smartprocurement review 2014

2014

Cracking the new B-BBEE Codes

INSIDE

B-BBEEENTERPRISE PLANNINGENTERPRISE DEVELOPMENT

THINKING AHEADGLOBAL TRADEPEOPLE MANAGEMENT

LEGISLATIONPUBLIC PROCUREMENTTECHNOLOGY

SmartProcurement

WORLD CLASS PROCUREMENT IN YOUR HANDS

FrontingA blessing or a curse

Value Analysis / EngineeringUnlocking additional cost savings

ERP in ProcurementMaking it work, no really!

Supply Planningin the wider Supply Chain

Published in association with

the UNISA Graduate School of

Business Leadership

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SmartProcurement Review

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PAGE ARTICLE SECTION

5 Editor’s Note

6B-BBEE policy implementation -look beyond box ticking

B-BBEE

10 BEE Codes Q&A with Grant Thornton B-BBEE

12 Leverage B-BBEEE with data analysis B-BBEE

14 Fronting - Blessing or Curse? B-BBEE

167 Guidelines for successful enterprise & supplier development implementation

Enterprise development

19Localised procurement - path to sustainability or poverty trap?

Enterprise development

22China’s transformation - implications for global sourcing

Global

24Opportunities into Africa abound for innovative supply chains

Global

26 The problem with procurement Thinking ahead

SmartProcurement Review is published annually by SmartProcurement. SmartProcurement is a news and knowledge provider with media channels spanning print, online, conferencing and exhibitions. SmartProcurement focuses on the niche segment of Procurement and Supply Management: Our audience comprises more than 15 000 readers in medium to large organisations in the private and public sectors, most of whom make or influence procurement and purchasing decisions. SmartProcurement is certified as a Level 3 BEE Contributor.

Call us: 0861 334 326Email us: [email protected] us: www.smartprocurement.co.za

EDITORIAL

Editor in Chief: Bernie van NiekerkManaging Editor: Debbie TaggSub Editor: Davy Ivins and Liam Morrison

EDITORIAL BOARD

Bernie Van NiekerkDr Ernst Van BiljonAdvocate Helen VenterProfessor Douglas BoatengHoward StephensRonald MlalaziCarin Urban-Stoltz

CONTRIBUTORS

Short biographies of authors and contributors are provided with each article. For detailed biographies visit smartprocurementreview.co.za

PRODUCTION

AssociationWorks www.associationworks.co.zaProduction Editor: Davy IvinsTraffic: Anna-Marie WestDesign Firm: Vision IMC (www.vision-imc.com)Designer: Sean KreuschPrinting: CTP Printers, Cape Town

ADVERTISING

[email protected]

Copyright SmartProcurement 2014. All due care has been taken with material submitted, but the magazine and publishers cannot be held responsible for inadvertent errors, loss or damage. SmartProcurement assumes no responsibility to respond to or return unsolicited editorial, and all material submitted will be treated as unconditionally assigned for publication and copyright purposes. The editor reserves the right to edit and comment editorially. SmartProcurement Review is fully protected by copyright and nothing may be printed in whole or part without written permission from the publisher. While reasonable precautions have been taken to ensure the accuracy of the content and advice given to readers the editor and publisher cannot accept responsibility for any damages or inconvenience that may arise therefrom. The views expressed in SmartProcurement Review are not necessarily those of the publisher, editor or editorial panel, and publication of articles does not imply any endorsement or warranty.

SmartProcurement

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www.smartprocurement.co.za

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WHAT’S INSIDE

30Green procurement - switching to renewables

Thinking ahead

32Is 3D printing set to radically change the supply chain?

Thinking ahead

34 Value analysis and value engineering Thinking ahead

36The need for unified legislation in public procurement

Legislation

38 How to sue a JV or consortium Legislation

40How HR can help supply chain manage its critical lack of skills

People management

42Continuing professional development through networking and events

People management

46The evolution of procurement & supply management professionals

People management

48SCM capacity development in the public sector

People management

50 Centralised SCM in the public sector Public sector

54 Government’s strategic sourcing journey Public sector

56 Purchasing cards can work in government Public sector

60Contract management in the public sector - light at the end of the tunnel

Public sector

64Service quality in procurement and contracting

Public sector

66How the State buys. Public Procurement in South Africa 2014

Public sector

70Supply chain must plan according to customer signals

Enterprise planning

72 How to make ERP work for procurementEnterprise planning

74Integrated operations planning needed to weather the electric storm

Enterprise planning

76 Making e-procurement work Technology

80Selecting the right network using a total cost of ownership approach

Technology

89 Business Directory

32 40

36

46

56 66

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76

Growthpoint Properties is the largest JSE-listed property company in South Africa.

Transformation shouldn’t be about compliance.

It should be about giving the right people the right opportunities…

At Property Point we understand that for transformation to bring meaningful change, you have to unlock real opportunities in your supply chain. And give the right people access to these.

This is why we’ve created an enterprise development model that links procurement directly to current and future supply

chain needs. Giving SMEs a real chance to compete for opportunities while becoming sustainable. Creating over 840 direct

jobs and unlocking contracts valued at R167 million in the greater property sector over the past six years.

Perhaps the best thing about our model is that it can be tailored to meet the needs of your organisation. We’ll partner with

you to catalyse meaningful supplier diversity and transformation. And ensure this goes beyond compliance.

Contact us today to unlock the potential of your supply chain.

Property Point. Building sustainable small businesses.

www.propertypoint.org.za

Tel no: 011 833 0340


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Will the revised B-BBEE Codes of Good Practice with their greater emphasis on Supplier Development, and the highly elevated role of the Preferential Procurement component and associated scoring, lead to the achievement of much needed social transformation?

Or is it another opportunity for a few well-connected individuals to enrich themselves while corporate procurement professionals furiously, and sometimes desperately, try and tick all the boxes? Have the new scoring mechanisms been properly thought through in the context of what a typical procurement function can practically achieve?

Our 2014 issue kicks off with a well written, slightly irreverent but incisive analysis on Preferential Procurement, by a leading African academic. The article, whilst underscoring the need for transformation, provides context from outside South Africa, considering the perspectives of other African players who are faced with difficult choices and decisions when investing in South Africa.

Various other interesting questions posed and answered in this 2014 issue of the SmartProcurement Review include:

• Who / how to sue when dealing with a joint venture?

• Can China still lay claim to Low Cost Country sourcing fame?

• Can fronting be considered a good thing?

• How do you make ERP work practically for your procurement organisation?

• Can Value Engineering / Value Analysis unlock the next level of cost savings?

• What supply chain opportunities are presenting themselves within Africa?

This 2014 issue of the SmartProcurement Review deals with preferential procurement, global sourcing, technology and associated implementation, career development, enterprise development, value analysis / value engineering, strategic sourcing, supply chain planning and legislative updates.

As is our custom the eview also contains a useful directory for finding enterprise development / BBBEE suppliers.

Of particular interest are recent developments within the public sector with regards to World Class Procurement trends. This issue deals with Strategic Sourcing of massive commodities within government; the use of procurement cards in governments throughout the world and various excellent public sector case studies.

I’d like to extend a sincere word of thanks to our editorial board members, for the fantastic support provided by The Chartered Institute of Purchasing and Supply Management (CIPS), our academic partner UNISA Graduate School of Business Leadership (SBL), esteemed contributors and our excellent production team.

To your continued success!

Bernie van Niekerk CEO & EDITOR

WELCOME


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HEADING

B-BBEE POLICY IMPLEMENTATION

LOOK BEYOND BOX TICKING

ABOUT THE AUTHOR

Professor Douglas BoatengFounder: PanAvest skill development partnership 011 469 [email protected] www.panavest.com

Prof. Boateng is Professor Extraordinarius, Supply and Value Chain Management at UNISA Graduate School of Business Leadership; Independent Distinguished Extraordinary Chair in Operations and Supply Chain Management at the Institute of Operations Management Africa; Chair of the CIPS Africa Strategic Advisory Board; and Founding Chair of the West African Institute for Supply Chain Leadership.

B-BBEE


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When implementing the revised B-BBEE policy, business must avoid box-ticking compliance.Over the last 20 years the government has tried various means to

spread South Africa’s wealth to its entire people, quite rightly employing

policies such as affirmative procurement, black economic empowerment

(BEE) and broad-based BEE. As the country’s biggest procurer of goods

and services it is a moral attempt by decision makers to enlist the might

of its multi-billion rand spend to steer socio economic transformation.

While progress to date has been relatively good, the overall effect on

joblessness, especially among the youth, and SMME growth continues

to be a significant challenge. Various reasons have been put forward,

including a complex, political box-ticking-compliance approach to

affirmative procurement and associated policies. To address these

challenges the government recently promulgated a new and more

comprehensive broad-based BEE act. At the core of this new act is

supplier and enterprise development.

The question is whether the implementation of the new act is immune

to the box-ticking compliance that contributed to the poor results of the

old act?

Whilst attempts to use public sector spend to transform society is a

must, marrying political agendas with business goals is usually met

with concern and anxiety from those subject to the resultant policies –

especially in South Africa, where many emerging democratic institutions

and state-owned enterprises have a history of blurry governance issues.

The consequent response is often compliance through box-ticking, an

approach that applied to public sector procurement creates problems

that, if not managed, can lead to unforeseen consequences.

The chaos that unfolded under the existing BEE act has created an

invisible and complicated barrier between existing and emerging services

providers (black enterprises, SMME and others) on one side and the

government and associated enterprises on the other side.

Confusion still among emerging and existing service providers

On one side is the increasing alienation of emerging black suppliers,

who are sometimes, from no fault of their own, marginalised and

cannot compete with fellow established service providers. In a frantic

attempt to survive, emerging black suppliers are resorting to some

incredible means to position themselves for potential deals.

On the same side are the existing, niche and small white service

providers, who are feeling the pinch and are frustrated with political

box-ticking that tends to penalise them.

The situation has become so desperate that most of the affected service

providers have resorted to unethical means to either hang on to existing

contracts or pitch for new ones. Already there are many casualties,

especially among emerging black groups, the same group these policies

were supposedly meant to foster and grow.

The government and associated enterprises must insist on service

delivery quality

On the other side is the government and associated enterprises, which,

in an attempt to satisfy this political box-ticking-compliance approach,

are increasingly compromising on service delivery. Of concern is the

increasing number of contracts awarded to certified BEE companies who

were paid in advance, but failed miserably to deliver the service, leading

to anger and frustration from certain parts of the community.

We are witnessing demonstrations in the townships owed to poor

service delivery: unfulfilled, yet paid-for, promises for housing and

contracts awarded to BEE certified companies to maintain energy plants.

Procurement and supply chain professionals must come together to

support Government efforts.

Although there is increasing acceptance of the strategic role of

procurement professionals, there is still an image problem. Direct and

indirect dealings with procurement and supply chain clearly indicates

that these professionals are not necessarily corrupt; rather it is this

complex, political box-ticking-and-associated–procedures-and-incentive

scheme that is corruptive. Collectively we as supply chain professionals

must be vigilant and work together to assist government to:

• Curtail these unfortunate negative incidences that could overshadow

the very positive gains over the last 20 years.

• Simplify affirmative policies to make it less corruptive and simple to

implement.

• Develop business-driven policies that will in the long-term address

the economic imbalances in South Africa.

• Foster value-adding empowerment and not the politics of natural

entitlement which is a fallacy in the real world.

• Develop a simple-to-implement KPI for affirmative procurement

that does not penalise, but rather helps to stimulate wider

entrepreneurship and SMME growth.

• Encourage entrepreneurship beyond government entities among

existing and emerging black businesses.

• Openly support development finance institutions (DFIs) to risk more

capital in funding proven, value-adding and emerging black and

SMME companies.

• Reduce the amount of DFI capital that goes towards funding

relatively large-scale empowerment acquisitions into comparatively

matured companies.

• Encourage the private sector to embrace supply relationship

development and management.

• Mandate state-owned enterprises and companies to provide

developmental funds to proven, serious and value-driven emerging

black service providers over a limited period.


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B-BBEE

As in other emerging economies, South Africa’s public sector spend initiatives are seen as a huge opportunity to:

1. spread wealth across the political divide;

2. create long-term jobs;

3. foster entrepreneurship and the growth of small, medium and micro enterprises (SMMEs);

4. transfer useful skills;

5. develop black enterprises;

6. get people working, irrespective of colour;

7. sustain and grow existing enterprises;

8. develop new businesses across the socio economic divide; and

9. sustainably and competitively grow the economy.

PRECARIOUS SAGA CANNOT CONTINUE

Worrying aspects of the chaos around of previous BEE policies:

An increasing marginalisation of existing and emerging black companies that are caught in this complex web.

1. A short-sighted and misleading notion of the politics of free entitlement, to stakes in companies by virtue of colour and political connections and not necessarily value-add.

2. A very sensitive and unethical practice of creating community trusts whose beneficiaries may never see a dime in their lives.

3. Empty promises by service providers (black and white) made to communities to encourage them to join a grand scheme as broad-based partners without educating them on the implications.

4. A use of creative accounting to sell stakes to black and BEE groups.

5. Fronting of non-transformed companies by black people for short-term gains.

6. Director-level appointments of people who may not understand the legal and financial implications of such a role.

7. A use of ghost names, tea ladies and domestic assistants in proposals to prove that an organisation represents the rainbow nation and is BEE compliant.

8. An incessant desire to borrow beyond ones means to buy stakes in companies.

9. A continual debt funding of large BEE-related acquisitions that have relatively failed to create much needed jobs to reduce youth unemployment or in some cases benefits the participants at all.

10. The dangers of appointing inexperienced professionals to directorship roles in public and private organisations merely to comply with and score BEE points.

11. A plethora of companies issuing supposed BEE compliance certificates.

12. The long-term tangible and intangible cost of non-delivery to tax payers.

13. Emerging creative corruptive practices within government to comply with political box-ticking compliance.

14. The pressure and effect of this confusion on the professionalism of the procurement and supply chain professional.

• Expand opportunities through supply chain management and not

just procurement.

• Openly promote and innovatively reward the transfer of best

practices between the public and private sectors.

• Foster sustainable non-equity based, win-win, smart, value-adding

business partnerships across the political and socio-economic divide.

• Encourage procurement and supply chain professionals to be openly

creative in assisting emerging value-driven small businesses.

• Encourage supply chain professionals to be openly and ethically

entrepreneurial, plus possibly benefit in the long term from their

innovation. In so doing the lure to participate in short-term gains

and deceitful practices could be minimised.

At the end of the day we are all casualties of this unwanted and

avoidable bedlam. It is thus our duty as professionals to find creative

ways to assist each other and help the decision makers to come up

with simple and workable policies that not only help to sustainably

address the socio-economic divide, but also foster SMME and black

enterprise growth for long-term societal benefit. n

9

BLACK AND WHITE

CAN BE COLOURFUL

At Grant Thornton, we don’t see BEE as just another grey area. We know that measuring Broad-Based Black Economic Empowerment can unlock opportunity for growth.

We also know that it takes commitment, time and resources. So we’ve tailored our services to keep you in control and looking forward. In addition to our range of audit, tax and advisory services; we have the capability to meet all your B-BBEE verification and compliance needs.

Contact us to find out how you can bring colour to your business and watch it grow.

www.gt.co.za

© 2014 Grant Thornton South Africa. All rights reserved. Grant Thornton South Africa is a member firm of Grant Thornton International Ltd (‘Grant Thornton International’).

B-BBEE_Smart_Procurement.indd 1 2014/05/20 10:40 AM


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THE RESPONDENT

Wade van Rooyen Managing Director, Verification Services: Grant Thornton

041 374 [email protected]

Wade van Rooyen has extensive executive experience in the BEE industry and served as a director of the Association of BEE Verification Agencies. His educational qualifications include a BCom (Law) and a MBA in Strategic Financial Management. Wade is a specialist in government intervention, Broad-Based Black Economic Empowerment and Industrial Incentives. Visit smartprocurement.co.za/spr for a full biography.

THE INTERVIEWER

Liam MorrisonContent Specialist: Commerce Edge and SmartProcurement

[email protected]

Liam is a journalist and copy editor, currently specialising in Procurement and Supply Chain. He publishes Commerce Edge’s procurement and supply chain optimisation training material, has developed various procurement-focused e-learning tutorials and sub-edits Smart Procurement’s monthly newsletter.

B-BBEE

In October 2013 government legislated the new BEE Codes of Good Practice, which will replace the existing codes by April 2015. The New Codes affect all companies that do business in South Africa and significantly influence the way that procurement decisions are implemented.SmartProcurement Review spoke to Wade van Rooyen, Director of Verification Services at Grant Thornton, for some insight into the changes.

Q WHICH TYPES OF SUPPLIER WILL INFLUENCE AN ORGANISATION’S BEE SCORECARD THE MOST?

The New Codes combine preferential procurement with enterprise development from the existing Codes into a new element enterprise and supplier development.The drive is to develop new sources of supply through enterprise development by forcing companies to buy from enterprises that they develop or develop enterprises that they buy from, strengthening the whole supply chain.

To that end, the New Codes have replaced ‘value adding suppliers’ with ‘empowering suppliers’. An empowering supplier is one that incorporates a high level of local content in its offering, creates jobs in the financial year, transfers skills to other enterprises and adds value through manufacturing or beneficiation.

Consequently, your first concern is supporting companies that are empowering suppliers.

In addition to local content, value adding, skills transfer and job creation, the other big consideration for procurement is black-owned suppliers. However, this is not new to the New Codes, it has always been an issue, but it has become more prevalent.

Q HOW WILL PROCUREMENT PROFESSIONALS BE AFFECTED BY THE REVISED CODES OF GOOD PRACTICE?

Under the revised codes one of the procurement targets for organisations is to spend 40% of their procurement budget with black-owned, empowering suppliers. This constitutes a large portion of their budget – meaning that they cannot spend it on the traditional easy targets like catering or cleaning alone and must look to the suppliers of their strategic commodities.

However, black-owned suppliers of strategic commodities remain few: black-owned suppliers have previously provided cleaning or catering services in abundance. Consequently, the New Codes require us to identify and develop these suppliers so that South Africa can secure a future supply of strategic commodities from black-owned business.

Q TO WHAT EXTENT WILL THE PROCUREMENT FUNCTION’S RESPONSIBILITY EXPAND TO INCLUDE ENTERPRISE DEVELOPMENT?

Procurement departments make procurement decisions: buying at the right prices and the right quality from a supplier that meets the demand. That function is never going to change. If anything, procurement departments will now become more integrated with, for example, engineering departments to establish the required supplier competencies and what needs to be done to develop or make suppliers available in the black-owned supplier market.

Buyers will be responsible for ensuring that their spend meets the BEE requirement, using their spend to drive suppliers to diversify their

BEE CODES Q&A WITH

GRANT THORNTON

VERIFICATION SERVICES


11

operations. “The shape of a company is determined by its customers: customers are calling the shots.” To that end, procurement will increasingly foster collaboration between its tiers of suppliers, facilitating discussions where suppliers have to sit down and say “we’ve got a problem, how do we fix it?”

Q DOES THE REVISION OF THE CODES PROVIDE SIGNIFICANT OPPORTUNITIES FOR SMMES?

Under the revised codes, the procurement spend target is 40% with black-owned, empowering suppliers and the enterprise development target requires that two thirds of the enterprise development spend is attributed to direct contributions to your suppliers. It is clear that the whole of corporate South Africa has been given the incentive to contract over the long term with black-owned SMMEs and further assist them to develop their financial operational capacity.

There is a need to identify and develop suppliers so that South African big business can secure a future supply of strategic commodities from black-owned business.

Q IT HAS BEEN WIDELY DISCUSSED THAT THE STRETCH BETWEEN THE CURRENT AND THE OLD CODES IS MUCH BIGGER THAN ANTICIPATED. HOW HAVE STAKEHOLDERS REACTED TO THIS?

Corporate South Africa has adopted a very responsible approach and they have accepted that they will drop, for example, from Level 4 to non-compliant. They have accepted that they are in the same boat as their suppliers and competitors, but are committed to making an effort to improve.

I would say that 1 in 10 suppliers are irrationally saying the New Codes have gone too far, we can’t do this anymore, we’re giving up. This is an emotional response that will prevail until they begin to grapple with the implications of not complying. Most of them will eventually come around.

We saw the same reluctance when the existing Codes were initiated. The failure of companies to act quickly contributes to the extended life span of BEE policies in the economy. The Codes initially envisioned a 10-year life span from 2007, often referred to as the sunset clause. The slow pace of transformation has, however, led to an overall extension of the policy. The new act has removed the sunset clause that was in place, and there is now no end to the policy.

Q THE NEW CODES HAVE ELEVATED B-BBEE TO A MORE STRATEGIC LEVEL IN ORGANISATIONS. DOES THE EXTENDED TRANSITION PERIOD ALLOW ORGANISATIONS ENOUGH TIME TO ADJUST AND ADAPT THEIR STRATEGIES IN LINE WITH THE NEW CODE’S REQUIREMENTS?

The New Codes were released in and effective from October 2013, with a 12 month transitional period during which either the old or New Codes could be used for measurement. A six-month extension was then granted to April 2015, after which only the New Codes may be used. Sectors with their own sector code must ensure that the sector codes are aligned to the New Codes by the end of April 2015.

Q WHAT ARE LEADING ORGANISATIONS DOING TO INCREASE THEIR BEE POINTS IN PROCUREMENT AND SUPPLIER DEVELOPMENT?

Organisations that are able to are considering ownership. Previously

they did not consider it, but they are realising it is a large opportunity.

By organisations that are ‘able to’ I mean those that do not have

an international policy of no local ownership - parent companies of

multinational companies are not going to give away local equity.

In a case of a policy of no local ownership the Codes provide for an

‘equity equivalent’ under which an organisation can apply to the DTI to

register an approved social economic development contribution. Any

money spent on the approved programme gives the organisation quasi

recognition for ownership. Currently, an equity equivalent is prohibitively

expensive, but there is a move to restructure the way that the equity

equivalent amount is calculated, which government is entertaining, and

if industry is successful then an equity equivalent will be a viable option

for many companies.

Q TO WHAT EXTENT CAN TECHNOLOGY ENABLE IMPROVED ACCUMULATION OF PROCUREMENT, SUPPLIER DEVELOPMENT OR ENTERPRISE DEVELOPMENT POINTS?

Organisations cannot influence their BEE score unless they have access

to supplier BEE accreditation and spend information on a daily basis.

Technology’s role is to integrate systems so that the information required

to manage a BEE procurement score is at procurement’s fingertips.

Ultimately, every procurement decision should incorporate BEE status.

Furthermore, technology plays a role in implementing procurement

policy. Under certain circumstances we will only buy from a black-

owned, empowering BEE suppliers. Under other circumstances we have

discretion. Under different circumstances we accept that there are no

suppliers, requiring us to revert to our enterprise development strategy.

Q IS IT POSSIBLE TO ACHIEVE A GOOD SCORE WITHOUT INCURRING SIGNIFICANT COSTS?

If we assume that organisations will score poorly because their suppliers

are not empowering suppliers, but are strategic supply sources, then

the New Codes come at a significant cost as organisations must develop

these suppliers in order to meet these targets.

But, it’s comparable to buying a cow or buying milk. In the long run it

will always be beneficial to develop suppliers, to have a secure supply

chain that is empowering and black-owned, as your BEE points are

secured into the future at no cost.

Going forward, the money that you spend developing your suppliers will

very quickly bring business benefits.

Q WHAT MESSAGE WOULD YOU LIKE TO OFFER COMPANIES AROUND THE NEW CODES?

The surest way to create sustainable growth in our economy is to

increase participation by all South Africans. The faster we can do that

the more stable our economy is going to be. What the New Codes

propose is an aggressive way of making this happen.

The longer organisations fight the policy and try to hold back the

tide, the more we delay the ultimate benefits of having an expanded

economy. There is no other policy that brings all South Africans

together: this policy is about increasing economic participation of black

South Africans, of marginalised South Africans.

Ultimately, it makes economic sense: your business can only thrive in a

strong and stable economy. n


12

The new DTI Codes are complex and meeting them will be challenging. For management to make informed decisions and measure progress in achieving transformational goals at business-unit level there must be one version of the truth that is accurate and up-to-date.The 2013 Department of Trade and Industry (DTI) Codes ‘ratchet up’ the broad-based black economic empowerment (B-BBEE) bar for all larger South African organisations: most believe that if they had to conform to the Codes now their B-BBEE level would drop at least 2 points (e.g. from 4 to 6).

And yet the codes come into force in April 2015 - less than a year away.

For some industries there may be a further brief interlude while the bodies representing specific sector charters negotiate the changes to their own existing Codes. However, as a minimum the industry sectors are expected to comply with the levels in the generic codes.

MAKE YOUR SPEND DATA MORE VISIBLE

Most organisations measure their B-BBEE scores reactively, a process fraught with manual intervention and checking (many organisations employ auditors and B-BBEE experts to verify their scores prior to a score audit). The resulting lack of productivity, increased internal and external cost and increased level of proactive management hampers organisations achieving their transformation strategy and diverts resources away from their core activities.

What is required is real-time B-BBEE data analysis, which covers all the pillars of any B-BBEE sector code and gathers transactional data, or data at the ultimate granularity, and automates the process of collecting information, providing head office and business units with scorecards to:

• set targets;

• perform “what-if” analyses to determine what must be done to fulfil these targets; and

• measure progress on a month-by-month basis against these targets.

Figure 1 is an example of the organisation’s current scores for preferential procurement compared with the DTI Codes (‘Actual %’ and ‘Actual Score’), while the ‘Forecast %’ and ‘Forecast Score’ show the effect of transferring R400-million spend from non-compliant suppliers to suppliers with B-BBEE levels of 3 and 4. The score increases from 5.67 to 8.00 – above the target.

Figure 1

But how can an organisation use such an analysis to recognise suppliers who are not sufficiently compliant and relocate spend to those that have a B-BBEE level of 3 or 4? Within a matter of minutes a dashboard view can be created that identifies the suppliers that are not compliant and the divisions that use them, as shown in Figure 2.

