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Saudi ARAMCO, in an effort to improve the supply, is moving aggressively on the path to collaboration ... to succeed in its collaborative efforts, it is investing resources not only to improve the skill set of its own people but also of its suppliers ... the quality of forecasts is a big concern for ARAMCO as well as for its trading partners, which must be addressed.
Saudi Electric Supply Co. (SESCO) is a full-line distributor of electrical, mechanical, industrial, automation, valve, and instrumentation products as well as engineered equipment in the Gulf area. While it is owned by the Tamimi Group, it is managed by GE Supply/Rexel. Saudi ARAMCO (often called ARAMCO) is one of our major customers, to whom we have been supplying electrical materials for over two decades. In recent years, in an attempt to improve its supply chain, ARAMCO not only changed its ordering process but also initiated close collaboration with its suppliers, which helped both ARAMCO and its suppliers.
CHANGING ARAMCO'S ORDERING PROCESS
For many years, SESCO used to supply products to ARAMCO on a Direct Charge order basis. Under this arrangement, when ARAMCO placed an order with SESCO, SESCO placed the order with the manufacturer. Then the material was delivered either in the United States at the port of export or brought to Saudi Arabia for a delivery to the ARAMCO 's designated job site. This required ARAMCO to hold a huge inventory.
Thereafter, ARAMCO shifted from direct-charge buying to Local Delivery Order and Receipt (LDOR) agreements, under which ARAMCO gave firm orders and delivery dates to suppliers. To meet the delivery dates, SESCO had to keep sufficient amounts of inventory to make sure that items were delivered on time. Based on order releases, these items either were picked up by ARAMCO or were delivered to DPCs (Delivery Point Code), which ARAMCO had assigned for each warehouse. SESCO secured many LDOR agreements from ARAMCO, and its delivery performance was above 90% on most of the agreements. ARAMCO maintained inventory for such materials, though at a lesser level.
To improve the ordering process...