Executive Summary
This project aims to study the current outsourcing strategies at Abu Dhabi National Oil Company (ADNOC), Onshore. Moreover, it contains a re-evaluation of the Light Transportation Contract and the options of using public service providers such as Taxi and Uber. While it reviews the most significant outsourcing aspects, the primary concern is the maintenance function within Abu Dhabi service locations. The researcher will achieve this aim by evaluating the pros and cons of incorporating outsourcing and public transportation in the company. In the first section, the paper highlights background information relating to the company’s distribution strategies. Such data include what the company does, problem statement, expected improvements and additional skills.
Moreover, the paper discusses ADNOC onshore’s current situation, analyzing the present time position, history, and external and internal constraints controlling the transportation strategy. It also introduces the issue facing ADNOC in implementing public and outsourcing strategies. The document incorporates the work undertaken to arrive at the conclusions and formulate recommendations as well. It presents a detailed analysis and synthesis of findings from various pieces of literature. Lastly, the paper highlights logical conclusions and recommendations from the study of alternative transportation options.
Introduction
ADNOC Onshore is the largest oil producer within ADNOC Inc. It accounts for more than half of the United Arab Emirates (UAE) total oil production. Moreover, the company is the oldest oil producer, dating back to 1939, when it signed a 75-year concession to explore gas and oil in the region (Reference for Business par. 1). ADNOC Onshore drilled the initial exploration well in 1950 and the second one in 1958, leading to oil discovery in the UAE (Reference for Business par. 1). The company launched the initial lot called Murban crude, currently known as the AB oil field, in 1960. Afterward, the company took the initial barrel of oil to Jebel Dhanna Terminal, and it shaped the UAE’s future as the major exporter of energy. ADNOC benefited from the fresh concessions, which brought new technologies and collaborators. As a result, the company hastened the delivery of its 2030 smart goals and granted a 40 percent stake to global strategic partners.
The value-added collaborations benefited ADNOC Group in disparate ways. It was able to actualize its innovations, enhance production efficiency, facilitate foreign market access, and more profitable fund operations. Furthermore, the company is the leading advocate for environmental sustainability because it first captured carbon from the steel and iron industry (Liu and Lewis 1). This project aims to study the current outsourcing strategies, Re-evaluate the Light Transportation Contract, and explore using public service providers, such as Taxi, or CAREEM/Uber in Abu Dhabi. The main focus includes describing the 3PL transport services market in Abu Dhabi, stakeholder requirements and analysis, current transport categorization and passenger transport contracts in ADNOC. Moreover, the project explores the trend of car hire and vehicular share in passenger conveyance. It will also present the current capabilities, resources, and operations of public taxi service providers. The role of technology in the third-part logistics operations and a comparative analysis of public taxi usage for B2B and B2C markets will be presented. Lastly, the paper presents a cost-benefit analysis of two outsourcing models.
Background
ADNOC’s operating fields in western Abu Dhabi City do not accept public transportation. Therefore, it is crucial to examine the current outsourcing and the possibility of using public transport within the city. The company is a public-owned enterprise with a diversified product portfolio, including crude oil and products (Alhammadi et al. 52). The commonly known products include natural gas and petroleum chemicals. ADNOC has achieved a significant market identity because it has incorporated practical international and local promotional activities. Moreover, the company has derived market recognition from the provision of high-quality petroleum products. It also invests heavily in commodity distribution, therefore appearing in the list of innovative oil and gas companies. ADNOC’s distribution services are offered in various business units, and its effectiveness has significantly improved the reliability of its offers.
ADNOC prioritizes customers, and its profitable expansion has been noted in the past decade. In 2019, the company proposed a profit-sharing policy of close to 1.2 billion in the second half of the year (ADNOC Distribution). The policy was delivered to all shareholders and it was approved in the Annual General Assembly Meeting of 2020 (ADNOC Distribution). Table 1 below shows ADNOC’s key financial metrics.
Table 1: ADNOC Key Financial Metrics
The company makes outsourcing decisions based on their needs, goals, and interests. ADNOC benefits from optimal maintenance function accompanying subcontracting in distribution. Therefore, its managerial team has developed effective outsourcing decision-making criteria to implement a complex strategy. Each company utilizes outsourced services in a particular way. In such a case, the executive team must establish a case-by-case framework to apply the strategy. The intensive use of subcontracting to promote business performance requires a company to formulate creative application techniques (Perunović and Pedersen 1). Moreover, outsourced operations can be time-consuming to manage. Overcoming the challenge requires strong outsourcing policies, which include identifying subcontracting firms, logistics and procurement processes needed, and the outsourcing contract to seize through efficient and effective management. Therefore, ADNOC supply chain management should consider these issues to achieve the desired competitive advantage through subcontracting.
