How Cross-functional Collaboration Influences Purchasing Performance: A Case Study of an Omani

Oil Company

By

XXXXXXX

A DISSERTATION

Submitted to

The University of Liverpool

In partial fulfilment of the requirements

for the degree of

MSc in Operations and Supply Chain Management

2019

SUBMISSION STATEMENT

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I hereby certify that this paper constitutes my own product, that where the language of others is set
forth, quotation marks so indicate, and that appropriate credit is given where I have used the
language, ideas, expressions or writings of another.

Signed:XXXXXXXX

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 ABSTRACT
Purpose – The aim of this research was to evaluate the influence of cross-functional team
collaboration and shared leadership on purchasing performance of the oil and gas industry in Oman.

Design/methodology/approach – The variables that were measured to evaluate the effectiveness of

cross-functional collaboration on purchasing performance include cost, quality, efficiency, delivery,
and supplier relationship. In this exploratory study, the major stakeholders particularly those who were
directly involved in the CAPEX purchase of essential production equipment in an Omani Oil and Gas
Company were contacted and interviewed at lengh. An in-depth general interview questionnaire was
administered to them followed by a focus group meeting with all respondents to retrieve their
response on the effectiveness of cross-functional collaboration in the context of purchasing
performance. In this way, a flexible conclusion was deduced which helped to set the dimension for
future studies regarding the impact of cross-functional collaboration on purchasing performance in an
organization.

Findings – The implications of this research indicate that [To be continued after data collection]

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ACKNOWLEDGEMENTS

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 TABLE OF CONTENTS
SUBMISSION STATEMENT.................................................................................................. I

ABSTRACT ......................................................................................................................... III

ACKNOWLEDGEMENTS .................................................................................................... IV

TABLE OF CONTENTS ....................................................................................................... V

CHAPTER 1: INTRODUCTION ......................................................................................... 1

1.1. INTRODUCTION ....................................................................................................................................... 1

1.2. BACKGROUND ......................................................................................................................................... 2
1.3. RESEARCH JUSTIFICATION....................................................................................................................... 3
1.4. AIMS, OBJECTIVES AND RESEARCH QUESTIONS...................................................................................... 3
1.5. METHODOLOGY ...................................................................................................................................... 4
1.6. DISSERTATION OUTLINE.......................................................................................................................... 4
1.7. SIGNIFICANCE OF THE RESEARCH............................................................................................................ 4

CHAPTER 2: LITERATURE REVIEW............................................................................... 5

2.1. INTRODUCTION ....................................................................................................................................... 5

2.2. COLLABORATION IN SUPPLY CHAIN FOR PERFORMANCE IMPROVEMENT ............................................. 5
2.3. CHARACTERISTICS OF PETROLEUM INDUSTRY ........................................................................................ 5
2.4. ACTIVITIES IN THE UPSTREAM INDUSTRIES ............................................................................................. 6
2.5. QUALITY OF CROSS-FUNCTIONAL COLLABORATION ............................................................................... 6
2.6. IMPROVING THE QUALITY OF VIRTUAL COLLABORATION....................................................................... 7
2.7. CROSS-FUNCTIONAL COLLABORATION IMPROVING DECISION-MAKING ............................................... 7
2.8. CROSS-FUNCTIONAL TEAM ..................................................................................................................... 8
2.9. OPENNESS IN CROSS-FUNCTIONAL TEAMS ............................................................................................. 8
2.10. EVALUATING PURCHASING PERFORMANCE ....................................................................................... 9
2.11. PERFORMANCE MEASURES .............................................................................................................. 10
2.12. COST REDUCTION IN THE PETROLEUM INDUSTRY ............................................................................ 11
2.13. BENEFITS OF CROSS-FUNCTIONAL COLLABORATION ........................................................................ 11
2.14. KEY INDICATORS OF CROSS-FUNCTIONAL COLLABORATION AND PURCHASING PERFORMANCE .... 12
2.15. ISSUES IN THE CONTEMPORARY PROCUREMENT/SUPPLY CHAIN .................................................... 13
2.16. THEORETICAL FRAMEWORK ............................................................................................................. 14
2.17. INHERENT GAPS IN THE LITERATURE REVIEW ................................................................................... 19

CHAPTER 3: METHODOLOGY ...................................................................................... 19

3.1. RESEARCH APPROACH .......................................................................................................................... 20

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 3.2. RESEARCH DESIGN ................................................................................................................................ 20
3.3. RESEARCH INSTRUMENT ....................................................................................................................... 22
3.4. SAMPLING STRATEGIES ......................................................................................................................... 22
3.5. STUDY PARTICIPANTS ........................................................................................................................... 23
3.6. DATA ANALYSIS ..................................................................................................................................... 23
3.7. VALIDATION .......................................................................................................................................... 23
3.8. ETHICAL CONSIDERATIONS ................................................................................................................... 23

APPENDIX 1: CASE STUDY – CAPEX PURCHASE ......................................................... 41

APPENDIX 2: IN-DEPTH INTERVIEW QUESTIONS ......................................................... 44

REFERENCES ................................................................................................................... 45

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 CHAPTER 1: INTRODUCTION

1.1. INTRODUCTION
The evolving business trends across the world have compelled the oil and gas industry to adopt better
approaches and in particular to inward efficiencies to deal with the problems of fluctuating oil prices in
the international market. The process of purchasing was ignored in this industry for quite some time
due to the large gap between historic revenues and costs of production. Market players within the oil
and gas industry introduced advanced technology to enhance productivity from a technical
perspective; however, paid little attention to optimising the purchasing performance.

This reduced focus and negligence have created many problems for the oil and gas industry, which
has forced the major stakeholders to understand the value of procurement management. In the last
decade, oil and gas firms have taken initiatives to organise their procurement management and
expand their profit margins without increasing the costs to develop a competitive advantage (Yusuf et
al., 2012). According to research, procurement management of oil and gas industries is multifarious
and prone to high risk (Esteves& Barclay, 2011). Besides that, the ever-increasing demand forthe oil
and gas supplies have made the procurement management a complex task for the stakeholders of oil
and gas industry (Yusuf et al., 2011).

The major problem for procurement management in the oil and gas industry is the unnecessary
increase in the lead time, which occurs due to longer distances between supply markets and the
oilfields, including oil processing facilities. The oil and gas companies have to invest money in
inventories to ensure the safety of the supply chain. This investment in the form of maintaining safety
stock to combat price fluctuations reduces the profit margins and increase the cost (Chopra &Sodhi,
2004).

Primarily, this research aims to investigate how cross-functional collaboration has

influencedpurchasing performance in a selected oil company in Oman. This study further examines
the effects of organisational culture and leadership on the supply chain performance in an
organisation in context to inter-departmental integration and collaboration. The challenges faced by an
oil company in Oman in managing their purchasing performance by inquiring the role of cross-
functional collaboration. The topic is of great interest for the researcher given it studies the purchasing
performance by focusing it on purchasing processes and procedures and how they tie-up with
different departments in the organisation.

In this chapter, a background highlights cross-functional collaboration and its importance and role in
improving purchasing performance. The gaps in the literature are presented in the light of ways cross-
functional collaboration improves purchasing performance. The research problem and proposed
approach to closing gaps in the literature are summarized by the aims of the study, objectives of the
study, research questions and significance of the study.

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1.2. BACKGROUND
The demand and supply of crude oil and other petroleum products is the primary driving force of the
world economy. The continuous fluctuation in the demand and supply of petroleum products
combined with political intervention has created an uphill task for the oil and gas industry to remain
competitive. There are also severe fluctuations in the price of petroleum products(Chopra &Sodhi,
2004). In such a complex scenario, petroleum companies are continuously and consistently exploring
every opportunity to enhance their profit margin.

Petroleum products are the primary source of world energy, and it covers 30% energy demands of the
world since 1990 (British Petroleum, 2016). Petroleum products power the vehicles and run the
chimneys of the industries which create new avenues of economic, industrial and technological
development across the world. The diversified, growing demands of petroleum products depend on
sustainable supply chain management practices. Operation and maintenance of the petroleum supply
chain is an expensive and complicated process. Petroleum supply chain requires enormous
investment; therefore, petroleum companies are looking for cheap and efficient techniques to caterto
the growing demands of the industry. Planning an effective petroleum supply chain needs utmost
caution as errors at any step may result in a significant increase in the cost as well as may cause
severe environmental damage. Most countries in the Middle East and predominantly in the Gulf
states, the supply chain of the oil companies also serve as a vital link to satisfy the rigid and
complexities of the requirements of the Exploration and Production Sharing Agreement (EPSA). This
also applies toOman, where the Exploration and Production Sharing Agreement (EPSA) has set out
specific requirements that need to be addressed during the supply chain operations of oil companies.

Elsaghier (2017) has highlighted the need for effective management and optimisation of the supply
chain in the petroleum industry, where the supply chain costs around 40% of the total expenditure.
Advancement in technology has enabled the researchers to develop quantitative models and use
programming techniques to enhance the efficiency of the petroleum supply chain. The recent
economic slowdown has exerted pressure on petroleum companies to abandon their plan of
developing new refineries and optimise the working capacity of the existing facilities. It is imperative to
develop a robust petroleum supply chain to cope with the uncertainties and to make necessary
adjustments both in the internal and external environment of the petroleum industry. Since the last
decade, the researcher’s professional role has progressively focused on optimising the existing
petroleum supply chain with the help of different technique and programming models.

Historically, purchasing was not recognized as a critical operational function. According to a study,
purchasing was considered as a minor contributor to the performance of any industry (Ammer, 1974).
However, the competitive global economy has highlighted the importance of purchasing in the
success of the oil and gas industry. The traditional supply chain is transformed into a globally
dispersed chain with several stakeholders spread across various parts of the world. This dispersal has
led to the advent of a new form of the petroleum supply chain (Krause, Scannell&Calantone, 2000).

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Resultantly, the importance of procurement in this type of supply chain has become cardinal in the
success of the oil and gas industry (Gonza’les-Benito, 2007).

1.3. RESEARCH JUSTIFICATION

The supply chain of the oil and gas industry is widely dispersed and consists of varied processes.
There are numerous stakeholders, which participate in the management of the petroleum supply
chain. All these stakeholders provide mechanical, electrical and professional support to ensure
smooth operations of the petroleum supply chain. Furthermore, legal expertise and project
management skills are also required to ensure smooth contracts among the stakeholders of the
petroleum supply chain. In such a complex supply chain, procurement has gained the Centre stage
understandably.

