5th CSES Implementation Consortium (IC) Update

5th CSES Implementation Consortium (IC) Update
In-Kingdom Total Value Add (IKTVA) Program
May 2016
Agenda
Time
Topic
Speaker
07:15 – 08:00
Registration and Check-in
–
08:00 – 08:40
IKTVA Program Overview
Thomas Deeb
08:40 – 09:30
ITKVA Survey Finance Team Overview
Bradley Nielson
09:30 – 09:40
Break
–
09:40 – 10:40
IKTVA Planning Guide Overview
Maha Sabah
10:40 – 11:15
Break Out Session Q&A
Team
11:15 – 11:30
Conclusion
Ghadeer Ibrahim
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Agenda
Time
Topic
Speaker
07:15 – 08:00
Registration and Check-in
–
08:00 – 08:40
IKTVA Program Overview
Thomas Deeb
08:40 – 09:30
ITKVA Survey Finance Team Overview
Bradley Nielson
09:30 – 09:40
Break
–
09:40 – 10:40
IKTVA Planning Guide Overview
Maha Sabah
10:40 – 11:15
Break Out Session Q&A
Team
11:15 – 11:30
Conclusion
Ghadeer Ibrahim
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In-Kingdom Total Value Add (IKTVA)
Introduction
Partnership and collaboration
The in-Kingdom Total Value add (IKTVA)
Program is designed to drive domestic value
creation and maximize long-term economic
growth and diversification to support a
rapidly changing Saudi economy.
•
Supplier focused
•
Jointly develop action plans
•
Mutual benefit and commitment
Creating a level playing field
•
Diversified local Saudi economy
Opportunity
•
Uniform evaluations (services and
materials)
•
Better trained, qualified Saudi
workforce
•
Access to information
•
•
Supplier solution center
Export your local content to
neighboring GCC markets
Strategic imperative
IKTVA supplier engagement
A bedrock of Saudi Aramco’s strategy is to
create value in every aspect of our
business, maximizing long-term economic
growth and diversification. Through the inKingdom Total Value Add (IKTVA) Program,
Saudi Aramco is taking action to drive
additional domestic value creation to
support a rapidly changing Kingdom and
foster future prosperity.
•
Cooperative engagement – suppliers
and Saudi Aramco
•
Sponsorship from both
Objective
To drive key activities toward localization
and job creation.
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IKTVA planning
To enable focus and drive IKTVA to success,
Saudi Aramco is engaging our suppliers to
create 5 year IKTVA plans and implement
those plans as the instrument to drive
IKTVA metrics to the levels suggested by
Saudi Aramco.
The intent of this guide is to give Saudi
Aramco suppliers a framework of suggested
inputs as IKTVA plans are created and
stewarded forward. The guide is not
exhaustive and each supplier and sector
will have its own nuances and differences
that require the supplier to plan and
customize accordingly.
Step Change – In-Kingdom Total Value Add Program
IKTVA is a program,
not a metric
IKTVA will work with
suppliers in a new way for
success
IKTVA is a Saudi
Aramco Strategic
Imperative
Saudi Aramco vision is to enable a
globally competitive Saudi Industrial
Base
2021 TARGETS ARE:
70% Local Content
500,000 Jobs
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30% Exports
The In-Kingdom Total Value Add (IKTVA) Program
The objective is to drive key activities towards localization and job creation, which will be assessed against the
following metrics:
A.
B.
C.
D.
Localized goods and services ($)
Salaries paid to Saudis ($)
Training & Development of Saudis ($)
Supplier Development Spend ($)
E. In relation to revenue (spend from Saudi Aramco or
estimated major contract value)
Supplier IKTVA Formula
DEFINITION
The IKTVA program
drives, measures and
monitors the “addedvalue” brought to the
Kingdom by a supplier.
% IKTVA =
𝑨+𝑩+𝑪+𝑫
𝑬
Additional Info.
Number of Saudi Employees
Investment ($)
R&D spend ($)
Exports ($)
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∗ 𝟏𝟎𝟎
IKTVA Supplier Guidelines -Highlights
Included
Goods & Services
•
•
IK Manufactured Goods &
Services
IK Operating & Admin
Expenses
Excluded
•
•
•
OOK Goods & Services
Materials/Services
from Agents
Capital Expenditures
Compensation
Saudi Compensation:
• Salary & Bonus
• Housing
• Transportation
• Education Assistance
All Expat Base Salary &
Bonuses.