Furthermore, the basis of outsourcing decisions should include a comprehensive evaluation, including the consideration of the advantages and disadvantages of the strategy within ADNOC’s context (Perunović and Pedersen 3-7). Outsourcing might lead to adverse outcomes that the adopting company should recognize and plan for mitigation. Therefore, ADNOC’s supply chain should not overlook the effects of outsourcing on the overall performance.
Current Situation
At present, ADNOC onshore runs under specific contractual terms. The contractors provide at their cost labor, supervision, equipment and operational materials as per their agreement with the company. Such works include vehicle provision and maintenance, car washing in all the stations that ADNOC operates, and the regions it may expand to in the future within the UAE. Contractors shall replace vehicular damage and breakdown as soon as they use them at fault or as the company dictates. Further, ADNOC onshore shall not be liable for any charges, and payment for any vehicle shall commence from the period it is subjected to operation. The company reserves the right to demobilize equipment at any operational time, and it will not compensate the contractor. However, the contractors can prove non-usability or non-salability to claim compensation from the company.
Furthermore, ADNOC does not pay any penalties, liabilities, or charges that the government might implement after contractors infringe the UAE and Abu Dhabi traffic laws. The same parties will oversee the usage of vehicles that contractors’ personnel and organizational employees will operate. Any defects and damages during their service will be reported to the outsourcing company. Contractors are responsible for ensuring all vehicle maintenance adheres to the manufacturer’s conservation procedures. Vehicles should also be cleaned at the contractor’s cost, and the activity should follow city limits.
Contractors are responsible for compensating personnel for working overtime as per the UAE labor law. The same agent shall cater to training personnel without imposing any costs to the drivers. In contrast, loading and safe transportation of materials are under the custody of drivers. ADNOC Onshore has providence for the base location of vehicles for each group. The primary locations at ADNOC Onshore include Abu Dhabi, Sahil, Sha, Sab, Qasewra, mender, Hawila, Jebel Dhanna, BAB-13, Sweihan, and the NEB area (Annexure Four 75). They also provide special requirements for onshore operations at ADNOC. The mandatory fittings for GEODETIC machines drilling include a four-wheel drive, manual gears, sand tiers, cruise control, shock absorbers, as well as hind and front steel bumper.
Further, the company responds to emergencies within its concession area using tactical response team emergency vehicles. Such machines should have specific provisions, which the contractor will provide and install. They include large stickers along the length of a rear passenger’s door, written in black color and stating on the logo that it serves the company’s emergency response. They should also have high-intensity injector lights, facilitating response to the night’s unforeseen calamities (Annexure Four 79). The vehicles should be fitted with flashing and rotating lights at the top part. The flashing lights use solar energy, and they should be approved before purchasing and using them.
The firm has developed a diverse workforce contributing to its success. The company has a resource base of up to 1000 employees, comprising staff from almost all countries across the world. Moreover, ADNOC has established more than 200 service stations across the UAE, and activities in each station are motivated by the past Arabic architecture, reflecting the state’s heritage. These stations provide various petroleum products, including gasoline, diesel, car care, and oil change operations. The company’s focus is to meet energy demands for different industries. Some of them include aviation, manufacturing, construction, air traffic, utility industries, and marine firms, which form the bases for product diversification. ADNOC supply chain and logistics ensure that all deliveries are eco-friendly.
The company’s current maintenance services for vehicles are provided through a strategic unit located in the Gulf region. The unit has incorporated fast repairs and regular car servicing, including brakes, tire repair and battery replacements. It allows clients to observe the maintenance processes and comment on them in case they should. Moreover, service stations include clients’ convenience facilities, including shops, cafeterias, food outlets, and religious centers. These establishments have increased the company’s ability to serve customers conveniently. The company’s distribution facilities are also set to develop workforce expertise through continuous training to improve efficiency and productivity. Therefore, incorporating public transport such as taxis and Uber will hasten distribution within the UAE regions.
Furthermore, ADNOC’s maintenance facilities have diverse equipment to facilitate all-vehicular management. The company is asset-intensive due to its level of facility maintenance. Therefore, its executive team improves productivity by ensuring that all facilities and equipment are reliable. The intensity also underscores the significance of the transformational strategy target in this project. As mentioned earlier, ADNOC uses strategic outsourcing in all its maintenance functions. This framework aims to enhance organizational competitive advantage; therefore, it is incorporated with long-term procedures to penetrate an optimal market position (Clegg et al. 11). Outsourcing has helped ADNOC achieve various benefits, including economies of scale, time management, operational flexibility, and risk-sharing. Today’s oil and gas industries have accepted outsourcing due to the rising uncertainty of resources and distribution and operating costs. The company mainly focuses on saving costs through subcontracting.
