- The goal for the iktva program is to further cement itself as the driver for all of Saudi Aramco’s procurement awards
- The Ras al-Khair maritime anchor project, King Salman Energy Park, PlasChem, Jazan Economic City are examples of the efforts
- Al Shammary describes iktva as “a holistic and collective” pathway to localization
Iktva strengthens Saudi Aramco, an interview with Mohammed A. Al Shammary
The man at the helm of the program, vice president of Procurement & Supply Chain Management, Mohammad A. Al Shammary, talks all things iktva.
Mohammed A. Al Shammary gets animated at the very mention of the In-Kingdom Total Value Add (iktva) program. Quite simply, it is the Procurement & Supply Chain Management vice president’s passion.
Now in its fifth year, iktva has matured and has established itself as a concept and a brand in the energy sector. Al Shammary is swift to point out clearly what the program is all about.
It's about localization
“Some people talk of iktva as about Saudization. It’s not about Saudization — it’s about localization,” he says in his office at Saudi Aramco’s Dhahran headquarters.
“Why would a company like Saudi Aramco localize? It’s not just a corporate responsibility, it actually boils down to the strength of the company.
“Because, if you have your supply chain near you, you become very reliable. The positive side effects of it are that it is good for the country, and it’s increasing the economy.”
How iktva imparts added strength and power to Saudi Aramco is a strong theme for Al Shammary.
“I say that localization makes this company stronger and more reliable because you have your supplies very near you. What do I need to do to become more reliable? I need to increase my inventory. If I keep that inventory with the supplier who is next door, I can call on him with ease and get everything I need.”
Al Shammary believes that having the company’s inventory rooted in the local marketplace greatly increases reliability and results in added efficiency.
“Now, I am keeping a large inventory because of all the material coming from the United States, from Asia, and from Europe, which sometimes takes months.
“So what do I do? I keep an inventory, so actually localization reduces the inventory of the company, making the company more economically efficient, and to the side you are increasing the local economy by increasing the numbers of manufacturers around. That is what iktva is all about.”
The iktva program features a scoring mechanism based on the spending record of suppliers within the local market.
“If they buy 50%, great. How much salary or compensation has been paid to Saudis is also a consideration,” Al Shammary reveals.
“We are giving them a percentage and asking if they are meeting that and we ask them how much they have contributed as a contractor or supplier to the research and development of whatever they are doing.
“We ask, are you really looking to manufacture this In-Kingdom by utilizing the local nature that we have by doing research to make sure that it is built within the country? Are you really investing in that? We tell them that ‘it’s up to you.’”
Unlocking business opportunities
If manufacturers and suppliers invest, it will increase their iktva score and that, in turn, unlocks business opportunities with Saudi Aramco. It is all about competition.
In line with Saudi Vision 2030 and Saudi Aramco’s iktva program, Siemens delivered its first gas turbine built in Saudi Arabia in 2016 — the first of five.
The turbine was produced at the Siemens Dammam Energy Hub — Saudi Arabia’s first gas turbine manufacturing facility and the largest in the Middle East.
These big hitting energy industry partners have to meet the iktva score criteria.
“We are using the score to actually allocate business,” Al Shammary explains, “There are two ways when it comes to the procurement — they (manufacturers and suppliers) are either in or out when it comes to iktva.
“If they don’t have iktva, they’re not invited. They are not coming to the table. We have a threshold for the iktva score. If they have that, they are in. How much of an iktva percentage they have will be included in the procurement award. So if someone says he has a 60% score, then the threshold for that is 40% for that commodity.
“One supplier has 40% and another has 60%, which means the latter is spending more In-Kingdom. He is buying more, he is investing, he is doing R&D, and he is exporting from the Kingdom. We’re trying now to find a mechanism to reward the one with the higher iktva score with more business.”
The goal for the iktva program is for it to even further cement itself as the driver for all of Saudi Aramco’s procurement awards.
“The journey started five years ago and now I think that everybody understands the concept and they know that Saudi Aramco is serious about it. I am seeing a lot of involvement. They are very much engaged with iktva,” adds Al Shammary.
This is evidenced by the enthusiastic participation of manufacturers and suppliers at the annual iktva Exhibition and Forum at the Dammam Expo. Attendance has been growing year- on-year since the event was first launched.
“And now we are reaching 55%, and our target for this year is 56%, so we are only 1% short and we are going to reach it,” Al Shammary proudly states.
“We were at 30% five years ago, so there has been a jump of almost 30%. That’s a great achievement and that is because all of the management in the company is behind iktva.
“They care about improving the local economy, and most importantly, ensuring the reliability of the company by having the surrounding supply chain and the ecosystem surrounding Saudi Aramco,” says Al Shammary.
“We have seen the benefits of this after the recent incidents. Because we had suppliers and manufacturers nearby, we got things quickly and were able to fix things in a short period of time.”
A well-stocked inventory crucial
He cites the reliability of the company and having suppliers nearby and having a well-stocked inventory as crucial.
“In the future, we want to reduce that inventory and have it within the local market. The company should not be carrying that load of inventory. That should be in the market and that is what iktva is all about.”
The Ras al-Khair maritime anchor project, King Salman Energy Park, PlasChem, Jazan Economic City, and other industrial parks dotted across the Kingdom are examples of great efforts to provide best-in-class infrastructure to attract investment and stimulate the development of subject matter experts.
“Actually, what is happening on Ras al-Khair is major because it is an anchor project,” notes Al Shammary. “The government is building the infrastructure so that there is a ‘plug and play’ environment for investors. So the port, utilities, everything is there to encourage investors to come and build, like the engines for the ships, like the casting and forging.“
He recognizes casting and forging as great enablers for localization.
“The whole energy sector is there nearby so that they can localize the ecosystem nearby. There will also be a dry port, so all of that ecosystem and the infrastructure that we are building is to encourage the investors to come and do business.”
Such projects, Al Shammary believes, will help iktva, localization, and also Saudi Aramco. To provide skilled manpower, Saudi Aramco, in partnership with the Technical and Vocational Training Corporation, has set up 16 technical academies — a number that will rise to 30 across the Kingdom.
“These academies are there to ensure that the investors and the suppliers have access to Saudis who are qualified,” he says.
“So suppliers and contractors have no excuse now. Saudi Aramco is strong in training and these academies are open for everyone. That’s another example of the company extending its support to the surrounding ecosystem.
“So, I will say to contractors to access the manpower from a particular academy. In that way, I am a link between the academies and the manufacturers and suppliers.
'Holistic and collective' pathway
In summation, Al Shammary describes iktva as “a holistic and collective” pathway to localization, Saudization, improving R&D, and the development of subject matter experts.
“We give credit to those suppliers or contractors who develop subject matter experts because they are the basic element for the big guns,” he explains.
“We want the suppliers to help with this development. The subject matter experts are a major factor, and another is exports. We encourage them to not just build for Saudi Aramco, but to build for the region and elsewhere.
“So, if they export from the Kingdom, they get an iktva score because in the end, if they manufacture here they will hire Saudis. We also want the suppliers to be continuously working because Saudi Aramco cannot commit all of the time to suppliers. In between, they have to guarantee an outlet for themselves.”
The iktva formula evolved over the years to accommodate what motivates the suppliers and contractors to excel and make it a successful program.
“I am passionate about it, because it is something that will make this company stronger. Iktva keeps me motivated every day. I feel that I am adding something to the company and to the country,” says Al Shammary