Supply Chain Management In Saudi Telecom Company

Introduction:

Saudi Telecom Company is a telecom provider and a digital leader providing telecom services and platforms to help enabling the digital transformation of the MENA region. In order for any company to reach a leading position in the market, there has to be a developed supply chain management to enhance the efficiency and the effectiveness of the integration between supply and demand. Through the supply chain management, STC has developed an end-to-end SCM by developing the supplier system, and creating supplier assessment every year along with developing the procurement process and having customer experience sector as assess the customer satisfaction with the service. Moreover, STC through the technical team in infrastructure sector deals with many international telecom vendors such as Huawei, Nokia, Eriksson, Cisco, etc. For that, the technical team has developed a vendor strategy to control the vendor along with reducing the cost, which promotes and enhances the supply chain management.

Procurement Process:

The procurement function in STC related to three areas, which are marketing, materials, facilities management. The procurement department is also responsible for identifying the sources of supply, negotiating contracts with the vendors and the contractors, Obtaining goods and services for the facilities in all over the kingdom along with STC stores. In addition, the procurement also manages the suppliers through iProcurement System. The iProcurement System is a system that was develop by STC to allow new suppliers to apply through the system to get vendor ID. In order to get vendor ID, STC’s procurement has a long process before they approve the suppliers or the contractors and issue a vendor ID to them. Once the vendor ID is issued and the supplier have signed an NDA document, the supplier can request some data from STC such as the annual demand, the amount spent annually by STC for that specific product or equipment, and then STC signs the offtake agreement with them. Then the supplier would be able to see all the requests for proposal at iProcurement system. STC would receive the proposals from the vendors for any project posted, and then the procurement performance would choose the best value for money, quality. After that, STC will sign a contract with the vendor, where the infrastructure department would be responsible for all the technical work and procurement would be responsible for all the expenditures. On the other hand, it is very common in the telecom sector that a vendor comes with a new solution to a problem in STC network and present to the Infrastructure sector. For example, Ericson came up with a unique solution to help STC network to reach STC customers in areas that they cannot deliver FTTH. Those problems comes during the project and the solution to them costs a lot of money, but the procurement sector plans for those issue ahead.

Vendor Strategy:

The procurement sector represented by Procurement Performance has created a vendor strategy with the technical department “Infrastructure & Operation” to enhance the efficiency of vendors work. The objectives of the vendor strategy was reduce CAPEX / obtain Value for Money, reduce OPEX, mitigate Risk, alignment with Vendor-related stakeholders. The vendor strategy should consider and prepare STC for the evolution of new telecom technologies and services such as IOT, and 5G where many projects will exist. The procurement department purchases from international companies and local companies. For example, IP network equipment, optical fiber cables, and telecom installation equipment purchased from international companies such as Nokia, Ericson, Huawei, and Cisco for Cloud storage equipment. Local content department inside the procurement sector plays a main rule in increasing the purchases from local companies and manufacturers. Nowadays, STC prefers to buy all its products from Saudi manufacturer except the products that no one produces in Saudi Arabia. Some of the products that STC used to buy from a manufacturer in different country is the fiber optic cables and other products that related to civil work where STC used to consumes a huge quantity of fiber optic and pays a lot of money, but now everything is changes. In addition, STC also purchases the sim cards, and In fact, the new method that is done by STC and other big companies in Saudi will help the Saudi economy at the, which was done by having an effective and an efficient supply chain system.

Demand Forecast

STC plans and builds future strategy based on a 3-year forecast. The business unit sector prepares the forecast annually with the coordinating of infrastructure sector along with procurement sector. The business unit studies the customer behavior, and compares it to the previous years and based on that; it foresee the next three demand. The procurement receives the 3-year forecast from the business units, and start planning the procurement budget based on the expected demand along with the distribution of material all over the kingdom. The forecast will also help the procurement department to predict short- and long-term prices, and builds a business case to understand the changes. Moreover, procurement would analyze the operating expenses of the vendors and contractors, and the possibilities of reducing it, since the old data would help. STC builds a forecast depending on many different products and services, such as mobile services, internet services, storage services, and the expansion of the network. They all affect the values in the forecast, whether it will be increasing or decreasing.

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Implementation Process:

The implementation process is a technical process that turns strategies and plans into actions, which starts from designing the service and end up with implementing the service. Depending on the requested service by the customer, the duration of any service is different. For example, building a telecom tower for ARAMCO will take more time than connecting fiber optic to ARAMCO offices. To reduce the duration of the implementation process for the telecom work such as towers, fiber, etc. STC has divided the three main cities in Saudi Arabia between the vendors. For example, Khobar and Dammam belongs Huawei, Jeddah belongs to Nokia, and Riyadh belongs Ericsson. STC decided this method to reduce the delay of work that occurred before and to increase the quality of the service, but providing services to the customer as soon as possible. There are many reasons that accuses delay such as, availability of labor, logistics of equipment, etc.

Distribution:

STC has many services to distribute to its customers. Some customers as big companies request a dedicated service, which STC has to provide special equipment, where the installation is in their facility. The company provides the distribution to its commercial & public customers by shipping the equipment or their orders such as sim cards, phones, and others from the warehouse to the customer facility or house. In addition, STC has developed a new distribution strategy to increase the customer satisfaction. The new distribution strategy is to allow customers to purchase sim cards, routers, and phones online through STC application, where it will be deliver to the customer place. This new technique have increased the customer satisfaction about the services provided from STC. Moreover, the customer can rate the service and the driver who delivered the shipment to them. The rating of the service helped STC to identify mistakes of this service and helped them develop it.

Improvement in supply chain:

STC is a big telecom provider and a digital leader in MENA region, which owns STC Bahrain, STC Kuwait, and other shares in different companies. Although STC has the capability over other companies in MENA region, but STC still does not find solution to reduce cost without affecting the quality of service. The cost management department need to find some alternatives to reduce the supply chain cost, which includes material cost, implementation cost, logistics cost, and outsourcing costs. STC might reduce the outsourcing costs by determining appropriate levels of outsourcing. Some outsourcing products will cost much more than if STC start to produce in Saudi Arabia. Cost reduction will help STC to match supply to demand as effectively and efficiently as possible by not delaying the work to the next year budget because of the budget gap.

Conclusion:

Demand and supply are the main drivers of supply chain, and the efficiency and the effectiveness of supply chain management would result in a successful system. STC is a rich company and pays a lot of money to develop the supply chain process. Starting from material purchasing and passing through the supplier management, developing a new strategy to monitor the vendors, implementation process, and ending up with distributing the products to the customers. All of those are important processes in SCM, and having a positive customer experience is the indicator of a successful entity in the telecom sector. Although STC has a successful SCM, but it still pays a lot of money to maintain an efficient system, without caring about the possible chances of reducing the cost without affecting the quality of the service.