Training
All Costs Associated With Saudi
Training
• Internships
• Scholarships
• Travel and Accommodations
• Course Fees
Training Costs Associated
With Expats
Supplier
Development
All Cost Including Workforce,
Materials, Travel,….
Note: For items that have a substantial impact (>5%), the total value was prorated based on the tier 2 suppliers IKTVA
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Agenda
Time
Topic
Speaker
07:15 – 08:00
Registration and Check-in
–
08:00 – 08:40
IKTVA Program Overview
Thomas Deeb
08:40 – 09:30
ITKVA Survey Finance Team Overview
Bradley Nielson
09:30 – 09:40
Break
–
09:40 – 10:40
IKTVA Planning Guide Overview
Maha Sabah
10:40 – 11:15
Break Out Session Q&A
Team
11:15 – 11:30
Conclusion
Ghadeer Ibrahim
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IKTVA Package
Available at www.iktva.sa
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IKTVA Survey Worksheet
• 3 years provided to create baseline
• Report both Saudi Aramco and Total KSA (including
Saudi Aramco)
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General Instructions
1. All financial amounts should be reported in USD.
2. Amounts reported should correspond to the company’s fiscal year end.
3. Assumptions and calculation methodologies utilized should be consistent with prior
years.
4. Except for R&D expenses, amounts should not be double counted. For example, if
Training Costs are provided, these costs should not also be included in Goods and
Services or Payroll.
5. For JVs and subsidiaries, incorporate Parent’s share of operations into their own IKTVA
calculation – one submission per parent company
6. Reports will be submitted annually
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Company Information
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Category E – Section 1: Revenue
Includes
revenue from
Aramco
$45 mil / $60 mil = 75%
• Includes company-wide revenue sources
from SA and in-Kingdom customers
• For partially owned entities of the
company, partial credit is given
• Saudi Aramco total:
• includes indirect revenue through
agents and EPC revenue
• excludes partially owned
subsidiaries and JVs
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Category A – Section 2 – Goods and Services
Goods & Services = IK COGS/COS
+
Exclude
Goods & Services ≠ COGS• or
COS taxes, customs, duties, iqama/visa
SG&A + R&D
fees
• Exclude capital expenditures,
depreciation, and amortization
• Include financing charges
• Include IK sourced selling, marketing,
administration and other operating costs
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Category A – Section 2 – Goods and Services
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Section 7 – Top in-Kingdom Suppliers
>
70%
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Category A – Section 2 – Goods and Services
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Category A – Section 2 – Goods and Services
SA/KSA Sales Ratio
Unless otherwise justifiable, Saudi Aramco Goods & Services can be estimated using a simple ratio.
Challenges:
• Inventory fluctuations
• Length of supplier table
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Category B – Section 3 - Saudi Payroll
Can include Saudi
Expat compensation
and headcount
Unless otherwise justifiable, Saudi Aramco headcount and compensation can be estimated using a simple ratio.