According to the course modules, outsourcing helps companies to focus on major company activities to enhance resource exploitation. ADNOC has primarily integrated this strategy in providing non-major maintenance activities, including the management of automated sliding doors, fuel dispensers, closed-circuit television, and air conditioning units. The principal subcontractor of maintenance services for ADNOC includes Emirates Transport. They offer automobile preservation effectively and efficiently, meeting international standards.
Table 2: ADNOC SWOT Analysis
SWOT Analysis for the Region’s Third-Party Transport Sector
Abu Dhabi has experienced significant expansion in the recent past. This applies to ADNOC Onshore because it is a metropolitan area, developing and increasing congestion. As the city continues to grow, every resident is affected, including employees going to work and those operating various businesses. ADNOC Onshore needs to tackle congestion as well as implement a transformational passenger strategy. Table 3 shows the strengths, weaknesses, threats and opportunities of the third-party transport sector in Abu Dhabi.
Table 3: SWOT Analysis for Public Transport
Table 4: ADNOC PESTEL Analysis
ADNOC Porter’s Five Forces Analysis
Purchasing power from buyers: the UAE has a significantly low consumer power in the oil and gas industry because ADNOC Group is the controller of its market and industry. The company controls prices disregarding the buyer’s power, and it puts more attention on management information systems to plan for marketing and production.
Supplier power: It is comparatively high because companies from ADNOC organizations prefer working with contractors on a long-term basis. Cooperation is only practical according to its reputation outside the company. Thus, the company has a long list of suppliers engaging in prolonged connections with them.
Threats from new entrants: The Petroleum industry is capital intensive, and new investors may take longer to earn customer loyalty. Additionally, there are many barriers, including political instability and legal requirements to enter the market. Intellectual resources required to sustain the business are also high. Thus, the threat from new entrants is low, giving ADNOC Onshore a competitive advantage.
Threats from rivals: ADNOC has operated in the oil and gas industry for close to 100 years. Although competition is high on the international level because various organizations are offering similar products and services. However, the united ADNOC group can overcome rivalry together. Stakeholders should analyze its potential using value chain analysis to identify the activities, add value to the company, and improve its competitive edge.
Threats from substitutes: The challenge is significantly high because the group has many organizations, and there are different exploration techniques within the group. To overcome this threat, the company can develop new technologies and exploration options to enhance operations and increase sales.
Further Considerations
Third-party companies in the UAE have expertise that facilitates the delivery of proficient services in a way that helps businesses operate smoothly. Each company should find a logistics organization within the UAE to meet freight role requirements, streamlining the logistics management sector.
Car hire in the UAE has risen over the past decade, and it is expected to increase further. The companies offering this service set reasonable prices for a particular duration. Hiring time ranges from a few hours to days and weeks. Moreover, car renting can serve various reasons, including local services, event transportation, employee transportation, outstation, personal drive, and airport facilitation. The companies also offer traditional services such as global positioning system navigation, entertainment, and insurance. According to Mordor Intelligence, the Middle East has seen a significant increase in fleet rentals since 2010. Thus, the region’s market has expanded due to hiring prices and high-quality services. The primary booking method is online, gaining a competitive advantage due to the intensive use of smartphones and younger populations.
The UAE is among the most car hiring states in the Middle East, and most customers prefer online booking. The services receive high demand during peak seasons, such as holidays when they become scarce for employee servicing as people book them in advance. This request method is instrumental in verifying the passengers’ documents, informing them about the vehicle, determining details of pickup stations, and signing contracts online. It also reduces cash transactions, especially in today’s world, with deadly diseases contracted through close contacts. Further, car renting in the UAE offers several affordable options that clients can select based on their needs.
Abu Dhabi state dictates that transport providers such as Uber users must register their hiring applications. The rule was formulated since the United States-based Uber suspended its operations in the UAE in 2016. Careem, one of the public service providers, operated in Uber, and it still serves Abu Dhabi. With taxi service providers, the company must register their applications under the Center for Regulation and Transport by Hire Cars. It helps the organization control its market by preventing unregulated applications. Uber is the largest ride provider, and it returned to the UAE around 2017 after taking several years out of the market. It provides the same range of offers across the city as other states (Time Out Dubai). They use GPS to reach passengers, paying them directly from phone applications. They offer discounts, and their prices are slightly lower than those of taxis.