Reliability of supply chain management is critical in ensuring the quality and timing of supply lines.
The productivity and profitability of an oil and gas company are affected by the quality, time and cost
of supplies. Any delay in the production and faulty delivery significantly deteriorates the profit
generation capacity. Furthermore, the lack of standard quality inputs also creates safety issues for the
oil and gas industry.

In recent years, and in particular after the global economic crunch, the demand for hydrocarbon has
declined or somewhat waned off. This (amongst other factors) led to a substantial decrease in oil and
gas prices, and prices have stabilised at the much lower rate of mid-US $60 per barrel. This fall in
prices along with the high cost of maintaining a constant supply of materials and services has created
significant pressure and strain on the profit generation of upstream companies (Sharma et al., 2016).

The upstream companies depend on third-party for maintaining their raw material supplies which
amount of 80% of operating costs. Therefore, in order to enhance the cash flow, the upstream
companies need to explore inward for efficiencies in the process chain and sustainability in their
supply chain through cross-functional collaboration. The role of procurement officers has become
more daunting, wide-ranging and challenging. Procurement officers need to maintain a balance
between the costs incurred for maintain supplies and delivering quality products to the customers at
the end of the supply chain timely. Therefore, cross-functional collaboration is essential in managing
both the short and long-term goals of oil and gas companies.

1.4. AIMS, OBJECTIVES AND RESEARCH QUESTIONS

The overall aim of the study is to evaluate the influence of cross-functional team’s collaboration and
shared leadership on purchasing performance of the oil and gas industry in Oman. It will analyse
themes impacting the purchasing function due to cross-functional challenges and whether leadership
can play a significant role.

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1.5. METHODOLOGY
In this research, an exploratory approach was adopted to collect the data. The major stakeholders in
the Omani Oil and Gas industry were interviewed to understand their perspective regarding cross-
functional collaboration. The in-depth interviews enable one-on-one engagement, which will provide
reliable information. A set of questions were prepared that elaborates the research objectives, and the
interviewer asked the questions in the in-depth interviews. Due care was taken to prevent the loss of
any detail during interviews.

1.6. DISSERTATION OUTLINE

The dissertation wasorganised in a transparent way to convey the problem identified in the literature
review. It then builds a theoretical framework to formulate hypothesis complementing the research
aims and objectives. Then a detailed methodology is presented which demonstrate all the steps from
beginning till the end deployed in this research to get the data. Moreover, the detailed analysis of the
result is presented in the subsequent sections, and finally, a discussion and conclusion are drawn
which lay the foundation of future implications.

Dissertation Layout

Chapter 1: Introduction

Chapter 2: Literature Review

Chapter 3: Methodology

Chapter 4: Results, Analysis and Discussion

Chapter 5: Conclusions, Implications and Recommendations

1.7. SIGNIFICANCE OF THE RESEARCH

Cross-functional collaboration is imperative for supply chain management in the petroleum industry
(Danese, 2007; Nyaga Whipple & Lynch, 2010; Ramanathan, Bentley & Pang., 2014). Cross-
functional collaboration helps in interactive and quick yet effective decision making, enhancing
efficiency, and information sharing and reducing the cost of the petroleum supply chain. This research
highlights the benefit of the collaborative supply chain for the oil and gas industry in Oman. In this
management practice, the data was shared among all the members of the cross-functional team,
which helped in forecasting the demand for required operational goods and services and thus
enhance the performance. The previous literature has limited data available on the factors that
influence supply chain collaboration.

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 CHAPTER 2: LITERATURE REVIEW

2.1. INTRODUCTION
Cross-functional collaboration in the supply chains has gained popularity among business researchers
since the last decade. The new dynamics such as shorter life cycles of the products, the downward
slide of prices, and the emergence of low-cost competitors have pushed the markets to modify the
supply chain to gain competitive advantage. The petroleum industry is one of the leading sources of
global revenue generation, but the literature on cross-functional collaboration in the petroleum supply
chain is scarce. In the 70s and 80s, the petroleum industry giants were more focused on the cost of
constructing new oil wells rather than running and operations of these new wells, and thus a little
attention was given to outline the long-term procurement strategies. The after-sales services were
affected as the contractors were following the approach of ‘sell and forget’. The industry was not long
term partnership focused. These gaps created additional risksto the oil and gas industry. There are
multiple stakeholders that are involved in the oil and gas sector, investors, government, private sector,
technology and equipment used to extract oil and gas. Despite the involvement of multiple
stakeholders, the procurement approaches are traditional, which has rendered the oil and gas
industry highly prone to the risk of losing revenue. According to a report issued by World Economic
Forum (2017), any industry can revamp its business operations through technological improvement,
reducing cost and formulating innovative procurement strategies such as joint ventures and leasing.
Therefore, the aim of this chapter is to critically evaluate the existing literature on cross-link
collaboration and the prevalent purchasing performance of the oil and gas industry.

2.2. COLLABORATION IN SUPPLY CHAIN FOR PERFORMANCE IMPROVEMENT

There is a bundle of literature on the supply chain management which has beenpractised around the
world in business. However, the cross-functional collaboration in the supply chain is a relatively novel
idea, and it is gaining momentum at a tremendous pace. In the sections below, the characteristics of
the petroleum industry are presented as well as the cross-link collaboration that is being carried out in
the petroleum industry to optimise the performance and the purchasing process. Collaboration
between different function in an organisation ideally on the grounds of communication, cooperation
and coordination are very important in improving performance (Saaraniand Bakri, 2012).

2.3. CHARACTERISTICS OF PETROLEUM INDUSTRY

Almost every country of the world is influenced by the petroleum industry due to its larger operational
areas and increasing demand for petroleum products (Doric &Dimovski, 2018). Petroleum companies
can be categorisedbased on four different functions it performs (Misund et al., 2008). These four
functions include transportation, exploration and production, refining and processing and finally,
marketing and distribution. There are two main streams of the petroleum industry which include
upstream and downstream (Cibin& Grant, 1996).

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The ‘upstream’ industries include the producers of petroleum products, and these are also involved in
exploration activities such as Exxon Mobil, whereas ‘downstream’ industries include the oil refineries
and transportation companies. In this research, the main focus is on the collaboration among various
stakeholders of the petroleum supply chain and its impact on purchasing performance. In the
upstream industries, there is a significantly higher level of risk as compared to that of downstream
industries (Ross, 2004). The significant risk arises from the uncertainty of the recovery of the oil from
the producing field (Baddour, 1997). There is no correlation between the higher capital investments
and the activities performed in the upstream industries which makes them prone to extremely high-
risk (Baddour, 1997). Despite that extremely high-risk the industries in the upstream are considered
knowledge-intensive industries (Bartram & Wood, 2009).

2.4. ACTIVITIES IN THE UPSTREAM INDUSTRIES

In the upstream petroleum industries, the activities are divided into four different stages (Hultzsch,
Lake & Gilbert, 2007). These four stages include exploration, appraisal, development, and production.

 In the first stage of exploration, two activities are performed (i) the industry applies for a license to
uptake the exploration and drilling task (Favero&Pesaran, 1994). After getting a license the
company performs geological surveys to ensure that oil is available in that area; (ii) the second
activity of the first stage is drilling of exploration wells to determine whether the reservoir is active
or dry (Favero&Pesaran, 1994).

 The second stage is the appraisal in which new fields are discovered, and appraisal of that field
starts. At this stage, the company performs drilling of appraisal wells along with the exploration
wells to determine the size of the newly discovered field and to evaluate the development options
for the new field (Favero&Pesaran, 1994).

 The third stage is developed in which the company prepares a plan to develop the oil field with a
well-defined previously found reserves of lower risk. It takes on average 7 years to cover all the
events of appraisal and development stage.

 The final stage is that of production, during which the extraction of petroleum products starts
(Cassells, 1999).

2.5. QUALITY OF CROSS-FUNCTIONAL COLLABORATION

Managing the running oil fields is becoming problematic for the managers. The oil fields are maturing
at a faster rate and pressure is mounting on the managers to find innovative solutions. This can be
possible through a collaboration from a variety of skilled persons with a technical background
(Hickman, Guidry & Seaton, 2008). Traditionally the complex problems are resolved by ‘subject matter
experts’ (Roland, Yttredal&Moldskred, 2008). However, this method of resolving problems has

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become obsolete. The world is moving forward rapidly, and therefore it is critical that all the technical
experts from different disciplines work in collaboration in multidisciplinary teams to yield positive
results (Roland, Yttredal&Moldskred, 2008). It is interesting to note that developing a cross-functional
collaborative team depends on cutting off the functional silo mentality (Gryskiewicz&Knoppe, 2009).

2.6. IMPROVING THE QUALITY OF VIRTUAL COLLABORATION

Cross-functional collaboration occurs among the technical workforce,which is geographically
dispersed; this form of collaboration is called virtual collaboration. In the petroleum industry, virtual
collaboration has altered the concept of the collaborative work environment. Previously, in the
petroleum industry, the production facilities and the expert support was dispersed within the
organisation. Besides that, the support of external experts was also sought when required (Bessant et
al., 2003). Personnel of the petroleum industry are trained to work across distant and remote
locations. However, the use of technology has helped collaboration among the personnel of the
petroleum industry (Bayerl et al., 2008). At the start of the 21st century, the collaboration among
personnel of the petroleum industry started taking place in real-time (Hickman, Guidry & Seaton,
2008). This environment is equipped with all the advanced hardware and software to assist
videoconferencing, data exchange and audio collaboration with the help of computing devices (Philips
et al., 2007; Vindasius, 2008). In the collaborative work environment, a synchronous atmosphere is
provided which facilitates the personnel to share visual artefacts in real-time (Churchill &Snowdon,
1998).