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Category B – Section 3 - Saudi Payroll
Saudis Only
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Category C – Section 4 - Training & Development
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Category C – Section 4 - Training & Development
Cost can also include a portion of expat
compensation and OOK costs related to
T&D of Saudis
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Category D – Section 5 – Supplier Development
• Can include customer training & development
costs related to skills/capabilities
improvements
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Section 6 – In-Kingdom Investment
Annual Additions
Only
Highlighted in Supplier Profile
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Section 6 – In-Kingdom Investment
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Barriers
8.0
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Other
• Exclude costs not related to IK revenue sources even if purchased IK – highlight in notes
• Client releases to allow open dialogue
• Confidentiality of detail IKTVA numbers
• Website will have latest details and FAQs
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IKTVA Submission
• Cover Page Stating IKTVA Engagement for Client X
• Index (Optional)
• Agreed Upon Procedure (one page report plus AUP appendix)
• Management Representation Letter
• Final Client IKTVA Template/Questionnaire
• Include PDF and Excel version
Email to Bradley.Nielson@Aramco.com
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Contact Information
Brad Nielson, Financial Consulting Division
Bradley.Nielson@Aramco.com
013-873-3526
Tom Deeb, Industrial Development & Strategic Supply Department
Thomas.Deeb@Aramco.com
013-874-0115
www.IKTVA.sa
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10 Minute Break
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Agenda
Time
Topic
Speaker
07:15 – 08:00
Registration and Check-in
–
08:00 – 08:40
IKTVA Program Overview
Thomas Deeb
08:40 – 09:30
ITKVA Survey Finance Team Overview
Bradley Nielson
09:30 – 09:40
Break
–
09:40 – 10:40
IKTVA Planning Guide Overview
Maha Sabah
10:40 – 11:15
Break Out Session Q&A
Team
11:15 – 11:30
Conclusion
Ghadeer Ibrahim
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Saudi Aramco: Confidential
IKTVA Plan Methodology Defined
As you embark on the journey of creating your 5 Year IKTVA plan utilizing
this guide, you will find that you have collected a tremendous amount of
valuable data. The key question asked is “Now What?” You must take this
information and present it in a way that tells a detailed story of how you
plan to get from 2016 to 2021 and achieve the desired goals set forth in
the IKTVA program. Key questions that must be answered as you complete
this are:
1. Have we documented each year what the expected benchmarks,
milestones and outcomes will be?
2. Have we tied all of our multiple business lines together to paint the
whole picture of our company and its respective IKTVA plan?
3. Do the objectives and milestones selected achieve our future state as
outlined?
4. Is the plan executable as presented?
5. Is the plan clear, concise and consistent?
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A Suggested Methodology: Backcasting
•
Backcasting is a planning method that starts with
defining a desirable future and then works
backwards, to identify policies and programs that
will connect the future to the present.
5 Year IKTVA Plan Format Guide
Format Guide Objective:
Saudi Aramco is providing you this guide to allow your organization to create and provide the most valuable and comprehensive 5 Year IKTVA plan
possible. While this outline is comprehensive in nature, some items based on your material or service may not be applicable. Our expectation is that
you follow the provided outline in the formulation of your plan and provide in a Microsoft PowerPoint (.ppt) format. This document should be
carefully created and presented in a way that is suitable for Executive Management review. Items with an * have an example on page 7 and 8 of this
guide.
Section I. Company Background
This section should include all relevant corporate background details as it pertains to the plan.
A. Annual Updated Executive Summary Sheet*
B. Executive Summary Written Report
C. Current Corporate Structure
D. In-Kingdom Operating Locations/Contact Details and Core Team Roster
E. In-Kingdom Company History
•
Investments Prior to 2013 and other In Kingdom Activities not listed elsewhere
Section II. Goods and Services
This section should include relevant details as it pertains to the cost structure and supply chains surrounding your material or service.
A. Supply Chain Overview Map*
B. Detailed Cost Structures and Forecasts for five (5) years*
C. IKTVA Potential with Existing and/or Potential Local Suppliers
D. Key Global Supply Chain Partners Listing
E. In Kingdom Manufacturers Listing and amount spent with IK Manufacturers and the five (5) year plan to increase these values
F. End to End Value Chain Map (identifying IKTVA opportunities at each step)*
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TIP: Determine information
you require from Saudi Aramco
Saudi Aramco will assist in providing
the best available data in the forms of
forecasts for the next 10 years. The
suppliers’ responsibility is to define
what is sufficient information to make
the appropriate business decisions.
5 Year IKTVA Plan Format Guide
Section III. Human Resources
This section should include relevant details as it pertains to the hiring, training and utilization of Saudi Nationals in your
workforce.
A. Number of Saudis Employed, by job function
B. Five (5) Year Hiring Plan of Saudis by job function and year
C. Number of Saudis currently in training (Defined)
TIP: Highlight opportunities
D. Five (5) Year Training Plan (Defined by number and training discipline)
E. Current Saudization, next five (5) year plan
F. Total workforce, % of Saudis as a total and five (5) year plan
G. Saudi Training Budget plan for five (5) years ($)
H. In-Kingdom Higher Education Collaboration
I.
IKTVA opportunities with peers and across industry sectors, such as shared training facilities
Section IV. Supplier Development
This section should include relevant details as it pertains to enhancing IKTVA through developing and expanding InKingdom existing and potential suppliers.