ADNOC’s plan, apart from current operations, is fundamental in deciding its transformational strategy. The current plan for vision 2030 in Abu Dhabi focuses on sustainability in developing the whole emirate region (ADNOC Distribution). The best approach to this vision is Estidama, which aims to control all activities, including transport, for a sustainable environment. Therefore, it provides requirements to earn credits to the organization and achieve planning procedures. Transport management also helps to address accessibility in the emirate regions heavily relying on ride hire. The state’s development of sustainable road and rail infrastructure is significant in this study. It uses demand-responsive commuting and car-sharing schemes to improve access to single-ride cars, which are more sustainable. The reason behind this allegation is reduced congestion and carbon emissions.
Technology is a fundamental aspect of third-party logistics in today’s business environments. The advantage mostly favors retailers who want to remain on top of a competitive market, transporting goods in different shapes, weights, sizes, and packages. E-commerce businesses are looking for 3PL services that boost their core competencies using new technologies. The facilitation ensures flexibility, for example, through low-capital intensive robots. It also provides real-time visibility; hence, modern transport management systems required for the supply chain at ADNOC will benefit from the improved and actual visibility. The company can handle the order volume of logistics that it could not manage in the past. Technology has enhanced functionality in transport, especially for companies handling up to last-mile deliveries. Therefore, ADNOC, with improved technology, will benefit from optimized freight and inventory management. Further, technology streamlines collaborations in third-party logistics. Service providers who automate their organizational supply chain systems benefit from increased interconnectivity. Incorporating the same approach in public transport provision will hasten deliveries. ADNOC can integrate trading partners and new customers to build its organizational profile.
Another area benefiting from streamlined connections is the management of risks. In natural conditions such as weather, sudden changes can be predicted for better planning and coping with unforeseen calamities. Technology has also improved and hastened communications between parties engaging in logistics and the supply chain. They can cooperate in developing a risk management strategy to facilitate better navigation of natural issues. The tech also helps in troubleshooting, where a company can view faults across all channels. Thus, it can plan for better monitoring, facilitating more accessible and faster resolution processes in the issues that may arise, including missing items and delayed loads. Technology is instrumental in providing better analytical information. 3PL service providers can establish stable and long-term relationships with clients.
Public transport in the UAE has seen a technological transformation with better online services and customer satisfaction. The benefit extends to vehicle repair and maintenance, which is the primary focus of outsourcing companies in Abu Dhabi. Technology has facilitated online car renting through applications throughout app development, which receives more mobile booking usage. The UAE’s central online platform for vehicle hiring is OneClickDrive.com.
An analysis of current public transport means that taxis and Ubers are the most common forms of riding in Abu Dhabi, and it is relatively cheaper than in other regions. The commonly available types include limousines available through online booking, either from a phone or from a hotel. Apart from being metered, they are relatively expensive, although some of their trips have a constant process. Moreover, silver taxis operate under different organizations, observing the Trans AD rules (Trip Advisor par. 4-5). These taxis are metered, and they have the same appearance as the limousines. People book them before the travel time on the Trans AD hotline or outside malls. Therefore, it is easy to acquire such transport means within and out of the city. The Trans AD also helps passengers to book taxis visiting more remote areas. Between six o’clock and ten o’clock in the morning, travel fare ranges around 2 Dirhams, and the minimum charges are 12 Dirhams per ride (Time Out Dubai par. 9). The fare charges at night and during the evening peak season rise to five Dirhams.
Analysis and benchmarking of public transport services for business-to-consumer (B2C) and business-to-business (B2B) markets show that ADNOC’s leading market position, strong brand, shareholders and extensive distribution infrastructure are attributed to its success. For the B2C market, retail fuel offered in close to 400 domestic locations proves that it is the leading operator in Abu Dhabi and dominates the northern emirates. The company has expanded its presence in the UAE, and it operates many service stations near the Dubai emirates. Further, ADNOC is the only fuel provider across all the emirates, apart from having two more service stations in Saudi Arabia. ADNOC Group is proactive in selling compressed gas, liquefied petroleum gas, and automotive lubricants.