Figure 2

B-BBEE

LEVERAGING BEE THROUGH PROACTIVE DATA ANALYSIS


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ABOUT THE AUTHOR

Alan Low CEO, PI SA

011 803 0005084 890 0005 [email protected]

Alan Low qualified as a chartered accountant in the UK and came to RSA in 1991. He worked as a consultant and account manager before starting PI SA in 1997.

PI offers Enterprise Decision Support (EDS) analysis and benchmarking solutions.Putting big data to work.

A further dashboard view (Figure 3) shows spend with suppliers with a B-BBEE level of 3 or 4, the divisions that use them and whether the suppliers are classified according to the generic codes (GEN), as exempt micro-enterprises (EMEs) or as qualifying small enterprises (QSEs).

Figure 3

The next step is drilling further down into the data to see which of the suppliers could be used by other divisions, for example. Alternatively, the organisation can engage with non-compliant suppliers to verify their current B-BBEE status and amend their records. As the scores are incorporated into the data, the dashboard views will automatically update to reflect the correct scores and the effect on the organisation’s overall B-BBEE score.

The flexibility of the analysis will be particularly useful as suppliers grapple with accommodating the new DTI Codes and maintaining their current B-BBEE status. If an organisation has a small group of suppliers providing a high proportion of goods and services it will be essential to understand these suppliers’ new scores. With regular updates of suppliers’ adjusted scores and the available “what if” facilities, management can model what the supplier performance may look like and how this will affect the overall supplier performance score.

The analysis would enable users to drill down into the detail to identify, for instance, smaller suppliers who would benefit from enterprise development spend; and staff members with the right skills, qualifications and track record to manage and groom into management positions, etc., as in Figure 4.

Figure 4

The scorecard in Figure 4 shows the effect on employment equity where 50 new black middle managers are appointed (as 50 white middle managers retire) together with 50 black women middle managers. The score goes up from 8.67 to 10.94. The Venn diagram in Figure 4 shows the number of existing staff who are female, black and skilled or semi-skilled, who may be available for training to take middle management positions.

The reality is that meeting the new and complex DTI Codes will be challenging. If management is to make informed decisions and measure progress in achieving transformational goals at business-unit level there must be one version of the truth that is accurate and up-to-date. n


14

B-BBEE BACKGROUND

Since 1996 Government procurement was significantly transformed,

or rather reformed, to not only ensure that preference is granted

to previously disadvantaged individuals, but also to curb fraudulent

procurement practices. The granting of preference was seen through

the incremental adoption and promulgation of legislative and regulatory

reforms applicable to all organs of state.

These government reforms, however, have contributed to the

development of a new phenomenon commonly known as ‘fronting’. The

question being asked these days is: “Is fronting good or bad?”

FRONTING IS DEFINED AS “NOT BEING AS HONEST AS POSSIBLE ABOUT SOMETHING” .

It happened in the past that fronting occurred where a tender was

awarded and the black beneficiaries obtained only short-term financial

benefits, but in the long term NO EMPOWERMENT took place, rendering

the scheme unsustainable and defeating the purpose of black economic

empowerment.

On the other hand, owing to South Africa’s history, a substantial number

of black shareholders and small to medium enterprises (SMEs) do not

have access to funding and collateral to enable them to start their own

operations and need partners to provide such support. By engaging such

partners a form of relationship is created, which can also be classified as

a form of fronting and raises the question: “When is fronting permissible

and when is it bad?”

In an attempt to address this question the Preferential Procurement

Policy Framework Act (PPPFA) and the Broad-Based Black Economic

Empowerment (B-BBEE) Codes provide for penalties and even

blacklisting of companies who obtained preferences based on

misinformation. It also determines that ownership can only be claimed

if the shareholders or directors of a company are actively involved

in the day-to-day management/running of the company or exercise

management control in such company.

With these types of prescripts government is attempting to ensure that if

‘fronting’ does take place, BEE groups are involved in both the operation

and also strategic level of the company, thus ensuring proper and

sustainable skills transfer, empowerment and resultant financial benefits,

and not only be providers of so-called blue collar services.

In order to detect fronting, one must have the ability to test preference

claims during the bidding process and then consistently monitor any

change during the award of a tender. This is an extremely expensive

and time-consuming process, which can eventually exacerbate the

already cumbersome and tedious bureaucratic government procurement

process.

An alternative approach to promote SMEs when awarding major

contracts could be to force the conclusion of joint ventures/consortia

requiring so-called big firms to conclude agreements with smaller firms

and submit such agreements as part of the tender, indicating how

the SMEs will participate in strategic decision making and operational

involvement, the level of profit sharing and, very importantly, how

participation and profit sharing will increase over the contract term

to the benefit of the SMEs. On this basis the profile of the bidder is

determined upfront and the management and monitoring arrangements

are put in place before the tender is awarded.

All of the above attempts, if restrictively interpreted, can be regarded as

forms of permissible ‘fronting’. Can it therefore be regarded as ‘wrong’?

The answer is a simple ‘NO’. The writer’s respectful opinion is that there

are two types of ‘fronting’: negative fronting and positive fronting.

Negative fronting is not permissible because it usually relates to the

so-called rent-a-black-person scheme, where preferences are claimed

FRONTING BLESSING

OR CURSE?

BEE

Member of:

Harvest BEE is a division of Harvest Chartered Accountants Inc. a member of the Harvest Group

TEL: 086 111 1251 www.harvestbee.co.za

BEE VERIFICATION AND ADVISORY SERVICES

www.THEHarvestgroup.co.za

ABOUT THE AUTHOR

Advocate Helen VenterDirector: Brasika Consulting

[email protected]

An accomplished public sector legal expert, Helen has more than 25 years experience in supply chain management and government finance. In 2012 she was appointed as a European Union SCM Specialist. Helen believes in the value government organisations add to citizen’s lives and is driven to act as a change agent to help government officials believe the same.

purely on black shareholding of which the relevant black participants

do not participate in the strategic and operational management of the

company and no sustainable empowerment takes place.

Positive fronting is acceptable because it is structured with the main

aim of skills capacitating and sustainable empowerment, with built in

provisions of increased profit sharing as skills are developed. Tenders

are opened for bidding with the requirements being transparent, fair,

equitable and competitive.

Therefore, the test for positive fronting is based on four criteria:

DOES THE BIDDER PROFILE ALLOW THE FOLLOWING?

Structured fronting, i.e. consortium or

joint venture agreement? Yes/No

Skills development? Yes/No

Sustainable empowerment? Yes/No

Incrementally increased profit sharing

linked to skills development? Yes/No

If at least 3 of the requirements are answered in the positive = positive

fronting.

CONCLUSION

There is a fine line between the two types of fronting. Negative fronting is unacceptable and all attempts must be made to avoid it, while positive fronting is acceptable if it complies with the test of being in the form of structured agreements, based on skills development, includes sustainable empowerment outcomes and links increased profit sharing to skills development. In order for positive fronting to be successful, good governance arrangements related to reporting and monitoring must be agreed to and put in place. n

ABOUT THE AUTHOR

Elmarie DaviesAdministrative Executive Consultant, Brasika Consulting

[email protected]

Elmarie has a wide range of experience in public sector financial management. She has assisted in the development of PFMA/MFMA implementation and compliance, SCM policy and system for Departments and Municipalities, various delegation frameworks, standard operating procedures, governmental policies and SCM case law and case studies.

BEE

Member of:

Harvest BEE is a division of Harvest Chartered Accountants Inc. a member of the Harvest Group

TEL: 086 111 1251 www.harvestbee.co.za

BEE VERIFICATION AND ADVISORY SERVICES

www.THEHarvestgroup.co.za


16

ENTERPRISE DEVELOPMENT

Confronted with the revised black economic empowerment (BEE) Codes and the strong focus on supplier development (SD) in particular, corporations must now re-orientate their existing enterprise development (ED) programmes to align with their procurement and supply chain strategies.

As business leaders come to terms with this new imperative, consider their options and plan for the changes ahead, applying a few proven best-practice principles will go a long way to ensuring they get enterprise and supplier development (ESD) right.

1. THE RIGHT PEOPLE IN THE RIGHT POSITIONS

ESD must be driven from the highest level of the organisation. The Executive Committee must (1) appoint a capable steering committee (steerco) to drive the ESD programme, (2) give the steerco a clear mandate and (3) broadly communicate its support for the initiative. The right steerco will bring the heads of ED and transformation together around a table with those from procurement and supply chain planning, as well as any other key stakeholders. Working closely with the business’ leaders, the steerco must be accountable for developing a collaborative ESD solution that supports overall business strategy and ensuring that it is successfully integrated into everyday operations across the broader organisation.

2. THE RIGHT SPECIALIST PARTNERS IN PLACE

ESD programmes require the support of the right specialist practitioners. The right ESD advisory partner will bring in-depth knowledge, first-hand experience and best-practice skills to the planning process. The right ESD partner is one that understands the commercial operating environment and knows how to co-ordinate the inputs and activities of cross-functional stakeholders. The right ESD advisor will be able to work with the steerco to prepare a single, consolidated business case for an end-to-end ESD solution.

3. THE RIGHT PERSPECTIVE ON THE PROBLEM

The case for ESD must be built on the back of a comprehensive diagnostic assessment of current buying strategies and supply chain operations. A detailed analysis will highlight any existing gaps in supply and will help identify any immediate opportunities for ESD integration. Demand forecasts will provide insights into the longer-term capacity-building requirements of the business where ESD linkage could potentially enhance or improve the quality, cost, speed or efficiency of production.

GUIDELINES FOR SUCCESSFUL

ENTERPRISE AND SUPPLIER

DEVELOPMENT IMPLEMENTATION


17

ABOUT THE AUTHOR

Daniel Hatfield Managing Director Edge Growth

010 001 3715 [email protected]

Since co-founding Edge Growth, Danny has been involved in Enterprise and Supplier Development across the entire value chain; from developing and implementing ED strategies across multiple sectors to being ‘hands on’ with grass roots SME incubation. He has structured, raised capital and set up four, first of their kind ED Funds, collectively managing more than R250m for companies and associations across the industry spectrum.

4. THE RIGHT SMES

The current supplier portfolio must be reviewed in the context of these requirements. Finding “perfect fit” suppliers for an ESD programme is unlikely. Instead supplier screening, sourcing and selection processes must be adjusted to identify “closest match” suppliers - SMEs with the right fundamentals in place and the highest potential for sustainable growth. Enterprise owners must have the right combination of experience, skills, vision, passion and resilience – growth is painful and not all entrepreneurs want to scale their businesses. A strong commitment is required from both parties at the outset.

5. THE RIGHT SUPPORT AT THE RIGHT TIME

Generic SME development programmes don’t work. For an ESD programme to be effective, business development support must be customised around each enterprise’s unique capabilities, growth stage and gaps. Each SME’s development path must be synchronised to enable integration into the system at the point when appropriate opportunities arise. Customised financial support is also critical: each SME’s funding requirements will be different and will vary throughout the development process, and without track records or surety most of them will not qualify for funding from traditional institutions. The premise of “less is more” applies: efforts and investment should be focused on helping a few SMEs develop to their fullest potential as opposed to providing a “light touch” approach to a high number of enterprises. An ESD programme must provide holistic support and should address financial as well as non-financial needs.

6. THE RIGHT PLANNING

The path to delivery must be defined by a detailed, deliberate and actionable ESD implementation plan. The right plan will prioritise and phase proposed activities in a way that manages the business through its transition. A few initial “quick wins” are essential to demonstrate programme benefits and to ensure buy-in and commitment at every level of the organisation. The plan must map timelines to initiatives, allocate accountabilities and ensure adequate resourcing. It should balance ESD interventions across high- and low-volume areas of the supply chain, business critical and non-core production requirements.

7. THE RIGHT POLICIES, PRACTICES AND PERFORMANCE MEASURES

Internal policies and processes will need to be adjusted to support programme implementation as changing established sourcing and buying practices requires a paradigm shift. Governance measures must be established and clear KPIs must be included in the performance management of all stakeholders influencing the buying decision. It is vital to incentivise ESD integration and to enable evaluation and reporting against the progress of the programme at a department, team and individual level. n

AcademyLEARNING • KNOWLEDGE • RECOGNITION


19


Caught up in the cycle of “tenderpreneuring”, small business owners are unable to plan for the longer-term and are never incentivised to grow their businesses to the point where they qualify for more substantial and/or regular contracts. Ultimately this condemns them to the poverty trap - quite in

contradiction to the DTI’s focus on building black industrialists. Until

corporations adopt a new approach to local procurement programmes,

they will continue to fail to contribute to the ultimate goal of broad-

based empowerment: a sustainable future for all.

South Africa’s largest industrial corporations have, in the main,

responded positively to the broader national development agenda.

Perceived to be one of the most immediate solutions to sharing the

value of industrial operations with the communities that surround them,

the localisation of procurement has been an area of particular focus.

In many instances, formal policies and programmes have been put in

place to drive the purchase of goods and services from local businesses

wherever possible. But few of them have as yet demonstrated any real

socio-economic improvements and, often, it is the way in which these

programmes have been structured that lies at the heart of the issue.

Sourcing quality SMEs from the local community is not easy. Most

SMEs will be small and undifferentiated, with limited track records and

insufficient capability to deliver on large meaningful contracts.

As a result, corporates will typically look at small periphery spend areas

to provide opportunities for SMEs; opportunities that present no risk

to business operations. These tend to address only low- to no-skilled

job creation - contracts like ad hoc catering, bush clearing, garden

maintenance, event co-ordination, etc. Corporates will also rotate these

contracts regularly to allow other SMEs the opportunity to benefit from

their business.

The unintended consequence of this approach is that local SMEs

all tender for any type of contract to increase their chances of

winning a higher number, which makes them lose focus and become

commoditised. On top of this, tender rotation means that they are only

eligible for contracts every few months, making cash flow a constant

struggle and forcing SMEs to remain in survival mode. Many would

prefer to be employees and are only operating a small business as a last

resort.

Consequently these SMEs never grow a core business. More importantly,

they never build specialisation, capability or a track record in a single

focus area. And they never grow into a sustainable company.

So, what approach could a corporate take to address this reality?

A few options exist and they all take time to implement, so the

first aspect to address is ensuring that time scales and stakeholder

expectations around the delivery of results are realistic.

Identify talent and commitment…

Corporates must begin by identifying the most talented and committed

entrepreneurs from their pool of SME suppliers. There are always a few

entrepreneurs who stand out as “hustlers” – they are determined to

make a success of themselves and do not let obstacles get in their way.

Finding these high-potential entrepreneurs and working with them over

LOCALISED PROCUREMENT PATH TO SUSTAINABILITY OR POVERTY TRAP?


20


ABOUT THE AUTHOR

Stuart TownshendHead of SME Growth Support Services - Edge Growth


Stuart has worked across the ED spectrum and uses his background in Corporate Supply Chain, SME Funding, SME Business owner and Management Consulting to help Entrepreneurs build and grow sustainable businesses. His previous work experience and expertise positions him well to work with procurement managers and SMEs to build sustainable, reliable suppliers through Supplier Development programmes.

time to diversify and build a specialised and profitable core business will

go a long way to breaking the cycle.

…then identify supply chain opportunities that will support their focused growth

Selected SMEs will need to be given longer-term contracts and the

certainty of future cash flow. To mitigate risk, and allow the SME

adequate time to build capability, the contract can be small to begin

with and increase as the SME develops over time.

Whereas, in the past, corporations have sourced SMEs to fit local

procurement opportunities, they must now find the right entrepreneurs

first and then work with them to identify supply chain opportunities

that would support their specialisation and growth.

Establish new local suppliers capable of delivering on high-volume

contracts

Where SMEs cannot be sourced locally, an alternative is to establish new

businesses in the area. High supply chain spend is typically with larger

suppliers based outside local areas of operation. By establishing new

suppliers capable of delivering on high-volume contracts, corporates

can create significantly more jobs for the community. A specialist

partner would be able to set up and run the business and train the local

community before handing over management to a suitably mentored

and up-skilled entrepreneur. On the back of a contract, financing the

set-up of this business would be possible.

In both instances the process will, however, take three to five years to

demonstrate a direct return to the sponsor corporate. Furthermore,

the necessary change in mindset and buying behaviour at a localised

procurement level will only ever take place if leadership and

stakeholders drive the process, which is another critical factor that is

currently often lacking. n

C

M

Y

CM

MY

CY

CMY

K


22

GLOBAL TRADE

CHINA TRANSFORMATIONIMPLICATIONS FOR GLOBAL SOURCING


23

New competitive forces are shaping China and other low-cost countries’ competitiveness, which has implications for African supply chain executives.

ASSESSING CHINA’S COMPETITIVENESS IN A CHANGING LANDSCAPE

Though China is a classic example of an export-led

manufacturing industry, the country’s rising cost

profile has encouraged many leading companies to

identify alternative production bases, particularly in

the garment sector where the primary location of

factories has shifted to other Asian markets, such

as Thailand, Indonesia, Vietnam, Bangladesh and

Myanmar.

China may be moving away from its position as

merely a low cost country (LCC) into a high-tech

sourcing destination, but owing to China’s unique

scale and supply chain efficiencies, it is unlikely

that a “second China” will arise. Thus, a wider set

of factors must be considered when choosing an

alternative. Ease of doing business, availability of raw

materials, reliability of supply, quality of products

and unparalleled scale are a few of the unique

competitive advantages that China enjoys.

Secondly, wages and land costs in central and

western China are still comparable with other

LCCs. Hewlett-Packard, for instance, recently set up

factories in central and western China, from which it

can now deliver goods to Western Europe in around

three weeks via high-speed rail links. The Chinese

government is currently upgrading its existing

infrastructure network to counterbalance increased

inbound logistics costs.

Thirdly, Chinese investment in R&D has increased

dramatically over the past decade. Today, more than

half of the world’s Fortune 500 companies operate

factories and R&D centres in China. While China

might be losing a competitive edge in inexpensive,

labour-intensive products, it is gaining new

competitive advantages in high-value-add products.

China’s competitive edge is not coming to an end;

rather, it is transitioning to growth increasingly based

on higher levels of value-add and innovation.

IMPLICATIONS FOR GLOBAL SUPPLY CHAINS

Procurement professionals must consider the

following when confronting supply chain challenges:

1. Fine-tune China procurement. For most

procurement managers, China will remain central

to their strategies for reasons such as scale,

variety and reliability. However, its transformation

requires a re-conceptualisation of current product

category strategies.

2. Follow a portfolio approach. Most strategic

and prudent sourcing executives are adopting

a portfolio approach—building capabilities

in emerging sourcing destinations that can

complement an existing Chinese supplier base. A

complex supply chain portfolio may reduce costs

and diversify potential risks. Reducing supply

chain risks is key for procurement managers

because African supply chains face a host of

unique geographic and infrastructure challenges.

3. Revisit risk management. As companies become

more dependent on cost-cutting initiatives to

maintain or increase their margins, managing

supply chain risks becomes critical. This is

especially important when these initiatives involve

new (and often risky) sources of supply.

4. Develop innovative strategies. Supply chain

managers are realising that exploiting cost

arbitrage opportunities between geographies

is becoming increasingly difficult. The shifting

landscape of LCCs has decreased the likelihood

of finding a one-stop sourcing solution. For this

reason, other strategies, such as inbound and

outbound logistics and storage, are playing a

greater role in cost-cutting strategies. This reality

requires innovative supply chain organisational

structures, strategies, skills and technologies in

order to facilitate cost reductions and improve

efficiencies across the entire supply chain.

FINAL WORD

While companies with an existing LCC agenda

are revisiting and optimising their strategies with

a portfolio approach, companies with minimal

exposure to LCCs will begin to feel the pressure of

rising costs.

Though China is not necessarily the right answer

for all procurement initiatives, it is a focal point for

most global supply chain strategies. Facing tight cost

pressure, Chinese companies are learning to optimise

processes to boost productivity.

Simultaneously, China is becoming increasingly

attractive for high-value products and increasingly

unattractive for low-value products. Supply chain

managers anticipating how such shifts will affect

their supply chains will be able to adapt quickly and

create unique competitive advantages. n

ABOUT THE AUTHOR

Javier Cuñat Associate Director The Beijing Axis

+86 10 6440 2106 [email protected] www.chinasourcingblog.org

With over ten years of China experience, Javier has led numerous low cost country procurement and strategy consulting projects for multinational clients in the mining, engineering and heavy machinery industries. He is also responsible for the development of Latin American clients. He has an EMBA from Tsinghua-INSEAD, and holds BA degrees in Administration and Business Management as well as Economics from the University of Valencia.

While costs remain a focal point for companies seeking to increase their margins, China’s competitive position as a low-cost sourcing destination is changing.


24

TOP SUPPLY CHAIN OPPORTUNITIES IN AFRICA

While business may be slowing elsewhere, Africa is booming with many opportunities for the entrepreneurial supply chains keen to meet distribution needs in developing countries.

“Most opportunities are in retail – think food and cellular – and public services, since governments are the big spenders when it comes to service delivery,” says Abré van Buuren, Training Manager for Imperial Health Sciences’ (IHS) Africa Supply Chain Academy. “What is needed now are innovative solutions that will work well in the unique African context,” he adds. “It is a time for entrepreneurs and, for those who are willing to work hard, the pay-off will be big.”

PRIVATE PUBLIC PARTNERSHIPS

According to van Buuren, a substantial opportunity exists in our industry for companies to partner with governments on delivering public services. A particular area of interest is the distribution of medicines. “Major donors of ARV drugs and the like are pushing governments to partner with the private sector in developing their public health supply chains, with the intention of ensuring that millions-of-dollars-worth of donated medicines are actually received by those who need them most.”

In Malawi, a local distributor, CML, which has received support from IHS and USAID, has rapidly grown as it assists the government in

distributing medicines. CML has invested in its routing and scheduling system, its vehicle fleet and has hired more staff members to cope with the growth.

“This is evidence that engaging the correct private-sector partner can enable a speedy, successful implementation of supply chain infrastructure, particularly where funding is available to enable rapid deployment,” says van Buuren. Furthermore, this demonstrates the feasibility of governments outsourcing the key supply chain functions like procurement, storage and distribution, he says.

“This may be the only sustainable solution to provide better outcomes in low-resource settings where the national system’s resources may not match the capacity one finds in the private sector.”

BOOMING ECONOMIES

The rapid growth of economies like Nigeria and Angola is creating a huge need for supply chain infrastructure.

Van Buuren notes that, especially in countries that are growing rapidly because of the discovery of oil, such as Angola, some industries are being neglected. “It is as if the country’s focus shifts to oil, so other industries simply lag behind, creating opportunities in these areas.”

In Angola just one central store is tasked with distributing medicines to the entire country. “This means that opportunities exist for partnering with the government on, for

example, building regional medicine stores so that medicines can reach the smaller towns.”

RETAIL

The cellular industry is growing rapidly, says van Buuren. “Demand is huge and product needs to be distributed to outlying areas.” The retail food industry appears to be a bit behind in several countries where one retailer holds the monopoly. “In Rwanda, for example, there is just one big retailer with no healthy competition.”

CHALLENGES WHEN DOING BUSINESS IN AFRICA

Although Africa is ripe with opportunity, it is important to be aware of the challenges. Business in Africa is often highly politicised, which contributes to slow growth. “It is all about who you know and how you approach them; so make sure you learn the culture and how best to operate in it.”

Whatever the challenges, the need for innovative investment is clear. “Africans are hungry for knowledge and change; they want to work with people from other countries. These are people who do not suffer from an ‘entitlement complex’ – they would do anything to gain skills and knowledge, and therefore, make great investment partners,” notes van Buuren.

Africa is growing with a commensurate increase in supply chain opportunities. The time is now. n

OPPORTUNITIES INTO AFRICA ABOUND FOR INNOVATIVE SUPPLY CHAINS

GLOBAL TRADE

It is all about who you know and how you approach them; so make sure you learn the culture and how best to operate in it.


25

ABOUT THE AUTHOR

Abré van BuurenImperial Health Sciences’ (IHS) Africa Supply Chain Academy

[email protected]

Abré is a registered learning and development practicioner with 12 years’ experience. He holds a Bachelor of Commerce from the University of Pretoria and an Honors of Education from the North West University.

In Nigeria, for example, we have found that just two organisations oversee the distribution of pharmaceuticals. The opportunities are clearly vast!


26

A recent Harvard Business Review article entitled ‘The Problem with Procurement’ highlighted the importance of communication in procurement, including Figure 1 below. A cursory examination of the graph makes it clear that communication is prevalent in nearly every point.

Figure 1: What is important in procurement?

(Harvard Business Review, http://blogs.hbr.org/2013/08/the-problem-with-procurement/)

Without effective communication in their arsenals procurement specialists will fall back on only following process and getting the best price. Worse still, they may fall back into being a mere function.

The last 20 years have seen some great changes in procurement. From being a mere function in companies, procurement has evolved into a strategy enabler vital to the sustainable success of organisations.

There is little doubt that the strategic role of procurement will continue to grow: procurement professionals today hold more qualifications; they are responsible for bigger budgets; their reporting lines are higher in organisations; and there has been a dramatic increase in policies and procedures in procurement.

However, even with this change taking place, procurement professionals still face some significant obstacles. The fact that procurement is more strategic means that purchasing decisions are taken at a higher level -

and being ‘up there’ means there is added focus and scrutiny placed on procurement.

“Tall trees catch more wind.”

Consequently, procurement professionals have a greater need to be successful in their critics’ eyes, as this creates satisfaction and confidence, which even further escalates their successes.

So, what is that single capability that influences success the most? That one capability that addresses the demands of a strategic role and promotes the success of a procurement professional?

Excerpts from two recent articles may give us a clue...

THE BUILDING BLOCKS TO BOLSTER PROCUREMENT CAPABILITY BY CIPS:“To optimize value, procurement professionals need to augment procurement governance with managing the organisational interface. Although governance provides procurement legitimate authority and decision rights around some organisational elements, a lot of what procurement needs to do to be successful can only be delivered through managing the organisational interface.