A. Five (5) Year spend budget for supplier development broken down per year
B. Development plans for In-Kingdom Suppliers (Number per year, detailed actions, etc.)
C. Gap Analysis for Supply Chain (highlighting items or services not currently offered In-Kingdom and how it would
affect IKTVA if they were)
D. Developing new sources of supply by attracting localization
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The IKTVA plans allow suppliers to
demonstrate areas for IKTVA
enhancements along the total value
chain. Opportunities for enhanced
value creation, end to end solutions,
and in-Kingdom development should
all be highlighted and presented.
5 Year IKTVA Plan Format Guide
Section V. Research and Development Initiatives
This section should include relevant details pertaining to the introduction or expansion of your Research and Development (R&D) activities
In-Kingdom.
A. Five (5) Year In-Kingdom Technology Roadmap *
B. Five (5) Year R&D budget and detailed plans with key milestones
C. Five (5) Year Technology Acquisition and/or Deployment Plans
Section VI. Exports
This section should include relevant details pertaining to enhancing IKTVA through exporting Made in Saudi Arabia Products.
A. Current Export $ Volume
B. Five (5) Year Export Growth Plan with Targets and Milestones
C. Five (5) year Global Market Share Projections
Section VII. Business and Market Challenges
This section should include relevant details pertaining to the challenges your business faces in achieving the objectives outlined by Saudi Aramco.
These challenges can exist in many areas, please highlight them here.
A. Historic and Current Facility Utilization
B. Historic and Current Employee and Asset Utilization
C. Global Competitive Challenges
D. Availability of Local Candidates
E. Availability of Raw Materials or Equipment
F. Needs for Changes to Procurement Practices by Saudi Aramco.
G. Other Barriers to Success
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TIP: Don’t forget to ask!
The IKTVA plans provide a forum
for suppliers to submit what-if
scenarios. For example, “If
Saudi Aramco offered a longterm contract for our goods or
services, we could increase our
IKTVA by 30% over five (5)
Years.” Be creative, but
realistic: this is your
opportunity to ask questions.
5 Year IKTVA Plan Format Guide
Section VIII. 5 Year IKTVA Plan
The final section is where all numbers from the previous 8 sections are calculated showing the year by year changes in the IKTVA values. The expectation is that
these are KPI figures that can be reviewed and evaluated each year, to ensure compliance of the plan by management of both organizations.
A. Utilizing benchmark values from the average of 2013-2015, create the models for the next five (5) years highlighting your path for IKTVA growth
B. Show details on how you will get from one value to the other citing specific examples
C. Your Account Manager is available to answer questions in regards to the plan or its contents, however, it is your responsibility for content and formatting.
IKTVA Plan Submission
Upon completion of your Plan, please submit online at https://www.iktva.sa/iktva-submission
TIP: What should the plan look like?
The IKTVA plan is specific to each company, but the plan should contain the principles and
outline set forth in this guideline. The key part of the plan is it should be clear with
measurable benchmarks as well as be executable as presented. We recommend graphics
illustrating and highlighting key items as well
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Executive Summary Sheet 2016
XXXX Key Accomplishments:
2013
2014
2015
2016 YTD
Saudi Aramco
Sales
$-
$-
$-
$-
KSA Sales
$-
$-
$-
$-
Human Resources
’16 Target
’16 Actual
Number of Saudis Trained
Saudization %
R&D and Capital Investment
Pre 2015
‘16
Supplier Development
‘16 Target
‘17
Facility Investment
Spend with Local Suppliers
R&D Investment
New Suppliers’ Developed
Performance KPI Value
2013-15
Benchmark
Current Actions List
‘16 Actual
•
•
•
•
2016 Target
2016 Actual
Cost Savings Potential
Current Facility Utilization
Xx
Xx
2017 Plan
Goods & Services (A)
Saudi Compensation (B)
Training & Development (C)
Supplier Development (D)
Export Sales
Saudi Jobs Created
IKTVA %
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2018 Plan
Execution Plan
•
•
•
2019 Plan
15% cost reduction with new
local manufacturer developed
20%
Xx
2020 Plan
2021 Plan
Plan Content Examples
Supply Chain Overview Map
End to End Value Chain Map
Technology Roadmap
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Detailed Cost Stack Up
Breakout Session Q&A
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