2.7. CROSS-FUNCTIONAL COLLABORATION IMPROVING DECISION-MAKING

Several studies have revealed the critical importance of sharing relevant data and information in the
upstream petroleum industries to make the right decision (Babadagli, 2007; Yawanarajah et al., 2008;
Costa &Schiozer, 2003). Similarly, one of the studies has argued that petroleum companies need
real-time data to make prudent decisions to improve the efficiency of their oil and gas production and
reduce the costs (Landgren&Sood, 2006). Cross-functional collaboration within the collaborative work
environments provides the opportunity to all the officials to exchange real-time information regarding
oil exploration and development of fields (Bayerl et al., 2008). The sharing of information helps in
decision-making which ultimately optimise the operations of the upstream petroleum industry in
specific (Baaziz&Quoniam, 2013) and any business environment in general (Ghobadi&D’Ambra,
2012), making them reliable and efficient. In the cross-functional collaborative environment the time
spent to make a prudent decision is shortened which helps the industry to be more competitive
(Bayerl et al., 2008; Edwards, Saunders & Moore-Cernoch, 2006). The collaborative work
environments strengthen decision-making process (Henriquez et al., 2007). According to a study,
cross-functional collaboration improves the quality of decision-making (Taylor & Fosse, 2006).

One of the other salient features of the industry is the lack of relianceon long term partnership models
with its key suppliers. The openness and nature of the tendering process discourage Oil companies
from building long term relationships with its key providers of services. This model of sourcing goods

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and services are more prevalent in the government and semi-government organisations and those
having joint venture partnerships or have signed exploration and production lease agreements with
governments. Most contracts are typically 2-4 year range, thus a very short term mindset.

2.8. CROSS-FUNCTIONAL TEAM

Cross-Functional Team (CFT) consist of a particular group of people with functional expertise to
achieve the strategic objectives (Krajewski&Ritzman, 2005). According to some studies, the success
factors of the cross-functional team include motivation (Webber, 2002), organizational flexibility( Liu,
Li, & Wei, 2009), functional diversity ( Clark, Amundson&Cardy, 2002), strong communication
(Ghobadian&Gallear, 1997) and empowerment (McDonough III, 2000). There areseveral advantages
and drawbacks of cross-functional teams. One significant advantage is the wide range of information
utilisation (Lee & Chen, 2007). This information is obtained from people with a diverse range of
expertise such as people from finance, human resource management, technical department, and
production department. Collaboration among personnel with a diverse range of skills gives functional
diversity to the cross-functional team. It is important to note that cross-functional teams are organised
as a small team to simplify the collaboration and develop robust horizontal relationships among the
members of the team. In the complex hierarchy, internal rifts are common, which render the cross-
functional team ineffective (Mohamed et al., 2004).

There are some drawbacks of cross-functional teams if their collaboration is not carried out in a
coordinated fashion. The smooth functioning of the team is interrupted when too much functionality is
emphasised in cross-functional teams. It causes a lack of innovation in the cross-functional teams,
and the purpose of forming them is lost. Appropriate leadership is vital to ensure the success of the
cross-functional team. The leader provides clear objectives to the cross-functional team and facilitates
synchronised decision-making within the team. Furthermore, a CFT leader also helps in conflict
management that arises in the team.

2.9. OPENNESS IN CROSS-FUNCTIONAL TEAMS

Cross-functional teams are highly flexible and promote the innovation process, which helps in finding
novel ways to achieve strategic objectives. However, it must be noted that innovation is an antecedent
of openness. One of the studies has reported that the level of openness of large organisations is
relatively smaller than that of SMEs (Van de Vrande et al., 2009). It suggests that small and medium-
sized enterprises are more innovative with maximum organisational flexibility and more collaboration
among the smile hierarchy. The organisations have to take some risks to apply unmatched new
knowledge, and only the firms with open organisational structure will be able to adapt to newness. In
the context of these facts, it can be said that cross-functional teams are flexible and play a critical role
in advancing innovation within an organisation.

Furthermore, these teams also create an open climate which facilitates in embracing novel
knowledge. In the petroleum industry, the purchasing performance enhances when cross-functional
teams collaborate which results in innovation and encourage coordinated decision-making. The

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flexibility of CFTs also enables it to formulate robust relations with external partners, which helps in
optimising the business operations.

2.10. EVALUATING PURCHASING PERFORMANCE

According to Puschmann& Alt. (2005), the purchasing process of the petroleum industry is divided
into two mainstreams, an upstream and a downstream. These two streams have different functions,
and different purchasing processes are involved in oil exploration, extraction, refining, sales, and
distribution the buyers. The purchasing process of the petroleum industry is complex and include
different stakeholders performing various operations. Disturbance at any process halts the whole
process of procurement. Therefore, it is crucial for the success of petroleum industry that purchasing
process is carried out by robust deliberation and collaboration among the technical experts, together
with the procurement teams to meet the evolving demands as well as providing quality products to the
customers in a timely fashion.

In the petroleum industry, the purchasing decision is bifurcated into two main categories; either “make
or buy”. They make decisions in purchasing regarding the extracting machines and installing all the
equipment at the oil filed to extract oil and gas from the reserve. According to a study, during these
purchasing decisions, concerned petroleum company purchase the components and all the necessary
equipment required to extract petroleum products from the reserve (Osmundsen, 1999). This study
further argued that contemporary oil and gas companies are focused on developing novel strategies
to reduce the purchasing cost and meet the evolving global demand for oil and gas. The rationale
behind optimising and developing novel strategies to gain a competitive advantage in the marketplace
and expand the profit generation capacity as well as reducing the procurement costs.

Sustainable procurement strategies are devised to reduce wastage, enhance competitiveness, and
save costs in the form of supply chain management. Oil and Gas companies have started
sustainability programs as a part of their sustainability strategy and performance optimisation. In these
programs, local transportation networks are integrated with the oil and gas fields at different locations
to ensure the unbridled supply of petroleum products (Hajjari et al., 2017).

The petroleum industry also emphasises on carrying out business operations in a sustainable way to
ensure cost-effective procurement. As a part of this strategy, the suppliers are expected to observe
ethical standards and ensure smooth supply lines of petroleum products. Furthermore, the
procurement strategy layparticular emphasis on maintaining high safety standards to avoid any
catastrophic event (Hodgkinson, 2001). There is a particularconcern on the environmental and health
issues that may arise due to failure to comply with the safety standards. In this way, the cost
associated with unnatural damage to the environment can be reduced. The procurement strategies of
petroleum companies are comprehensive and offer new avenues to suppliers, buyers, and
companies.

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The procurement strategies can be further polished through transparent, effective and shared
decision making regarding innovative technologies (Wilson &Kuszewski, 2011). The collaborative
team can evaluate all the operations which have any significant impact on the procurement activities.
In this way, operations that increase the procurement cost can be stopped or modified to optimise the
purchasing performance of oil and gas industries (Wilson &kuszewski, 2011).

2.11. PERFORMANCE MEASURES

Previously conducted empirical studies on petroleum supply management have focused on limited
practices that influenced the performance. In this research, all the practices are investigated. The
main focus of this research is on the purchasing practices that significantly contribute to the success
or failure of any organisation in the globalised market economy. In this performance evaluation, the
enabling factors such as cross-functional collaboration and coordinated work environment in
petroleum supply management is reviewed.

Previous literature has shown that the operational and financial performance of any organisation has
strategic implications for its purchasing power (Carr & Pearson, 1999; Chen &Paulraj, 2004).
According to a study, strategic purchasing is the integration of all the processes and knowledge to
formulate a cohesive and progressive goal to ensure organisational success (Chen &Paulraj, 2004).
In strategic purchasing, a relational supplier interaction takes place which enhances the performance
of buyers (Paulraj, Chen & Flynn., 2006).

According to Naslund& Williamson (2010), effective supply chain management depends on the
integration of all the functions such as purchasing, production management, logistics and the
marketing of the products. These functions seem distinct to each other. However, they overlap with
each other in some functions and purpose. Therefore, it is imperative to integrate all the overlapping
functions of these variables to execute a robust petroleum supply chain strategies.

Several researchers have contributed their empirical findings to determine the implications of
integrating overlapping functions on the successful management of the petroleum supply chain. One
of the studies demonstrated the positive impact of integrating purchasing variable on the buyer-
supplier relationships and improving the manufacturing performance (Narasimhan& Das, 2001).
Similarly, one another researcher propelled the idea of strategic integration with the purchasing
competence, and it was found that strategic alignment helps the firm to achieve higher level
performance (Gonza’les-Benito, 2007). In consonance with these findings, one another study found a
positive impact on the performance of petroleum supply management through strategic alignment at
the plat level (Pagell& Krause, 2002). Likewise, it was found that integrating overlapping functions and
skill levels of employee considerably improve the operational performance (Giunipero,
Handfield&Eltantawy, 2006).

Although the main emphasis of the researcher is on the integration of common functions and its
impact on performance, however, scholars have also evaluated the factors that boost the

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performance of petroleum supply chain to attain a higher level of maturity. One of the studies has
reported that effective performance managementis an enabling factor to optimise the functions of the
petroleum industry (Cousins &Spekman, 2003). There are also some empirical connections between
purchasing talent and strategic purchasing in the petroleum industry (Carr and Smeltzer, 1999).
Based on these findings, it was found that the technical skills of the employees are critical to uplift the
performance of an organisation. Furthermore, these skills positively impact strategic purchasing.
When the highly skilled workforce collaborates in a cross-functional team, the petroleum supply
management moves toward strategic function (Harland, Brenchley& Walker, 2003). In recent studies,
it was reported that effective talent management in the petroleum industry is the key driver of
functional coordination (Englyst et al., 2008) as well as enabling cross-functional integration
(Giunipero, Handfield&Eltantawy, 2006). After careful consideration that purchasing professionals
make strategic decisions, it is imperative that professionals in petroleum supply management acquire
competencies that promote functional integration with other business to ensure talent management
(Giunipero, Handfield&Eltantawy, 2006). Despite these findings, the literature is limited to the positive
impact of functional coordination and cross-functional team collaboration on the purchasing
performance of the petroleum industry.

2.12. COST REDUCTION IN THE PETROLEUM INDUSTRY

One of the surveys(Ramanathan, Bentley, Pang, 2014), revealed that more than 88% of senior
executives of the global oil and gas industry stated that cost reduction is their topmost priority. Almost
10-15% cost is incurred in supply chain management of the petroleum industry (Hagh, Lida, Pranav,
Zarrin, 2017). Therefore, the cost reduction activities are focused on reducing the cost in the supply
chain. One of the recently published reports stated that the reduction in oil prices has increased
tension in the Middle East and therefore, any step towards further reduction of cost in the petroleum
industry will result in political turmoil.