Managing the organisational interface is about getting buy-in from key stakeholders regarding procurement strategies, activities and goals. It encompasses leadership, communication, the ability to form relationships, build credibility and influence internal customers and senior executives, as well as get the best out of suppliers. Simply, a procurement professional needs to make or at least influence internal decisions where [procurement] has no decision-rights (i.e. governance) to do so.

THE 5 MOST DIFFICULT OBSTACLES FOR PROCUREMENT PROFESSIONALSProcurementBulletin summarised the following as the real obstacles:

1. Lack of internal communicationThere has to be direct communication between every department as purchasers must be aware of key issues that will affect their buying decisions. However in many cases that level of transparent and

THINKING AHEAD

THE PROBLEM WITH PROCUREMENT

SUPPLIER INTELLIGENCE AND ADVOCACY

PERCENTAGE RESPONDING OFTEN OR VERY OFTEN

46%We listen to and learn from suppliers

40%We ask suppliers to bring new businessopportunities they see to us

48%We ask suppliers to update uson their markets

31%We make new connections in thebusiness for suppliers

34%We advocate suppliersin the business

33%We share opportunities outside currentspend with suppliers

30%We ask our suppliers about businessissues they see in our company

20%We ask suppliers about ourstakeholders in the business

17%We know how our suppliers segmentus as customers

Source PwC 2013


27

trustworthy communication does not exist between procurement and the internal customers.

2. External communication blocksWhen internal communication is below standard, it’s easy to fall into a similar trap with your vendors and suppliers. Procurement can only be as effective as the people involved in the procurement process. This includes everyone from purchasers to logistics experts to sellers to end users. Procurement professionals must realise that strong trustworthy relationships are critical to the success of their roles. And the effectiveness is driven by communication.

3. Cost controlDepending on the industry, the costs of products, materials and transportation are constantly fluctuating. On the other side, demand and value are also changing. Keeping all of this under control to meet the desired profit is a big challenge in most procurement processes. Again, internal and external communication is essential throughout the procurement process. Concentrate on building relationships with the suppliers who have the biggest impact on profits.

4. Improper focusToo many procurement professionals remain isolated from corporate operations and often fail to see a product for its greatest end value leading to overlooked detail, increased costs and other side effects. The foundation to overcoming this obstacle is communication at all levels.

5. Failure to streamline the processThe most effective procurement strategies integrate seamlessly into the corporate strategy. Of course, a process that works this effectively requires overcoming all the obstacles (communication) already mentioned. It starts with a cost effective software solution (not too complex as it will cost more) … and these resources are better spent improving internal and external communication and, ultimately, becoming a leader in product innovation and demand progression.

Tackling all the challenges that come with supply chain management isn’t easy. Remember that communication at every level is the key to procurement success.

Today’s procurement professional must be able to strategically influence

people inside and outside the organisation; while the process method of procurement is important, it will not build strategic success. This is true at any level of the procurement function. It is communication that will make the difference.

However, we are not talking about a communication process (e.g. a once-a-week email, minutes of meetings, purchasing needs analyses, requests, agendas, weekly supplier meetings, etc.), which fits into the procurement methodology and is a by-product of the industrial era having taught us that people are just a resource.

Rather, we are talking about communication that influences and persuades people, that builds relationships, that lets procurement professionals work as an effective unit internally and externally - communication from a humanistic and psychological perspective.

For this level of communication to take place we must understand that people all differ in our approaches to communication owing to the fact that we all have certain preferences in the way we communicate. Having grasped this, we can adapt our own communication and make it more appropriate to the person we are dealing with.

Therefore, the most important contributor to success in procurement communication is the ability to understand people and in the process of doing so change our communication approach appropriately.

While, many different models exist to understand how people differ, there are few models that show how our communication differs.

Below are two areas that are important in our communication, namely the style of communication (Figure 2) and the behaviour in communication (Figure 3). Applying the wrong style or behaviour in a given situation will most likely lead to ineffective communication.

Figure 2: The communication styles, Source: 2Interact

The greatest ability in business is to get along with others and to influence their actions. - John Hancock

Best-in-class companies hire supply chain managers who have strong communication and relationship management skills (both internally and externally) - Supply Chain [quarterly] – Procurement.


28

THINKING AHEAD

ABOUT THE AUTHOR

Deon BassonDirector, 2Interact

021 403 6487www.2interact.com

Deon Basson has been in the human communication business for 19 years operating in Europe, North America and Africa. He has a great understanding of the impact that communication has on effective procurement and effective sales. Deon has a B.Sc. Hon (Information Technology) and an MBA specialising in the alignment of business and people. His experience on both the procurement side and sales side of the “fence” gives him insight into creating an optimum environment for communication in procurement.

Figure 3: The communication behaviours, Source: 2Interact

Figure 4 is a set of examples of one person’s preference in communication.

TYPICAL STYLES OF COMMUNICATION

TYPICAL BEHAVIOURS IN COMMUNICATION

Figure 4: Communication preference of one individual, Source: 2Interact

FACT BOX

Some facts about changes in procurement:

• The number of women entering the profession has increased significantly.

• Buying green is becoming real.

• BEE plays a much bigger role.

• The number of graduates has doubled.


29


30

Responsible, sustainable, green procurement means selecting products and services that have the lowest negative consequence on the natural environment plus the greatest positive effect on communities and individuals.Everything we use, every day, affects the environment in positive or negative ways: pollution, forests, the air, water systems, natural resources and people. Most critical of all are negative effects on climate change.

CONTRIBUTION FROM THE PUBLIC SECTOR

A recent study conducted for the European Commission highlights the potential role of government agencies in promoting decoupling (the ability of an economy to grow without corresponding increases in environmental pressure). It found that if all public bodies in the European Union switched to renewable energy they would avoid the release of more than 60-million tons of carbon dioxide emissions per year.

Public authorities have a particular role to play in promoting “green procurement”: through appropriate regulatory reform and by demonstrating more responsible practices in their own production and consumption activities.

In recognising its potential to make a meaningful difference through its procurement practices, the Western Cape Government (WCG) committed itself to developing a provincial Green Procurement Guideline (GPG) that seeks to reduce the environmental footprint of WCG’s daily operations, and influence the behaviour of its suppliers.

In terms of procuring goods and services, the objectives of the GPG are:

• to encourage a decrease in the use of energy and resources;

• to promote and increase the usability of spent or discarded products through reuse and recycling;

• to utilise and disseminate environmental best practices in the areas of waste reduction and management; water and energy efficiency and conservation; pollution reduction; and socio-economic development; and

• to encourage communities and businesses to use environmentally responsible products and services.

THINKING AHEAD

GREEN PROCUREMENTSWITCHING TO RENEWABLES


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ABOUT THE AUTHOR

Lorraine JenksFounder: Hotelstuff.co.za and Greenstuff.co.za


Lorraine is a tireless activist and thought leader in advocating greener practices in design, operations and procurement. She was Contracts and Procurement Manager for Africa’s largest hotel chain for 15 years and has trained under the UN Environmental Programme, the EU Flower Eco Label Standards as well as the Green Building Council. She is an accredited trainer for Al Gore’s Climate Reality Programme. She has won FEDHASA Imvelo Chairman’s Award, Eskom ETA Award, and the Enviropaedia Eco Warrior Special Award.

Implementing the GPG will be a challenging task. Therefore, it considers a phased-in approach to take cognisance of, among others, the readiness of suppliers; product availability; the development of expertise and capacity within the WCG; and the rate at which WCG personnel are able to absorb change.

Including environmental considerations in provincial purchasing decisions is intended to encourage a change in the behaviour of provincial personnel and suppliers, and in so doing stimulate the local green economy and promote innovation towards the development of products and services with a lower environmental footprint.

It is the intention of all departments at the WCG to implement this GPG during the course of the next two financial years by incorporating and implementing the principles within their supply chain management systems.

CONTRIBUTION FROM THE PRIVATE SECTOR

The concept of green procurement is daunting. It can be a minefield of misinformation, conflicting research, controversy and constantly-evolving definitions of green criteria. There are hundreds of eco labels overseas (all representing different aspects of “green”), but unfortunately we have little comprehensive eco labelling in South Africa. For most products, the choice will be yours and the key considerations are deforestation, depleting resources, burning fossil fuels, slave labour, factory farming, toxic chemicals, transport, pollution, product disposal and waste.

Professional buyers and investors who are looking for new business are increasingly required to find companies with formalised or measurable environmentally responsible practices in operations, production processes and end products. Tenders for “green” goods and services must stipulate clear eco standards and specifications, which requires a sound understanding of 1) why it is critical to change; 2) what must change; 3) how to change; and 4) where to find solutions.

Consequently, switching to renewables is a significant executive policy decision following which, procurement managers would be guided by specialists in assessing and recommending alternative options for a company.

GREEN MANAGEMENT AND OPERATIONS

The overall environmental policy of a company must be thoroughly assessed, either internally or with the aid of professional auditing companies who will assess energy and water consumption, travel behaviours and waste management. They will benchmark these and then help reduce and manage them more efficiently.

The next step is to define and implement new standards for all aspects of procurement - a sadly neglected, but critical component of going green.

GREEN PROCUREMENT

Compile a list of all the products and services purchased by your company; work through the list systematically and begin researching greener alternatives. If you are unsure, find established organisations that you can trust to advise your selection of “greener” or the “greenest” versions of products. Use them for advice or to run workshops to explain the rationale behind and criteria for green product credentials.

WHAT TO LOOK FOR

Each product purchased should be selected based on its overall green attributes - its lifecycle analysis. This entails evaluating the environmental effects and social consequences of a product through each stage of its life - also called “cradle to grave” or “cradle to cradle”.

Begin with ascertaining 1) where and how raw materials are sourced; 2) the manufacturing process; 3) handling; 4) transport; 5) safety; 6) impact during use; and 7) the disposal of the product. All these aspects must be taken into account and included in the supplier assessment template of the company’s procurement policy and procedures. Each criterion or key performance area should be weighted to suit the unique needs and aspirations of the organisation because no two organisations are the same.

SUPPLY CHAIN MONITORING

Manufacturers of products must be able to furnish you with information on the level of green compliance at each stage of their supply chain and they must continue to monitor these as long as they remain preferred suppliers. For example, wood should have an internationally recognised sustainability label, such as a Forest Stewardship Certification (FSC). Your supplier can then trace the journey of that item right back to the forest where the tree was cut down.

CONSIDER COST VERSUS PRICE

Greening is not about cost. It is about the price our children will pay for our apathy. It is about everyone collaborating to clean up our act, and committing to mitigate climate change and the degradation of our environment. It’s about finding new ways.

Importantly, we do not need to copy overseas models. Unlike other parts of the world, South Africa’s most critical sustainability criteria are, firstly, water security; then job creation, food security and energy saving; and then the rest. n

During the next 60 seconds:

One-million plastic bags will be sold - the ocean has become a soup of plastic, killing off marine life.

An area the size of two football fields will be destroyed to clear space to grow palm oil and soya to feed cattle.

Consider that climate change is happening right now and will influence your business, your family and your supply chain!

ABOUT THE AUTHOR

Jim MakuwaCommerce Edge Academy

0861 334 326www.commerce-edge.com

Jim Makuwa is an accomplished Supply Chain Management professional, with more than 18 years’ experience. He holds the MCIPS title from Chartered Institute of Procurement and Supply (United Kingdom) and is an MBA graduate. Jim believes the supply chain profession is coming of age and becoming a driver of competitive edge and a market differentiator for business success.


32

IS 3D PRINTING

TECHNOLOGYSET TO

RADICALLYCHANGE

THE SUPPLY CHAIN?

THINKING AHEAD

WHAT IS 3D PRINTING?

3D printers allow objects of any shape to be created from a digital file. They work by building a 3D object with layers of material. The technology is commonly known as ‘additive manufacturing’.

Products are fabricated by a printer that places layer upon layer of material (stereolithography) or employs lasers to burn materials to reveal a finished item (sintering).

Like a traditional inkjet printer, material, usually plastic, is laid down on a base. Further layers are simply printed on top, gradually revealing a 3D object.

The technology is used in a range of industries from construction to aerospace. Shoes, jewellery and even dresses have been created, with designs often sold online.


33

First developed in 1984, 3D printing technology is now on the cusp of being a disruptive technology. “3D has the potential to revolutionise the way we make almost everything,” said US President Barack Obama in his 2013 State of the Union Address.The technology paves the way for better and enhanced methods of production; drastically lowered costs; and products made more affordable for consumers. It will transform manufacturing flexibility by enabling firms to slash development time, eliminate tooling costs and simplify production runs.

The reality is that, aside from sustainability, environment and fair trade concerns, the vast majority of consumers are indifferent to how a product is built as long as they do not have to carry additional costs. If a manufacturer adopts 3D printing technology and can offer the same product as before, but can pass cost savings onto their customers, then the market will not ignore the value proposition.

Consequently, the market is abuzz with the potential of 3D printing.

Early adopters believe that companies need only invest in a 3D printer, raw materials and patent rights in order to make anything on their own without relying on the manufacture and shipment of required goods, meaning that logistics companies involved in the movement, shipment and storage of goods become irrelevant as manufacturing can happen in-house.

Others view this as simplistic, countering that as consumers of final products we are accustomed to making a purchase without considering which components were combined to produce that product. Their view is that manufacturing a product for market involves a great deal of collaboration. Most products are manufactured from a variety of components from different patent holders, making it impractical to acquire all patent rights to produce a final product. The time and effort involved in acquiring all the patents may not warrant the investment when compared with purchasing from organisations that can provide products in the same form.

Furthermore, conventional manufacturing has its own advantages: think of the economies of scale that companies leverage when acquiring raw materials. Will cost be lower if raw material is bought at individual level? What of transport and shipment costs for raw material obtained across the globe?

Naysayers believe that 3D printing technology is viable for non-component production such as making toys, cell phone casings or generally products that are plastic in nature (the additive material used most is plastic resin). Products that would otherwise be moulded can easily be produced with this technology.

What is clear is that while the debate may be polarised, the actual effects on the market will not be. Consequently, one of supply chain’s fundamental roles remains: constantly evaluate the opportunities and threats that 3D printing technology will bring to your environment, which requires you to be diligently interested in the changes that are happening as the technology improves.

“Supply chains that support the flow of products and parts to consumers will vanish, to be replaced by supply chains of raw material”, says Professor Yossi Sheffi of Michigan Institute of Technology. The changing supply chain dynamics will lead to the evolution of a new type of logistical design aimed at solutions to provide demand planning, manufacturing, delivery, market monitoring, service parts management and return and recycling services around raw materials.

While supply chain already manages these roles around the supply of raw materials, Sheffi argues that raw material management will become the primary role of the entire supply chain, rather than the job of commodity managers.

Furthermore, while supply chains will be managed around these ‘new’ business objectives, a continued focus on driving down costs and improving consumer and commercial sentiment will remain.

Consequently, 3D printing’s envisaged role in the supply chain will open new opportunities for highly qualified supply chain professionals who will be required in contract and intellectual property rights management as well as in high-level negotiations for the use of patents and blue prints.

THE TECHNOLOGY IS STILL MATURING

It is too early to make firm conclusions about changes expected in the market. The technology is still maturing and considerable obstacles remain before it can be widely adopted. The raw materials used by 3D printers are still very expensive, making the cost of a finished product correspondingly expensive.

Despite these obstacles, however, there have been some early indicators of the technology’s commercial potential. A Chinese firm successfully printed ten houses in one day using high grade cement and glass fibre, all for under $5 000 apiece.

Similarly, Paul Doe, chief designer at motorsport technology designers Prodrive, says that while his company has a great deal of experience using 3D printing technology to make non-functional prototypes, “the use of the machine has changed quite a lot in 18 months to actually making production parts. We are able to build shapes that you can’t mould, cast or forge - pieces you can’t make in any other way but through additive manufacturing. Specialist parts now cost a fraction of what they once did”.

Futhermore, Prodrive can print its own tools. “Modification of pieces of tooling previously cost around £10 000 - the company can now print it in-house for £10,” says Doe.

A significant hindrance will be the initial capital outlay for firms to invest in 3D printing. The Chinese firm made a huge investment for the enormous 3D printer which measured 32 metres long, 10 metres wide and 6.6 metres high.

In closing, considering that consumers are becoming more demanding, requiring suppliers to offer more personalised products with a shorter product lifecycle and decreased delivery times, new innovative supply chains will be required to bridge these gaps, which major industry players with resources to establish new organisations will be able to exploit. n


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Handled poorly, rationalising the design of goods or services to extract greater value or lower costs has the potential to sour internal and external relationships.

To prevent relationships from deteriorating ensure that you include

everyone who can make a meaningful contribution to a value analysis

(VA) and value engineering (VE) project team.

VA is a structured process that is used to either identify and eliminate

or modify product features that add little or no functional value to the

product or service offered (as viewed from a customer perspective), but

do add cost, or offer product functionality or services that meet market

requirements or expectations at a lower cost.

VA is not just a cost cutting exercise: the process strives to positively

influence and, if possible, optimise the so-called value equation.

VA is a process that is used to critique all aspects of existing products

and/or services in the quest for the optimum value equation.

VE on the other hand uses the same processes and principles used for

VA, but is traditionally conducted on new products or services still in

their development/design phase, also in an attempt to find the optimum

value equation.

THE VA/VE PROCESSThe VA/VE process can be summarised into the steps detailed in the sidebar, see Key steps in the VA/VE process.

The initial phase of the project includes choosing the product or service to be analysed and formulating the VA team, which could include members from outside the company, such as customers and/or suppliers, if these individuals’ input is deemed to be beneficial.

The second phase of the process deals primarily with ensuring that the function of the product and relevant market expectations are properly understood. Data is collected and comparative processes such as benchmarking are used against competing products/services that are available.

The last four steps of the process are where new ideas are generated, evaluated, change decisions made and eventually implemented.

COLLABORATION WITHIN THE VA/VE PROCESSIn the past many initiatives that focused on improving the value equation were dealt with in a way that developed fairly adversarial relationships between companies and their suppliers.

In contrast to this, the VA and VE approaches recognise that suppliers know more about their product - the markets in which they deal and potential opposition products that could substitute their own - than do the companies that they service. As such, they are often better placed than the companies they service to make a meaningful contribution to VA and VE processes, and their inclusion into any VA or VE project team is sound business sense.

Any supplier that meaningfully collaborates with their customer in a successful VA or VE project has a unique opportunity to not only protect their business and strengthen the relationship with their customer, but is also often able to improve both parties’ margins in the process.

A supplier with the right attitude and partnership approach can be invaluable to a project’s success (similarly a supplier with the wrong approach can be detrimental).

The adversarial approach has no place in this environment.

TEAM WORK WITHIN THE VA/VE PROCESSVA/VE team members must be carefully selected and include individuals who are open minded, experienced in their roles and able to work effectively in teams, all the while keeping the numbers of team members manageably low.

THINKING AHEAD

Value = Function/Cost

Opportunities to Improve Value

VF

C

=

The Optimum Position

Influencing the value equation

V = V =

V = V = F

F

F

F =

C

C

C

C


35

VALUE ANALYSIS AND VALUE ENGINEERING: THE ESSENTIALS OF COLLABORATION TO IMPROVE THE VALUE EQUATION

Importantly, the project team needs to encourage input from all team members in an atmosphere that makes members feel comfortable to do so without their ideas being criticised and belittled.

Furthermore, in an ideal situation the project team is temporarily removed from their day jobs for the period of the project and is relocated together in an environment that is conducive to creative thinking.

Factors that influence whether a VA/VE process will achieve its goals:

The project must have the support of executive management and the VA/VE project leader should ideally be a senior manager who is well respected and experienced within the business.

The product/service that is the subject of the VA exercise should be early enough in its lifespan for any costs relating to the project to be recovered and for the benefits of the exercise to be realised by the company. There is little point in conducting a VA project on a product that is soon to be discontinued.

Customer expectations and competing products’ value offerings must be well researched and documented.

Any existing and proposed legislation that does or might affect the product or service offering needs to be clearly understood and any new functionality needs to remain within the necessary legal boundaries.

Any proposed changes to the technical aspects of a product must be well researched and, where applicable, the necessary product stability tests must be conducted. Product integrity should never be risked in any VA project.

IT’S THE JOURNEY, NOT THE DESTINATIONSuccessful VA and VE projects follow a structured process that enables the value equation of either products or services offered by the company to be improved in an organised manner. It is an injustice to view the process as one focused simply on reducing prices.

Any company that wishes to grow its market share and stay ahead of its competition needs to effectively embed the VA/VE way of working into its culture and to nurture its growth. n

REFERENCES:Rich, N. & Holweg, M. 2000. Value Analysis, Value Engineering. Lean Enterprise Research Centre,Cardiff,United Kingdom.[O].

Available: http://www.adi.pt/docs/innoregio_value_analysis.pdf (Accessed on 9/7/2014)

ABOUT THE AUTHOR

Grant WallManaging Member, Grayle Consulting and Enterprise Solutions

082 800 2596 011 894 8338 [email protected] Skype grant2wall

Grant has spent 40 years working in Supply Chain management in multinational companies including Beecham South Africa (now Glaxo Smithkline), Colgate Palmolive, and Diageo / Brandhouse. He currently consults to businesses on their growth and value improvement initiatives.

KEY STEPS IN THE VA/VE PROCESS

1. Gather Information

2. Define the scope of the project.

3. Gather the most accurate, up-to-date information from internal sources and competitive evaluations.

4. Define functions and associated costs

5. During this step answer the following questions in very specific terms: a) “What does your product or process do?” b) “How much does it cost to do it?”

6. Based upon the answers, particular functions are selected as key opportunities for value improvement.

7. Generate creative alternatives.

8. The creative forces and abilities of the team are utilised in a brainstorming session to generate alternative methods of providing all appropriate functions, particularly those identified as key opportunities.

9. Evaluate, develop and compare.

10. The ideas generated in the creative stage are filtered.

11. Promising combinations are developed by the team into concrete proposals for implementation.

12. Recommendation.

13. The team prepares a visual/oral presentation on the proposed changes and an action plan for implementation, which are presented to Sourcing.

14. Implementation.

15. Ensure that the documented steps of the action plan are followed through to implementation and that the related cost savings/performance improvements are documented.


36

LEGISLATION

ABOUT THE AUTHOR

Professor Geo Quinot Professor of Law & Head of Department, Department of Public Law, Stellenbosch University Director: African Public Procurement Regulation Research Unit

021 808 3195 [email protected] @GeoQuinot www.sun.ac.za/procurementlaw

Geo’s work focuses on administrative law and public procurement regulation. He has published widely and recently co-edited Public Procurement Regulation in Africa (2013) (Cambridge University Press). He advises suppliers and the state on procurement law questions. He is the editor of the African Public Procurement Law Journal.


37

THE NEED FOR UNIFIED

LEGISLATIONIN PUBLIC

PROCUREMENTPublic procurement is governed in South Africa by a highly fragmented regulatory regime. The Supreme Court of Appeal effectively captured this state of affairs when it stated in its 2010 judgment in Moseme Road Construction CC v King Civil Engineering Contractors that “[c]ourts … are swamped with unsuccessful tenderers that seek to have the award of contracts set aside and for the contracts to be awarded to them... Sometimes the award has been tainted with fraud or corruption, but more often it is the result of negligence or incompetence or the failure to comply with one of the myriad rules and regulations that apply to tenders”.

An overview of the regulatory landscape reveals ten distinct pieces of legislation, apart from the Constitution, dealing directly and significantly with the regulation of public procurement in general. These statutes range from the general Public Finance Management Act and Preferential Procurement Policy Framework Act to the more focused State Information Technology Agency Act. In addition there are a number of statutes governing, in greatly varying degrees of specificity, the procurement functions of particular organs of state and/or in relation to specific issues, such as the Financial Management of Parliament Act and the Broad-Based Black Economic Empowerment Act. Additionally, public procurement is subject to various general statutes governing state conduct such as the Promotion of Administrative Justice Act. Most of these statutes are supplemented by detailed regulations. Finally, common law (that is non-legislative judge-made law) such as contract law also significantly affects aspects of procurement.

If one considers the regulatory picture from this broad perspective a clear picture emerges as to why public procurement has become such a difficult area to navigate. Section 217(1) of the Constitution, however, demands a procurement system that is inter alia transparent and cost-effective. One can question whether a procurement system that suffers from such regulatory fragmentation meets these constitutional standards. Is the system truly transparent if it is exceedingly difficult to locate the exact rule that applies to a particular procurement issue, for example the question whether a mistake in a bid may be condoned and the bid considered? Is the system cost-effective if transaction costs are very high owing to the difficulties of steering through the regulatory regime? The evident answer seems to be no.

Another regulatory challenge in public procurement is the wide range of different objectives that are pursued via procurement. In South Africa, public procurement transactions do not merely aim to acquire the desired goods or services on the best possible terms (i.e. to achieve public finance objectives), but also contribute to wealth distribution and social transformation via the preferential procurement scheme; to industrial and economic development via the set-asides for local goods; to law enforcement via requirements pertaining to tax compliance and anti-corruption measures; and increasingly to environmental concerns via various green procurement initiatives. Apart from the fact that these objectives are typically regulated under distinct instruments, they are also pursued by distinct agencies within their respective policy mandates. A single procurement can thus amount to a policy instrument for a range of public entities such as DTI, Treasury, Departments of Economic Development, Public Enterprises, Public Service and Administration, Environmental Affairs and Justice, to name but a few.

The key insight is that public procurement is not a matter within any one of these environments, it is not simply a matter of public finance or public administration or economic development, etc., it is a matter of all of these simultaneously. Coordination and alignment across all these interests should thus be a critical ingredient of the public procurement regulatory regime.

In my view, the best solution to the regulatory fragmentation currently seen in South African public procurement law is to consolidate all the rules governing procurement into a single regulatory instrument. In light of the plethora of statutes currently affecting procurement this will require a single, dedicated piece of legislation creating the regulatory space for such consolidation and alignment.

The first step in achieving this goal is, however, not to simply create a comprehensive procurement statute. An institutional platform should first be created upon which the consolidated regulatory regime can be built. As a first step, an entity, a procurement regulator, should thus be statutorily created with the necessary public power to effectively take this project forward. Only once such a structure is in place can and should we start talking about a procurement code for South Africa. n


38

LEGISLATION

HOW TO SUE A

CONSORTIUM OR

JOINT VENTURE


39

How does an organisation go about suing a consortium or Joint Venture for non-delivery?

