices,” said Husam Al-Saleh, general manager of logistics company Hala Supply Chain Services.

“Support of supply chain management must be given from all of those in senior management positions. Of particular importance is a concerted move away from the current tendency to follow the clearly ineffective do-it-yourself strategy.

“It is only through addressing the issues highlighted by SCIR 2008 that companies in the oil and fuel industry will be able to gain strategic competitive advantage.”

As part of the survey, executives from companies with SAR100m to SAR1bn turnovers were asked to list challenges to their supply chain operations. Most said staff skills shortages and increased business were the major obstacles.

Many also said outsourcing supply chain was rarely considered, a common trend across most Saudi industries according to the survey. Logistics operations, such as warehousing, administration and inventory, were generally managed in-house.

The survey revealed companies that tried to improve their in-house supply chain operations achieved little success. Two thirds of the respondents reduced costs by only 5-10 percent, while all reported moderate or insignificant changes to service levels.

“Such low levels of success are indicative of the inefficiencies of a do-it-yourself strategy, particularly when undertaken during a serious skills shortage, and in a fast changing and globalising world,” the survey said.

Some 25 percent of companies quizzed had no idea what their supply chain costs were. A further 25 percent believed it was less than 5 percent of the turnover, while 50 percent thought it was between 10-15 percent.

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