Transnet’s Competitive Supplier

Development Program (CSDP)(Part 1)

Presented by Fanie van der Walt CSDP

Implementation Manager

2009-01-29

CSDP Purpose for Transnet

Background• For the pat 30 years, the capacity of Transnet’s supply base for capital good has declined

along with their capital investment.• However Transnet is now investing strongly in infrastructure again.From NIPP to CSDP• Cabinet approved the new policy on 25 January 2007• The DPE established a Competitive Supplier Development Program (CSDP) to which Transnet

GCE formally gave notification in February 2007 to DPE that Transnet wishes to participate.

Programme Aim• Transnet’s long-term aim with CSDP is to localise its supply chain of imported manufactured

goods or services to a reasonable level while promoting local industries and South Africa as an off-shore site of choice for OEMs’ and multi-nationals’ procurement personnel.

• This will depend on Transnet’s ability to create a cohesive picture of future spend, to be the catalyst for local suppliers’ investment in their own capacity and in their capability to meet Transnet’s future manufactured equipment requirements.

Approach to CSDP• To achieve this ambitious aim, over the next five years Transnet will implement CSDP in a

phased manner, starting off by engaging with opportunities in two priority-focus areas, namely Rolling Stock and Port Equipment, while preparing SM staff to exploit emerging localisationopportunities.

• Transnet’s CSDP rollout will be supported by a holistic Change Management Programme, which will include a strong focus on stakeholder management and communication.

CSDP focus areas: Rolling Stock & Port Equipment

Transnet Spend 2008 – 2012*

CSDP: Current & Future Objectives

Focus Area

Priority 1

Locomotives –components

and spares

Focus Area

Priority 2

Harbour

Focus Area

Future PriorityInfrastructure

Focus Area

Focus PriorityOther

Transnet’s CSDP Approach

Tier 1Systems –

Subsystems

Tier 2

Tier 3

Other

Rolling Stock

Components

Assemblies

IP

FDI

Goods

Services

Kalmar

Liebherr / CPS Projects

Alstom

OEMs: Kalmar, Liebherr

Cranes, Straddle Carriers,

RTGs, Tugs, Dredgers

Supplier Base

Sphere of Control

Tra

nsn

et’s C

SD

P

Focu

s

Su

pp

liers

’

CS

DP

Focu

s

Tra

nsn

et’s E

D

Focu

s

Tra

nsn

et’s

PP

Focu

s

Su

pp

liers

’ PP

Fo

cu

s

Supplier

Development

Category

Supplier

Development

Activities

Port Equipment

OEMs: GE, GM, EMD,

Mitsui, Alstom, Siemens

TRE

DCD

UCW

SURTEES*

*SURTEES IS A WAGON MANUFACTURER IN MINING INDUSTRY

**ED – Enterprise Development / PP – Preferential Procurement

OEM

s

Export

SM personnel

lobby with

OEM Global

Sourcing Team

SM personnel

RFx process

and contract

negotiation

SM personnel

advise on

available

partners and

TRE

involvement

SM personnel

identify ED

opportunities

Transnet’s CSDP phase one Strategic Approach will be to focus on Tier 1

suppliers and to assist them in engaging local Tier 2 suppliers

Skill

s

Sphere of Influence

Railway and Harbour Association

& Tender Process

Award

OPERATORSSA Regional

SADEC

Tier 0

OEM’s

Tier 1

Plan Contract Implementation

SUPPLIERSRail and Harbor

Tier 2/3

Tender RFP

DEAD ZONE – NO COMMUNICATION OPEN ZONE - COMMUNICATION

Operator process

Railway & Harbour Supply Chain Association

Meeting 15 Aug 08

(Operator)

Administration(Railways Africa)

Skills Development

Benchmarking (UNIDO)

Meeting 25th Aug 08

(OEM’s, Suppliers)

+

++

CSDP(Transnet Contracts)

* Training

* Self Assessment

* Final Assessment

* Networking

* Professionalization - IPSA

* CIPS/ NQF Qualifications

* Boot Camps

+

www.rhsupplychain.com

www.benchmark2grow.org

Railway & Harbour Supply Chain Association

The initial foundations for the affiliation between UNIDO and CIPS is based on:

In the case of CIPS*

• to assist the purchasing and procurement officers of private and public organizations

• in gaining greater transparency on possibilities for local procurement in developing

country environments; and

• in making more informed procurement decisions.