In the unfortunate event of finding yourself or your company in the unenviable position of having to institute legal action against a Joint Venture (JV), the question arises who do I/we sue?

The answer is not quite as straight forward as one might think. With the global economy clawing its way back to health the advent and necessity of JVs is growing. While this is not a new trend it is certainly a growing one as companies seek to maximize resources and minimize risk.

JVs may be formed for a variety of reasons, the most common being the following:

• The project is too large, or complex, for a company to undertake with its available resources.

• The project requires specialist skills, or abilities, which a company is unable, itself, to provide.

• In developing countries, including South Africa, the skills and expertise of emerging firms can be developed through their association in JVs with well-established experienced companies.

But what is a JV? By definition, according to the Lexis Nexis Dictionary of Legal Words and Phrases, a JV in respect of a single transaction is a partnership if the three essentials of a partnership mentioned by Pothier (1854) are present. These are:

• that both parties bring something into the partnership or bind themselves to it;

• that the partnership is carried on for the parties’ joint benefit; and

• that the object of the partnership is to make a profit.

The words ‘Joint Venture’ and ‘partnership’ are sometimes used interchangeably. A JV is similar to a partnership in that it must be created by an agreement between the parties to share in the losses and profits of the venture. It is different from a partnership in that the venture is normally for one specific project rather than a continuing relationship.

Ordinarily if you are instituting legal action against a partnership, all the partners are jointly and severally liable. This means that you can sue all the parties or one of the partners who can then claim back a pro rata portion of any award made in your favour from the other partners.

Joint ventures are increasingly being entered into between international companies to secure ‘local support’, which means that the partners may be spread all over the world. Therefore, the expense of instituting action against all partners is in most cases prohibitive.

So what is the position of JV partners in so far as

liability incurred by the JV is concerned? Well, in the matter of Nelson Mandela Municipality v Ngonyama Okpanum Hewitt-Coleman [2012] ZASCA 11 (14 March 2012) the appellant instituted action against the respondents for an amount which it alleged was paid in excess of what was due to them.

When the case was taken on appeal to The Supreme Court of Appeal the court said:

“The relationship between the parties to a joint venture is that of partners. Partners are liable jointly and severally in solidum. It follows that the members of each joint venture are liable jointly and severally in solidum to the Municipality.”

In lay terms, this means that each joint venture partner can be held individually liable for payment of an amount owed by the joint venture.

In Electro-Motive Sibanye Joint Venture v Transnet Ltd and Others (2009/3994) [2009] ZAGPJHC 113 (11 March 2009) a question that was posed was whether the JV agreement constituted a partnership between STS and EMD-SA.

The JV agreement between the parties was not vague or indefinite in its terms. It stipulated that there was no partnership between them and that the JV should have no separate legal personality.

The Court stated that

“Contracting parties are, as a rule, bound by their agreements. If the agreement states that there is no partnership, a party to the agreement cannot claim that there is one in fact. Third persons, on the other hand, are not necessarily bound by the description which contracting parties give to their agreement. At their instance a court will declare the transaction a partnership if it is one in fact.’”

In a consortium or JV, the partners will all be liable to third parties in the event of a legal claim. However, they can reduce this liability by using separate holding companies to enter into the consortium or JV.

As a practical matter, all parties to a JV should look into insurance coverage, and one party should be given chief responsibility to secure such coverage.

Nevertheless, when entering into any contract it is imperative to determine who you are contracting with. If it is a JV, consortium or partnership you can request a copy of the consortium, JV or partnership agreement. Enquire as to whether it is a new entity and which partner is responsible for what? The more knowledge you have of the JV at the outset the stronger your position will be in the event of something going wrong. n

REFERENCE

Pothier, R.J. 1854. A treatise on the contract of partnership. Trans. by Tudor. London: Butterworths.

ABOUT THE AUTHOR

Attorney Garry Hertzberg Owner, Transaction Analysts South Africa, Practising Attorney at Dewey Hertzberg Levy Attorneys Inc.

011 883 4512 [email protected] www.dhlattorneys.co.za

Garry Hertzberg is a practising attorney and popular broadcasting personality. He has a wealth of legal and business knowledge and experience and has always been passionate about law. Garry presents a legal show on Cliff Central entitled ‘The Laws of Life’ as well as ‘Justice’ on 89.1 Alex FM.

PEOPLE MANAGEMENT


40

The most significant threat facing supply chain management is a lack of skills, but effective HR management

has a significant role to play in helping the industry develop its own experts.

“Increasingly, organisations are realising the extent to which supply chains integrate industries and sectors,”

says SAPICS President Cobus Rossouw, commenting on the transition of the role of supply chain professionals

from functional professionals – think production and inventory control – to integration specialists.

“And for this reason there’s a rush on supply chain professionals right now, with companies across a variety of

industry sectors scrambling to hire people with supply chain expertise.”

Consequently, experts are hard to come by. Rossouw says it makes sense for organisations to start developing

the supply chain management skills of their existing employees rather than focusing exclusively on spending a

lot of time and resources on hiring external experts.

A PHASED APPROACH

“Knowledge exchange is a key ingredient to the process of developing the skills of your internal supply chain

professionals,” says Rossouw, referring to the importance of the opportunities for development offered by

conferences such a Smart Procurement World.

“For those who are not ready to take the plunge into gaining a formal supply chain management qualification,

we recommend work experience training, where organisations take the time to assess their employees’

skills levels and train them to turn their passion for the industry into contributions that make business more

integrated and profitable,” he says.

INTEGRATING HR WITH SCM

Integrating human resources management with supply chain management is critical to ensuring that the

desired skills are identified and plans made to develop them, says Rossouw. “Developing one’s people

according to industry best practice is imperative in achieving strategic business goals owing to the fact that the

successful management of businesses and supply chains rests on the performance of people,” he adds.

However, this requires businesses to realise that managing the people in a supply chain is as important as

managing overall strategy. “Line managers need to realise the fact that HR managers can help employees

understand the business strategy as it applies to their roles.”

“Where technology and systems are increasingly the same, it is becoming more apparent that companies with

good HR practices are the ones that outperform others, because they regard their people – and by extension

HR - as critical to their business function.” n

ABOUT THE AUTHOR

Cobus RossouwChief Business Development Officer, IMPERIAL Logistics. SAPICS President

[email protected] @_CobusR www.imperial.co.za

Cobus obtained engineering and commerce qualifications from the University of Pretoria, studied towards a MBL at UNISA and qualified as Certified Supply Chain Professional through APICS. With his focus on industrial & systems engineering and business logistics, his career was destined for Supply Chain Management.

HOW HR CAN HELP SUPPLY CHAIN MANAGE ITS CRITICAL LACK OF SKILLS


41

CROSS-FUNCTIONAL SKILLS DEVELOPMENT KEY TO SUSTAINABLE GROWTH

By Liezl Smith, Director and SCM|EEA judge: [email protected]

The effect of skills gaps manifests in high levels of business process inefficiencies and in reputation-damaging areas of low employee morale and reduced customer satisfaction.While many factors influencing industry growth fall outside of industry’s direct control (strike action, for example), adopting a cross-functional approach to skills development that is aligned with strategic business goals is one of the ways in which industry can gear up for sustainable growth.The true value of cross-functional skills development initiatives lies in aligning skills development goals with business priorities. This allows the cost/benefit analysis of skills development initiatives to be based on actual financial outcomes, rather than opinions based on individual experiences.Adopting a cross-functional approach to close skills gaps makes the effect of skills development on business performance more tangible.However, a common mistake is to support only certain levels of employees in their professional development. To ensure maximum impact of any skills development initiative it needs to be implemented across various business units and departments to ensure a common understanding and that the same practices are

followed. n

POOR PROJECT RESULTS – ARE SOFT SKILLS THE SOLUTION?

By Keabetswe “Kea” Mpane, Director: [email protected]@keabetswempane

Projects are not only an integral part of infrastructure development, but also a key element in service delivery improvement, technological advancements and environmental sustainability imperatives.However, the communication of project outcomes does not receive nearly enough focus, says Keabetswe Mpane, SAPICS director.When project participants across the supply chain are not aware of the project outcome, motivation for future projects is reduced, posing a significant risk for project funders. The lack of feedback may also result in the continuation of project-related practices that are no longer needed, leading to wasted resources.It is in the best interest of an organisation funding a project to promote the use of a supply chain management mindset that spans the dynamic relationships of project participants located inside and outside organisations. Consequently, soft skills are necessary to manage supply chain projects at a personal level among project team members.According to APICS, the US-based professional association for supply chain and operations management, supply chain project management “enhances the best of a supply chain professional’s skills, including forecasting, soft skills, planning and risk management. This combination builds strategic and advanced management experience.”A supply chain project management mindset:Holds accountable those who must deliver.Helps prevent silos from forming, promoting cross-functional collaboration and enhancing the capability of an organisation to succeed at complex projects.Turns ideas into practical endeavours that consider strategy in terms of organisational culture and behaviour, priorities, risks,

resources and visibility. n

EMPHASIS ON HIGHER EDUCATION A MAJOR BOOST FOR SCM INDUSTRY SKILLS DEVELOPMENT

By Gerard de Villiers, Chairperson: Supply Chain Management [email protected]

Many organisations have recognised the importance of up-skilling the next generation and have introduced highly innovative programmes to train young people to turn their passion for supply chain management into contributions that make business more effective, more integrated and more profitable.However, work experience training is still heavily reliant on formal tertiary education. The importance of laying a solid foundation in theory before practical interventions can be of benefit is exteremely important.The National Student Financial Aid Scheme received a R1,5-billion injection. The fact that this will enable over 236 000 students to attend university by 2016/17 is excellent news for every industry that requires skilled individuals.The SCM|EEA aims to address the skills shortage in the Supply Chain Management profession and encourages knowledge sharing between organisations and individuals.Supply chain management is critical to business success across all industries. By improving the skills in this profession greater

economic growth can be achieved. n


42

Developing professionals to be competent networkers and collaborators takes time and money - equally scarce resources. When considering the various avenues available for continuing professional development (your own or that of members of your organisation), is professional networking and events effective for the continuing professional development of procurement professionals?

To answer this question meaningfully, we should understand what continuing professional development (CPD) is. Kapp (1987) defines continuing professional education as ‘the provisioning of opportunities for qualified professionals to update their professional knowledge, skills and attitudes to enable them to remain competent professionals’. CIPS (2014) defines continuing professional development as ‘the means by which professionals maintain and enhance their knowledge and skills’.

One could argue that in addition to short courses, conferences and networking events are essential in the process of continuing professional development as these interventions provide professionals with ‘an ongoing and continuous process’ (Lieberman, 1995) and as a ‘series of extended, job-embedded learning experiences’ (Sparks and Hirsh, 1997).

Lieberman (1995) advocates that the definition of professional development must be expanded to include ‘authentic opportunities to learn from and with colleagues’. This proposed expansion of professional development to learn from and with colleagues resonates with social learning theory.

Social learning theory, a concept developed by psychologist Albert Bandura in the 1970s, suggests that learning is a cognitive process that takes place in a social context and can occur purely through observation or direct instruction, even in the absence of motor reproduction or direct reinforcement (Bandura, 1977).

While this type of learning could take place at conferences and events, it also happens through informal networking – the kind of networking that allows one to pick up the phone and speak to an expert on a particular topic, simply to get information or obtain advice. Calitz (1987) in fact indicates that continuing education is rooted in the community, which performs an important educative role. Life itself is perceived as a major source of learning.

This reminds one of Etienne Wenger’s ‘communities of practice’. Lave and Wenger (1998) define communities of practice as ‘groups of people who share a concern or a passion for something they do and learn how to do it better as they interact regularly’. According to Lave and Wenger (1998), communities develop their practice through a variety of methods, including problem solving, requests for information, seeking the experiences of others, re-using assets, co-ordination and synergy, discussing developments, visiting other members, mapping knowledge and identifying gaps.

The case for recognising networking and participating in events to be seen as learning, albeit informal in nature made by Sparks and Hirsh (1997) and Wegener (1998), is strong enough to accept that these activities are certainly valid CPD activities.

The underlying questions are (while the importance and value of networking and collaborating is seen as a valued CPD activity), firstly, how do managers ensure this is optimised and, secondly, how can it be measured?

CONTINUING PROFESSIONAL DEVELOPMENT

THROUGH NETWORKING

AND EVENTS –COLLABORATION

IN SKILLS DEVELOPMENT

PEOPLE MANAGEMENT


43

There are no easy answers to the above questions. This is always the challenge of aligning theory with practice. Trust and good judgement are the keys to successfully maximising this CPD practice. Managers need to trust that when staff are networking and collaborating, the organisation is benefitting – they also assume staff members are making good judgements about whom they are networking/collaborating with and what information they are sharing and gaining.

This is by its very nature a learned skill, gained through extensive experience - good and bad. As such managers should take care not to let people “loose”. Instead, the way to go is allowing people to shadow more experienced networkers and then encourage them to take the lead while being monitored.

Measuring networking for CPD reporting purposes is equally challenging. Professional bodies recognised by the South African Qualifications Authority (SAQA) are required to monitor the CPD activities of its duly designated members. Each professional body is able to develop its own criteria and measurement process for CPD.

While networking is difficult to manage and equally, if not more, difficult to measure (given the importance and value of networking to organisations and the individuals personal development) it is suggested that all SAQA recognised professional bodies incorporate networking as a core element of their CPD policies.

In closing, while networking is a valued CPD activity for professionals and should be embedded into the CPD policy and processes of all SAQA recognised professional bodies, the importance of networking goes beyond CPD and must be also seen as a business imperative: developing professionals to be competent networkers and collaborators may take time and money, but the cost of not developing professionals to be competent networkers and collaborators is potentially far more costly to the business, the individual and ultimately the public that the organisation and its

professional staff serve. n

REFERENCES

Bandura, A. (1977). Social Learning Theory. New York: General Learning Press.

Calitz, L.P. 1987: Continuing education as a function of a university for distance

education. (In: Issues in education and distance education. Vol. 2. Distance education in Southern Africa. Preparing for the 21st century conference. 18-21 May 1987.Pretoria: University of South Africa. pp.235/236.)

CIPS website CPD http://www.cips.org/Careers/continuingprofessionaldevelopment/

Accessed 9 June 2014.

Lieberman, A. (1995). Practices that support teacher development. Phi Delta Kappan, April,1995.

Lave, J., & Wenger, E. (1998). Communities of Practice: Learning, Meaning, and Identity: Cambridge University Press.

ABOUT THE AUTHOR

John ArnesenExecutive, Chartall Business College


Prior to joining Chartall, John served as Director: NQF Advocacy at SAQA and was previously CEO at the Financial Planning Institute. John is an expert in the field of advocacy and social marketing and is pursuing a PhD in that field.

ABOUT THE AUTHOR

Carin Stoltz-UrbanClient Engagement Manager, The Da Vinci Institute


Before joining the Da Vinci Institute, Carin was Head of Professional Development and Education at CIPS Africa. She is responsible for strategic direction and client engagement at the Institute. Carin holds a Masters Degree in Public Management from the Regenesys School for Public Management.

ASSESMEN

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S

KIL

LS

DEVELOPMENT TRAINING POST-TRA

ININ

G COACHING1

2

3 4 5 6

Commerce EdgeC O M P E T E N C E D E L I V E R E D


46

THE EVOLUTION OF PROCUREMENT & SUPPLY MANAGEMENT PROFESSIONALS IN THE ERA OF NEW PROCUREMENT

PEOPLE MANAGEMENT

In the past few years procurement and supply management (P&SM) have evolved to the point where they are core to most large businesses.

This evolution is not surprising if one considers that businesses spend money in areas where they can create synergies, create value or even save money. According to Ernst & Young, “70% of Chief Financial Officers (CFOs) and 63% of supply chain leaders say that their relationship has become more collaborative over the past three years’’*.

This collaboration and focus on improving supply chains has influenced the type of professional employed in the P&SM space.

In the past P&SM was considered to be operational and non-strategic, requiring the people hired in these roles to have competencies in only one area.

But business’ expectations of P&SM are changing (i.e. increase efficiencies, reduce total cost of ownership and foster a culture of continual improvement): it has evolved into more than simply issuing tenders and hoping for the lowest cost: it is now the era of sustainable, long-term savings, requiring consistent delivery from suppliers.

This has led to a noticeable change in the type of qualifications required of P&SM professionals. All types of engineers who possess a technical understanding of commodities to make informed buying decisions are increasingly required. Industrial engineers with skills in supply chain optimisation and business improvement enjoy strong demand for their abilities.

Where clients do not request engineering qualifications, there is a requirement for Commerce qualifications coupled with strong supply chain understanding and experience, as well as a general procurement qualification, i.e. Member of the Chartered Institute of Purchasing and Supply (MCIPS).

This current trend shows that P&SM candidates with a holistic understanding of business are at a distinct advantage as they are able to understand the link between P&SM and overall business strategy.

Supply chain professionals looking to increase their chances of moving up the ladder need to consider the following factors:

• A postgraduate degree is fast becoming a requisite.

• Short courses relevant to the candidate’s specialist area are an advantage.

• An MBA is becoming increasingly popular for more senior candidates.

• Attending supply chain conferences, i.e. SAPICS, CIPS and Smart Procurement World, is a great way of increasing and solidifying networks.

• Value is added to a supply chain professional’s skills base and reputation by contributing to discussions on supply chain and procurement forums and social networks, at conferences and in prominent supply chain and procurement publications. n

* EY The Master CFO Collection, Volume 5

ABOUT THE AUTHOR

Zach Mogotsi Branch Manager, Tech-Pro

011 514 0463 [email protected] www.tech-pro.co.za

Zach has deep experience in specialist executive search and talent acquisition, and extensive knowledge and understanding of Procurement, Consulting and Supply Chain. Tech-Pro has strong relationships with key players in the supply chain management industry, and is well informed about the latest trends and developments in P&SM. Tech-Pro is affiliated with industry leaders and assists clients and candidates to find the right match and fit for the future. A partnership with Tech-Pro will help you get ahead in your P&SM journey. For a confidential consultation and career advice, please contact Tech-Pro.

See our Company Profile on page 98.


48

To bring about the South Africa envisioned in our Constitution, and to achieve government’s national priorities of socio-economic transformation, inclusive growth and efficient public service delivery, we must excel in good public financial management, especially supply chain management (SCM). This requires the transparent, economic, efficient and effective use of public resources. Not something we can attest to today.

The Auditor-General and other institutions have shown that a great deal of progress is needed before we can achieve such an ideal state, primarily owing to the lack of sufficient public financial management capability. Improving public financial management will require a government-wide transformation of PEOPLE, processes and systems.

Whether your aim is to maximise profits or to improve service delivery, you will be dependent on high performance teams to achieve your organisational goals. Successful organisations are characterised by good decision making, whether operational, tactical or strategic. These decisions are not made by systems, policies, processes or structures. No, they are made by PEOPLE. Therefore, it is reasonable to conclude that

the ability of your PEOPLE to make the right decisions will affect the success or failure of your organisation. PEOPLE are the common factor.

The capacity development strategy (CDS) for public financial management seeks to achieve and sustain excellence in the management of public funds. The CDS provides a comprehensive and sustainable approach to address financial management capacity constraints in the public sector, providing a national perspective to address the constraints, including scarce skills and inadequate competence levels. One of the four strategic objectives defined in the CDS is to empower a corps of competent and committed high-performance employees (PEOPLE). How will this be achieved?

There are multiple interventions (projects and programmes) that need to be implemented to address this strategic objective in an integrated and holistic manner. We will briefly explore two of these interventions: the Competency Framework and the Individual Competency Assessment Toolkit.

The Competency Framework was developed through an extensive consultative process as a living document that will be reviewed bi-annually. The Competency Framework defines the technical, core and behavioural competencies required by SCM PEOPLE in the public sector. Furthermore, it defines the specific knowledge and skills required to perform optimally within four occupational role levels: administrative, technical, supervisory and managerial. It is envisaged that the

SCM CAPACITY DEVELOPMENT IN THE PUBLIC SECTOR

PEOPLE MANAGEMENT

ABOUT THE AUTHOR

Mark Kuipers Chief Director, SCM Client Support, Office of the Chief Procurement Officer, National Treasury

[email protected]

Mark oversees the research, development and implementation of SCM capacity, capability and performance interventions across all three spheres of government. He has a Master of Business Management, Master of Project Management, Post Graduate Diploma in Higher Education and Training, and National Higher Diploma in Internal Auditing.

Competency Framework will progress from being a guiding document to a regulated standard of minimum competency requirements.

The Competency Framework is intended to underpin human resource development systems, such as job descriptions; recruitment and selection; performance management; career planning; succession management; and the design of human resource development initiatives and learning programmes. The Competency Framework also provides a uniform central reference and facilitates self-management and empowerment as it allows PEOPLE to assess their knowledge, skills and attributes (i.e. competencies) against the agreed standard of performance required for each occupational level. It is within this context that the Individual Competency Assessment Toolkit is being developed.

Individual capacity forms the foundation for organisational capacity and performance. It is reflected in the knowledge, skills, competence, behaviour, commitment, experience, attitude and values demonstrated by staff. Such capacity is developed through formal, non-formal and informal learning. Individual capacity is enhanced through education, work readiness, staff profiling, performance agreements, recognition and reward, learning frameworks, skills programmes and so on.

The Individual Competency Assessment Toolkit provides a powerful instrument to identify and assess the knowledge, skills and attributes that staff require to perform a particular role within the SCM environment. The Toolkit can be implemented individually or organisationally. Individual assessment results will inform individual development planning whilst organisational assessment results will inform the departmental workplace skills plan. Organisations will be able to identify and prioritise interventions linked directly to organisational, team and individual objectives and to channel resources into areas where they will contribute most to PEOPLE development, thereby enhancing staff morale and organisational performance.

The Individual Competency Assessment Toolkit has the potential to transform the way in which PEOPLE development and management are performed in the public sector. The identification of competency gaps across government provides a powerful mechanism to understand the current capacity constraints and will enable government to adopt national interventions to address the constraints and priority objectives.

Imagine what a corps of competent and committed high-performance people within SCM can achieve. We can change the world. n

The People Shop...

Linking business and Talent Office: 021 462 2828 Fax: 086 657 0444 Mobile: 072 020 3597 - Chantal Kading Email: [email protected]

Website: www.peopleshop.co.za

Clients - Secure talent to drive

COMPETITIVE BUSINESS ADVANTAGE

Candidates - Secure your

CAREER PATH

SUPPLY CHAIN HUMAN Assets?

When is the last time you ASSESSED your

Unique DNA or that of your company’s


50

PUBLIC SECTOR

JOIN THE DEBATE: CENTRALISING SCM IN THE PUBLIC SECTOR

Earlier this year government commenced with talks about centralising tenders, which resulted in the question: “Will Government be more effective with a centralised supply chain management (SCM) function or should such a function be limited to monitor SCM performance and resolve disputes, objections, complaints and appeals?”

A centralised SCM function...

The objective of Chief Directorate Policy, Norms and Standards is to manage the development and implementation of the State’s SCM policy, norms and standards for national, provincial and local government in order to influence the State SCM transformation agenda, explains Henry Malinga, Chief Director: Policy, Norms and Standards.

To achieve this objective the Minister of Finance has established an Office of the Chief Procurement Officer (OCPO) and appointed a Chief

CENTRALISED SCM IN THE PUBLIC SECTOR OR

IMPLEMENTING A MONITORING COMPLAINTS

AND APPEAL BOARD?


51

ABOUT THE AUTHOR

Advocate Helen VenterDirector: Brasika Consulting

[email protected]

An accomplished public sector legal expert, Helen has more than 25 years experience in supply chain management and government finance. In 2012 she was appointed as a European Union SCM Specialist. Helen believes in the value government organisations add to citizen’s lives and is driven to act as a change agent to help government officials believe the same.

ABOUT THE AUTHOR

Henry Malinga Chief Director, Supply Chain Policy, National Treasury

Henry is responsible for governmental procurement reform and supply chain policy development. Prior to joining the public sector, he was procurement manager at Anglogold, and also has experience as an Accountant, Auditor and Financial Advisor. He represented South Africa at the World Bank/DAC/OECD and currently spearheads a project to create a Cadrè for Supply Chain Management in national and local government.

Procurement Officer (CPO) in the National Treasury as its executive.

However, for the OCPO to fulfil this executive mandate, it must have the status and influence, in all levels of government, of an autonomous legal entity responsible for public procurement oversight: it must have direct access to the accounting officers and accounting authorities of government procurement entities to undertake performance audits and be able to recommend sanctions against any organ of State, explains Malinga.

While accounting officers and authorities remain primarily responsible for implementing procurement rules and the procurement function of their particular entities, they would be legally and uniformly subjected to the regulatory oversight and guidance of the OCPO.

This initiated a project to research the feasibility of specific legislation for National Treasury’s newly established Office of the Chief Procurement Officer.

The objective of the first phase of the project was to review and assess the SCM legislative landscape and benchmark against international public procurement best-practices. It was found that there is a need for national SCM regulatory oversight to resolve the current fragmented regulatory approach and non-compliance, which has an adverse effect on service delivery and the socio-economic agenda in the country, explains Malinga.

The Chief Directorate is currently engaged in the second phase of the project to develop a Public Procurement Regulatory Legal Framework. The research process will, amongst other objectives:

• review all legislation affecting SCM;

• recommend how the broader objectives of government can be achieved through a non-fragmented legislative environment; and

• recommend specific procurement laws for South Africa.

...or an SCM performance monitoring and dispute resolution functionHelen Venter, a SCM advisor to the public sector, advocates that a Monitoring, Complaints and Appeal Board (MCAB) will achieve significantly more improvements in government SCM than would centralising the SCM function in totality or trying to manage service delivery from a centralised platform.

However, establishing a Monitoring, Complaints and Appeal Board (MCAB) will require leadership commitment as well as policy and maybe even regulatory reforms.