However, one of the studies reported that oil companies are focused on reducing their cost in the
supply chain. This study also reported that extreme cost pressures are also fostering collaboration
among oil and gas companies to maintain high-level of innovation in the petroleum industry. It has
been reported that collaboration is the key to unlock new horizons of innovation. Oil and Gas
companies are collaborating and sharing technical knowledge through joint ventures. Thus, it can be
argued that promoting cross-functional collaboration is expected to reduce the outstanding costs
which are incurred in both upstream and downstream petroleum industries.

During the 2014-2017 period, when oil prices were at the lowest, tremendous efforts were put in place
for receiving price reductions on all service contracts by oil operators(Garside, 2019). Many national
regulators encouraged price negotiation to achieve further savings.

2.13. BENEFITS OF CROSS-FUNCTIONAL COLLABORATION

When the organisationfulfils the demands of the customer, it reaps the benefit in the form of customer
allegiance. In the petroleum industry, with the help cross-functional collaboration, companies can

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meet the evolving demands and build a substantial market presence in the global market. Some other
benefits of cross-functional collaboration include responsiveness to the complex demands, increased
economic value, reduction in logistics cost and smooth maintenance of supply chain (Lee, 2004).

In the petroleum industry, cross-functional collaboration has significant advantages which cater to the
needs of a rapidly evolving globalised world. According to some studies, the collaborative work
environment enhances the flexibility of business operations and the organisations can gain expert
opinions of a highly-skilled workforce across the globe. In this way, it is possible to resolve the
complicated problems in the management of petroleum products at a faster pace. A collaborative
work environment promotes coordination, communication and cooperation, which can result in
reducing high personnel commuting cost in the petroleum industry. Besides that, it also improves the
productivity of the managers and all the stakeholders involved in the petroleum supply chain. The
collaborative work environment also helps in managing the remote activities from a central command
which optimises the performance. Furthermore, collaboration substantially improves the
communication among all the stakeholders in the petroleum industry, which optimises the business
model of the industry and ensures collaborative decision-making.

2.14. KEY INDICATORS OF CROSS-FUNCTIONAL COLLABORATION AND

PURCHASING PERFORMANCE
The primary indicators of cross-functional collaboration in the successful strategic procurement
management include higher turnover in the inventory, hike in revenue generation and cost reduction
(Daugherty et al., 2006). Cross-functional collaboration improves the faster movement of inventory to
the customers as well as reduce the burden of partners. This result in higher revenue generation and
a decrease in the costs. It was also reported that cross-functional collaboration enables higher
productivity and decreases order cycle times (Leonard &Cronan, 2002).

2.14.1. Delivery Speed:

Delivery speed is an essential indicator of the ability of an organisation to deliver the products and
services within the agreed duration (Hult et al., 2006). It provides a competitive advantage to an
organisation (Yusuf et al., 2014). In the petroleum industry, business operations are scattered
geographically, and there are chances of delay in the delivery of petroleum products. In case of any
delay, the inventory cost will rise,which will influence the profit generation capability. Therefore a
cross-functional collaboration is essential to ensure streamlined business operations which are
expected to make the delivery cost-effective and speedy.

2.14.2. Deliver Reliability:

The reliability of an organisation to deliver the products and services appropriately gives it a
substantial competitive advantage. Delivery reliability depends on accurate order fulfilment
(Cagnazzo, Taticchi&Brun, 2010). Therefore, the delivery reliability of the oil and gas industry can be

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achieved through cross-functional integration in its operations. In this way, the cost of delivery can be
controlled and purchasing performance increases.

2.14.3. Quality:
One another important indicator of performance and cross-functional collaboration is the quality of
products and services eventually bought. Effective management of quality of products reduce the
variations in quality performance and also cut extra costs (Cagnazzo, Taticchi&Brun, 2010). One of
the studies has shown a positive correlation between the quality of the product and purchasing
performance (Kannan& Tan, 2005).

2.14.4. Flexibility:
Flexibility in purchasing is the key to meet the uncertain global demands. When a company has
flexibility in its supply chain, it can alter the orders and ensure sustainable purchasing (Hult et al.,
2006). Flexibility is the key feature of a cross-functional team and therefore integrating such team in
the oil and gas industry will yield maximum flexibility in purchasing decision.

2.14.5. Forecast Accuracy:

In the oil and gas industry, forecasting unknown future events is critical to reducing the unforeseen
cost in the form of inventory management. One of the studies has also reported that accurate
forecasting helps in reducing the inventory level, which ultimately saves much money to the
organisation (Ramanathan et al., 2014). The OPEC and IEA also lay particular emphasis on
forecasting to meet the global market demands.

2.14.6. Innovation:
Cross-functional collaboration eases the path to innovate and integrate new strategies in business
operations. It has reported that innovation gives a competitive advantage to the organisation (Menhat,
2017). One of the significant drivers of innovation is the customers’ expectation (Bhagwat& Sharma,
2007). Furthermore, the cross-functional team has members possessing different technical expertise
which allow them to innovate and ultimately reduce the cost incurred in traditional ways of petroleum
supply chain management. Thus, integrating cross-functional collaboration opens the window of
innovation and optimise the purchasing performance of oil and gas industries.

2.15. ISSUES IN THE CONTEMPORARY PROCUREMENT/SUPPLY CHAIN

There are several complicated issues, which have marred the profit margins of petroleum supply
chain. One of the significanthurdles for all the petroleum companies in the development of offshore
oilfield, which is technically complex owing to the high cost and schedule overruns. In order to
overcome this problem, one of the best strategies for oil and companies is to outsource and work in
the form of collaborative teams, including technical and economic experts. In this collaborative
workforce, the process of production and procurement will be optimised.

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Furthermore, a study has reported that petroleum procurements can save tangible cost, which
incurred in the tender bidding process (PILOT, 2002). For instance, the process of preparation of a bid
tender will cost approximately £20,000. In the UKCS with around 40 rigs, they are having the capacity
of drilling six wells per year. The total number of wells drilled in one year is around 240, and around
160 tendered. The bids usually awarded to the contractors who can drill on average seven(7) wells.
Such an innovative cost-saving can result through the integration of cross-functional teams who are
adept in yielding maximum output. Consolidation of contracts within the Oil and Gas sector is a
relatively new phenomenon, with slower throughput. Often, regulatory bodies tied with balancing their
other needs to ensure the pie is wide enough for more players to enjoy the success of the oil sector
rather than consolidating and decreasing the supplier base. Often regulatory authorities have an
ongoing commitment to In-country value generation, which is to grow the base of local providers
extensively. As this is in its infancy stage, focus is usually on quantity rather than quality (particular in
the case within Oman, for example).

One another study has reported that petroleum supply chain management system should be
integrated with cross-functional teams to enhance its productivity (Wilson &Kuszewski, 2011). One of
the major problems is that contractors are the main stakeholder to shoulder the risk in case of any
variation order. In the oil and gas industry variation orders are common, owing to uncertainties in oil
production (Stevenson et al., 2003). Moreover, some additional challenges for procurements in oil and
gas industries include phase overlaps, duplication of activities, fragmentations and complexity in the
organisationalstructure. When oil and gas industries partner with other stakeholders, it still has some
issues of trust and undefined roles and responsibilities. These issues arise during the conceptual
stage of any project. Therefore it is imperative to accurately define the roles and responsibilities and
ensure all the stakeholders have correctly comprehended the objective. In this way, a cohesive and
coordinated decision making can be observed in oil and gas industry which will help optimise the
petroleum supply chain.

2.16. THEORETICAL FRAMEWORK

The literature review shows that the main functions of Petroleum industries are;
includeTransportation, Exploration and production, Refining and processing; and Marketing and
distribution. Following are two mainstreams of Petroleum Industry and functions of upstream
industry(Cibin&Grant, 1996); (Hultzsch, Lake & Gilbert, 2007) which are being focused in the literature

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review:

Petroleum
Industry

Upstream Downstream

Development Exploration Appraisal Production

One of the functions of Cross functional collaboration is improvement of Decision Making. Following
are the factors involved in improving decision making mentioned in studies (Landgren&Sood, 2006);
(Baaziz&Quoniam, 2013); (Taylor & Fosse, 2006):

Real Time
Data

Improving
Decision
Making
Minimum
Reliance on Sharing
Long Term Information
partnership

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Cross-Functional Team (CFT) is a group of people who have expertise to execute certain strategies.
Following are the factors of Cross-Functional Team mentioned in various studies (Webber, 2002);
(Liu, Li, & Wei, 2009); (Clark, Amundson&Cardy, 2002);(Ghobadian&Gallear, 1997); (McDonough III,
2000).:

Organizational Functional Strong

Motivation
flexibility diversity communication

Empowerment

The literature review shows that there are multiple factors that are involved in improving the supply
chain management of petroleum industry and those factors include the following mentioned in
different researches (Narasimhan& Das, 2001); (Gonza’les-Benito, 2007); (Pagell& Krause, 2002);
(Giunipero, Handfield&Eltantawy, 2006); (Carr and Smeltzer, 1999):

buyer-supplier strategic alignment at the

manufacturing strategic integration
relationships plat level

effective performance
skill levels of employee strategic purchasing
management

The most important variables of the study are the indicators that affect the cross-functional
collaboration and purchasing performance concluded by different researches (Yusuf et al., 2014);
(Cagnazzo, Taticchi&Brun, 2010); (Kannan& Tan, 2005); (Hult et al., 2006); (Ramanathan et al.,
2014); (Menhat, 2017), which are following:

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 Quality Felixbility

Delivery Forecast
Reliability Accuracy

Cross-
Functional
Delivery
Collaboration Innovation
speed
and Purchasing
Performance

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 2.16.1. Scrum Literature Framework

Buyer-Suppliers
Relationship
Upstream
functions
Quality
Supply Chain
Process
Delivery speed
Production
Delivery reliability
CrossFunctio
nalCollaborati
on and
Purchasing
Management/
employee Performance
Performance

Communication
Organizational
Roles
Flexibility

Innovation

Decision
making
process

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2.17. INHERENT GAPS IN THE LITERATURE REVIEW
The inherent dynamics and optimising of cross-functional integration or lack thereof in the context of
purchasing performance suggests there are gaps in exploring the efficacy of successfactors of
purchasing performance if there is a breakdown in the cross-functional collaboration or a
counterbalance to the contrary of what is being stated.