In the case of UNIDO**

• to assist local enterprises in developing countries to be more visible and attractive as

suppliers; and

• expand their market access through supplier contracts.

SARASouthern AfricanRailway Association

RRARail & Road Association

Foundry Foundation of South Africa (Supported by CSIR)

New Association Structure

RHSCA

Steer Committee

(Founders)

Working Group

Priority Work Streams (Focus areas)

Chair DPE

Phillippa

Fanie, Karen - Transnet

Yolandi - IPSA

Communication

Administration & Marketing

Lo

co

mo

tive

s –

co

mp

on

en

ts a

nd

sp

are

s

Prio

rity 1

Po

rts &

Ha

rbo

ur

Prio

rity 2

Infra

stru

ctu

re

Prio

rity 3

Oth

er

Prio

rity 4

Operators

OEM’s

Suppliers

CSDP: Fanie

IPSA - Yolandi

UNIDO - Herman

Marketing & Admin - Phillippa

Technology R&D - Phillippa

Foundry – Fanie

OEM’s

Suppliers

Other Operators

Current

Priority

Focus Area

Future

Priority

Focus Area

Professionalization: Benchmarking

Purchasing

in Action

Securing

Supply

Client and

Supplier

Relationship

Purchasing

Operations

Understanding

the Purchasing

Environment

Certificate in

Purchasing and

Supply

3

The

importance

of Purchase

Contracts

Working with

Suppliers

Systems

and

Procedures

in

Purchasing

The Role and

Scope of

Purchasing

Introductory

Certificate in

Purchasing and

Supply

2

Managing

Purchasing

and Supply

Relation

ships

Measuring

Purchasing

Performance

Developing

Contracts in

Purchasing

and Supply

Purchasing

Contexts

Effective

Negotiation in

Purchasing

and Supply

Foundation Diploma

in Purchasing and

Supply

4

Management in Risk Management Improving

the Purchasing and Supply Chain Supply Chain

Function Vulnerability Performance

Plus 2 choice units from 3 options

Marketing for Purchasers; Storage and Distribution; Operations Management

in the Supply Chain

Advanced Diploma

in Purchasing and

Supply

5

Leading Supply Chain Strategic

and Influencing Management Supply Chain

in Purchasing in Practice Management

Plus 2 choice units from 3 options

Legal Aspects in Purchasing and Supply;

Advanced Project Management;

Finance for Purchasers

Graduate Diploma

in Purchasing and

Supply

6

Purchasing

in Action

Securing

Supply

Client and

Supplier

Relationship

Purchasing

Operations

Understanding

the Purchasing

Environment

Certificate in

Purchasing and

Supply

3

The

importance

of Purchase

Contracts

Working with

Suppliers

Systems

and

Procedures

in

Purchasing

The Role and

Scope of

Purchasing

Introductory

Certificate in

Purchasing and

Supply

2

Managing

Purchasing

and Supply

Relation

ships

Measuring

Purchasing

Performance

Developing

Contracts in

Purchasing

and Supply

Purchasing

Contexts

Effective

Negotiation in

Purchasing

and Supply

Foundation Diploma

in Purchasing and

Supply

4

Management in Risk Management Improving

the Purchasing and Supply Chain Supply Chain

Function Vulnerability Performance

Plus 2 choice units from 3 options

Marketing for Purchasers; Storage and Distribution; Operations Management

in the Supply Chain

Advanced Diploma

in Purchasing and

Supply

5

Leading Supply Chain Strategic

and Influencing Management Supply Chain

in Purchasing in Practice Management

Plus 2 choice units from 3 options

Legal Aspects in Purchasing and Supply;

Advanced Project Management;

Finance for Purchasers

Graduate Diploma

in Purchasing and

Supply

6

Nation

al Q

ualif

ications F

ram

ew

ork

Leve

ls

• Achievements • Next steps

• Supplier

Implement

– Working with Kalmar to finalise the plan.

– Set up meeting end November with Liebherr to discuss next steps.