Still, on the B2C market, the company offers retail non-fuel, which are located in convenience stores in various petroleum service stations. It also provides value-added services such as lubricant changing and car washing. Thus, it is the largest convince provider in Abu Dhabi. The company also offers allied services, including rental properties and vehicle inspection. Regarding rental properties, it leases and manages retail spaces within its service stations. Tenants have secured close to 1000 of these properties (ADNOC Distribution). They are used to run fast restaurants and provide supplementary services such as automobile insurance and banking operations. Some of the well-known tenants include Starbucks, Subway, McDonald’s, KFC, and Burger King. Its authorized vehicle inspection centers are approximately 25 in Abu Dhabi emirate.
ADNOC B2B market covers aviation and corporate sectors in the UAE. The commercial industry sells and distributes petroleum products, namely gasoline, gas oil, and liquefied petroleum gas. It also serves industrial, commercial, and government customers through the UAE, apart from exporting some of the voyage lubricants to international retailers. ADNOC serves the aviation sector with fuel transportation services and aircraft refueling offers (ADNOC Distribution). Aviation fuel is sold to strategic aviation consumers in the UAE as well.
An analysis of outsourcing and public transport shows that contracted services are driven by tending business situations. The act commenced in the 1990s when commercialization and affordable digital telecommunications services were introduced. ADNOC, having moved to outsource, has developed a competitive advantage by creating a more efficient framework for coping with the changing business factors in the marketplace. Outsourcing operations does not ensure that a company gets positive results because they depend on the contractors’ expertise. Public transport is more affordable than outsourcing because they are government-regulated. Moreover, the passenger is responsible for booking a ride, which will ensure it arrives on time. Maintenance of taxis and Uber are under the control of the renter, unlike in subcontracting, where the outsourcing company may raise charges to cover maintenance costs. Public taxi is flexible and fast, saving on commuting time.
Based on the considerations made above, incorporating both public taxi and Uber, apart from outsourcing maintenance in ADNOC distribution are cost-effective. The primary concerns include the impact that general riding will have on accessibility by passengers, and the social responsibility that the company holds in Abu Dhabi (Trip Advisor Par. 1). It will create employment opportunities and save time, which is crucial for passengers and their sustainability. Thus, public taxi is economical, and the company should consider including it in its transformational strategy. Further, outsourcing is appropriate when viewed in a narrow model in which operating costs and time are compared with in-house maintenance and initial installation costs (Vaxevanou and Konstantopoulos 573). The approach is practical when safety impacts and user benefits are included. Incorporating behavioral responses and cost variables with the effects of congestion when using private vehicles and crowd elimination with public transport is crucial in the project’s decision-making.
Furthermore, the user benefits theorem imply that public service providers contribute to positive environmental externalities and enormous economic impacts. The weakness of incorporating public transport is the additional regional planning to accommodate them. Abu Dhabi city has not included the top-down master planning approach; thus, public vehicles cannot enter the city. However, the region’s transport policy might evolve if public finance becomes scarce, crude oil production declines, and tight rules for carbon emissions. Public transport will be beneficial because it will reduce the number of carbon emissions among ADNOC’s passenger transporters (Sun et al. 1). The policy considers vehicle reliability and resilience, taking the company towards a well-thought economic development approach.
Work Undertaken
This research aimed to explore the transformational strategy for passenger transport at ADNOC Onshore, considering the current outsourcing strategy and the possibility of using public service providers such as Taxi and Uber. The study used a mixed research design, where various techniques were employed to ensure its success. The majority of the information was obtained from secondary data collection methods, including websites, journal articles and other written sources. Part of the data was collected from open-ended questionnaires delivered online due to the current Covid-19 safety rules.
There was a need to conduct in-depth research to gather sufficient information. Qualitative research was also undertaken to analyze, interpret, and evaluate the study’s findings effectively. The study population comprised workers at ADNOC Onshore distribution stations. Various resource constraints were considered as they were associated with studying such a larger population. Thus, random sampling was necessary to construct the research design. Since the questionnaires were delivered online, the researcher managed to reach a few employees, seven, from the company’s service stations in UAE. They mostly came from the supply chain management sections from their stations.
The reliability of the research employed depended on the credibility of the data collected. Thus, the primary method of data collection was vital, and it involved open and closed-ended questions. The researcher used this technique to improve the possibility of gathering enough and reliable data from the market. The respondents had the discretion to answer each question. Moreover, the researcher could quickly gain a diverse view of the issue. The researcher obtained information such as the advantages and disadvantages of outsourcing, and the benefits associated with public service provision through Taxi and Uber. The responses were reviewed before delivering them to the target audience. Hence, the step focused on eliminating ambiguity, helping the researcher increase the possibility of achieving highly reliable responses. Online delivery of questionnaires also helped the researcher to eliminate travel costs and save on the study time.