Since 2009, Government’s commitment towards a MCAB body has been evident from the proceedings of the Extended Public Committee Parliamentary Monitoring Group, during which it was confirmed that “work is currently under way to establish a supply chain management compliance monitoring unit in the National Treasury”.

A centralised MCAB, argues Venter, can significantly assist public sector institutions and contribute to bridging the gap between traditional methods of procurement and reformed principles of supply chain management. At the same time it can address procurement related matters that are of strategic importance.

Importantly, establishing the MCAB will not hamper service delivery as SCM activities will continue as per the prescripts of the PFMA and MFMA on a decentralised basis, with a centralised MCAB monitoring performance and trends and dealing with costly SCM appeals and/or complaints.

Venter has suggested a framework that government may consider for such a MCAB, see Suggested MCAB framework overleaf. n

HEADING


52SmartProcurement Review

52

PUBLIC SECTOR

SUGGESTED MCAB FRAMEWORK

OBJECTIVES

a) Establish an independent and impartial point of

access for:

(i) reporting, investigating, determining and

treating SCM system abuse, -disputes,

-objections, -complaints or -appeals.

(ii) measuring performance output of government

SCM.

b) Establish an independent board to promote,

monitor, report and advise government

on the fairness, equitability, transparency,

competitiveness and cost-effectiveness of the

SCM System whilst achieving the following:

(i) Instil SCM best practice.

(ii) Prevent irregular expenditure.

(iii) Strengthen the control environment.

(iv) Prevent the undermining of the financial

management system.

(v) Assist management to act appropriately on

incidents of SCM system abuse and complaints.

(vi) To strengthen the ability to manage the SCM

system.

c) Establish a board to independently review and

advise government on the determination of

‘Liability in Law ’ of any perpetrator abusing the

SCM system.

FUNCTIONS

The MCAB must do all that is necessary or

expedient to achieve its objectives, and for that

purpose:

(a) must promote a fair, equitable, transparent,

competitive and cost-effective SCM system;

(b) must monitor, evaluate and report on

the fairness, equitability, transparency,

competitiveness and cost-effectiveness of the

SCM system;

(c) must advise government on the fairness,

equitability, transparency, competitiveness and

cost-effectiveness of the SCM system;

(d) may review and advise government on

proposed SCM system policies, procedures and

practices, inclusive of prescribed preferences;

(e) must assess and report on draft SCM system

policies, procedures and practices referred to

the committee by government institutions;

(f) must monitor and report on access to the SCM

system;

(g) must monitor and report on the access and

quality of advisory and educational support

to potential suppliers and institutions in

government;

(h) must consider and advise government on the

reporting, investigation, determination and

treatment of SCM system abuse, -disputes,

-objections, -complaints or –appeals; and

(i) must advise government on its measurement of

performance output of Public Sector SCM.

POWERS

The MCAB must do all that is necessary or

expedient to perform its functions, and for this

purpose:

(a) may invite expert or technical advice;

(b) may procure experts, technical advice or

research capacity;

(c) may require the submission of reports, returns,

notices and other information from an

institution;

(d) exercise such powers as may be prescribed; and

(e) must review all reported SCM system abuse,

-disputes, -objections, -complaints or –queries

cases and make recommendations with regard

to liability in law and other related actions and

for this purpose hold in-camera committee

hearings.

HEARINGS

Government may instruct the MCAB to conduct,

or cause to be conducted, open or in-camera

hearings, enquiries and investigations in respect of:

(a) any matter which is necessary for the

effective implementation of the provisions

of this instruction and the achievement of its

objectives; and

(b) anything that must or may be investigated in

terms of its mandate.

REPORTING

The MCAB must submit to government via the

Office of the Chief Procurement Officer, a quarterly

report on the activities of the MCAB during

that quarter, which must include a summary of

all recommendations made and all complaints

received. n

The impetus behind centralising SCM

“Widespread non-compliance with public procurement law has a detrimental impact on service delivery: and may lead to interruptions in the procurement of goods, services and works, causing consequent delays in securing service delivery contracts and programmes at the right price, at the right time and at the right place to citizens.’

- Henry Malinga

“Where public sector SCM implementation is concerned, various oversight bodies and internal and external audit reports have highlighted issues of insufficient controls as well as policy and procedure gaps in relation to monitoring SCM performance and managing SCM-related complaints and appeals. Furthermore, when applying SCM-related legislation it is evident that various pieces of legislation contradict each other, which results in confusion, delays and costly legal representation.”

- Helen Venter

CCAR

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54

GOVERNMENT’SSTRATEGIC SOURCING

JOURNEY

PUBLIC SECTOR

The South African Government is committed to delivering value for

money when spending public funds. Value for money not only considers

price, but implies a balanced measurement of benefits that also looks at

factors such as quality levels, performance standards, risk exposure and

other government objectives (e.g. improved local content, small business

development, etc.). Value for money is usually assessed on a “total cost

of ownership” basis, which stretches over the transitioning-in, contract

period and transitioning-out phases of a contractual relationship. To this

end the Office of the Chief Procurement Officer at National Treasury

is introducing a more strategic, data-driven and analytical planning

approach where informed procurement decisions will lead to better

value for money outcomes.

Strategic sourcing is a structured process that optimises the

government’s supply base while reducing total cost of ownership (TCO)

and improving service delivery. Strategic sourcing solutions are based

on robust analyses of spending patterns; a clear definition of business

needs and requirements; and the alignment of government needs and

objectives with supply market capabilities and commercial best practices.

Strategic sourcing in government may take the form of three distinct

types of projects:

1. Whole-of-government strategic sourcing: This covers the

procurement of goods and services that are common across

government, such as travel and accommodation, ICT services and

hardware, mobile devices and subscription services, broadband and

motor vehicles, to name only a few. This applies particularly where

economies of scale can be derived by aggregating the volumes or

quantities.

Cost benefits flow to government from leveraging government’s

buying power and directing that purchasing capacity to a small

number of suppliers. In addition to having more control over the

supply and demand, other processes and administrative efficiencies

will drive additional indirect cost savings.

2. Department-specific strategic sourcing: This covers procurement

of goods and services that are core to a government department’s

key service delivery objectives. This would typically include goods

and services above a certain threshold value and considered highly

complex and/or high risk. Examples are numerous, but will typically

be commodities such as pharmaceuticals for Department of Health,

learner and teacher support material for the Department of Basic

Education, prison catering for Department of Correctional Services

and a myriad of other equally important commodities.

Achieving value for money requires that the specific department

clearly defines its requirements, which must be explained to the

market to create certainty and competitive tension between

competing bidders. It is the responsibility of the specific department

to exercise judgment on the best way to achieve value for money.

The potential high-risk nature of some procurement in this category

can be addressed in robust business case reviews.


55

ABOUT THE AUTHOR

Estelle Setan Chief Director: Strategic Procurement, Office of the Chief Procurement Officer National Treasury

[email protected]

Estelle’s primary task within the OCPO is to research, develop and implement strategic sourcing practices to achieve cost savings and socio-economic objectives.Prior to joining the public sector, she worked for Siemens Ltd, RAU, and Anglo Gold Ltd. Estelle holds a B.Sc (Hons).

Opportunity Analysis

Analyse internal

information

Needs assessment &

impact

Analyse external

information

Evaluate and develop sourcing

approach

Prepare & Engage

Bidding Process

RFx Process

Evaluation

Award

Contracting & SLA

Manage & review

performance

3. Sector-specific strategic sourcing: This covers procurement of goods and

services that may affect more than one government department, but

involves a specific industry sector. This would include commodities in the

textile, leather and foot wear industries where numerous government

departments (Departments of Defense, Correctional Services, Health,

and Police) would have an interest, especially for the procurement of

uniforms, shoes and boots.

Strategic sourcing is based on the premise that optimal value for money

can best be achieved by developing a detailed knowledge of consumption

behavior (needs assessment); the commodity being sourced (internal

information); and the supply base (external information), before conducting

the bidding process. This knowledge can then be applied to develop

targeted sourcing strategies and market engagement strategies that are

aligned with value drivers of both government and its suppliers.

The broad principles and techniques of strategic sourcing are outlined in the

following figure:

Strategic sourcing promotes an effective acquisition system that meets

government needs and ensures the prudent use of taxpayers’ money.

Specifically, strategic sourcing:

DRIVES EFFICIENT GOVERNMENT OPERATIONS• Provides visibility into spending habits.

• Lowers TCO.

• Creates commodity expertise.

• Enables better and more informed decision making.

• Reduces complexity for end-users.

IMPROVES VENDOR PERFORMANCE• Increases clarity of requirements.

• Improves supplier relationships.

• Encourages new and innovative solutions.

• Improves competition and contract structures.

• Improves vendor ability to meet performance goals.

SUPPORTS GOVERNMENT OBJECTIVES• Helps achieve the objectives of the National Development Plan (NDP).

• Enables the Capacity Development Strategy of the acquisition workforce

in government.

• Reduces redundant contracts and procurement activities.

• Uses government buying power to drive sustainable and socio-economic

goals.

• Increases transparency and accountability.

When implemented government-wide, strategic sourcing also encourages

cross-departmental collaboration and allows the government to aggregate

requirements and reduce redundant contracting activities. n


56

HEADING

One purpose of government is to provide people with services through good management of its resources and the careful use of taxpayer funds. A well-implemented purchasing card (P-Card) programme can help achieve government’s goal of utilising public funds more efficiently because it can save costs, curb wasteful spend and reduce the misappropriation of funds.When it comes to strategic sourcing activities, the Kraljic Model1 is one of the most widely used for the purpose of prioritising the items a company needs to procure.

From this model it is clear that low-value high-volume purchases would be in the ‘non-critical items’ quadrant, where purchases tend to be ad-hoc, limited to one supplier and of low value (meaning they do not have a significant impact on profit in comparison with leveraged or strategic items). The purchasing strategy for items in the non-critical quadrant is to reduce the amount of time and money spent during the purchasing process through efficient processing.

The P-Card is intended for these non-critical-quadrant purchases.

Low-value, high-volume purchases require a considerable number of man-hours to process, and the cost of processing is often greater than the actual cost of the items in question. These costs are reduced significantly when P-Cards are adopted, and procure-to-pay processes can be reduced by up to 65%.

The Bolton Metropolitan Borough Council2 revealed that by using a P-Card they could reduce the number of staff required in its vendors payable department from 23 to 15, which enabled them to redirect their human resources to other departments in the council. The process efficiency of the P-Card also led to audited savings of £440 000 in the course of a year on 4 000 transactions per month.

Coventry City Council2 saved a cost of £19.30 per transaction by using a P-Card: the cost per transaction on a P-Card was only 70 pence, compared with more than £20 for the processing of a traditional paper invoice.

PUBLIC SECTOR

Figure 1: Kraljic Model


57

The traditional reimbursement process at the University of Cape Town (UCT) had 14 steps, while the streamlined process for P-Card payment has only three, notes Linda Harrower, Purchasing Liaison Manager at UCT.

In addition to cost savings, P-Cards enable immediate payment of suppliers, which enhances supplier relations and eliminates the damaging effect that late payments have on small businesses. A goal of government is to empower its suppliers, and the timing of payments is often a problem for small businesses, which rely on cashflow to stay afloat. Paying with a P-Card would solve this problem.

The Hertfordshire Constabulary’s procurement manager acknowledged that one efficiency offered by P-Cards is fast and flexible payments to suppliers, and added that card payments are preferred as suppliers benefit from the immediate transfer of money into their accounts, which supports the government’s drive towards faster payment, particularly for SMMEs.2

This efficiency garners support from vendor partners. “Streamlined procure-to-pay processes benefit vendors, encouraging vendor co-operation,” says Harrower.

P-Cards offer greater visibility of spend by providing data up to the third level, which is increasingly important as accuracy and relevance of organisations’ data becomes a necessity.

Organisations can seamlessly integrate data feeds and online portals into their enterprise resource planning (ERP) systems, providing exact details about who bought, where they bought, what they bought and how much they paid.

Making this information available on ERP systems means P-Cards offer enhanced spend reconciliation as well as the data to track suppliers with which the organisation spends the most and the frequency with which it spends at various suppliers. In so doing

the system sheds light on inconsistent and wasteful spend and fraudulent activities, and gives the organisation more negotiating power with a supplier.

One of the most important things an organisation should have when adopting a P-Card programme is a strict P-Card policy; this helps ensure that the organisation is not affected by P-Card fraud and misuse. The policy should be comprehensive, transparent and easy to understand so that all employees know the dos and don’ts of using the card and the consequences of not adhering to the policy.

However, if it is not followed, the policy is supported by the “excellent controls built into P-Cards, such as spend limits, allowing spend only at specific suppliers, greater visibility of what is going on daily through online portals and data feeds, and seamless integration with company processes,” says Roddy Mann, �Procurement Analyst at Old Mutual.

Thanks to these spend limits and other controls (such as merchant category code blocking, which blocks the card from making certain purchases), P-Cards will ensure that public funds are not wasted: the spend limit ensures that the cardholder has only the necessary funds available – no more. Cardholders are prevented from spending excessively and can spend the available funds only where necessary.

It is clear that with the efficiency, potential savings and controls that P-Card programmes offer there will be less strain on taxpayers and the government will have more funds to spend on its strategic objectives: job creation, education, health, rural development and the reduction of crime. n

REFERENCES

1 http://www.artzblog.com/tag/kraljic-portfolio-model/

2. http://www.visaeurope.com/en/public_sector/case_studies.aspx structures.

PURCHASING CARDS CAN

WORK INGOVERNMENT

HOW CAN A P-CARD ASSIST GOVERNMENT?

1. By lowering the cost of processing purchase transactions.

2. By speeding up payment to suppliers, which is important for SMMEs.

3. By preventing wasteful or fraudulent spend through P-Card controls.

4. By shedding light on wasteful or fraudulent spend through a high level of spend visibility.

ABOUT THE AUTHOR

Tshipi Alexander Head: Corporate Issuing Sales and Service, Nedbank

[email protected]

Tshipi has over 16 years of experience in the financial services and banking industry, including Private Banking and Structured Lending, Merchant Card Acquiring, and Card Issuing. He previously headed up American Express Merchants in South Africa and in four SADC countries.


58

HEADING

GROWINGYOUR BUSINESS

MAKE

HAPPEN

Ensure complete control and visibility of all business spend with Nedbank’s range of card solutions.

nedbank.co.za Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16). For tailormade card solutions for your business, call Nedbank Corporate Card Direct on 0860 102 191 or visit nedbank.co.za.

American Express® Business Travel Account (BTA)The BTA card simplifies your travel payment and reconciliation processes whereveryour business may take you. Simply nominate your preferred travel company and they will handle all your company’s travel expenses. And with BTAPowerlinkSM youget travel data and automated reconciliation at no cost.

Nedbank Corporate CardsThe corporate solution links multiple cards to your overall business account andenables selected employees to settle travel, entertainment and other businessexpenses while giving a consolidated view of all transactions.

Nedbank Procurement CardThe procurement card drives saving on procurement processes and costs while simplifying smaller, more frequent transactions. It allows for complete visibility and control of all procurement spend, including low-priced miscellaneous expenses.

Whether you are a growing business, a large or multinational organisation, our range of products and solutions will give you complete visibility and control of all your corporate spend. Together with our industry and product specialists whoare committed to understanding the ins and out of your business, you can make payment processes seamless and costeffective while maximising on savings.

We offer easy-to-use payment solutions that plug into your management information system and actively manage billing,payment and reconciliation processes. With tools, such as a digital dashboard, which track and compile every singletransaction big or small, allowing you to maximise savings on day-to-day business expenses and evaluate yourorganisation’s overall spend at a glance.

‘Nedbank Procurement cards come with excellent controls such as spend limits and allowing spend only at specifi c suppliers; greater visibility of what is going on daily through online portals and data feeds and seamless integration with the company processes.’

Roddy Mann, Old MutualProcurement Analyst


HAPPEN


American Express® Business Travel Account (BTA)The BTA card simplifies your travel payment and reconciliation processes whereveryour business may take you. Simply nominate your preferred travel company and they will handle all your company’s travel expensesget travel data and automated reconciliation

Nedbank Corporate CardsThe corporate solution enables selected employees to settle travel, entertainment and other businessexpenses while giving a

Nedbank Procurement CardThe procurement card drives saving on procurement processes and costs whilesimplifying smaller, more frequent transactionsand control of all procurement spend, including



the company processes.’

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CORPORATE

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MAKE

HAPPEN


nedbank.co.za Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16). For tailormade card solutions for your business, call Nedbank Corporate Card Direct on 0860 102 191 or visit nedbank.co.za.

American Express® Business Travel Account (BTA)The BTA card simplifies your travel payment and reconciliation processes whereveryour business may take you. Simply nominate your preferred travel company and they will handle all your company’s travel expenses. And with BTAPowerlinkSM youget travel data and automated reconciliation at no cost.

Nedbank Corporate CardsThe corporate solution links multiple cards to your overall business account andenables selected employees to settle travel, entertainment and other businessexpenses while giving a consolidated view of all transactions.

Nedbank Procurement CardThe procurement card drives saving on procurement processes and costs while simplifying smaller, more frequent transactions. It allows for complete visibility and control of all procurement spend, including low-priced miscellaneous expenses.



‘Nedbank Procurement cards come with excellent controls such as spend limits and allowing spend only at specifi c suppliers; greater visibility of what is going on daily through online portals and data feeds and seamless integration with the company processes.’

Roddy Mann, Old MutualProcurement Analyst


HAPPEN


American Express® Business Travel Account (BTA)The BTA card simplifies your travel payment and reconciliation processes whereveryour business may take you. Simply nominate your preferred travel company and they will handle all your company’s travel expensesget travel data and automated reconciliation

Nedbank Corporate CardsThe corporate solution enables selected employees to settle travel, entertainment and other businessexpenses while giving a

Nedbank Procurement CardThe procurement card drives saving on procurement processes and costs whilesimplifying smaller, more frequent transactionsand control of all procurement spend, including



the company processes.’

2529_MCARD GOLD CREDIT CORP 12/4/08 9:48 AM Page 1

Composite

C M Y CM MY CY CMY K

VALID DATESGELDIGE DATUMS

CORPORATE

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60

HEADING

The contract management phase of the procurement lifecycle often receives the least management attention and effort (at least until something goes wrong). However, looking at the lifecycle of a typical two-year procurement project it is noteworthy that:

• 95% of expenditure under contract occurs after the contract has been signed.

• 80% of the project time is occupied by the contract management phase.

The article focuses on creating a simplified process to effectively manage contracts. The first part focuses on developing an appropriate contracting strategy while the second focuses on developing and executing the contract as part of total contract lifecycle management within the public sector.

PUBLIC SECTOR CONTRACT MANAGEMENT CONTEXT

Contract management is one of the most underrated functions within Government supply chain systems: attention is paid to the process leading up to signing the contract, including activities like competitive bidding and tender administration. A good contract management process ensures that the organisation and the supplier fulfil all of the obligations that they agreed to in the signed contract. Failing to put in place a good contract management process has consequences for both parties. If no one is managing the performance of the contract an organisation is likely to fail to meet its project goals associated with the contract.

The heat is on in the public sector procurement space, as highlighted in the 2014 budget speech: the establishment of the Chief Procurement Office aims to ensure value for money and that contracts adhere to the various prescripts. This further aims to ensure that the government’s service delivery objectives are supported by the purchases of goods and services.

DEVELOPMENT OF THE CONTRACT STRATEGY

In the public sector there is a wide variety of contracts with different types of contracts needing different types of contract management.

These procurements range in size from millions and hundreds of millions to billions of Rands; from simple to very complex; from once-off to multi-year. These projects all need different degrees of contract management practices, but the principles remain the same. The framework in Figure 1offers a simplified categorisation of contracts using two axes: complexity of service and spend value under consideration.

Fig 1: Contract Categorisation

Simple low-complexity, low-value contracts may require little more than monitoring, basic record keeping and payment authorisation. More complex or strategic contracts of higher value will generally require:

• An active role for the contract manager and contract administrator.

• The development of more strategic and comprehensive relationships with suppliers.

• Excellent communication.

• More comprehensive performance evaluation mechanisms.

• Increased direct and indirect control mechanisms for administrators and managers.

PUBLIC SECTOR


61

ABOUT THE AUTHOR

Lucille Jansen van Vuuren Business Unit Manager: Procurement & Inbound Supply, Resolve Solution Partners

[email protected] www.resolvesp.com

Lucille has 17 years Sourcing and Procurement experience in the Professional Services, Financial Services, Mining and Telecommunications and Public sectors. Her current focus with Resolve is on procurement transformation, risk management, supplier relationship management, contract management and strategic sourcing.

CONTRACT MANAGEMENT IN THE PUBLIC SECTOR:LIGHT AT THE END OF THE TUNNEL

Based on the categorisation, various strategies can be deployed for the development and management of the contract, as outlined in Figure 2.

Objectives Buying Structure Relationship Structure

Strategic • Develop long-term relationship• Ensure continuity of supply• Identification of continuous

improvement opportunities – jointly beneficial – to reduce total cost of ownership (TCO)

• Encourage value-add• Risk management – reputation,

continuity of supply, opportunity cost and actual cost

• Long term partnership• Detailed SLAs• Detailed key performance indicators

(KPIs) frequently reported on• Cross-functional management• Open-book costing• Co-design

• Dedicated supplier account manager

• Cross-functional company supplier management team with supplier relationship management (SRM) representation

• Monthly/quarterly reporting, review KPIs and continuous improvement opportunities

• Complete “strategic” scorecard

Niche • Manage risk of price increase or product/service interruption

• Ensure continuity of supply• Location of an alternative product/

service or source of product/service• Move commodity into major or

strategic group• Manage indifferent supplier

(company unlikely to be seen as key account.)

• Annual agreements• Blanket cover• Purchase cards• Consolidated invoices• SLAs• Buy consortium

• Disinterested (minimal) supplier account management

• Cross-functional company supplier management team with SRM representation

• Monthly/quarterly reporting, review KPIs and continuous improvement opportunities

Major • Drive down TCO. Leverage spend to drive down cost per unit

• Promote continuous improvement and cost reduction initiatives with supplier

• Generate/sustain competition• Manage SLA and send analysis to

reduce leakage

• Spot buying• Competitive tendering• Business agreements• One off detailed orders

• Dedicated supplier account manager

• SRM involvement will depend upon commodity and ownership

• Quarterly reporting by exception, review KPIs and continuous improvement opportunities

Commodity • Lower TCO by reducingtransaction costs

• Create competition• Minimise supplier opportunities for

internal marketing

• Purchase cards• Purchasing agents• Rationalisation• Devolved buying• Electronic catalogues• Internet/Intranet

• Limit strategic sourcing resources allocated to these commodities.

• Annul reporting on KPIs

Fig 2: Contract Strategy Development


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HEADING

CONTRACT LIFECYCLE MANAGEMENT

Once the strategy for the contract has been decided, the contract will follow the normal contract lifecycle management process.

Contract lifecycle management “is the process of systematically and efficiently managing contract creation, execution and analysis for maximising operational and financial performance and minimising risk” (CIPS Contract Management Guide).

The Lifecycle of a contract has four elements to it: pre-bid award; post-bid award; contract delivery; and contract close out. The actions required from each of the four elements are outlined in Figure 3.

Fig 3: Contract Management Cycle

PRE-BID AWARD

Before any procurement process is initiated, it is important that the agreed specification or terms of reference includes the following key issues relating to managing the contract and achieving the specified objectives:

1. The objectives and outcomes of the contract and how the contract should be managed.

2. The role, responsibility and obligation of each party.

3. The strategic and operational objectives of the contract and the key success factors of each.

4. The approach for dealing with variations to contract scope.

5. The tasks necessary to ensure a successful contract outcome and reduce risk.

6. Other important information that must be considered: acceptance criteria; communication and relationship management; completion and renewal arrangements; continuous improvement; contract changes and variations; contract deliverables; contract management meetings; data and information management; dispute resolution processes; ethical conduct; financial management; governance structures; inspection and testing procedures; insurances; key success factors or performance indicators; payment milestones; performance monitoring and reporting; quality assurance practices; risk management; schedule management; statutory and regulatory requirements; training; and warranties/guarantees/securities.

The outcome of considering the factors in 1 to 6 above will determine which contract management and administration activities will be followed and who will be responsible for which aspects.

POST-BID AWARD

Prior to commencing services it is important that the contract manager, end user/project manager and bidder meet to ensure a clear and mutual understanding of all contract requirements and to identify and resolve potential problems prior to any contract performance.

The basis for developing an effective working relationship with the service provider is to analyse the contract and agree on the service provider’s understanding of the contract, by jointly:

1. Identifying the deliverables and how their achievement will be measured.

2. Identifying and agreeing on service levels and format of delivery.

3. Ascertaining time frames, particularly any critical deadlines.

4. Understanding payment arrangements, including links between payments and performance.

5. Identifying the roles and responsibilities of both parties and allocating responsibilities.

6. Confirming agreement with the service provider, in relation to the management of any sensitive matters and/or disputes.

CONTRACT DELIVERY

This phase involves the execution of the deliverables, be it a product, service or work that is required. The final delivery of goods, services and work can be controlled by:

• General performance metrics.

• Schedule/ milestone variations.

• Goods, services or programme variations.

• Corrective action requests.

CONTRACT CLOSEOUT

The contract close-out phase is an important part of the contract lifecycle as it provides a space of “tying up loose ends”, as well as an opportunity to reflect on the execution of the contract and identify where improvements can be made. The closeout phase in the contract management lifecycle comprises:

• Finalise administrative requirements

• Contract review - including lessons learnt

• Transition planning and arrangements

• Documentation management

What is clear is that in the public sector, contract management is a highly neglected area. For contract management to be efficient and effective within the public sector, a more robust approach is required in order for the organisation to meet its objectives and manage risks. It is necessary that fresh energy is focused here in order for organisations to improve this area and for the public sector to realise the benefits of contract management. n

PUBLIC SECTOR

• Consider risks• Negotiate contract• Conclusion and sign off

of contract and SLA’s

• Contract Manager/ Project Manager certify services rendered and payment due

• Payment of Account• Review of contract

execution and management

• Manage service delivery & risks

• Manage communication• Escalate issues• Manage variations/

deviations/extensions

• Consider risks• Develop special conditions

of contract and service level agreement deliverables

For a demonstration, contact David Long at [email protected]


64

BUSINESS DIRECTORYPUBLIC SECTOR

SERVICE QUALITY

IN PROCUREMENT AND CONTRACTING

Quality of service contributes significantly to business success. It affects

market share and return on investment, lowers costs and improves

productivity. But most importantly, measuring service quality is a device

that supports key performance indicators (KPIs) in the provision of

services in procurement and contract management.