– Ongoing

Ports

– Kalmar

– Liebherr

Rolling Stock

– GE

– EMD

– MARS (Mitsui)

– Other OEM’s (TBD)*

– Kalmar has submitted the plan to the DTI to satisfy their NIPP obligations (over Euro 26m). This plan will satisfy our requirements, as it is a Cartego School (fright solution training for container cargo).

– Liebherr have considered two CSDP options – both in training. The Austrian Ship-to-Shore training school is at full capacity and they want to create a second site here. Also there is a possibility to send welders to an apprentice programme in Ireland.

– SSM working with TRE continue discussions on localised part manufacture, such as traction motors, with GE and EMD for current fleet.

– SSM working with TFR on new loco RFP documentation, including CSDP.

CSDP SUCCESSES TO DATE: PRACTICAL EXAMPLES

APRIL - DECEMBER 2008

* TBD = To Be

Determined

CSDP SUCESSES TO DATE: PRACTICAL EXAMPLES

APRIL - DECEMBER

* Railways and Harbours Supply Chain Association

* Top 20 Strategic Local Suppliers for Rolling Stock (Loco’s) Identified- 80: 20 Principal

* Top 60 Tactical Local Suppliers for Rolling Stock (Loco’s) Identified

* Transnet Port Terminals

Supplier list

* ESCOM & PetroSA

• Current

Activities

– Meeting with Operators & Suppliers from Railways and Harbours occurred.

– Well attended

– Industry voted

– Nature & Mandate of Association Established

– Web Page Created

– Networking

– AC DC Locomotive discussion

– UNIDO Training in progress to develop Champions to perform benchmarking assessment (Tier 2 &3)

– Suppliers identified (Tier 2 &3)

– Road shows were held with Suppliers

– Interest shown by other SOE’s which contacted Transnet to assist in Identifying Synergies

– Ongoing

– UNIDO to perform training & perform final Supplier Assessments by end February 2009; All suppliers to be registered on Association & Yellow Pages database by end December 2008

– All suppliers to be registered on Association & Yellow Pages database by end December 2008

– All suppliers to be registered on Association & Yellow Pages database by end December 2008

– Alignment meeting to be held 1December 2008 followed by future rhythm meetings to Identify Synergies

• Area • Achievements • Next steps

CSDP Challenges

April – October 2008

Resistance to Change

- Both Internally & Externally

- Transet was not allowed to Negotiate up to 2005

- Transet Business Units operated in Silo’s

Time Constraints

- Limited Resources

- Training & On boarding time of Suppliers

- Synchronization of Supplier Development & Capital Expenditure (Tenders)

Sustainability of Capability & Capacity Building

- Poor Sustainable Demand Management & Forecasting

Closing Summary

Continue with Capability & Capacity Building through:

- CSDP Methodology

- Working with RAILWAY & Harbour Supply Chain Association

- UNIDO Benchmarking

- IPSA Skill Development

Collaborate with other SOE’s

- Identify Synergies

- Combine efforts & Resources

- Share Lessons Learned & Successes

Questions

Transnet’s Competitive Supplier

Development Program (CSDP)Part 2 (Supplier Benchmarking)

Presented by Fanie van der Walt CSDP

Implementation Manager

2009-01-29

The main objectives and value proposition for Benchmarking

• From a supply chain perspective we aim to achieve the following:

• Improved alignment between buyer and supplier organisations which improves the

effectiveness of the total supply chain;

• More sustainable trading relationships based on clear measures and expectations;

• An increase in local participation in both local and global supply chain

opportunities;

• A more sustainable business by accelerating the competitiveness of the

participating individual firms and the industry as a whole; and

• Providing suppliers with a network of support organisations and possible funding to

focus on specific change interventions.

The high level process

• The benchmarking and development process will be implemented in stages,

starting with the locomotive contracts and the harbour equipment contract

opportunities, from where it would be rolled out to other commodities.

A collaborative framework to accelerate

industrial development across the economy

Alignment

• Common assessment

• Benchmarking

• Cluster development

• Industry-wide development

• Shared IT platform

• Visibility

The Benchmarking and Supplier

Development Process

Supplier Benchmarking and Development Process

Identify focus

areas for local procurement

1Buyers capture

requirements (assisted by UNIDO)

2 Do any local

suppliers meet buyer

requirements?