Some of the respondents were asked about incorporating public service providers such as taxi and Uber in the company’s transformational strategy. One of them noted that the idea effectively increases transport flexibility because the vehicles serve all routes in the city. They are also fast, and they have fixed charges, depending on the seasons they are boarded. Further, another responded cited the need to ensure safety among workers, and the option will serve this function.
Analysis, Interpretations and Conclusions
The research conducted revealed that ADNOC has partly seized the outsourcing strategy, especially in the maintenance function in various service stations. The company aims to maintain high competitiveness by offering diverse maintenance and supply chain services at all UAE locations. ADNOC at present has commenced implementing contracted services at its main distribution stations. The study revealed that ADNOC is eager to attain a competitive edge through subcontracting, but a few gaps hinder its outsourcing strategy.
Moreover, the research showed that the company is motivated by different factors to opt for outsourcing. Most respondents and the literature reviewed demonstrated that ADNOC strives to remain outstanding in the market. Thus, meeting this goal depends on ADNOC’s extent to which it develops core competencies. According to the research, the company has developed adequate competencies covering several distributional sections. Respondents noted that some of the contracted services include the preservation in the maintenance of air conditioning units, generators, gas identification units, fire alarms, signage and cladding, fuel dispensers and other repairs. Therefore, it can be interpreted that ADNOC has established a significant service portfolio to satisfy its customers.
To determine the level that outsourcing strategy has been utilized at ADNOC, the study included evaluating the core and non-core services in the company. The respondents noted that the company deals with several non-core operations, including the maintenance of CCTVs, generators, fuel dispensers, air conditioning systems and roller shutters, which have been delegated to contractors. The interviewees also mentioned that ADNOC conducts other maintenance roles in-house because it has developed sufficient expertise. For example, it car wash maintenance, fuel dispensers, CM water pumps, and air compressors. Outsourcing at the company was understood by asking the respondents about the issues driving ADNOC to opt for contracted services. Most of the respondents noted that the company anticipated developing adequate ore competence to guide its operations. They also cited that outsourcing would help ADNOC to provide efficient and effective services.
Further, other respondents noted that ADNOC uses contracted services to minimize operational costs. On the contrary, some interviewees opined that outsourcing provides better expertise and skills, apart from offering flexibility. Furthermore, they cited various rationales, such as access to a broader market through contractors’ latest technologies. It improves the company’s attractiveness at each service station. As a result, the company has attained an optimal market position within the UAE and the global business atmosphere. Outsourcing also helps the company outcompete rivals because the contractors offer the best technologies that cannot be imitated. However, one of the respondents stated that the organization might fail to sustain its competitiveness because it will over depend on contractors. Therefore, the contractual relationship can affect ADNOC’s long-term competitiveness in case the parties breach it.
Two of the respondents further opined that outsourcing had helped the company improve perceived customer benefits, significantly affecting their purchasing decisions. Cost reduction was another factor mentioned. They asserted that ADNOC had been driven by the desire to share variable and fixed costs, which primarily arise from equipment wear and tear and market uncertainties. One respondent stated that the company had transferred maintenance costs due to the fixed expenses, minimizing overall operational expenses. The same respondent said that ADNOC had eliminated the requirement to incorporate intensive capital investment. It has delegated the role of acquiring new preservation technologies to contractors.
Furthermore, the interviewees posited that outsourcing has significantly contributed to high efficiency by incorporating expert knowledge in operations. The same respondents stated that the strategy has benefited from economies of scale arising from subcontracting. Each service station onshore has seen significant returns from optimal equipment utilization. Furthermore, it was noted that the company desired to transform its environment into a knowledge-based enterprise. Therefore, respondents replied that adopting outsourcing helped the company to improve its employees’ skills. They have accessed and worked hands-on with the newest technologies in the automobile industry.
The literature reviewed and the methodology applied revealed that outsourcing has both advantages and disadvantages. On the positive side, it is cost-saving, a fundamental aspect that companies consider in their strategic operations. Outsourcing comprises the main frameworks that organizations adopt to minimize costs, including variable costs, fixed costs, and labor costs. However, ADNOC onshore should undertake intensive expenditure analysis to optimize prices through subcontracting. The strategy is mainly effective if the in-house expense of completing a specific task is higher than outsourcing. Thus, it helps a company to achieve cost reduction in several ways. First, it minimizes maintenance and operational costs because it enables a company to evade the prices arising from equipment depreciation (Pishghadam and Ismaeeli 2). Contractors integrate the latest technology to deliver the best outcomes, relieving the organization from up-from capital investments.