How many times have you heard contractors/suppliers/end users

grumble that procurement is not delivering, that it takes too long to

complete projects or that some projects have been left incomplete?

Service quality is measured so that action can be taken to prevent these

situations from developing or escalating.

Consequently, it is imperative that procurement and contract

management functions use service quality dimensions and attributes as

barometers to evaluate and assess service level satisfaction as well as

work performance.

What do procurement professionals consider when assessing quality?

Customers (whether internal or external) compare the service they

receive with the service they expect. If they received service that falls

short of what they expected then customers are disappointed. On the

other hand, organisations that train their staff in the use of service

quality attributes can delight their customers and enjoy success.

Identifying service quality dimensions is necessary to be able to specify,

measure, control and improve customer service quality. Without these,

performance will be weak.

Certain accepted quality dimensions are considered universal, even

among internal customers, and should be a baseline for examining

procurement’s service levels.

Reliability The consistency of performance and dependability. The service is right the first time; and the supplier honours its promises, keeps correct records and performs the service at the designated time.

Responsiveness The readiness of employees to provide a service, the timeliness of the service (e.g. calling back quickly), responding to requests and giving prompt service and feedback.

Competence Possessing the required skills, knowledge and ability to perform the service.

Access Refers to your approachability and ease with which customers can make contact with you. The service is easily accessible by telephone; waiting time to receive service is not excessive; and the hours of operation and location of the service facility are convenient.

Courtesy This refers to how polite, respectful, considerate and friendly your contact personnel are. This includes having consideration for the customer’s property and the clean and neat appearance of public contact personnel.

Communication This refers to keeping customers informed in a language they can understand - speaking simply and plainly - and ensuring you listen to them attentively in return. It involves explaining the service itself, service costs, tradeoffs and assuring the customer that a problem will be handled.

Credibility This refers to how trustworthy and honest customers perceive your business to be; and whether you have customers’ best interests at heart. It affects company reputation.

Security Security is freedom from danger, risk or doubt, and it involves physical safety, financial security and confidentiality.

Understanding the customer

This involves making an effort to understand a customer’s needs and recognising regular customers.


65

ABOUT THE AUTHOR

Sophie Nkwe-Dimbungu Chief Regional Officer, Corporate General Services and Procurement African Development Bank

012 003 6900 [email protected] www.afdb.org

Sophie is responsible for African Development Bank oversight of facilities management, assets management, procurement and contract management in SADC countries. She previously worked for the State of Maryland in the USA, as well as Air Botswana and Botswana Railways in procurement management. Sophie served as a non-executive Director for Botswana Public Procurement and Asset Disposal Board (PPADB).

Professor Douglas BoatengFounder: PanAvest skill development partnership 011 469 [email protected] www.panavest.com

Prof. Boateng is Professor Extraordinarius, Supply and Value Chain Management at UNISA Graduate School of Business Leadership; Independent Distinguished Extraordinary Chair in Operations and Supply Chain Management at the Institute of Operations Management Africa; Chair of the CIPS Africa Strategic Advisory Board; and Founding Chair of the West African Institute for Supply Chain Leadership.

Procurement stands a far greater chance of exceeding its customers’ expectations if it practices and applies the above attributes throughout procurement processes.

SERVICE QUALITY AND SATISFACTION

In procurement’s daily operations it must identify what satisfies its customers and what does not. Procurement professionals should guard against pitfalls such as a lack of knowledge, reluctance to correct errors, service inconsistency, rudeness and sloppiness. Quality of service is one of the factors that rank highly as both a satisfier and a dissatisfier.

Satisfaction can be improved by:

EFFICIENCY AND EFFECTIVENESS

Quality service in procurement begins with an annual procurement plan that defines the activities and processes to follow. The results of tenders issued by organisations that have shared their annual procurement plans with the vendor community are usually of high quality. Documents should be complete, with succinct and clear specifications, scope of work, terms of reference and a pre-drafted contract.

INCREASED PRODUCTIVITY

It has been proven that demonstrating mutual respect, trust and fairness increases productivity. You will gain vendors’ trust and develop meaningful partnerships with them if they know you are managing a quality project and contract. Procurement professionals should procure ethically throughout the process.

ENHANCED COMMUNICATION

It is critical to be on top of your communication to your clients, keeping them abreast and informed of what is happening and how you are going to meet their needs. Most importantly, do not mislead or misinform a contractor, be honest. With clear contracts, disputes are resolved amicably at the lowest level, which saves time and money.

CONTROLLING COSTS

Cost savings rank as a primary benefit that procurement organisations look for when evaluating procurement programmes. Procurement professionals are duty bound to ensure that the right price is paid and that payment is made on time. Consequently, they must also be fully involved in the process of ascertaining that both parties are satisfied with the quality of service and that all contract deliverables were executed according to the agreement and on time: this is a cost saving in terms of time, money and stress and it avoids and controls unnecessary costs within the procurement function

ADDING VALUE

Procurement and contract management adds greater value when it considers service quality attributes.

ACCOUNTABILITY AND TRANSPARENCY

Procurement professionals are accountable and responsible for the outcomes of their actions and decisions. All activities must be handled in a transparent manner whilst protecting confidential information.

CORPORATE IMAGE

How does an organisation represent itself, its customers, investors and employees? Procurement professionals should ensure that the way we speak to our contractors and customers (both internal and external) depicts the norms and values of our corporations.

While it is clear from the above that measuring service quality is both subjective and objective, what is most important is customer satisfaction. Consequently, it is important that service quality dimensions and attributes are upheld in the procurement curriculum. Furthermore, procurement professionals must consider adding service quality variables (universally accepted or of an organisation’s own creation) to their procurement processes.

It is time for procurement professional to walk the talk, make a difference in the delivery of quality

service. Delighting customers is a matter of exceeding customers’ expectations. n


66

PUBLIC SECTOR

While procurement has been identified as key to service delivery, in contemporary South Africa public procurement is seen more as a problem than as an opportunity.Indeed, it has emerged as a major deficiency in the system of government and a key enabler of corruption in South Africa.

In a bit to shed light on why public procurement is in such disarray, the Public Affairs Research Institute (PARI), supported by the Ford Foundation, undertook to describe the procurement process under South Africa’s current regulatory framework, in order to reveal important weaknesses in this process.

PARI conducted in-depth interviews with government officials in a number of departments, with supply chain management practitioners and with a limited number of non-governmental organisations.

Their findings, published in their report How the state buys: public procurement in South Africa – 2014, argue that labouring under a massively decentralised and fragmented procurement function (owed to a supply chain management system introduced in the early 2000s), already weak government departments and institutions are struggling to control and regularise South Africa’s ‘contract state’, of which corruption is a symptom rather than a cause.

WHY CAN SA BE CONSIDERED A ‘CONTRACT STATE’?

“One of the most dramatic features of the current [South African] state has been the contracting-out of government services to third-party providers,” notes PARI’s report.

With over 42% of government’s 2012/2013 budget allocated to the procurement of goods and services, procurement has become one of the largest tasks, arguably the single largest function, of government departments, which is part of why PARI argues that South Africa is a ‘contract state’.

A ‘contract state’ is a state that co-ordinates its operations less through bureaucratic hierarchies and more through market exchanges. A contract state still involves a bureaucracy, but one that is largely involved in making policy and in facilitating delivery by co-ordinating mainly private sector entities.

“Contract state is just one facet of the South African state as a whole; however, its importance derives from the fact that it has become a rather dominating facet,” notes PARI.

Importantly, while departments outsource their mandated core functions, whatever they might be, to third-party service providers instead of doing it themselves, this does not reflect the indolence of South African public servants; rather is an effect of local and international trends to improve government efficiency and reduce wastefulness and is supported by the perception that the South African state is relatively dysfunctional. “Interviewees noted that state managers in South Africa often do not trust the expertise and capacities of those below them... Risk aversion can therefore be an important reason for outsourcing, because

PUBLIC PROCUREMENT IN SOUTH AFRICA 2014

HOW THE STATE BUYS


67

outsourcing serves to shift some of this risk to the private sector,” notes PARI.

WHY IS IT NOT WORKING?

To a substantial extent government departments and agencies do their work by contracting out their core functions. In so doing, the role of ‘public servant’ changes from administration to procurement and the management of contracts.

Consequently, the performance of government departments and agencies is strongly related to the ability of these institutions to plan strategically for the goods and services they will need, to understand the details (specifications) of what they require, to appoint the best suited service provider and/or to buy the most appropriate items for their needs.

Where departments handle this role well, service delivery may be adequate to good. Where they do not, service delivery tends to be poor or negligible.

PARI’s research found that a great deal of departments and institutions do not practise their procurement and contract management

roles effectively (see Problems identified in the procurement process for full details).

Their lack of efficacy is owed to their procuring of goods and services within a system that is highly fragmented and decentralised.

South Africa’s current state formation is a strong centre-periphery pattern, notes PARI. “At the national level, and especially at regulatory centres such as the National Treasury, bureaucracies are relatively well-established, meritocratic and clean. However, at the provincial and local levels and at the margins, there are weaker bureaucracies…”.

While this is not necessarily a problem, many offices and departments in South Africa do not have strong background in routines and ethical norms of public service. South African public administration was never adequately insulated from political and personal considerations, which, notes the report, provides room for the proliferation of informal practices. The architecture of discipline is correspondingly weakened.

Dynamics such as these can be seen in South Africa’s procurement system.

PARI’s report cites examples of “simple, precise and consistent procurement rules being visibly broken”.

Even when timeously prepared, procurement plans are often not followed.

Despite repeated protests from National Treasury, bids are commonly and openly split, bringing them under value thresholds, allowing for less restrictive procurement procedures.

Single providers are often approached without following procedure. The Auditor-General has repeatedly raised the concern that single quotations are taken in contravention of triple-quote procedures.

In some places private providers are informed of competing bids, a practice made possible by accepting late bids, or cancelling and then repeating tenders.

Sometimes bidders are disqualified on spurious administrative or technical grounds.

Specifications are occasionally changed during the adjudication process apparently to favour certain suppliers.


68

PUBLIC SECTOR

Once a tender is won, procedures for checking payments against receipts are often not followed, so double-invoicing and other methods of price-inflation are common.

IN A NUTSHELL

The combination of out sourcing, decentralisation and fragmentation (making up what can be called a contract state) expands opportunities for non-compliant procurement to take place. Furthermore, the decentralised and fragmented institutional architecture of the state offers limited means through which disciplined organs of state can bring the ill-disciplined into line.

This suggests that successful procurement reform may require broader interventions into the institutional architecture of the state.

“It may well be that overcoming the challenges of governance in South Africa does not lie with greater centralisation and increasing bureaucratisation, but with the professionalisation of public servants by recruiting them through an open and competitive examination and by making promotion dependent on professional advancement and examinations,” concluded the report.

This article was adapted from a report originally published by the Public Affairs Research Institute (PARI). PARI’s survey amounts to an amalgamation of and generalisations about weaknesses that have emerged in the actual practice of public procurement in South Africa. n

The report “How the State buys. Public Procurement in South

Africa 2014” was produced by the Public Affairs Research

Institute (PARI).

The lead author was Ryan Brunette working with Ivor Chipkin,

Gumani Tshimomola and Sarah Meny-Gibert.

It was supported by a grant from the Ford Foundation.

Visit the Public Affairs Research Institute at www.pari.org.za


69

PARI researchers found an amalgam of issues in actual practise across

South Africa. However, the list below is extensively supplemented by

their findings in the Limpopo province.

1. PROCUREMENT PLANNING

Strategic planning documents are often of poor quality, and frequently

not evidence-based, de-linking procurement planning from broader

strategic plans. When requested to forward a list of procurement needs,

end users often determine these needs not on the basis of strategic

plans, but in reaction to a problem that has unexpectedly arisen.

Also, procurement plans are often substantially incomplete or weak. In

fact, they may be partially or entirely ignored with adverse consequences

further down the line.

In interviews it was suggested that “supply chain is really pulled in at the

tail end” of the planning process. In this case timeframes built into the

regulated process are difficult to follow, “it is too late and most of the

damage is already done.”

Furthermore, problems with asset registers and inventories make it near

to impossible to plan effectively for maintenance and replacement. “If

the age and average lifespan of an asset is not known, and if the asset

has not been subject to routine checking and maintenance, then it is

difficult to discern when it would need replacement. In extreme cases it

may not even be clear that an asset exists at all until it breaks.”

2. COSTING AND SPECIFICATION

Laxity of the regulatory environment affords end users, who feature

prominently in estimating costs, substantial room to manoeuvre, which

is a concern considering that costing greatly determines the purchasing

procedure to be followed and opens the system to abuse.

“The higher the item cost, the more restrictive the purchasing

procedure. At the top end of this scale, then, sit purchasing procedures

that are cumbersome but well-protected. At the bottom end sit

procedures that are convenient, but that lack institutional integrity.”

‘Split bids’ can result (reducing the cost of any single item by breaking

it into a number of different items). National Treasury has repeatedly

instructed that this practice must end, yet accounts from interviewees

and PARI’s own research observations suggest splitting of bids remains

pervasive.

The process of item specification is equally subject to a “great deal of

improvisation” and the consequence is specifications that deviate from

the stated and legitimate needs of end users.

It is common to turn directly to private service providers for specifications

and where private service providers are not approached, and where the

public institution’s own needs are not sufficiently known or where other

interests apply, the result is often under-specification.

Specifications provided by the private sector to be used in a bidding

process may speak too directly to the product of a specific provider,

tending to disqualify its competitors from the outset.

On the other hand, under-specification does not adequately provide for

the minimum needs of the procuring entity and works to the advantage

of fly-by-night operations, as it undermines the ability to manage service

providers and hold them accountable for poor performance.

The risks of poor specification can be ameliorated by making the

membership of bid specification committees (and other such entities)

cross-functional. However, no law enforces this, so it is common for

these committees not to be so constituted.

3. SUPPLIER SELECTION

Petty cash purchases fall outside the regulated procurement system,

allowing one to simply choose a preferred service provider according to

private interests.

The need for exceptional procurement is invoked for purchases that have

become urgent, however this is often owed to incomplete procurement

plans and missing asset registers (“the unexpected failure of key

equipment or infrastructure legitimately takes on the dimensions of an

emergency”). Furthermore, pushing unspent money to the tail-end of

the budget cycle results is a most prominent form of emergency: the

end of the financial year. “Internationally, corruption is a well-known

consequence of the loosening of procedures that emergencies provoke,”

notes PARI.

With regard to bid processes:

Interviewees commented that where precautions are not applied,

tampering with bids is not uncommon.

SCM practitioners fail to check bidders against the Register for Tender

Defaulters and Database of Restricted Suppliers.

Like bid specification committees, bid evaluation and bid adjudication

committee should be cross-functional and the committees should be

separate and contain different people. However, interviewees noted

that this separation often does not take place and members can be

appointed by political and administrative leadership without having the

necessary capacity or neutrality.

Public institutions split tender awards between a number of service

providers, which is entirely legitimate, but in practice is open to

abuse: businesses with the same directors are awarded more than one

component of a contract.

4. CONTRACT MANAGEMENT AND SUPPLIER EVALUATION

By this point in the procurement process suppliers hold legitimate

expectations formed on the basis of initial requests from government. If

government has not effectively communicated its own expectations then

all sorts of problems follow and renegotiating contracts with selected

service providers carries a large risk of corruption. The practice of

contracting has, consequently, been substantially constrained.

Systems to monitor and report on supplier performance are largely

unregulated and ad hoc, in fact South Africa does not have a system

for reliably and impartially punishing poor performers and rewarding

effective ones.

Furthermore, if issues emerge in delivery, end users report these to SCM

practitioners for follow-up. However, communication and co-operation

between end users and SCM practitioners can often be deficient and

acrimonious, PARI found in its fieldwork.

Procedures for checking payments against receipts and contracts are not

always followed. Moreover, payments that should be made within thirty

days of receipt are often not, putting severe strain on emerging service

providers, and discouraging the involvement of established business in

government procurement. n

PROBLEMS IDENTIFIED IN THE PROCUREMENT PROCESS


70

ABOUT THE AUTHOR

Ken TitmussSAPICS senior educator Kent Outsourcing Services

[email protected]@KenTitmuss

For the last 16 years Ken has run his own business, Kent Outsourcing Services cc, providing consulting and education in operations and supply chain management. Over this period he has worked with close to 150 companies throughout Southern Africa and has recently presented seminars in India, France, Dubai and Saudi Arabia.

Kent Outsourcing Services in an Authorised Education provider for both SAPICS and APICS

SUPPLY CHAIN MUST PLAN ACCORDING TO CUSTOMER SIGNALS

ENTERPRISE PLANNING

Business must plan according to demand-driven signals.

With more products, fluctuating demand and increased outsourcing to foreign countries, organisations need to re-examine how they determine material requirements. Operating in the sweet spot where the amount of inventory is an asset rather than a liability is key to increasing revenue.

“Constant volatility has become the new normal,” says demand-driven planning advocate and SAPICS senior educator, Ken Titmuss. “We need to respond with an approach that rolls with the punches, instead of allowing small changes at the consumer end to have increasingly greater repercussions as they travel back up the supply chain.

MRP VS DD MRP

Traditional materials requirement planning (MRP) does not allow organisations and supply chains to align their assets more closely with their actual consumption. In terms of traditional MRP, if demand for the finished product changes a little, everything else upstream changes a lot, the so-called ‘bullwhip effect’.

The demand-driven materials requirement planning (DD MRP) approach is different in that it makes each part of the supply chain more independent so that the ripple effect is reduced. It does so by introducing buffers.

“The introduction of buffers means that we are not driven by computers, but by signals. Once we see a signal we can react on it. By assessing our position more often, we are able to reduce variations in supply and demand before they can cause a lot of trouble further up the supply chain.”

“This is nothing short of a revolution in supply chain planning,” says Titmuss. “This new thinking turns on its head what we believed about planning, yet the logic is sound and the dramatic results speak for themselves.”

IMPLEMENTATION ACROSS INDUSTRIES

According to Titmuss, the beauty of the theory is that it works across industries – even those that are not selling products per se. Although one might not implement stock buffers at a bank, capacity buffers would increase when, for example, more than three people are in the queue and signal for another teller to start operating.

EARLY ADOPTION RESULTS

DD MRP has already achieved impressive results for early adopters in the US. Typical results include increased sales (around 20%), accompanied by vastly reduced inventory (as much as two thirds), less waste and happier customers.

One company that has adopted DD MRP - Oregon Freeze Dry, the largest company of its kind in the US - experienced an increase of 20% in sales after its customer fill rate improved from 79% to 99.6%, all of which was conducted with 66% less inventory. The approach also worked wonders for its raw material requirements: no out-of-stocks were experienced and the company reported a $2.5-million inventory reduction.

“With results like these, DD MRP is definitely a game changer – and something the South African market would do well to implement as quickly as possible,” concludes Titmuss. n


72

ENTERPRISE PLANNING

HOW TO MAKE ERP WORK FOR PROCUREMENT

ABOUT THE AUTHOR

Steven Freemantle Chief Thought LeaderSweetThorn Thought Leadership

083 600 [email protected]@SCOguru

As a founding member of SweetThorn Thought Leadership, Steven is a driving force behind the execution of many successful SAP Implementation and supply chain improvement programmes across the globe. Steven’s SAP consulting career spans 20 years and is characterised by an unrelenting fervour to improve the working lives of his clients. He has assisted clients in South Africa, UK, Europe and USA, and to re-think the way they manage their supply chains.


73

A common view held by many companies in the Enterprise Resource Planning (ERP) install-base is that their ERP systems fail to deliver the intended business value. Some even feel they are slaves to their ERP, and at best have a very expensive data-capture tool. These companies work for their ERP systems, rather than their ERP systems working for them.If they would like to unshackle their ERP chains there is definitely a remedy, but they will not necessarily find their shackle’s lock where they think it is.

UNSHACKLING YOUR ERP CHAINS

Seldom do organisations look to mechanisms that tackle ERP challenges (see Are you an ERP slave?) through the real solution - addressing the people factor. The harsh reality is that ERP systems work as intended and it is the users who do not! Not because they are bad people; they have never been afforded the opportunity to understand how to use the ERP system differently.

Does this mean companies will need to embark on more training and change management? Yes, but it is not traditional approaches that need to be followed. Instead the approach is to use your live ERP data to bring about a critical shift in your company’s ERP behaviour and culture.

STANDARD IS THE KEY TO FREEDOM

Vital to this non-traditional approach is using standard ERP tools and reports to access the information that highlights errant behaviour of individuals in your supply chain – holding up the proverbial data mirror.

Any ERP system worth its salt already contains the standard reports needed to drive value across your supply chain – as most systems do. The problem is that at the time of taking the existing ERP system live, no one focussed on reporting; instead everyone was rather busy getting the transactions to work and were never exposed to the powerful standard reports. Once armed with standard ERP reports you can begin enlisting your ERP system to work for you.

There are several pointers that you will need to follow to empower your supply chain staff:

1. Ditch the excusesWhen you hold up the data mirror you will hear many excuses why your ERP system is not a reflection of your reality, and that in actual fact the apparent

value opportunities are not realistic. You will need to encourage your supply chain role players to abandon these excuses and accept that there is value in using your ERP differently.

2. Quantify the opportunityPart of this process is using your standard ERP tools and reports to quantify the value opportunity that can be realised if your ERP system is used as intended. You should highlight opportunities in the following areas:

• Customer service

• Inventory performance

• Operating costs

• Revenue

• Management information and decision making (supply chain visibility)

• Business process optimisation

• Continuous business improvement

3. Educate, don’t trainWhile ‘click-here, click-there’ is needed, training does not shift organisational cultures. ERP users must learn how to check that “they’ll get the results they’re after, fix it if it’s wrong and stop a bad result from happening next time around”. All the while ensuring that there are no negative effects on the rest of your supply chain. This is called education.

4. Establish ownership and accountabilityEach role player in your supply chain owns data inside your ERP system. As this data flows up and down your supply chain your business is affected. People must also own these effects and results.

5. Set targetsThe ownership and accountability you seek will become entrenched only by establishing individual performance measures reported from your standard ERP toolsets. By quantifying the opportunity, you will have a starting point to measure the successes that will come with freeing your company from ERP slavery.

APPOINT LIBERATION ENABLERS, NOT LIBERATORS

As a final note, ensure that the operators in your supply chain do their own liberation work. Buyers, planners, inventory controllers and their leaders must be equipped to identify, understand and remedy their own errant ways.

Over and over again companies in the ERP install-base appoint task teams or ‘hit squads’ to address their ERP challenges – an approach that fails each and every time. Every individual contributing to your ERP-driven supply chain must consciously liberate the part of the chain to which they are fastened.

Use a task team to do this for you and they will become your new Slave Masters. n

ARE YOU AN ERP SLAVE?A company that is a slave to its ERP exhibits any of the following symptoms:

1. Highly frustrated user communities.

2. Little trust in ERP data.

3. ERP systems are regarded as inflexible and not user friendly.

4. Extensive use of Microsoft Excel for reporting and even day-to-day execution of operational activities.

5. Various supply chain functions operate in independent silos. In extreme cases these departments may be close to war with one-another and blame shifting and turf defending prevail.

6. End-to-end supply chain visibility is hard to come by.

THE COST OF ERP SLAVERY If an organisation exhibits any of the following symptoms, one can diagnose the extent of ERP slavery by examining some of the cost implications associated with it:

1. Out-of-control inventories; too much of the wrong material and not enough of the right material.

2. Customer service challenges exist for internal and external customers.

3. Cries from the business for more people to do the job.

4. Continual requests for re-training on ERP functionality.

5. Regular re-engineering of business processes.

6. Calls for customisation and tweaking of standard ERP functionality.

7. On-going implementation of more and more ERP technology or 3rd party solutions.

8. The latest trends, and the ultimate cost, are calls to re-implement your ERP system.


74

Electricity load shedding emphasises the need for education in planning skills“Up your game when it comes to supply chain planning – fast!” That’s the word from supply chain body SAPICS President Cobus Rossouw concerning electricity load shedding’s disastrous effects on the economy.

Although the cuts appear to be on hold, given the electricity supply’s vulnerability to poor weather and other risks, SAPICS is cautioning businesses to be ready to plan quickly for worst-case scenarios. “The latest wave of rolling black-outs emphasises the need for integrated operations planning in order to avoid complete disruption to your business,” says Rossouw.

“Without establishing an alternative energy supply, most businesses have little option but to mitigate this external risk through improved demand and inventory management. And even in the case of those that have some form of alternative energy supply to help power their priority operations, careful planning is still needed, particularly if load-shedding remains a risk for the foreseeable future.”

TIP 1: INCREASE YOUR INVENTORY… BUT BE SMART ABOUT IT

In the face of a reduced ability to produce during power cuts, Rossouw recommends that product availability be secured by carrying higher inventory levels to buffer against downtime.

During power cuts in early March 2014, it was reported that the output of some businesses –

particularly those identified as the country’s top energy users – was immediately reduced by as much as one fifth. “Given significant cuts like this, the likelihood of recovering that 20% is very small; so we believe it is important to be prepared to scale up production fast so that your losses are not quite so extreme.”

On the down side, however, Rossouw notes that having more inventory than one needs of the incorrect products or having them in the wrong locations is of little value. “It is a catch 22 situation, so it is in times like these that we realise how critical the skills of integrated planning are to business.”

TIP 2: IMPROVE YOUR SKILL IN DEMAND AND INVENTORY MANAGEMENT

When correctly applied, the science of demand and inventory management can assist organisations to minimise the effects of load shedding.