Possible shortlisting

for participation in buyer’s supply chain

7

Buyers

Invite all potential

suppliers to participate

3

UNIDO

Assisted self

assessments

Develop

improvement plan

Implement

improvement planSuppliers

Inputs

• Benchmarking information• Comparative country strengths

• Other industry studies

• Supplier Development Plans

UNIDO facilitates access to govt./buyer/donor

supplier development programmes

4 5 6

Improvement Cycle

Ongoing improvement cycle

Competitiveness is increasingly driven by the

ability to integrate within a broader network

of organisations

SC Visibility

Bu

sin

ess

Val

ue

Level of Integration

Hierarchical Functional Business Supply Chain NetworkProcess

Integrated Business Planning

Supplier Alignment & Collaboration

IsolatedImprovements

Process Alignment

Extended Marketplace

Customer Integration

SC Execution Integration

Key Measures

Industry Community

Value Drivers

• Strategy Execution

• Customer Centric

• Market Responsiveness

• Performance Excellence

• Organisational Efficiency

TheFundamentals

Cross-FunctionalIntegration

IntegratedEnterprise

Extended SupplyChain

SupplyChainCommunity

Strategic

Collaboration

The immediate focus is to facilitate the participation of the rail and harbour community through the following process:

• On-boarding workshops: This entails a series of workshops, including owners and operators to discuss the initiative with the Railway and Harbour supply chain community and gain commitment for those companies interested to participate.

• Participation registration: Organisations provide their basic information on the benchmarking web site www.benchmark2grow.org.

• Training invitation. Organisations that are registered on the web site will be invited for a training programme.

• Training courses: A two day training course which should ideally be attended by a senior executive who is overall accountable for competitiveness and growth within the organisation, and the operational person who would implement the initiative.

• Implementation: Supplier benchmarking and development process including benchmarking, development plans and support.

• CSDP Implementation Champions:

Working throughout the infrastructure development

programme supplier network

Buyer

Tier 1 Suppliers(i.e., OEMs,

System Integrators)

Tier 2 Suppliers (i.e., System or Subsystem

Assemblers)

Tier 3 Suppliers (i.e., Component Manufactures)

Tier 3 Suppliers (i.e., Other Input Industries

Buyers Sphere of Control

Buyers Sphere of Influence

Procurement teams embed local procurement requirements in RFx and contract negotiation process

Procurement teams identify ED opportunities and advise

on available partners

Focus of Procurement TeamsTypical Supply Chain Structure

It provides a detail view of performance gaps, what

to do about it and who can

assist in doing so

Financial Performance

• Cost management

• Productivity

• Financial Stability

Customer Performance

• Product Quality

• Service Quality

• Customer responsiveness

Internal Processes

• Operations Management

• Supply Chain Management

• Information Management

• Corporate Governance

Learning and Growth

• Leadership

• Human Capital Management

• Safety and Health

• Environmental Management

Bu

ild

ing

Blo

ck

sO

utp

ut

Are

as

Exceed buyer expectationsBelow Expectations

The programme deploys a common framework to rate

competiveness and develop this in line with contract

and/or management expectations

Ability to minimise cost

Ab

ilit

y t

o m

inim

ise r

isk

Financial Performance

• Cost management

• Productivity

• Financial Stability

Customer Performance

• Product Quality

• Service Quality

• Customer responsiveness

Internal Processes

• Operations Management

• Supply Chain Management

• Information Management

• Corporate Governance

Learning and Growth

• Leadership

• Human Capital Management

• Safety and Health

• Environmental Management

Bu

ild

ing

Blo

cks

Ou

tpu

t A

reas

Broad-Based BEE contribution: 9 8 7 6 5 4 3 2 1

Supply chain matrix

• The benchmarking framework provides the ability to

strategically position a company in terms of it ability

to minimise cost and risk performance. This can be

cascaded into the detail evaluation of each of the

underlying performance areas.

• It then provides the means to identify the

development areas in line with management and/or

customer expectations.

• It provides the means to determine what needs to be

done to address development gaps and who can

assist in this.

• It then provides the management team with visibility

on the ongoing development of the organisation,

which can also be provided to customers and other

stakeholders.

Current

competitiveness

rating

Expectations