While the literature review provides vital information and research on collaboration resulting to better
outcomes in purchasing performance; there is a significant lack or reduced research information on
purchasing performance results where there is a partial or complete breakdown of inter-department
collaboration. Whilst, it could be stated that it is a distinct and natural consequence that logically
follows, this may not necessarily be the case. Many organisations would keep unsuccessful
purchasing stories as confidential due to loss of face or reputational risk or put an artificial united front,
therefore, an inherent lack of research into the areas of where a purchasing decision and outcome
has been impacted negatively due to specifically a lack of coherent collaboration between key
stakeholders during the purchasing process (Eccles, Newquist& Schatz, 2007). It is also possible that
the underlying framework for the purchasing process is rigid and does not allow for flexibility for inter-
department collaboration.

The questionnaire also aims to tease these out in a generic sense, and if specific examples of
purchasing examples are highlighted confidentially, then this would add to the empirical foundation
and dimension for future review and studies.

CHAPTER 3: METHODOLOGY

A research methodology is a procedure of logically investigating a specific problem which has not
been addressed well in the Literature Review. In this chapter, the study design and all the process
that is carried out to conduct this research are explained. This chapter also provides the details of the
planned study design, stages involved in collecting the research data. There area number of factors
that influence the critical issues in the oil and gas industry. Therefore, the methodological approaches
to conduct a study in the oil and gas industry requires careful consideration of all those factors. Some
of these potential factors in the oil and gas industry include the different practices of production at oil
fields, technological advancements, political factors, duration and availability of major stakeholders
and confidentiality of data. In this study, a qualitative research design, the exploratory approach
wasemployed to determine the influences of cross-functional collaboration on purchasing
performance. The following sections will elaborate on the research design, study setting, study
participants, analysis of the research findings and the reliability of the research results.

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3.1. RESEARCH APPROACH
The aim of this research was to optimise the purchasing performance of oil and gas companies in
Oman through the integration of cross-functional collaboration in the industry. The aim of this research
can be set out in three different phases.

 The theoretical framework of this research wasbased on primary and secondary literature.
This phase comprises of the literature review chapter and highlights the significant
shortcomings.

 An empirical investigation of the data, which includes an in-depth interview based on the set
of interview questions provided in Appendix 2. The exploratory approach which helpedin
identifying the strategies to optimise the purchasing performance through collaboration of
cross-functional teams.

 The final phase wasdeveloping a guideline for effectively introducing cross-functional

collaboration in the oil and gas industry to optimise the purchasing performance and develop
an innovative procurement strategy that gives the Omani oil and gas industry a competitive
advantage.

3.2. RESEARCH DESIGN

The research design of any research work is critical in logically investigating an issue. It explains all
the major components of the study and shows how all the steps are interlinked throughout the
process of research. According to a study, the research design is associated with the coherency of all
the steps which are conducted in research (Labaree, 2009). In this research, a qualitative research
approach was applied. The exploratory approach was chosen to answer the research questions. The
main purpose of the exploratory approach was to answer the questions, which were not evaluated in
previous literature and therefore, limited empirical evidence on the subject matter was available. The
current study intended to identify the problems experienced by the oil and gas companies in
collaborating with other stakeholders.

According to Yin (2003), the most effective way to answer questions involving how or why is by using
the interview technique at the same time Block (2011) has supported the notion that interviews can
help trust and readiness to accept the need for change throughout the organisation.

Given the study is related to an identified capital purchase equipment (CAPEX) procured two years
ago. Therefore, systematic sampling method is applied to identify the participants’ those who were
intimately involved in that CAPEX purchase. The potential participants who were directly involved in
the CAPEX purchase were approached via a short email, outlining the objectives of the study, the role
of the researcher, the role of the participant and all other relevant details. It was further highlighted
that the study is not being carried out by the researcher in his usual role as in the organisation, but as
a dissertation study done with the support of the University of Liverpool. It was explained that there is
no obligation whatsoever to take part and participants are free to discontinue at any stage if they feel
uncomfortable or whatever other reason which they feel appropriate. They were invited to ask any

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questions they may have or they can request further clarification if needed. Those who wished to take
part were asked to contact the researcher at which point a full Participant Information Sheet (PIS)were
provided. Participant Consent Forms (PCF) was e-mailed. Potential participants were then had an
opportunity to ask questions and the contact details of the researcher were provided if they wished to
proceed after reading the PIS. A date, time and location for the interview were arranged with each
participant. Before the interview commences, participants had a further opportunity to ask questions
and researcher provided them again the PIS to read again. Those participants who wished to continue
were then given a copy of the Participant Consent Form (PCF) to read and sign.

Interviews were audio-recorded. Recordings were kept until the interview wasanonymously
transcribed and then the original recordings were deleted. Anonymised transcripts will be kept until
the study has been completed by the researcherand submitted successfully to the University.Hard
copies of signed consent forms werekept in a locked filing cabinet to ensure safety and confidentiality
during that time.

Interviews were conducted to gather qualitative research which focuses on gathering information that
wasbased on an individual’s opinions and interpretations. An example of the set of questions that
were asked at the interviews can be found in Appendix 2.These questions were designed to
understand the perspective of major stakeholders on the integration of cross-functional teams and
their influence on purchasing performance of the organisationbeing studied. The resource-based
theoretical framework guides the formulation of these question. The results of the interviews provide
great insight into the purchasing experience and highlight the influences or rather the lack of certain
influences throughout the process. The responses have, with the benefit of hindsight identified areas
of enhancing cooperation and collaboration, which will serve as lessons learnt and a foundation of
future guidelines to the critical functionality of the process.

Responses gathered and obtained through discussions with different stakeholders in their business
environment (Kirk and Miller, 1986). The interviews were conducted independently,and it was ensured
that the stakeholders were highly accessible, the clarifications were conducted throughout, which
enables to ask those poignant questions at a later date (Block, 2011).

Another reason for utilising the interview approach was due to the lack of a standardised set of
measurements, which made it difficult to measure the data obtained on a quantitative level.
Furthermore, the interviews approach allowed for a certain degree of flexibility in the way interviews
were conducted, which in turn wasan essential part of interpretation and conceptualisation.

The problem thatwas identified in this research wascomplex, and exploratory approach simplifiedit
into manageable parts to find the answers. The exploratory approach also helped in gaining a
complete understanding of the context of the problem and potential solutions. Moreover, the
exploratory approach also helpedtheresearcher to detect the loopholes in an organisation and provide
potential solutions. According to a study, the exploratory approach gives meaning to the research
problem and its solutions (Jajoo, 2014). Besides that, it also translates these solutions into empirical

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evidence. However, the researcher must be careful in giving any biased assumption and incorporating
it in the empirical findings.

With the benefit of hindsight, the interview will highlight inherent gaps in the purchasing experience for
the case study chosen. The responses to the interview have highlighted important aspects of how
better outcomes could have materialised and will serve as lessons learnt to those executives
interviewed.

3.3. RESEARCH INSTRUMENT

In this study, in-depth interviews were used as a research instrument to collect primary data and
participants own feedback following the outcomes of the particularly identified CAPEX purchase which
was the identified case study (referenced in Appendix 1). While the participants were not asked direct
and pointed questions at first, with the technique being to concentrate their thoughts on cross-
functional collaboration first, then discussion targeted to the particular example case study eventually.
All efforts were made to give reassurance to participants that their responses did not come with any
ramification or reparation. All participants were selected based on their involvement in the specific
CAPEX purchase being studied. Hence, they already had the background information and the events
took place till the closing of that contract. The interviews do highlight other cases, which are
elaborated in the next section. All the variables were evaluated, which include namely cost/price
saving, quality, delivery and shared leadership for improved purchasing performance. In the current
study, the researcher interacted with research participants in their real-life work settings in order to
observe ways cross-functional teams influence purchasing performance. The researcher gathered
primary data through participant interviews and use of focus groups to share findings to triangulate
data to finalise the final set of recommendations.

3.4. SAMPLING STRATEGIES

The study adopted several sampling strategies which aimed at collection and analysis of the data
through in-depth interviews, wherein the importance of target population was crucial towards
achieving findings that we're trustworthy, reliable and support internal consistency with existing
knowledge on the influence of cross-functional teams on purchasing performance. In this research,
participants were recruited based on their direct involvement and historic knowledge of the case being
studied.

In-depth interviews are designed to comprehend the opinions and feelings of study participants
regarding a particularsubject (Hussey & Hussey, 1997). Open-ended questions are asked in the
interviews to allow the participants to provide a more detailed opinion and provide a more
enormousscope of comparability (May, 1997). The answers of the participants identified themes and
patterns discerned which are discussed in the next section.

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3.5. STUDY PARTICIPANTS
In this study, participants recruited to participate arethosewho were directly involved in the CAPEX
purchase being studied in the Omani oil and gas company. The case study, which was about a critical
and significant CAPEX purchase of equipment (referenced in Appendix 1), was utilized to understand
the influences of departmental collaboration in a purchasing experience in an open yet subtle way,
where the benefit of hindsight was used to see what could have been done better or how the study
participants way of doing business has improved after this particular targeted incident and experience.

The participant recruitment was diverse and from various departments of the organisationwho were
directly involved throughout the life-cycle of the CAPEX purchase in question. For example, projects
department was the client of this CAPEX purchase;supply chain department was the facilitator,
operations department was the subsequent client who will own and operate the equipment after
handover from the projects department. The legal department was also directly involved in sorting out
legal issues relating to claims and non-compliance. Therefore, based on the legacy knowledge of this
specific purchase of the capital equipment, it was simple to identify the participants without any bias to
influence the outcome of this study. Consequently, those who were directly involved in the CAPEX
purchase in an Omani Oil and Gas Company were contacted to participate. These respondents
including the managers were the major stakeholders in cross-functional collaboration who ensures the
smooth functioning of the organisationalsupply chain. The sample size of this research was limited to
five respondents. These five selected respondents represented the different members of a cross-
functional team who provided their opinion regarding the effectiveness of cross-functional
collaboration.

3.6. DATA ANALYSIS

Data analysis will be achieved by using discourse analysis, narrative analysis and qualitative content
analysis that will be integrated to form a data process analysis for different factors are suspected to
explain ways cross-functional collaboration influence purchasing performance.

3.7. VALIDATION
Validation of the research instrument and the findings obtained through the research instrument
wascrucial, specifically for the oil and gas industry. As the research design wasbased on the
exploratory in-depth interview, therefore, validity cannot be established. The research questionnaire
administered in the interviews provided flexibility to the participants to express their opinions without
recourse. Furthermore, the current study design was qualitative research, and this study design has
an interpretive nature which is influenced by subjective judgement. Therefore, no validity test
wasconducted for the research questionnaire.

