Kevin Jacoby

Chief Financial OfficerCity of Cape Town

South Africa

Enhancing Sustainability and

Profitability for Utility Businesses

through Effective & Efficient

Supply Chain Management

Overview

Supply Chain Management (SCM) vs Procurement

SCM as a tool for utility businesses Future developments in the SCM field Enhancing profitability through SCM Enhancing sustainability through SCM

SCM vs Procurement

SCM: the planning and management of all activities involved in sourcing, procurement, conversion, logistics and disposal management

Integrating activities that procure materials and services, transform them into intermediate goods and the final product, and deliver them to customers 

The key goal: to respond to uncertainty in customer demand without creating costly excess inventory

SCM vs Procurement (2)

Procurement: managing all aspects related to inputs to an organization i.e. procuring goods, materials and services

Procurement is a sub-set of SCM

SCM includes: Planning, Vendor Management, Tenders And Contract Administration, Orders/Acquisition, Inventory And Stores Management, Disposal Management

SCM as a tool for utility businesses

1. SCM Policy aligned to applicable legislation – Authorised process (approved by Board or relevant

higher authority) Gives clear direction - can be supported by SOP Must be reviewed regularly – taking into account:

changes in legislation, outcome of court cases, new developments, etc

2. Delegations support the Policy, clearly allocating responsibility from the accountable party

SCM as a tool for utility businesses (2)

3. Can extract Value-for-Money: transparent competitive processes implemented with

due care can result in cost savings Only do business with those who do not owe any

money to the utility Clear and understandable specifications that do not

“prescribe” a single product Conducting a due diligence on the financial affairs of a

company can identify cash flow weaknesses or capacity problems which can be taken into consideration when awarding tenders

SCM as a tool for utility businesses (3)

4. Minimise Abuse: Preventative controls built in to: Combat fraud, corruption, favouritism and unfair and

irregular practices; Blacklist vendors or implement other sanctions; Report on the performance of contractors/vendors

5. Ethical Standards set for SCM officials & stakeholders

6. Minimum Competency Standards/Skills sets

SCM as a tool for utility businesses (4)

7. Data: SCM is data-rich dependent Vendor database can be established to enhance

market coverage Tenderer’s information can be compared to current

service provision information Limitations of trade (such as trade with an employee of

the State) can be compared against database of employees

Employees declarations of interest can be verified against vendor information – etc

SCM as a tool for utility businesses (5)

8. Oversight Responsibilities Accounting Officer / CEO overall accountable for SCM Independent party for handling disputes – e.g.

Company Secretary, Legal Advisor

Current and future developments in SCM

Facilitate social or economic imperatives E.g. Green Economy; BBBEE; encourage joint ventures

with SMME’s; enhance employment through labour-rich processes, etc

Demand management Ensures resources required to support strategic

operational commitments are delivered at the correct time, at the right price, at the right location, in the right quantity and at a pre-determined or specified quality

Determines quantities and timing of demands on tenders & orders

Current and future developments in SCM (2)

E-procurement To manage tender submission volumes Improve SCM compliance Aid transparency Promote accuracy of information Speed up tender evaluations and awards

Enhancing profitability through SCM

Competitive processes: Tenders; quotations, auctions and other competitive

bidding processes Promotes competitive behaviour and enhances value for

money Minimizes single sources and getting locked into a single

supplier product

Cost-effective: Significant data commonality and versatility enhancing all

revenue collection actions Comply with legislation/prescribed regulatory framework

Enhancing sustainability through SCM

Fair: open and transparent procedures including pre-qualification processes

Equitable: clearly identify when an entity may or must use a particular process

Flexible: when value is below a prescribed amount, use simpler processes

Transparent: procedures and mechanisms set out for each particular process including opening, registering and recording bids

Thank you

Dankie

Enkosi

Any Questions?