Still, on cost reduction, outsourcing helps start-up businesses and small firms operate despite lacking the financial capability to incorporate maintenance function in-house. Recruiting operations from within would be more costly because installation charges are significantly huge. According to Vaxevanou and Konstantopoulos (572), a company can reduce operational prices by approximately 30 per cent through subcontracting maintenance and human capital. Regarding labor charges, outsourcing adopts new technology in executing its functions. It reduces operating costs by utilizing experienced and expertise in completing similar tasks.
Moreover, the study revealed that subcontracting is instrumental in risk-sharing between the company and the contractor. It not only eliminates but also minimizes risks associated with completing a task. Under ADNOC’s subcontracting strategy, adversities are distributed due to the partnership relationship [between the contractor and the agent. The two institutions must collaborate through shared liabilities and performance duties.
Outsourcing also aims to implement the primary competencies that target organizational success and competitiveness. This is achieved by recruiting experts to complete the tasks that a company lacks the necessary technology to execute. The subcontracted experts are usually self-sufficient instead of the outsourcing company, enabling them to complete the assignments that seem challenging to the organization (Pishghadam and Ismaeeli 4). As a result, the company’s chief executives can prioritize the primary organizational duties. Outsourcing adds value to the subcontracting firm, and the ability to deliver the required outcomes significantly increases with the strategy.
Further, subcontracting is beneficial in terms of an organization’s economies of scale. It was mentioned earlier that there is risk sharing, meaning errors are also minimal. Thus, it enables a company to achieve the desired economies of scale through price minimization and error reduction (Polat and Korkmaz p. 128). The contractors ensure that they incorporate optimal overhead control measures. The company outsourcing them achieves economies of scale by utilizing the best practices, hence minimizing operational inefficiencies. In the end, the company obtains a larger market share by employing the best and result-yielding practices.
Time is another factor that ADNOC considered to selecting outsourcing. It is vital to achieve high operational efficiency in a bid to gain a competitive advantage. The company was motivated to outsource some activities to save time in completing specific tasks because contractors are experienced and experts in the fields they are called to undertake. Thus, human effort deficiency that prevents accompany from undertaking particular tasks is eliminated. It also dissipates the need to restructure staff and train workers to achieve operational efficiency (Clegg et al. 3). Timesaving is a fundamental aspect contributing to organizational overall performance as the chief executives focus on completing major tasks. Therefore, ADNOC Onshore’s cost-benefit analysis should consider this factor as one of the domains of achieving satisfactory productivity levels.
Flexibility is another factor emanating from outsourcing, and it is associated with time management. ADNOC has developed various types of flexibility, including resource, operational, and demand. Its potential to improve depends on its ability to transform service delivery activities to meet the changing market situations. The dynamic nature of businesses calls for strategic response to customer needs. Outsourcing significantly makes an organization flexible to such demands by reducing the time required to complete specific tasks (Akbari 1548). Further, as a company seeks to achieve a competitive advantage, rapid response when implementing corrective maintenance. Through this strategy, the contracting firm influences the operators to ensure optimal execution of services.
Moreover, flexibility is vital in handling a challenging workload. The study revealed that the company’s ability to deal with a workload improves as they transfer duties to the outsourced stakeholders. Further, a firm should not adjust its staff structure such that it increases the number of employees needed to complete articular assignments (Akbari 1548). Thus, flexibility arising from outsourcing saves a company the cost of raising human capital, which might even fail to be engaged adequately during unproductive periods.
Lastly, the research showed that quality improvement arises from subcontracting, and it is a critical element in finding the customers’ return behavior. Organizational managers at ADNOC should consider the importance of investing in effective transportation plans, assurance, control, and improvement (Akbari 1548). If the company perceives quality as a crucial factor in attaining sustainability and competitive advantage, outsourcing is the ultimate aspect for continuous improvement. Therefore, ADNOC’s transportation decisions should be based on the need to meet specific client requirements.
Having discussed the pros of outsourcing, it is necessary to highlight some of its disadvantages. On the one hand, the company faces operational risks while subcontracting transportation. It was noted that outsourcing involves the transfer of specific tasks to external operators based on special agreements (Polat and Korkmaz 122). However, the course may prevent organizational operational efficiency, such that it does not meet its clients’ requirements. Further, the company may outsource a firm before conducting extensive analysis to ensure they do not take poor service providers. The outsourcing firm may also lose control due to delegation of duties; therefore, it may fail to achieve its desired outcome. Similarly, the company may end up developing dependencies, creating unforeseen discrepancies. Thus, ADNOC should incorporate a systematic methodology, which guides the implementation of a sourcing strategy.