Attend a forecasting workshop. “Participants work through practical examples – even ones involving rolling black-outs - in an effort to hone their forecasting skills, effectively helping them to transition from ‘guessing’ to ‘knowing’. And the more you improve your forecasting process and your general skill in this regard, the ‘luckier’ you will get,” says Rossouw.

Following such workshops, participants may continue with their training to become Certified Professional Forecasters (CPF), a qualification that is recognised globally by the Institute for Business Forecasting and

Planning (IBF). n

ABOUT THE AUTHOR

Cobus RossouwChief Business Development Officer, IMPERIAL Logistics. SAPICS President

[email protected] @_CobusR www. imperial.co.za

Cobus obtained engineering and commerce qualifications from the University of Pretoria, studied towards a MBL at UNISA and qualified as Certified Supply Chain Professional through APICS. With his focus on industrial & systems engineering and business logistics, his career was destined for Supply Chain Management.

ENTERPRISE PLANNING

INTEGRATED OPERATIONS PLANNING NEEDED TO WEATHER THE ELECTRIC STORM

Supply Chain ManagementThe Deloitte Supply Chain Management team manages Supply Chain and Procurement processes on behalf of clients, enabling them to focus on their core business function. Our people-and-technology-enabled offering is economical and efficient, and it extends across a number of industries.

Infrastructure and Capital Procurement SolutionThe Deloitte Infrastructure and Capital Procurement Solution enables you to improve the delivery of your infrastructure and capital projects. Our team of experts will be your dedicated partner throughout the project lifecycle.

Key contacts:

Sandile Gwala Leader of Business Process SolutionsDeloitte Consulting AfricaEmail: [email protected]

Lerato SitholeLeader of Supply Chain ManagementDeloitte Consulting AfricaEmail: [email protected]

Business Process Solutions

© 2014 Deloitte & Touche. All rights reserved. Member of Deloitte Touche Tohmatsu Limited.

Infrastructure and Capital Procurement Solution*

Demand Management Bid Management Contract Management

Risk Management

Finance& Accounting

01.Technologies

Industries

07

06

02.

Real Estate

03.

Mining SharedServices

05.

ProjectServices

04.

Supply ChainManagement


76

TECHNOLOGY

MAKING E-PROCUREMENT WORKThe world of supply chain management, and procurement, has changed. Until fairly recently it was confined to the backroom and appeared low down on the strategic agendas of both private and public sector organisations. Today it is firmly on the boardroom agenda with many executives using the supply chain as a weapon for competitive advantage. Thanks to this recognition the procurement aspects of supply chain management are also gaining attention.

In South Africa it is frequently acknowledged that collective action is required to remedy how public sector and corporate organisations strategically source and acquire products and services and deal with selected suppliers. The action is all the more urgent in the context of a global economy that is sluggish and constrained after the economic crisis of 2008;

the downward trend is expected to continue into the foreseeable future, and indeed, South Africa’s economy seems to be contracting. At the same time there is increasing demand from shareholders and society at large for higher performance and significant improvements in service delivery.

This financial challenge and socio-economic value shift necessitates that emerging-economy public and private sector organisations’ sourcing processes be scrutinised and improved. One key means of achieving this is the rapidly maturing field of cloud computing.

Applications in the cloud have transformed the way many industries operate, not least within the e-procurement sphere. e-Procurement benefits from the cloud’s reduced cost, time and infrastructure; its performance and

reliability; and, crucially, its ability to pave the way for the implementation of best-practice information security, through reduced risk and built-in redundancy, with no need for backups or disaster contingency plans.

Leading e-procurement companies now make use of a mature area of cloud computing known as Software as a Service (SaaS). The SaaS model has flourished in recent years thanks to the number of benefits it offers. One key benefit is a user’s ability to access the application from any computer or any device – anytime, anywhere. To reach and interact with all your requests, you simply require a computer or mobile device that is connected to the Internet. Requests for Quotation (RFQs) can be compiled alongside colleagues in other locations, and users are able to view and score submissions online at their convenience.

ABOUT THE AUTHOR

David Carney Senior Consultant, Procurement and Inbound Supply, Resolve Solution Partners

[email protected] www.resolvesp.com

David has significant experience in the procurement field, especially Sourcing, Maturity Assessments and Spend Analysis. His consulting experience spans Strategic Sourcing, Spend Analysis, Public Sector Tender Management, Training Development and Analysis and Redesign of Supply Chain /Procurement functions.

Because of an average user’s familiarity with the Internet and web-based applications, e-procurement in the form of SaaS tends to have high adoption rates, further boosted by minimal training requirements and low costs.

Leading SaaS e-sourcing tools facilitate effective online sourcing of best-value goods and innovative business solutions in as little as four quick steps:

1. create a request

2. invite suppliers

3. compare quotes and

4. choose the best.

SaaS tools save time and money by putting the full sourcing cycle online, without any paperwork. Buyers can create and publish RFQs in minutes, saving administrative resources that can be reinvested in strategic tasks.

Furthermore, involving multiple global suppliers in the e-procurement process leads to increased marketplace competition, enabling the sourcing of best-value goods and services, which in turn cuts purchasing costs.

Sourcing solutions such as these enable many benefits, including:

1. Consolidating suppliers.

2. Working collaboratively with procurers and stakeholders across your organisation.

3. Providing a clear audit trail of the procurement process.

4. Developing an online library of specifications and questions for re-use.

5. Total visibility of all prices from all competing suppliers in one location.

6. Reaching suppliers in new parts of the world.

7. Identifying and monitoring preferred suppliers.

OPTIMISING THE SUPPLY CHAIN

In the South African market, e-procurement solutions offer real public sector benefits by providing an effective means to manage ‘tail spend’ - the 20% of total procurement spend made with 80% of suppliers. The solutions also mean increased compliance and reduced risk of process manipulation.

In certain private sector industries – for example in the construction and engineering sectors – the solutions can ensure that contractors, designers and clients are aligned early in the procurement process.

e-Procurement can offer not only time and cost savings, but huge efficiency gains in a market like South Africa’s, and in economic conditions that are crying out for them. n


78

TECHNOLOGY

mymarket.com

mymarket.com is a fully integrated, customisable, business-to-

business e-procurement and online travel management solution,

with a full range of services for both Buyers and Suppliers.

With a passion for delivering value mymarket.com is at the

forefront of e-procurement innovation. We are a wholly owned

subsidiary of The Bidvest Group Limited which employs more

than 106 000 people worldwide on four Continents. The

mymarket system is used by more than a hundred top South

African corporate clients and thousands of buyers and sellers.

We process more than 20 000 transactions every day.

Cutting edge eProcurement

The mymarket.com e-procurement system is easy to implement

and use. The system provides tools to:

• Support sourcing and supplier negotiations

• Implement stringent process controls, budget checks and

approval workflows

• Facilitate electronic ordering via a state of the art ordering

and approval system

• Drive down costs: approved users are only able to order

from approved supplier contracts at approved prices

• Manage online goods receiving and voucher matching

• Provide detailed reporting, supplier reconciliation and

settlement

• Interface with accounting and ERP systems to eliminate

duplication and optimise existing infrastructure.

The future of travel

The mymarket.com online travel solution utilises cutting edge

technology to provide clients with a holistic travel management

solution. Recognising the fundamentals of procurement best

practice and founded on the key objective of driving savings,

the mymarket.com travel offering is a world first in integrated, internet based travel solutions.

The online solution empowers corporate clients to manage

travel policies as well as traveller profiles. It provides travel bookers simultaneous access to the lowest available local and

international rates for flights, car rentals and hotel bookings.

Negotiated vendor rates and deals are stored in the system to

ensure the lowest in-policy trip is booked. Approval workflows ensure that travel approvers and managers are aware of out of

policy bookings or any trip not booked at the lowest rate, while

integration support for existing legacy systems and real-time

reporting tools ensure better controls.

The mymarket.com online travel management solution enables

organisations to effectively manage and control their travel requirements, while ensuring the realisation of significant cost savings.

Freedom with Control is a key benefit. Users are empowered to order without feeling as if they are

constrained by budget checks, approval workflows and process controls that institutions can build

into the system to maintain procurement integrity.

CEO, PURCO SA education purchasing consortium

The eprocurement system takes care of the

repetitive, mundane transactions, shifting

requisitions to end users and freeing supply chain

staff for more strategic, value-creation work.eBusiness Manager, Johnson & Johnson

We achieved a 484% improvement in contract

compliance and cut requisition to order cycles

from 18 days to less than one.

Aberdeen Group reporting on national university

eProcurement delivers large savings, usually

around 50% or more of total procurement costs.

University research - 2010

BEE LEVEL 3

BLACK OWNED

63.4%

BRANCHES 2

OPERATES AFRICA

1st Floor, 158 Jan Smuts Avenue

Rosebank, Johannesburg 2196

T: 011 731 7600

Helpdesk:

011 731 7700

[email protected]

www.mymarket.com


80

TECHNOLOGY

THE NETWORKED

ECONOMY SELECTING THE RIGHT NETWORK

USING A TOTAL COST OF OWNERSHIP APPROACH


81

Fuelled by business networks, companies are connecting and collaborating in new ways to drive better performance and profits.

BUSINESS NETWORKS: DISRUPT AND CONQUER

We live in a networked world. As consumers, we leverage personal networks to shop, share and consume better. Now companies are beginning to do the same, leveraging business networks to harness the insights and intelligence of entire communities to break down the barriers to collaboration and enable new processes that drive innovation and competitive advantage. But these are not your father’s networks. They’re smarter, faster and more global than ever. And they are transforming business in ways never thought possible.

COMPANIES ARE GETTING SMARTER

Networks are the most efficient and effective way to connect with a global network of partners and transact business. But their real power lies in what goes on inside them - all the interactions, transactions and commentary, and the massive amounts of insights and data that they generate. With increasing frequency, companies are moving beyond transactions and tapping into these insights and data to drive competitive advantage.

COLLABORATION IS DRIVING INNOVATION

Social tools and business networks have changed the very nature of business and engagement. Today organisations are more connected and mobile than ever and they are leveraging this to enable new processes that are only possible in a networked environment and drive innovation across their operations. Processes like dynamic discounting allow them to secure discounts that can be reinvested in research, development and funding to expand their businesses. Contingent workforce management enables them to identify and manage highly-specialised resources needed to develop that next-generation product.

BUYERS AND SELLERS ARE GETTING CLOSER

In their initial phase, networks were all about connecting companies more efficiently to perform a discreet process – buying, selling, invoicing, etc. Today, buyers and sellers are using them to enhance and expand their relationships. And this trend will accelerate. Buyers will harness the connectivity and insights of networks to find the right partners and optimise their spend and supply chains. Sellers will use them to engage with customers when, how and where they want to be engaged to increase satisfaction and wallet share.

THE BUSINESS OF THE FUTURE IS BEING ENABLED TODAY

Just as consumers tap into personal networks to learn, share and shop better, companies are tapping the ‘knowledge of crowds’ and insights from business networks to not only sense the present, but see the future and proactively shape it to their advantage by anticipating risks and trends in the market and developing plans and adapting processes to execute on them before anyone else.

Business networks are among the most disruptive technologies of our day. Disruption fuels innovation. And innovation drives advantage. Networks will continue to disrupt in 2014 and deliver companies that harness their power to new worlds of excellence.

Dr. Chakib BouhdaryPresident , SAP Business Networks


82

TECHNOLOGY

SELECTING THE RIGHT NETWORK USING A TOTAL COST OF OWNERSHIP APPROACHThe speed of business continues to accelerate while markets continue

to expand, shift, merge and emerge at a pace never before seen. The

result is a fast-moving and highly competitive global marketplace that

finds its participants increasingly interconnected and under greater

pressure to exploit any and all opportunities that arise. In this business

climate, agility and innovation are how market leaders are creating and

maintaining their competitive advantage, with many now reliant upon

outside partners and suppliers to ensure that they can respond to rapidly

shifting market pressures and deliver the products and services their

customers need most. What is clear is that these trends, which originally

only applied to certain fast-moving, technology-driven industries, are

universal in the market. What is also clear is that these trends show no

signs of retreat. And, while a stern awakening awaits certain industry

leaders and even more industry laggards, there is an opportunity for

most to course-correct. For some this will mean a radical overhaul, while

others may only require some fine-tuning. For most, however, a clear

plan is needed that includes more collaboration, better technology and

superior communication and connectivity; commerce networks will likely

play an important role. There may still be time for some self-reflection,

but there is a more pressing need for action. The stakes are rising fast

and those that sit idle risk losing out.

COLLABORATION AND NETWORKS FOR A NEW ECONOMY

Best-in-class enterprises have shown that investments in improving

internal systems and processes and enhancing external relationships

with key partners are proven paths to better performance. Collaboration

has become a primary strategy for many leading organisations to

unify internal stakeholders and gain alignment with strategic external

partners; and it is often the case that global enterprises look to their

procurement and finance organisations to lead the collaboration charge

as each group sits at the intersection of business commerce and business

process and has the ability to affect business results. When it comes to

external collaboration, procurement once again is uniquely positioned to

drive and manage collaboration with suppliers across the supply chain.

Unsurprisingly, the approach that different enterprises take to improve

collaboration is fairly uniform: (1) remove the friction and noise that

can clutter a relationship and (2) focus on enhancing the level of trust

and quality of communication between groups. With that foundation

stakeholders can become true partners and increase the likelihood of

superior results. And it is here where commerce networks can begin

to play a powerful role in helping enterprises streamline and improve

communication and tactical exchanges by helping blur the traditional

dividing lines that isolate internal constituencies and by supporting

highly complex and interdependent business relationships with trading

partners. The result is that the different stakeholders can better focus

on the strategic goals that drive value within an enterprise and across its

supply chain.

Originally conceived as buy-side transaction enablers, many commerce

networks in the market today have moved far beyond that original

mission. Because these networks enable multiple trading partners to

engage on the same platform, value can be generated for multiple

constituencies on the buyer and supplier sides. For example, on the

buy side, procurement and accounts payable are direct beneficiaries of

commerce networks that can help to streamline the supplier transactions

and communications that these groups manage directly. And, according

to a recent study by Ardent Partners (Figure 1), a sizable percentage of

enterprises frequently use networks to support their transactions. On

the sell side (and opposite side of the transactions and communication),

the supplier’s accounts receivable and order delivery teams can see

those same network-driven benefits, which makes it more attractive

for suppliers to join networks, helping to overcome the traditional

Procure-to-Pay challenge of supplier enablement. Additionally, the IT

and finance departments on the buy and supply sides can reasonably

expect to see gains from leveraging a cloud-based network since (1)

both IT departments can benefit from the cloud-based and outsourced

management of supplier catalogues and suppler information that

many network providers offer and (2) finance teams and treasury,

in particular, can operate with greater assurance, leveraging greater

visibility into payments and cash flow provided by a network; they

may even tap into value-added services like supply chain financing and

dynamic discounting that are available via some networks. Similarly,

trading partners can each derive value by using networks to drive their

transactions; some commerce networks offer search and promotional

features that can enhance the supplier’s sales process and the buyer’s

sourcing process by exposing and connecting both groups to potential

new partner or business opportunities that are only available on a

network.

Figure 1: The use of networks to support transactions

Given the often broad-reaching affect that networks can have upon

a business, it is not surprising to see the positive perspective that a

majority of enterprises now have around B2B or commerce networks

(Figure 2). In fact, Ardent’s research has shown that 75% of all

enterprises have seen an effect on their business as a result of a business

network.

75% Agree 73% Agree 67% Agree 64% Agree

Networks are beneficial to both buyers and suppliers

Networks enhance collaboration between buyers and suppliers

Networks help accelerate the supplier enablement process

A network is an important part of a successful einvoicing initiative

Figure 2: Perspective on B2B or Commerce Networks

Frequent Occasional

63%

22%

49%

30%

45%

31%

Purchase orders

Payments

Invoicing

© Ardent Partners 2012

TECHNOLOGY


83

Ardent Partners believes that these factors coupled with the growing

usage of and interest in networks, signals the beginning of a larger

marketplace shift into a new economy where the emphasis on value

creation moves from the traditional one-to-one business relationship

to the larger group of supply chain and/or network participants. In

this new economy the largest efficiency gains over time will be those

achieved and shared by the collective group or network versus the more

individualised gains seen today. In this new economy the enterprises

that fall behind will be those that opt out and fail to participate.

TYPE OF NETWORK

The overall growth of the network market has driven the emergence

of a number of different types of network that offer distinct value

propositions (see Chart 1).

Chart 1: Different types of networks

Network type Target market Description

Global commerce (or B2B) network

Sourcing, procurement, supply management and accounts payable operations within global enterprises; also sales, marketing and finance.

These networks facilitate trading partner transactions, communication and collaboration across the full source-to-settle process. As these networks mature, they have also identified sales and marketing opportunities for participants and may also be focused on other business process areas.

Payment network Accounts payable departments

These networks specialise in automating and facilitating the invoice process between trading partners.

Data standards network

Supply chain Technically not a network; rather a connection between computers that transfer documents in a standard format. The most common standard is EDI.

Industry network Trading partners in one specific industry (i.e. oil & energy, aerospace, retail, etc.).

These networks are often founded by a consortium of large industry players and seek to develop a shared infrastructure and establish industry standards in trade.

Category network Trading partners in one specific category (i.e. MRO, contingent labour, logistics, etc.).

These networks often look to aggregate supply markets, identify excess capacity, and/or promote best practices.

Country/Regional network

Trading partners in one country or region.

These networks specialise in ensuring compliance with the unique trade policies and regulations of a specific country or region.

What most of the above networks share is a many-to-many ability to

connect participants and a value proposition that promotes a shared

infrastructure and common standards. It should be noted that while

standalone supplier portals and supplier directories can offer value to

their buyers and suppliers, they are generally constrained from reaching

an optimal level of value unless they are connected to a business


84

TECHNOLOGY

network. Ultimately, these standalone solutions should not be

described as ‘business networks’, rather as connectors or alternatives

to them. Once the type of desired network has been determined, the

characteristics of the potential networks should be evaluated.

NETWORK CHARACTERISTICS

Ardent’s research has shown an increased interest in commerce

networks and an increase in overall commerce network adoption and

usage. As a result, competition in the commerce network arena is

heating up and different networks will adopt different strategies and

develop different capabilities in an attempt to win market share. Along

with the costs of choosing the right network, value generated from

differentiated offerings must be weighed in the final outcome. Below

are some of the characteristics that differentiate networks.

The number of existing and active suppliers in the network - With

networks, size definitely matters. This is understandable since the

bigger the network, the higher the “match rate” (the percentage of an

enterprise’s current suppliers that are active on a given network) is likely

to be. The effort and time to on-board suppliers is significantly reduced

with higher match rates; having active suppliers on a network is viewed

as a strong plus and should serve to drive more gains sooner.

The geographic reach of the network - Geographic considerations are important because there are networks that specialise in ensuring compliance with the unique trade policies and regulations of specific countries or regions. There are also global networks that manage these issues in most major trade regions in the world and have shown an ability to enable suppliers in the most remote places on the globe. The

ability to provide specific language support can also be important.

The vertical focus or expertise of the network - Vertical focus is

particularly useful in driving high supplier match rates, but networks

can also be highly valuable when they are able to aggregate supply

markets, identify excess capacity, set industry standards and/or promote

best practices. Based on their sheer size, the largest commerce networks

are often able to develop this type of market depth and expertise while

remaining horizontally focused.

The capabilities and information made available to buyers and sellers - Easier and improved methods of collaboration can have a

direct affect on supplier relationships and performance. For example,

collaboration between buyers and suppliers today is largely conducted

via traditional methods – phone calls, emails or meetings. Networks,

however, can enable a higher level of connectivity between trading

partners and can increase the time available for strategic interaction

and communication by decreasing the time spent on tactical matters.

Also, the quality of communication can be improved by embedding

the communication within a transaction or around a specific issue or

opportunity. This is similar to how social networks have dramatically

influenced personal communication and interaction.

The types of business processes and documents supported - Certain networks may specialise in one business process like vendor

payments or a sub-process like managing inbound receipts. Most

advanced business networks support an expanded series of processes.

Those that focus on the source-to-settle process, for example, offer

cloud-based and network solutions that include spend analysis, sourcing,

contracts, procurement, supplier catalogues, supplier information

management, master data management, invoice processing and

payments. The determination here is somewhat similar to the decision

between a point technology or a larger suite.

Network business model - Process automation can reduce transaction

processing costs by up to 75% and that benefit alone can justify the

business case for network adoption. However, there are different

business or revenue models that are employed by networks today that

need to be evaluated. Some networks charge subscription fees for

network access that are either direct charges for the network or bundled

into the cost of using any on-ramp applications, while others take a

volume-based approach to fees - charging buyers, and often suppliers,

South Africa

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WESTERN CAPE

TECHNOLOGY

based on the number of documents, transactions and catalogues or

dollar value of transactions processed over the network. Networks

may also take a hybrid approach and charge for access and

some level of transactions. Some networks view one side of the

transaction as their core group of customers and may only charge

buyers or utilise a supplier-funded model, whereas other networks

charge fees from both groups.

Associated services - Beyond a network’s core transaction,

communication and connectivity services, there may be additional

services designed to enhance the experience and value of the

network. Today the services can range from public auction and

public catalogue functionality and supplier enablement services to

receivables factoring and search-based advertising.

Related technologies or solutions - Enterprises need on-ramps

to access networks and most of the commerce networks oblige by

selling software solutions that automate all or part of the source-

to-settle process. As such, a decision on selecting a commerce

network is often part of a larger technology decision. The reality

is that there can be significant differences in the type and quality

of solutions offered by network providers and where the same

solution footprints are offered, there can be great variance in the

available feature/functionality. A fantastic network experience can

be limited if the software used to access it is below grade.

System integration capabilities - Similar to the related

technologies above, different networks will have different

approaches to and experience with integration to other systems.

While pre-built adapters and streamlined integrations can be

viewed as a benefit, integration capabilities, or a lack thereof, can

create very significant costs.

NETWORK SELECTION USING A TOTAL COST AND VALUE FRAMEWORK

Ardent Partners believes that an investment in a network has

become a very strategic decision, one that will have a significant

effect on operations and results for many years. It is a decision that

warrants a detailed analysis incorporating the value derived from

the network (i.e. expected benefits, incremental benefits and cost

savings) and the initial and ongoing costs of accessing and using

the network. From the buyer’s perspective, Chart 2 highlights the

main components that should be incorporated into the evaluation.

The framework also includes costs and value from the seller’s

perspective.

Chart 2: Total cost and value framework for network selection

Value factors Comment

Efficiency and effectiveness gains

The cost savings generated from increased process automation, improved visibility and the resultant better decisions.

Network characteristics The characteristics that differentiate networks and the value they can generate: the number of existing and active suppliers, geographic reach, the network's focus and expertise, the capabilities and information made available to buyers and sellers, the types of business processes and documents supported, associated services, related technologies or solutions, system integration capabilities, partner ecosystem and network vision and roadmap.

Internal stakeholder value The value of network participation can easily extend beyond the procurement and accounts payable function to include finance, treasury, IT, risk managers, sales and other business process owners.

Trading partner (supplier) value

The value of network participation typically extends to several constituencies within the supplier organisation including, most immediately, finance, accounts receivable, supply chain and order management, who can leverage process automation to lower costs and improve performance. Value can also extend to a supplier's sales and IT teams.

Cost factors Comment

Network access (buy side) The cost for a buying organisation to gain access to a network. These costs include network license or subscription fees, IT and other integration costs and training. Additionally, access to a network may only be enabled via proprietary supply management software that may need to be incorporated into the cost analysis.

Network ongoing usage (buy side)

Any buyer fees associated with maintenance, support and transaction or volume-based usage

fees.

Network access and ongoing usage (supplier's direct costs)

The cost for supplier access to networks varies by network and can be tied to access or volume-based usage; some networks have no direct supplier charges.

Network access and ongoing usage (supplier's indirect costs)

Indirect costs include resources dedicated to enablement, training, ongoing access and usage of the network.

Opportunity costs A very real and significant cost that is generally overlooked, but most significant in fast-growth and innovative industries like B2B networks.

TECHNOLOGY


86

87

ABOUT THE AUTHOR

Andrew Bartolini Chief Research Officer, Ardent Partners

[email protected] +1 617 752 1620 www.ardentpartners.com

Andrew Bartolini is a globally-recognized expert in sourcing, procurement, accounts payable, and supply management. He focuses his research and efforts on helping enterprises develop and execute strategies to achieve operational excellence within their procurement and finance departments. Andrew is also the publisher of CPO Rising, the first independent media site written for and about Chief Procurement Officers and other supply management executives (www.cporising.com).

ABOUT ARDENT PARTNERS

Ardent Partners is a Boston-based research and advisory firm focused on defining and advancing, the accounts payable, procurement, and supply management strategies, processes, and technologies that drive business value and accelerate organizational transformation within the enterprise.

Founded by Andrew Bartolini, Ardent also publishes the CPO Rising and Payables Place websites.

Register for access to Ardent Partners research at ardentpartners.com/newsletter-registration/

CONCLUSION

There are many factors and variables that inform the selection of a

commerce network. Surprisingly, many of these variables are often

ignored.

As network providers continue to advance, grow and deliver

new services, the factors involved in selecting the right network

are expanding and can include current network offerings and

capabilities, complementary support and services for the network,

as well as all cost and/or pricing options.

Yet, many enterprises assume that the value generated by all

networks is equivalent and fail to examine and analyse networks

beyond their initial start-up and usage costs. By ignoring the

benefits of a network’s unique characteristics, they fail to

incorporate operational and financial factors that should influence

their network selection.

To avoid these mistakes, Ardent Partners strongly urges enterprises

to utilise the total cost of ownership framework that is modelled

in this report or some similar approach to ensure that the right

network is selected. n



88

Mogogodi DiokaSouth African Revenue Services, Chief Procurement Offi cer

“You cannot separate industrialisation from procurement: industrialisation is about money and how industries spend it. Procurement professionals are the ones who make the spend decisions. Therefore, the profession must be brought into industrialisation of South Africa; it needs to be present in the boardrooms where industrialisation is discussed, it must be on the shop fl oor, everywhere. That way small business will benefi t from industrialisation.