3.8. ETHICAL CONSIDERATIONS

As the researcher is currently working in the same organisation, therefore, due consideration was
taken to ensure that the researcher does not use personal or professional relationship to influence the

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selection of respondents. The selection was strictly based on the criteria of being intimately involved
in the studied CAPEX purchase. Given the data collection and the participants were directly related to
the sensitive area of the organisation. Therefore, the researcher ensured the privacy of the research
subjects and exercised appropriate commercial sensibility and sensitivity to safeguard the identity of
the organisation.Theresearcher further ensured the anonymity of the organisation and the participants
with due consideration to the honesty and transparency towards the research. The researcher used
emails for initial communications with potential participants. Once data was collected,and recodings
were transcripted anonymously, there was no further use of this information. Therefore, all information
which included personal data or voice recordings of the participants were destroyed to keep the
privacy and confidentiality of the participants. In addition to the above, any information that is
considered sensitive or confidential will be pre-approved from the respondent’s organisation before
being used in this research.

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 CHAPTER 4: RESULTS, ANALYSIS AND DISCUSSION

The chapter begins with the demographic characteristics of the participants who were recruited

through snowball sampling. In this chapter, the result of the exploratory in-depth interview is provided.

The characteristic of all the participants and their opinion regarding the integration of cross-functional

collaboration in the petroleum industry for optimizing procurements.

In this research, an interpretive methodology is applied to decipher the opinions of the study

participants. In the current study, a flexible research strategy was adopted to draw realistic results and

analyze the findings in the real-world context. In this way, the findings of this study can build the

framework for successful integration of cross-functional collaboration in Omani petroleum industry.

4.1. DEMOGRAPHICS AND CHARACTERISTICS OF PARTICIPANTS

In this qualitative exploratory research, the main objective was to establish a relationship between

cross-functional collaboration and purchasing performance. Leaders play a vital role in ensuring the

success of any collaboration, therefore, all the participants in this study were managers of supply

chain and procurement department to analyze their understanding of cross-functional collaboration.

Therefore, snowball sampling was done to select the procurement managers and supply chain

leaders. Fiver participants were randomly selected based on their knowledge of the issue.

Furthermore, in the interview questionnaire, three questions were added to get the details of the

experience of working in the petroleum industry, qualification and any previous experience of working

in cross-functional collaboration. The confidentiality of all the participants is maintained and the

demographics data is presented in Table 1 below.

Table 1: Demographic Characteristics of Study Participants

Interviewee Gender Indicative Designation Qualification Related Industry

(M/F) experience

Respondent 1 Male Senior Procurement Master’s degree in Yes (5 years)

specialist Supply Chain

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Respondent 2 Male Procurement systems Bachelor’ degree in No

assistant business administration

Respondent 3 Male Procurement specialist Bachelor’s degree in No

business

Respondent 4 Male Supply chain Manager Master’s in Supply Chain Yes (3 years)

Management

Respondent 5 Male Procurement Coordinator Bachelor’s degree in Yes (6 years)

purchasing

4.2. INDIVIDUAL INTERVIEW DATA

The interviews of all the participants were analyzed to evaluate the emerging themes and concepts. In

this study, an open-ended design of the questionnaire was used during the interview to get the actual

opinions of the main stakeholders of the petroleum procurement department. There were various

themes that emerged from the opinions of the participants who were clustered under relevant

research questions. All the data of the interviews were analyzed to assess the quality of the data. All

the themes which were generated were assessed carefully to cluster it under relevant research

question and to support the hypothesis. The interview questions are attached in Appendix A. In order

to develop the reliability of the interview questions, all the questions were asked by colleagues and

classmates in the form of a pre-testing. This method of developing reliability of interview was taken

from an interview guide (Clark, 2006b). The data from the mock interview is not included in this study

and the transcripts were discarded after ensuring the reliability of the questionnaire.

The opinions, perceptions, and concepts of the participants are given in detail in Chapter 6. There

was a number of themes which were conveyed by the participants, some of the themes were

redundant in many questions. All the five participants spoke about the cross-functional collaboration

and expressed their opinion in greater depth. The responses of all the participants were cross-

checked to identify common themes that surfaced regularly. All themes that emerged from the

interview were explaining the success and failures of cross-functional collaboration. In this way, the

findings of this study were in consonance with the themes emerged from the literature review. The

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interviewee conveyed a greater understanding of cross-functional collaboration and all the interviewee

demonstrated optimism towards the success of the cross-functional collaboration. Furthermore, the

interviewees also explained the potential problems that hinder successful collaboration. The impact of

leadership on the success of cross-functional collaboration was also evaluated and all the themes are

clustered into a major theme based on the research questions.

4.2.1. Research Question 1: What is the structure of cross-functional collaboration in

petroleum procurement??
The interviews begin with the questions regarding the understanding of respondents on cross-

functional collaboration. The questions of the interview were designed in a way to determine the

concept of cross-functional collaboration and its relationship with the purchasing in the petroleum

industry. Interviewer probed the respondents regarding cross-functional collaboration and stimulated

them to indulge in an open discussion. One of the major ideas that emerged from initial interaction

was that all the respondents believed that the success of cross-functional collaboration depends on

the individual member of the cross-functional team. All the respondents were quick to agree that

effective cross-functional collaboration substantially improves the purchasing performance in the

petroleum industry. However, they also reported that any friction in cross-functional collaboration can

worsen the performance. One of the respondents said, “Poor cross-functional collaboration or lack of

cross-functional collaboration leads to poor productivity which in turn badly affects the purchasing

performance”. Furthermore, respondents also elaborated the concept of good cross-functional

collaboration and agreed on various factors to be critical in determining the success of the cross-

functional collaboration. The respondents also explained that critical factors of cross-functional

collaboration also improve purchasing performance. The major themes on the critical factor for the

success of cross-functional collaboration were found to be Communication, teamwork, and shared

goals. However, the factors that adversely affect the purchasing performance include lack of shared

vision, lack of mutual trust, and changing management priorities.

Themes No- of Respondents

Teamwork and Communication 5

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Lack of Early Engagement in the purchasing process 5

4.2.1.1. UNDERSTANDING THE CROSS-FUNCTIONAL COLLABORATION

In the interview, the major theme related to the cross-functional collaboration was found to be shared

values. The respondents stated that the success of the cross-functional team is linked with the shared

values of all the members if the members of a team have divergent values that would be harmful for

the cross-functional collaboration. All the respondents supported the concept that if cross-functional

teams do not share common values it results in operational delays and substantially reduce the

profitability. Shared values are crucial in the contemporary business environment. When all the

members of cross-functional teams have a shared goal it improves the process of decision-making

and ultimately achieve the goals of the organization. The respondents also stated that shared values

help in positive interaction among all the team members and a comprehensive strategy is formulated

to propel the goals in the global marketplace.

One of respondent 5 stated that “current practices of petroleum procurement lack any cross-functional

collaboration which results in poor planning”. Likewise, another respondent 2 further elaborated the

lack of proper planning in procurement department as “currently oil and gas industries in Oman have

no planning mechanism for petroleum procurement which adversely affects the quality of products as

well as increases the risk of operational hazards”.

Furthermore, respondent 3 argued that “quality of products is lowered due to poor handling of

petroleum products during the supply chain management”. While talking about the cross-functional

collaboration, respondent 1 was of the opinion that, “if a cross-functional team is involved in planning,

it enhances the sustainability of the procurement procedure”. Respondent 1 also stated that in a

cross-functional team, “it is imperative that all the members of a cross-functional team understand

their roles”. In this way, each member will be able to contribute positively to the achievement of

organizational goals. In the current case, the goal of improving purchasing performance can be

achieved if cross-functional teams collaborate and make robust plans for optimum purchasing.

Page 28 of 61
 4.2.1.2. TEAMWORK AND COMMUNICATION
All the respondents believed that teamwork is crucial for the success of the cross-functional

collaboration. Respondent 4 believed that “teamwork pushes all the members to perform and

maximize collaboration which facilitates in reducing the risk of any unplanned initiative in petroleum

purchasing”. All the respondents supported the concept that “collaboration enhances the knowledge

of all the members of a team and enable them to respect the diversity of ideas”. In this way, the team

members are able to get along with each other and advance the goals of optimizing petroleum

purchasing.

One another factor is the clear communication of goals in cross-functional teams. It is the

responsibility of team leaders to communicate achievable goals to the members. All the respondents

agreed that communication is the key to understand the evolving dynamics in the petroleum industry.

Besides that, respondents also suggested that a cross-functional collaboration can yield positive

results if the leaders communicate cohesive and realistic goals.

4.2.2. Research Question: What is the current notion of cross-functional collaboration

in the petroleum supply chain?
Respondent 2 explained that “if the communicated goals do not align with the organizational goals, it

results in poor productivity”. Similarly, respondent 5 suggested that “cross-functional teams are

successful when they communicate with each other along the whole process of procurement”.

Interestingly, respondent 1 lambasted the current state of purchasing performance and said that “the

top hierarchy of petroleum industry in Oman make unrealistic goals and keep on changing the

priorities which are the major stumbling block in optimizing procurement process”.

Respondent 1 suggested that “changing priorities send mix messages which results in operational

delays, decrease in profitability and delayed project completion”. Respondent 3 cited that “changing

priorities of procurement sometimes create unrealistic goals and force the procurement managers to

urgently procure petroleum products which cause compromise on quality”. Respondent 2 added,

“petroleum procurement is a planned activity and if the management priorities change abruptly it

results in poor quality products and high prices”.

Page 29 of 61
All the respondents reiterated that “non-existence planning in the organization cause duplication of

work”. They also reported that “cross-functional teams are only successful if all members of teamwork

in coordination rather than isolation”. Respondent 4 went on to say “coordination is achieved through

clear dissemination of goals to all the team members and sharing of information”. Likewise,

respondent 1 suggested, “cross-functional team in petroleum procurement can be successful in long-

terms”. However, all the respondents agreed that “current purchasing practices are hampered by

unrealistic targets and short term goals which also creates the problems for the successful working of

cross-functional collaboration”.