Outsourcing also poses strategic risks because contractors often develop opportunistic behaviors. The primary function of an outsourced enterprise is to provide consultancy services. However, the objective is achieved through the provision of adequate information concerning the operational strategy. In this course, the outsourced company may tale confidential information, including intellectual proprietorship rights, jeopardizing its competitiveness. Such risks result from the differences amongst subcontracted firms’ employees. Moreover, understaffing can affect the outsourced company. The service provider may increase prices during contract renewals after ensuring that the host company cannot avoid their contractual relationship.
Lastly, composite risks will arise when ADNOC has continually implemented subcontracting strategy for a long time. In this case, the host company, perhaps, has not developed the required operational capabilities to aid in sustaining its long-term productivity by the time the contract expires. A company that has not developed core competencies on its services from the outsourced firm will suffer the consequences.
It was noted that public service for passenger transport is beneficial in disparate ways. They match passengers and drivers using mobile technologies, where geographically located demand in real-time. Suitability considers factors and attempts to optimize the offers depending on the passengers’ willingness to share transport with their peers. ADNOC will reduce travel time using public service providers because a vehicle is assigned a nearby passenger. Additionally, the system is efficient because it gives passengers a driver depending on the street they are traveling. However, complex demand patterns will not be met because some customers may need transport available within short periods.
Moreover, public transportation offers services across a wide area, and they can accommodate more vehicles than the outsourced ones. Therefore, the company will be able to match demand and supply within a metropolitan area onshore. The cars will reach scale effects, and the supply chain team will reposition them accordingly. Regarding the regulatory setting, public Taxis and Ubers are regulated, apart from serving defined areas. The regulations mean that they cannot charge more than the stated values. Therefore, ADNOC’s passengers will save on transport costs because they will pay regular fares. On the contrary, the system will not thrive in competitive forces because charges are affected by rent-seeking behavior. The option also benefits the company because fare and supply are flexible. Taxis and Ubers can quickly adapt to demand changes by adding more vehicles and raising fares in an acute mismatch. Thus, passengers will either travel during peak seasons and pay higher fares or wait for them to drop.
Recommendations
Outsourcing Benefits:
- Cost reduction.
- High quality of services.
- Company’s competitive advantage.
Outsourcing Negative Implications:
- Overdependence on external resources.
- ADNOC can lose business control and core competencies.
- Suppliers might enter the market.
- Conflicts of interest with contractors.
- Risk of leaking ADNOC’s confidential information.
- Outsiders can fail to adhere to ADNOC’s conventions.
It was mentioned earlier that ADNOC focuses on offering efficient automobile maintenance services within various locations. Thus, it can enhance its competitive edge by subcontracting non-core activities. The ability to provide outstanding services might be diminished by the wear and tear of machines and equipment in the company. Thus, it is recommended that ADNOC adopts outsourcing explicitly in maintenance.. Furthermore, ADNOC can manage composite risks discussed earlier by developing core competencies regarding the services received from contracted firms. Similarly, they can manage strategic and operational risks by integrating preventive measures, especially in maintenance, because this project targets the company’s transport sector. One of the identified preventative measures that ADNOC can adopt is effective planning to subcontract. For instance, the company should ensure continuous accountability when implementing the strategy. Additionally, the manager should appreciate the significance of outsourcing some services, but they should delegate responsibility.
It was also noted that ADNOC benefits in disparate ways from outsourcing. However, the company’s supply chain managers should appreciate risk existence. The main challenges result from improperly designed methodologies, which organizational managers can seize while implementing contracted services. It is necessary to formulate outsourcing strategies from effective methods, mainly the alignment of such frameworks with the company’s business strategy. Further, today’s oil and gas industries experience significant transformations due to the changes in customer needs. Thus, ADNOC should develop a high response rate to such changes by embracing transformational strategies in passenger transport. Combining outsourcing and public service providers is necessary to offer optimum transport services.
Conclusion
Further, it was earlier stated that outsourcing could make ADNOC over-dependent on contracted services, affecting its competitiveness if the contract is terminated or when the agreement is breached. Thus, the organization should involve its employees in the collaborations that strengthen the contractors and the firm’s bond as they seek to develop long-term skills to retain in the company. In case it should include public service vehicles, ADNOC Onshore should expand infrastructure, such as using light rail and capacity to accommodate new cars. It should also reconstruct roads and parking spaces for public transit. Separating pedestrian walkways will make the option more attractive by reducing congestion. It should focus on using distance-based auto-insurance and compliance with transport regulations to ensure smooth operations.
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