Dr Masimba DahwaCPO South African Airways

“The benefi t of attending Smart Procurement World is the networking and the level of knowledge that comes through the various speakers.”

CxO Forum

Hosted by Ariba, the breakfast event attracted C-Suite supply chain professionals for a motivational talk and leadership workshop.Allon Raiz

Raizcorp, CEO

The author of two bestselling entrepreneurial books gave his insights on how procurement departments can help entrepreneurs avoid becoming one of the 96% of businesses that fail in their fi rst 10 years.

Richard A HuebnerHouston Minority Supplier Development Council (USA), President

“Diversity Lesson #1: Be aware of the potential in others, understand their interests and needs, and empower them to work with you… or they may end up working against you.”“Diversity Lesson #2: Diversity means taking some risk, being willing to invest in the strengths of others, and the results are well worth it.”

SMART PROCUREMENT WORLD

What our speakers had to say...

Gallagher Convention Centre10 - 11 September 2014

SP_Review 2014.indd 88 31/10/2014 15:30


89

Lebogang Letsoalo Sasol Polymers Corporate - General Manager Supply Chain

“South Africa can only develop with the help of supply chain, but supply chain’s greatest challenge is branding: we have to begin repositioning ourselves in industry at board-room level and addressing unethical behaviour – while we want people to understand the power of procurement, our brand is jeopardised by unethical behaviour.Smart Procurement World is where supply chain meets, it is where we come together to share insight. For me, being able to network and listen to different industries is where the value of the conference lies.”

Christopher GeorgiouKimberly-Clarke SA, Procurement Leader Sub Sahara Africa

“Attending Smart Procurement World enabled me to network with other professionals in the industry. I had great exchanges with companies such as Nampak and Engen about what they’re doing to develop supply chain talent. And being able to leverage those discussions with all the suppliers at the expo was great. The experience has been worthwhile and next year I will be bringing a few more members of my team.”

Andries LouwEastern Cape Provincial Planning and Treasury - Chief Director Supply Chain Management

“There must be consequences, hold people accountable for their actions. In the case of suppliers who fail to perform, list them on the Restricted Supplier Database. Use the tools in the Public Finance Management Act (PFMA) to assert yourself,” said Andries during his presentation on contract management, specifi cally self-policing contracts.

Grant AndradeTourvest Travel Services, New Business Development Executive

“At Smart Procurement World Tourvest gets exposure to key decision makers in the procurement space, in the public and private sectors. Our technology has the ability to align with procurement systems and needs ensuring one simple procurement process and, at the same time, driving cost savings in your business.”

SP_Review 2014.indd 89 31/10/2014 15:30


90

Panel discussions take centre stage in the various conference streams at Smart Procurement World. (L-R) Maria Lepore (Absa), Garry Pita (Transnet), Samantha Stephens (Coca-Cola Fortune) and Rod Ward (Ellerines) talked aligning supplier development with the procurement mandate and centralised procurement functions, with host David Williams.

Kamogelo MampaneState-Owned Enterprise Procurement Forum, CEO & South African Revenue Service, Senior Manager Commodities

“At the heart of the challenges that South Africa is facing – unemployment, poverty and inequalities – sits the problem of service delivery. However, as we have heard in public discussions today at Smart Procurement World, procurement has the power to deal with those issues effectively by supporting industrialisation. We have the capability, knowledge and intelligence to grow the South African economy.”

Andre CoetzeeCIPS Africa, MD

“There is a huge surge in the procurement and supply chain profession. The challenge is fi nding skilled people to drive this supply chain agenda forward and there are not many of them. Smart Procurement World is a huge opportunity to showcase the profession and give delegates an opportunity to hear the best and the newest trends in supply chain and to meet with like-minded people to see what they are doing to address supply chain challenges.”

David WilliamsCNBC Africa, Senior Anchor

“The wonderful thing about the Smart Procurement World Conference is the number of people here who are at the coal face, who can interact with each other, with policy leaders in the fi eld and with thought leaders in the fi eld. Once a year it seems to be the place to be in this sector.”

SP_Review 2014.indd 90 31/10/2014 15:30


91

John Robbie Talk Radio 702, Radio Personality

“I had the pleasure to speak at the Smart Procurement World Conference... Gee it was a big event, all about supply chain management – its effi ciency, ethics and [associated] technology. I was the mystery speaker, can you believe it!”“It is a huge event and very clever... All the buyers, the procurement executives, ... [from] government... and the private sector... [attend] the conference to learn about buying or to get more information or current thinking on procurement. But, running concurrently [is] a massive exhibition where all the sellers can display their wares. The conference calls all the buyers... and the [exhibition brings] the sellers so the two can network.“We had some fun, I told some stories, and then I spoke about Lead South Africa and how individuals can make a difference, that’s why I was there and I was very honoured to be there as well.”

Clive GovenderAnglo Platinum, Head of Supply Chain

“Major procurement and supply chain transformation projects are notorious for failing to deliver on the original intent of the change and missing the target on delivering sustainable bottom line results.” Govender discussed transforming procurement and supply chain organisations to deliver bottom line results by selling effective procurement business cases, using Anglo American’s procurement and supply chain transformation journey. The savings target for the ‘ONE Anglo P & SC Journey’ for 2008 to 2011 was 1.1-billion USD. The project delivered 1.34-billion USD over the period (internally and externally audited). “It is all about the value, not just cost reduction, and revenue enhancement opportunities.”

Jaco HumanNampak, Group Procurement Manager - Strategic Initiatives

“We had a wonderful experience at Smart Procurement World: it is an effi cient way of networking and meeting other people and leaders who have similar issues on their minds. As an example, this morning I was introduced to my peers at Kimberley-Clarke and Engen and we covered issues which are common to us, issues that we’re grappling with, and we shared ideas and insights.”

Douglas BoatengPanavest Group, CEO

“I believe that Smart Procurement World should happen more than once a year. It has been an eye-opener for myself, for customers, for suppliers, procurers and buyers, you name it. We are interacting with each other, which means we are beginning to know the products produced in South Africa, which is indirectly linked to industrialization: the more we buy from each other, and the more we know from each other the more we can produce locally.”

Grant Pattison Former Chief Executive Offi cer of Massmart

“You are what you eat, therefore, you have to procure carefully.” The collapse of the eight-storey Rana Plaza factory building in Bangladesh affected Massmart’s supply chain and it prompted the mass retailer to request building certifi cates from its suppliers. However, some suppliers responded by questioning whether Massmart was a big-enough client to them to warrant the cost the suppliers would incur to have their premises inspected and certifi cated.”

SP_Review 2014.indd 91 31/10/2014 15:31

Tel: +27 (0)8610 SASDC (72732) | Fax: +27 (0)86 692 8331 | Tel: + 27 (0)11 100 1025 | Email: [email protected] Ground Floor, Block C, Riverworld Park, 42 Homestead Rd (south entrance) or

53 Autumn Str. (north entrance), Rivonia, 2128 | PO Box 1469, Houghton, 2041, South Africawww.sasdc.org.za

Contact us and find out how other market leaders are using the SASDC to improve their brand, image, marketshare, competitiveness and compliance.

“Why not Become a Member today?”

Made possible by:

Advantages of Council membership includes:

•Member development services •Nationaldatabaseofcertifiedblack-ownedsuppliers•Business and supplier diversity information resources •Businessopportunityfairs,networking,‘meet-the-buyer’and

conferencing events •Formalawardsandrecognition

Our Suppliers are:

•Transaction ready •Reporting annual turnover in excess of 100 m •Certifiedandverifiedaccordingtostrictcriteria• 50+1%Blackowned•Located across South Africa


93

Tel: +27 (0)8610 SASDC (72732) | Fax: +27 (0)86 692 8331 | Tel: + 27 (0)11 100 1025 | Email: [email protected] Ground Floor, Block C, Riverworld Park, 42 Homestead Rd (south entrance) or

53 Autumn Str. (north entrance), Rivonia, 2128 | PO Box 1469, Houghton, 2041, South Africawww.sasdc.org.za

Contact us and find out how other market leaders are using the SASDC to improve their brand, image, marketshare, competitiveness and compliance.

“Why not Become a Member today?”

Made possible by:

Advantages of Council membership includes:

•Member development services •Nationaldatabaseofcertifiedblack-ownedsuppliers•Business and supplier diversity information resources •Businessopportunityfairs,networking,‘meet-the-buyer’and

conferencing events •Formalawardsandrecognition

Our Suppliers are:

•Transaction ready •Reporting annual turnover in excess of 100 m •Certifiedandverifiedaccordingtostrictcriteria• 50+1%Blackowned•Located across South Africa

BUSINESS AND B-BBEE DIRECTORY

African Dawn Risk Solutions 99

Ariba, Inc. 94

Associated Computer Solutions 99

AtVantage 96

Busi Ntuli Communications 99

City of Choice Travel & Tours 99

CommerceZone 95

Integrico Trading 99

Invantage 96

Kriel Occupational Health Centre 99

Leano Solution 99

Letsema Consulting 97

Logoman 99

Mpowered Business Solutions 97

Mpho Tshukudu Dieticians 100

Msila Travel & Tours 100

mymarket.com 97

PI 98

Prompt IT Solutions 100

Setsmol Housing Education & Training 100

SmartProcurement 98

TechPro 98

Ucon Civils 100

Ulwezi Consulting 100

BEE certficates were reviewed by Grant Thornton.

INDEX


94


ARIBA - an SAP Company

The future of business has arrived, and it is quite different from the past. Competition no longer lies within the four walls of the enterprise. It’s taking place between networks of trading partners. Companies are no longer judged solely on how well they balance the books, but on how well they buy from external suppliers, sell and support customers, and manage cash flow across the entire value chain.

Ariba, a SAP company, is the world’s business commerce network. Ariba combines industry-leading, cloud-based applications with the world’s largest web-based trading community to help companies discover and collaborate with a global network of partners. Using the Ariba® Network, businesses of all sizes can connect to their trading partners anywhere, at any time from any application or device to buy, sell, and manage their cash more efficiently and effectively than ever before. Companies around the world use the Ariba Network to simplify inter-enterprise commerce and enhance the results that they deliver.

Ariba enables companies to extend their processes beyond the four walls of the organisation. Then, without installing any new software or hardware, companies can connect and collaborate with digital communities of partners, peers, and prospects from around the world to:

• Quickly discover new sources of supply

• Easily find new, purchase-ready customers

• Make better working capital decisions

• Share best practices, expert advice, and community intelligence

BEE LEVEL 5

BLACK

OWNED

51%

BRANCHES 2

OPERATES INTERNATIONAL

JOHANNESBURG SAP Business Park, Building 21 Woodmead DriveWoodmeadT: 011 304 9000

CAPE TOWN SAP Building, 2nd Floor, 4 Waterford PlaceCentury City

T: 021 680 4600 F: 021 680 4655

www.ariba.com

1.5 MILLION+ COMPANIES

$460 BILLION IN GOODS AND SERVICES

5,000,000 END USERS

20,000


95

COMMERCEZONE

Through a formula that delivers Preferential Procurement, Strategic Supplier Sourcing, Business Travel Management and the application of powerful yet intuitive e-Procurement technology, CommerceZone has revolutionized the purchasing processes of their customers.

CommerceZone is a leader in outsourced e-procurement solutions and has more than a decade of experience in delivering reliable, cost effective and high quality hosted procurement solutions to enterprise clients.

CommerceZone offers a holistic procurement solution which ensures broad acceptance and application through ease of use.

CommerceZone’s e-Procurement solution ensures absolute control over procurement expenditure before the fact, replacing cumbersome paper-based ordering systems with an efficient electronic solution. Our solution caters for all aspects of procurement from shopping carts, purchase orders, Goods / Services confirmations, PO Invoices and Sundry Invoices. Our solution can be integrated with your financial system to fully automate the Procure to Pay process.

CommerceZone’s e-Procurement solution enables clients to reduce spend, streamline procurement process and enforce policy compliance. CZEasyBuy is our hosted e-procurement platform based on SAP SRM technology.

CommerceZone applies leading business practices and world class information technology to unlock value in all areas of procurement:

• Improved governance of spend

• Improved compliance of spend

• Improved visibility of spend

• Process efficiencies

• Preferential Procurement

• Leverage combined spending power

• Comprehensive audit trails

• Availability 24 / 7 /365

The CZEasyBuy solution is supported by a comprehensive reporting solution that includes business warehouse, business intelligence and mobility reports.

BEE LEVEL 2

BLACK

OWNED

34.31%

BRANCHES 2

OPERATES SOUTH AFRICA

256 Oak Avenue, Randburg, Johannesburg, Gauteng 2194

T: 011 369 7100F: 011 886 3717E: [email protected] www.commercezone.co.za


96

BUSINESS DIRECTORY


96


BEE LEVEL 3

BLACK

OWNED

26%


Woodmead Office Park 20 Stirrup Lane Van Reenen Avenue, Woodmead


INVANTAGEWe specialise in:

• Business process optimisation/automation;

• Data automation;

• Software development;

• Business intelligence & management reporting;

• Road mapping journeys (strategic & tactical); and

• Executing projects efficiently within large organisations.

We value long-term client relationships, collaborative partnerships, and pride ourselves on the benefits we deliver to our customers in making their businesses more efficient and effective. We are small enough that your continued business matters to us, and as part of the RDC Group, large enough to offer great depth of specialised knowledge and experience. We have solid experience working in some of the largest South African companies, including all the SA banks, the mobile operators and with government and are a majority black-owned business with Level 3 B-BBEE certification.

We are currently partnered with industry experts to develop our Supply Chain Finance (SCF) Portal at www.InvantageSCF.co.za.

“We apply innovation to everything we do – without exception.” Jaco Kachelhoffer

BEE LEVEL 8

BLACK

OWNED

0%

BRANCHES 4


220 Loop StreetCape Town8000


ATVANTAGE PROCUREMENTAtvantage Procurement is part of the Atvantage Group of companies with a proven track record of mitigating risk, creating transparency, meeting deadlines and allowing design and technical specifications to be delivered upon throughout the procurement process.

We are an established and trusted company within the international procurement and logistics disciplines. These include fit-out, logistics, sourcing, buying, FF&E, OS&E and logistics disciplines, ensuring that all development professionals and clients receive a seamless, timely and value orientated service.

Atvantage Procurement specialises in:

• Sourcing and buying of high-end architectural and finishing products for property development professionals and contractors throughout Africa and the Indian Ocean Islands.

• Provision of a full range of procurement and fit out services to the hospitality and hotel industry.

• Logistics and supply chain management, including outbound freight consolidations.

By choosing Atvantage Procurement you will enjoy true savings through a transparent and timely procurement process.


97www.smartprocurement.co.za

97

BEE LEVEL 3

BLACK

OWNED

63.4%

BRANCHES 2

OPERATES AFRICA

1st Floor, 158 Jan Smuts Avenue Rosebank, Johannesburg 2196

T: 011 731 7600

Helpdesk: 011 731 [email protected]

LETSEMA CONSULTING & ADVISORYLetsema Consulting is a leading South African consulting firm, established in 1995. We’re proud to be the first black owned and managed consulting firm in South Africa.

Our deep Supply Chain Management service offering has been brought to bear in the Energy, Transportation, Mining and Government sectors in South Africa and abroad. We are thought leaders in Strategic Sourcing, Procurement, Supplier Development, Localisation, Industrial Policy and Sustainability. Our Strategy, Transformation, Operations and Sustainability teams have worked closely with large private and public sector clients, achieving significant improvement in operational performance.

Our interventions enable lasting change and long-term impact.

BEE LEVEL 3

BLACK

OWNED

51%

BRANCHES 1

OPERATES SOUTHERN AFRICA

The Woodlands, Building 14, Cnr Woodlands/Kelvin Drive, Woodmead, Gauteng, 2191


MPOWERED BUSINESS SOLUTIONSMBS Mpowered is a B-BBEE Software Solutions provider invested in the success of South Africa’s business sector. With almost a decade of consulting experience, our systems incorporate insight born of assisting countless clients to achieve B-BBEE success.

We offer user-friendly web-based solutions for all your B-BBEE requirements, supplying your company with smart tools to actively take control of your B-BBEE process. From intuitive reporting and painless management, to strategy and assisted implementation - our software offers it all. Our systems have been proven to alleviate administration and empower companies to develop strategies that help drive lasting and sustainable transformation.

Give your company the edge and open the door to more business opportunities by being the best B-BBEE scoring company in your field. Call us. We’d love to put you in contact with some of South Africa’s largest corporates that are using our software to manage their B-BBEE status.

BEE LEVEL 2

BLACK

OWNED

0%

BRANCHES 2


The Office of Hyde Park, Block A Strouthos Road (Off 2nd)Hyde Park

Bruce Rowe 011 447 [email protected]

MYMARKET.COMWith a passion for delivering value mymarket.com is at the forefront of e-procurement and online travel management innovation. Being an internet based solution, swift adoption and roll out to new clients characterises the mymarket.com solution as no software is installed at clients’ premises.

mymarket.com is a wholly owned subsidiary of The Bidvest Group Limited which employs more than 106,000 people worldwide on four continents.

We subscribe to a philosophy of transparency, accountability, integrity, excellence and innovation in all our business dealings.

View our full page company profile and advertisement on page 78.


98


BEE LEVEL 4

BLACK

OWNED

5.15%

BRANCHES 1


First Floor, Block B, The Crescent, 3 Eglin Road, Sunninghill

011 514 0463 smartprocurement@tech-pro co.zawww.tech-pro.co.za

PIPI provides Enterprise Decision Support (EDS) solutions that allow organisations to integrate, clean and analyse increasingly complex data from within their business and outside, using PI’s data management and business skills and advanced technology.

This enables complex questioning in an interactive manner based on all the data sources including unstructured data.

For procurement professionals, this provides one version of the truth, shared across the organisation and used to analyse spend, risk and transformation with the same integrated data set. This empowers users to see what is happening and agree on remedial action (change behavior and processes) quickly and efficiently.

BEE LEVEL 4

BLACK

OWNED

0%

BRANCHES 2


PO Box 499 Paulshof

Alan Low 011 803 [email protected]

TECH-PROEstablished in 1997, Tech-Pro is recognised as the leader in South African Supply Chain recruitment. Our knowledge of Supply Chain, our recruitment skills and technical expertise allow us to achieve and sustain a competitive advantage. We seek to match the right talent with the right opportunity, understanding that this adds value to employers and career seekers.

Our areas of specialisation in Supply Chain recruitment are:• Consulting • Logistics • Planning • Procurement • Supply Chain

Tech-Pro is a wholly-owned division of ADvTECH Resourcing (Pty) Ltd (a Level 4 BEE Contributor) which, in turn, is a subsidiary of JSE-listed ADvTECH Limited. We are affiliated with SAPICS and SmartProcurement and are members of APSO and CAPES.

SMARTPROCUREMENTSmartProcurement, part of SmartDevelopment since 2004, has focused on the supply chain and procurement professional, endeavouring to continually develop and inform them on the latest industry trends and events ensuring that awareness is high in both the public and private sectors. Individuals are kept au fait with the latest opportunities in the commercial environment and useful news and tips emanate from the industry thought leaders.

With over twelve years’ experience dealing with the decision makers and leaders and sharing best practice ensures that the professional is continually at the forefront of current and upcoming developments.

Ensure your continued professional development by subscribing now for receive our free monthly newsletter containing procurement news, jobs, tips , tactics and events. (www.smartprocurement.net).

BEE LEVEL 3

BLACK

OWNED

27.43%

BRANCHES 3


0861 334 326088 012 665 5466 [email protected]

Pantone/ uncoated

SmartProcurement


99

BUSI NTULI COMMUNICATIONS

100% black female owned, the company is a full service media buying and planning agency accredited by the Media Credit Coordinator (MCC). Our core competencies are in media buying and planning, corporate marketing and communication strategy, and the integrated implementation of 360% media and communication campaigns.

Busi Ntuli011 447 7400 [email protected]@bncommunications.co.zawww.busintuli.co.za

PO Box 358, Auckland Park, 2006

ADVERTISING AND MARKETING

JOHANNESBURG

BEE 1

Black owned 100%

Black women 100%

Postnet Suite 336, Private Bag x033, Rivonia

Yvonne Mashigo011 468 3480 [email protected]@africandawnsa.co.zawww.africandawnsa.co.za

AFRICAN DAWN RISK SOLUTIONS

African Dawn specialises in the design of short-term risk solutions and the sale of short-term personal and commercial insurance products. The company was established in February 2003.

INSURANCE SERVICES

JOHANNESBURG

BEE 3

Black owned 100%

Black women 100%

ASSOCIATED COMPUTER SOLUTIONSACS-Embrace provides flexible, state-of-the-art, business software solutions, tailored for Sub-Saharan African companies. Our core focus is the development, implementation and support of ACS-Embrace, a comprehensive, locally developed end-to-end ERP business solution. The system is scalable and power packed with functionality to meet changing and growing business needs across all industries.

JOHANNESBURG

BEE 6

Black owned 7.01&

Black women 2.6%

Ian Foster011 275 2000 [email protected]

P O Box 651872, Benmore, 2010

BUSINESS SOFTWARE SOLUTIONS

CITY OF CHOICE TRAVEL AND TOURS

City Of Choice Travel & Tours presents our valued customers with an array of quality destination management services. Each service aims to be top-of-mind for any discerning private, leisure or corporate traveller and conference and incentive group. We also offer accommodation, car hire and shuttle service.

Brenda Roopai 031 464 0920 [email protected]

PO Box 40069 Queensburgh, Durban, 4070

TRAVEL SERVICES

DURBAN

BEE 1

Black owned 100%

Black women 80%

KRIEL OCCUPATIONAL HEALTH CENTRE

Kriel Occupational Health Centre delivers occupational health services for legal compliance, specialising in medical fitness to work and travel medicine. Services are delivered from our fixed clinic and mobile services - we take our service to our clients.

Annelie De Villiers 017 648 3894 [email protected]

PO Box 3754, Kriel, 2271

HEALTH & WELLNESS

KRIEL

BEE 3

Black owned 100%

Black women 100%

INTEGRICO TRADING

End-to-end building maintenance, i.e handyman services and all turnkey projects, cleaning services, grass cutting and garden maintenance.

Letty Ngobeni 083 214 [email protected]

21 Chroom Avenue, Roodekrans, Roodekrans, 1724

FACILITIES & BUILDING MAINTENANCE ROODEPOORT

BEE 3

Black owned 100%

Black women 100%

ENHLE CONSULTANCY

A company that specialises in environmental safety services and provides SHE training, machinery training, as well as Personal Protection Equipment (PPE) clothing. We are a 100% black-owned company.


SAFETY, HEALTH & ENVIRONMENT

JOHANNESBURG

BEE 1

Black owned 100%

Black women

LEANO SOLUTIONS

We are a building and renovations contractor that is 100% black owned and managed.

Neo Malefane011 027 1541 [email protected]

BUILDING AND CONSTRUCTION

NATIONAL

BEE 3

Black owned 100%

Black women 100%

LOGOMAN

A company that specialises in graphic design, corporate branding, signage and printing. They are 100% black-owned and have a level 3 BEE score.


ADVERTISING AND MARKETING

DURBAN

BEE 3

Black owned 100%

Black women

Listing proudly sponsored by Raizcorp




PROMPT IT SOLUTIONS

An IT company that offers full ICT services including infrastructure development data, voice and wireless connectivity, networking installations, as well as electrical and CCTV installation and maintenance. We are a 100% black-owned company with a level1 BEE score.


IT AND TECHNOLOGY

BEE 1

Black owned 100%

Black women

073 513 [email protected]@msila.co.zawww.msila.co.za

MSILA TRAVEL AND TOURS

We specialise in effective travel management and hospitality. Our clients include the Medical Research Council, Eskom Pension Fund, and Gauteng Premier’s Office. We are a 100% black-owned company.

TRAVEL SERVICES

JOHANNESBURG

BEE

Black owned 100%

Black women

MPHO TSHUKUDU DIETICIANS

A group of registered dieticians who are passionate about preventative health care. We provide wellness programmes for individuals and companies, to create a healthier and more productive working environment. We are a 100% black-owned company.

BEE

Black owned 100%

Black women


HEALTH & WELLNESS

SETSMOL HOUSING EDUCATION AND TRAINING

A South African based housing education company which provides training that helps empower clients to select the best options for them when it comes to owning a home. We are a 100% black-owned company.


HOUSING EDUCATION

NATIONAL

BEE

Black owned 100%

Black women

UCON CIVILS

Green Building technology products in the fields of construction, general building work, electrical contracting, and renovations. Finalist of the Eskom’s BIC awards 2014.


BUILDING AND CONSTRUCTION

NATIONAL

BEE 3

Black owned 100%

Black women

ULWEZI CONSULTING

Ulwezi Consulting CC is a vibrant human resources, consulting, and executive search and placement company. Their core focus in on services which provide human consulting, executive search and placement, and executive coaching.


RECRUITMENT AND HUMAN CONSULTING

DURBAN

BEE 4

Black owned 100%

Black women







COMPLETEVISIBILITY OF SP

MAKE

HAPPEN

nedbank.co.za Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).

Growing your business isn’t easy, which is why Nedbank offers a procurement card thatgives you complete visibility and control of your corporate spend.

The procurement card drives saving on conventional procurement processes and costs while simplifying smaller, more frequent transactions. It allows for complete visibility and control of all procurement spend, including low-priced miscellaneous expenses. The card also offers tools that restrict and control spend at certain merchant types-allowing you to enhance your supplychain management and make growing your business happen.

For more information call Nedbank Corporate Card Direct on 0860 102 191 or visit nedbank.co.za.

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WORLD CLASS PROCUREMENT IN YOUR HANDS

SmartProcurement


MAKE

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** See our advertisement on the Inside Back Cover

smartprocurement review 2014

Documents

influence procurement

aheadsmartprocurement

bbbee policy implementation

bbbee167 guidelines

supply planningin

supply management

niche segment of procurement

debbie taggsub editor