4.2.2.1. LACK OF EARLY ENGAGEMENT IN PURCHASING

One another theme that emerged in cross-functional collaboration is the lack of early engagement in

the purchasing process. All the respondents supported the challenge of “own agenda in

collaboration”. When team members have different agendas the team fail to take ownership of the

purchasing process which results in unnecessary delays. All the members of a team compete with

each other to outperform others and preserve their own vested interests. Therefore, the team

members involved in purchasing activities fail to engage with each other to ensure profitable

purchasing.

Respondent 3 explained that “the problem of lack of early engagement arise where team members

set their personal agendas and do not respect other members of the team” suggesting “lack of market

intelligence during the designing phase and poor specifications”. Furthermore, respondent 4 attributed

this to “lack of information sharing among members of cross-functional teams”.

All the respondents agreed that “petroleum industry is rapidly grown which has created problems like

poor early engagement just to extend personal agendas”. Respondent 1 argued that “the members of

the purchasing department outline their specific objectives and therefore avoid early engagement in

purchasing to attain their vested interest at the cost of organizational goals”. Respondents expressed

their concerns that “lack of early engagement can cause dysfunctional purchasing process and

substantial loss to the organization”.

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 4.2.3. Research Question 2: What major problems can be encountered in cross-
functional collaboration in petroleum procurement??
The interview questions were designed to provide an opportunity to all the respondents to explain

their framework for an effective cross-functional collaboration to improve quality, cut cost and optimize

delivery in the purchasing process. It has been seen from the literature that leaders play a vital role in

eliminating cross-functional conflicts and their guidance is a clear pathway for cross-functional team

success. The data obtained from interview revealed that respondents feel a lack of proper

communication, lack of trust, and lack of shared vision create cross-functional conflicts which render

the petroleum purchasing a costly function. The data also shows that the key to eliminating cross-

functional conflicts includes knowledge sharing, the culture of equality, sharing a common goal,

collaborating on technical aspects of purchasing, formulating long-term realistic goals and busting

departmental silos.

After discussing the causes of poor quality, costly functions and lack of cross-functional collaboration,

respondents provided their framework for cross-functional collaboration and the areas of improvement

that can eliminate cross-functional conflicts. The suggested framework came from the working

experience of respondents in cross-functional teams as well as their understanding of collaboration in

the development. The major themes clustered to address research question two are presented in the

table below:

Themes No- of Respondents

Lack of Shared leadership 5

Creating a fair culture 5

Building Trust Among Departments 5

Leading by Example 5

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 4.2.3.1. LACK OF SHARED LEADERSHIP
Effective leadership is crucial to steer any team out of conflicts and achieve the goals of enhancing

quality as well as cutting costs. All the respondents regarded leadership as a crucial factor in the

success of the cross-function collaboration. In the interview, the respondents were asked to explain

the cause of conflicts in cross-functional collaboration. All the respondents suggested that the lack of

shared leadership results in conflicts. Leaders foster long-term goals in cross-functional collaboration

and the lack of shared leadership results in short-term as well as unrealistic goals. In this way, the

quality of products is lowered and the cost increases substantially.

4.2.4. Research Question: What is the role of petroleum industry leadership in the
integration of cross-functional collaboration?:
Respondent 1 went on to explain the core cause of cross-functional conflict “leaders are the drivers of

any team, it depends on their leadership style to achieve long-term success, however, in the

petroleum purchasing cross-functional teams fail to collaborate due to divergent goals set by different

leaders” “when the members of a team are divided among themselves they form to nominate their

own leaders which results in lack of a shared leadership” “when the leadership is divided, the goals

will be divergent halting collaboration and creating conflicts”. Respondent 4 related the lack of shared

leadership with the personal agendas of team members “so if the team members have different

agendas and lack shared goals, such a team ends up in conflicts which dampens the purchasing

performance”. These views were supported by respondent 5 who argued that “lack of shared

leadership creates different small units among cross-functional teams which reflects their personal

agendas”. Respondent 2 added, “when the conflict goals collide due to lack of shared leadership the

process of purchasing becomes non-profitable and significantly reduces the profit margin of the

petroleum industry”.

4.2.4.1. CREATING A FAIR CULTURE

Respondents agreed that cross-functional conflicts can be eliminated by creating a fair culture in

which all the members of the team are valued and treated equally. All the respondents supported the

fact that leadership has a crucial role to play in creating a fair culture. It was also agreed that if a

leader fails to establish fair culture then cross-functional collaboration is set to collapse and worsen

the problems of poor quality, increased cost, and lower productivity. In this way, rather than optimizing

Page 32 of 61
petroleum purchasing performance, cross-functional team damage the purchasing process.

Respondents feel that an open leadership style in which all the members of cross-functional teams

are valued is expected to guarantee smooth functioning cross-functional teams.

Respondent 3 suggests that “leadership of cross-functional teams need to reduce the cultural barriers

which create distinctions among team members”. Furthermore “leaders need to inculcate a culture of

mutual respect, trust, and information sharing to reduce the diverging ideas and form a cohesion”.

Respondent 1 stated that “leaders also need to work closely with all the members of cross-functional

teams to understand their problems and take a greater interest in resolving their problems”. Similarly,

respondent 4 attributed “conflicts among cross-functional teams arise due to lack of shared vision

which can be eased out by forming a conflict resolution mechanism in which leaders directly

communicate with the conflict members”. Respondent 2 suggests “if the leaders treat members of

cross-functional teams unfairly, it results in resentment among members and these members drift

away from the organizational goals of optimizing purchasing performance”.

All the respondents are quick to agree that “leadership can bring the change in cross-functional

collaboration and ensure that the conflicts are minimized and collaboration is promoted”. Respondents

revealed that “conflicts grow larger when the leaders fail to act and calm down the tensions among

conflict members”. This situation becomes out of control “when team members openly discredit each

other and do not share common goals”. In this way, the role of the leader becomes critical to ensure

the success of cross-functional collaboration and retrieving optimum results from the team members.

4.2.4.2. BUILDING TRUST AMONG DEPARTMENTS

Trust is an important element of all sorts of relationship. Its importance increases many folds when

departments are involved. Respondents of the current study described the formation of departmental

silos as the cause of poor purchasing performance. Respondent 3 suggested that “lack of trust among

departments leads to divergent goals which render the purchasing process expensive”. Respondent 2

also agreed that “each department involved in cross-functional collaboration have their own goals and

therefore they work in isolation resultantly the purchasing performance deteriorates”.

Respondents agreed that “leaders should work towards trust-building measures among departments

to streamline the functions of all the departments to achieve high purchasing performance”.

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Respondent 4 further explained, “there should be an inter-departmental collaboration framework to

build trust among departments and ensure that all the departments are working towards the common

goal of optimizing petroleum purchasing”. In this way, the problems of poor productivity, lack of robust

engineering designs and operational delays can be effectively addressed.

4.2.4.3. LEADING BY EXAMPLE

Respondents believed that “leaders have the responsibility to lead by example to aware the team

members”. Respondents also suggested that “leading by example will open new opportunities to the

organization and gives a competitive edge in the global market. Respondent 2 believed “the cross-

functional teams are successfully when the leaders assist all the members without any discrimination

and transfer their proficiencies to the members through coaching”. All the respondents agreed that

“leading by example sets the bar high for cross-functional collaboration and significantly reduces the

conflicts”.

Respondent 3 quickly added, “leaders definitely have to be a role model for all the team members, if a

leader just imposes something on the team members it results in conflicts”. Respondent 5 believed

“enforcing something on team members take away the factor of innovation from the cross-functional

teams”. “When the team members are not allowed to innovate and share their ideas with the leaders,

it results in conflicts and non-satisfactory collaboration”. In this way, the process of purchasing will be

conventional without any innovation resulting in costly purchase and poor quality.

Respondent 1 and 4 agreed that “cross-functional collaboration starts when all the members of a team

are allowed to innovate and present their novel ideas for the betterment of procurement process, if

leaders restrict innovative ideas then conflicts are bound to happen”. All the respondents confessed

that “currently leaders do not actively involve in the petroleum purchasing process which results in

poor coordination and costly purchase of petroleum products and services”. One of the major points of

all the respondents was that “leaders need to implement practices that cater flexible collaboration and

promote innovation to improve the quality of petroleum purchasing”. “Leaders also need to

demonstrate an understanding of the whole process of purchasing to assist all the members to

manage their responsibilities effectively”. Furthermore, all respondents stated that “leaders need to

Page 34 of 61
demonstrate inclusive leadership style to take every member onboard and optimize the petroleum

purchasing performance”.

4.2.5. Research Question: Do you think that other departments share information
with the procurement department to optimize decision-making process?
Information sharing is the key to evolve in the contemporary global market. The information provides

the direction to set realistic goals and take calculated risks. The respondents emphasized the

information as the heart of effective collaboration and optimizing various functions of petroleum

purchasing. The respondents stated that the potential of collaboration expands if all the members

retrieve early information and share it with each other. In this way, the extra cost that is incurred in the

form of poor planning can be saved. Besides that information sharing generates new ideas which

facilitate in introducing novel techniques and strategies in the purchasing process. Information sharing

helps in improving the quality and delivery time as well as gives a competitive advantage in the global

market. The major themes clustered to this research question are provided in the table below:

Themes No- of Respondents

Setting Realistic visionary goals 5

Enables to identify constraints 5

Develop strong collaboration through Feedback 5

Enhancing the performance of team members which helps in generating 5

novel ideas for cost cuts

4.2.5.1. SETTING REALISTIC GOALS

Realistic goals are the key to optimize any process. In the petroleum industry, goal setting has a huge

role to play to ensure success. Respondents agreed that “the current environment of the petroleum

industry is constantly fluctuating and therefore it has become crucial for the procurement managers to

set realistic goals”. These realistic goals can be drawn by sharing new information with all the

members of cross-functional teams. Respondent 2 suggested that “information sharing opens the

gate for innovative ideas and the procurement managers can outline the goals in consultation with all

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the members”. Respondent 1 agreed that “information sharing brings creative ideas that have the

potential to optimize the whole process of petroleum procurement”. Furthermore, respondent 3, 4 and

5 expressed a similar opinion that “information sharing helps the procurement managers to forecast

the demand and supply in the future and develop realistic goals”.

All the respondents stated that “realistic goals are vital in the petroleum industry, the rapidly changing

environment and short-term unattainable goals exert tremendous pressure on supply-side which ends

up in costly production and poor quality products”. Respondent 4 emphasized that “there is a need for

information banks in cross-functional teams to enable them to utilize their full potential via latest

information”. Respondent 1 also supported the value of new information and said: “new information

gives a framework to test novel ideas and integrate innovative strategies which helps improve the

process of petroleum production and supply chain”. All the respondents reiterated that “the leaders

should build trust among the team members so that the flow of information remains unbridled”.

4.2.5.2. IDENTIFYING CONSTRAINTS

One another important aspect of optimizing the petroleum purchasing performance is to timely identify

constraints and reinforce corrective measures. All the respondents agreed that “the benefits of cross-

functional collaboration can be maximized upon timely identification of constraints and defining the

roles of all the team members”. It was also agreed that “leaders emphasizing the sharing of

information are able to identify constraints and take maximum benefit out of cross-functional

collaboration”.

Respondent 3 stated that “the quality of purchasing is affected by various unidentified constraints”. He

further said that “appropriate information sharing among all the team members of a cross-functional

team facilitates in timely identification of constraints which ultimately improve the quality of purchase”.

Respondent 4 highlighted “the need to increase communication among team members to effectively

identify constraints that render petroleum purchasing ineffective”. All the respondents reiterated the

fact that “the culture of cross-functional teams is different and therefore it is imperative that leaders

take the lead and encourage all the members to share information, in this way the major constraint in

quality, cost and productivity can be identified and resolved adequately”.

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 4.2.5.3. STRONG COLLABORATION VIA FEEDBACK
One of the most important aspects of information sharing is that it enables the team members to

share their feedback on certain practices. In this way, collaboration is strengthened and feedback

sharing facilitates in generating new strategies to fix loopholes in petroleum purchasing practices.

Respondent 1 suggests that “there should be open lines for all the members to record their feedback

and share the information of various practices”. Similarly, respondent 3 also suggest that “sharing

feedback information provides an insight into the matter and help the cross-functional teams to find

the loophole in current practices, in this way a shared innovative solution can be formulated to rectify

the issue and improve the quality of petroleum purchasing”.

All the respondents agreed that “there is a need to arrange weekly meetings of cross-functional teams

to encourage them to share the information and feedback”, “this feedback allows the teams to form a

joint strategy to solve the functional issues in the petroleum purchasing”.

Respondents also reported that “information sharing is imperative to understand the dynamics of a

challenge to petroleum purchasing and find an appropriate solution to major problems”.

4.2.5.4. ENHANCING PERFORMANCE

All respondents shared the concept of information sharing of enhancing performance. Respondents

suggested that information brings new ideas and enable all the participants to give their opinions on

the functions of petroleum purchasing. Respondent 2 argued that “all the members of cross-functional

teams need to constantly enhance their performance through information sharing to gain a

competitive edge”. In this way, the goals of optimizing delivery and quality process of the petroleum

supply chain can be improved. Respondent 3 was optimistic of the fact that “when the performance of

cross-functional teams improve they will ultimately generate novel ideas and participate in achieving

the goals of the cost-effective supply chain”.

Page 37 of 61
 Appendix A

In-depth Interview Questionnaire

Demographic Details

I. Gender

II. Indicative Designation

III. Qualification

IV. Related Industry experience (Duration in the Organization)

Interview Questions

1. What is the current status of petroleum procurement in Omani petroleum industry?

2. Why do you believe that current petroleum procurement practices are inefficient?

3. Which factors are critical for optimum petroleum procurement?

4. Do you think that other departments share information with the procurement

department to optimize decision-making process?

5. What is the current notion of cross-functional collaboration in the petroleum supply

chain?

6. Do you believe the cross-functional collaboration enhances business productivity?

7. What is the current lead time in the petroleum procurement process?

8. How will cross-functional collaboration influence the lead time in the petroleum

procurement process?

9. Which function of petroleum procurement do you think can be optimized through

cross-functional collaboration?

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10. Which performance measures do you expect to optimize through the integration of

cross-functional collaboration?

11. Do you think cross-functional collaboration enhances the innovation in petroleum

procurement?

12. Is the current environment favorable in the integration of cross-functional

collaboration in the petroleum procurement across Oman?

13. What is the structure of cross-functional collaboration in petroleum procurement?

14. What are the main barriers in effective cross-functional collaboration in the petroleum

industry?

15. What is your proposed framework to develop a cross-functional team in petroleum

supply-chain?

16. What major problems can be encountered in cross-functional collaboration in

petroleum procurement?

17. What is the role of petroleum industry leadership in the integration of cross-functional

collaboration?

18. How do the leaders in Omani petroleum industry deal with petroleum procurement? Is

there anything lacking in their behaviors?

19. How can leaders improve the process of cross-functional collaboration in petroleum

procurement?

Page 39 of 61
CHAPTER 5: CONCLUSIONS, IMPLICATIONS AND

RECOMMENDATIONS

Page 40 of 61
 APPENDIX 1: CASE STUDY – CAPEX PURCHASE
A. Aim

To purchase specific capital equipment for critical production pathway and for the ongoing
development of the field. This included 8 pieces of equipment packages withcomplete
design,procurement, fabrication, assembly, inspection, testing, certification, painting,shipment,
supervision for installation, pre-commissioning, commissioning, start-
upandprovidingperformanceguarantee, etc., withall onskid-piping, burnersalongwith burner
management system, field electrical and instrumentation requirements
withinthepackagescope,twoyearsoperationalspareswhicharenecessaryforsafeandreliableoperationofth
eunits.

B. Background

The requirement was classed as urgent and production sensitive; therefore, no market surveys or
consultation from other departments were carried out during the front end design of the equipment.
The scope was poorly drafted and the technical selection criteria was also lacked proper due diligence
and fit for purpose thinking. Consequently, an international tender was raised in 2015 in haste, which
attracted 15 bids globally. Only 3 companies passed the technical evaluation. Consequently, based
on the award to lowest priced technically qualified company, a contract was eventually entered into
with a local company, who acted as a commercial agent for its principal, which was an Indian based
company. Note, the winning bid was significantly cheaper than the other technically qualified bidders.
The final approved contract value for the purchase was US $7.7m. Also, note, the delays in
contracting were primarily due to protracted negotiation with the winning contractor, who did not want
to take on all liabilities and obligations under the contract but wanted the company to contract directly
with an unknown third party principal. The argument is that they were simply a local commercial
agent. The resulting compromise solution was a tripartite agreement between company, contractor
(Oman based) and third party principal ( international contractor). This was probably one of the critical
issues (legally agreed by lawyers without consideration of the practicalities of managing two parties)
in the whole purchasing program, which resulted in breakdown in communication or coordination
eventually. Note, as a lesson learnt from this case, new technical criteria of “direct contracting” was
introduced to all the Company’s tenders going forth.

C. Post Award

At the design phase, there were major disagreement and delay between the Engineering design
teams of both the Company and Contractor (third party principal) on the design methodology. This led
to a 12-week delay in getting the drawings approved and also variations and costs added to the
overall contract value (` US $400,000). This was further complicated by the fact that the above
purchase was being run Projects team and there was little if not any input from the Operational and

Page 41 of 61
field teams, where this equipment was eventually going to be installed and commissioned. The design
was comprehensively done in-house, without external professional engineering assistance.

D. Manufacture

As the fabrication of the equipment was done out of Oman; therefore, the inspection and quality
control function was at best minimal or ad hoc. The Projects Team had not fully engaged with the
QA/QC team on scheduling visits more often and at crucial phases of the build phase. In hindsight, it
could be said that significant amount of trust was given to the principal to complete within the
expected time frames. First signs of further delays were visible when certain long-lead items were not
secured. Industry sources hinted that the principal was in financial strife to commit to long lead items.
Their suppliers required cash payment upfront when dealing with the Contractor. This resulted in
further amendment to the contract, to allow for a certain amount of advance payments being provided
with the acceptance of an advance payment bank guarantee. The principal was not able to secure
any bank guarantees and had to rely on its commercial agent (Oman based) financial might and
industry reputation for company to advance further funds upfront (in contradiction to the original terms
and conditions).

Note, as lessons learnt, further technical criteria were added to all future tenders. These were
financial documents being submitted for all international companies and pre-award site inspections
being compulsory.

Furthermore, towards the later part of the build process, the contractor (Oman based) and its third
party principal (international contractor), severed their relationship. This resulted in a further
amendment, whereby payments were split between the two contractors and made directly and
separately to each party by the company.

E. Post Manufacture (1st batch)

On arrival of the first 4 units in the port, it was discovered, the units were significantly damaged with
many components missing or promised to be assembled in Oman. This caused further delays. The
company was not happy with the final product. It then contracted a further company to rectify many of
the electrical componentry. Again, this was done in isolation by the Projects team without input from
Operations or Production teams. It was also decided (without legal consideration) at this point that all
the commissioning and installation would be done by the Company’s preferred local contractor,
thereby waiving the warranty provisions of the contract.

F. Post Manufacture (2nd batch)

The remainder of the units were also significantly delayed with the same issues with the first batch.
Improper packing resulting in damages and componentry missing.

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G. Operations

On installation and commissioning, further issues were discovered with the equipment, requiring heat
sleeves being sourced to solve the issue for all the units. This will be required continuously for the
whole lifetime of the units, adding further running cost to the overall purchase.

H. Settlement

Around US $1.6m were withheld from payment with a final settlement of US $400,000 to settle all
outstanding amounts. This included US $600,000 liquidated damages for late delivery. However, the
additional cost and effort have not been accounted for within the total cost of ownership.

Page 43 of 61
 APPENDIX 2: IN-DEPTH INTERVIEW QUESTIONS
1. How do you define “cross-functional collaboration”?
2. How does cross-functional collaboration fit in this organization?
3. What is the impact of cross-functional collaboration on purchasing?
4. What is the impact of cross-functional collaboration on purchasing?
5. Can you re-collect few recent inter-departmental conflicts and state the reasons and
role of departmental managers?
6. What is your view of how the purchasing of capex equipment went?
7. How do you differentiate an isolated internal departmental business from the one
which requires inter-departmental teamwork in terms of decision making?
8. Do you think if various departments collaborated better in that example, would the
outcomes been better? Explain?
9. What steps has your organization taken to maintain and improve buyer-supplier
relationship?
10. What innovative steps do you suggest for future projects?

Page 44 of 61
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