East African Procurement Forum: Role of Supply Chain Management in creating favourable conditions and increasing the competitiveness of companies. Mobile: André Coetzee – Managing Director, CIPS Southern Africa

CIPS Members: Burundi 2; Kenya 2055; Rwanda 45; Tanzania 205; Uganda 1015 People development Process development Performance Enhancement CIPS Southern Africa members Operate in 150+ countries Largest Procurement & Supply Institute in the world 60,000 annual exam entries Brand = professionalism & integrity 150 study centres 42 Accredited universities CIPS?

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CIPS Southern Africa What does 1 Trillion look like? A billion dollars…A hundred billion dollars…Eight hundred billion dollars…One TRILLION dollars… We'll start with a $100 dollar bill. Currently the largest U.S. denomination in general circulation. A packet of one hundred $100 bills is less than 1/2" thick and contains $10,000. Fits in your pocket easily and is more than enough for week or two of shamefully decadent fun.

CIPS Southern Africa Believe it or not, this next little pile is $1 million dollars (100 packets of $10,000). You could stuff that into a grocery bag and walk around with it.

CIPS Southern Africa While a measly $1 million looked a little unimpressive, $100 million is a little more respectable. It fits neatly on a standard pallet...

And $1 BILLION dollars... now we're really getting somewhere... CIPS Southern Africa

Next we'll look at ONE TRILLION dollars. This is that number we've been hearing so much about. What is a trillion dollars? Well, it's a million million. It's a thousand billion. It's a one followed by 12 zeros. You ready for this? It’s pretty surprising CIPS Southern Africa

Ladies and gentlemen... I give you $1 trillion dollars... This is how small the gentleman is now Notice those pallets are double stacked…and remember those are $100 bills. Why $1 trillion? The amount annually lost to fraud and corruption globally! CIPS Southern Africa

Will Africa become more attractive in the next 3 years? CIPS Southern Africa Source: E&Y “It's Time for Africa”

Has Africa become more attractive in the past 3 years? CIPS Southern Africa

Top Sectors that will offer the greatest potential in the next 2 years 44% 21% 15% 14% 13% 9% 8% 6% 4% 3% CIPS Southern Africa

Barriers to investing in Africa CIPS Southern Africa

Investors’ plans in Africa CIPS Southern Africa

Three quarters of foreign investment was in just 10 African countries CIPS Southern Africa

Ladies and gentlemen... I give you $1 trillion dollars... This is how small the gentleman is now Notice those pallets are double stacked…and remember those are $100 bills. Why $1 trillion? The amount annually lost to fraud and corruption globally! CIPS Southern Africa

A supply chain is a network of internal/external companies /organizations that through value adding activities provides goods / services to customers What is a “Supply Chain”? CIPS Southern Africa

A Supply Chain Exists Across All Sectors be it Private or Public Within the Public and Private sector there are internal and external supply chains that are supposed to work together to deliver a service or product. The issue has always been whether the process/purchasing/logistics custodians know and understand their supply chain network and the impact of their actions on the various entities within the network! How does corruption impact supply chains!!! Issue of Post Contract Management? CIPS Southern Africa

The Product Supply Chain “Before” 19 Consumer USA UK Ireland Wholesaler Retailer T2 CHEMICAL COMPANIES Eg SHELL etc T1 BULK PHARMA CHEMICALS Eg FINE CHEMICALS..Ireland and UK PHARMACEUTICALS MANUFACTURING FOCAL COMPANY eg UK T1 WHOLESALERS GLOBAL T2 RETAILERS T3 CONSUMER T3 Petro-chemicals E.g.TOTAL SHELL BP T1 IT SUPPLIER SAP//ORACLE T1 IT SUPPLIER SAP//ORACLE T1 IT SUPPLIER SAP//ORACLE T1 IT SUPPLIER SAP//ORACLE Information and product flows ---silo mentality T1 IT SUPPLIER SAP//ORACLE Within each of the above entities there were INTEGRATED purchasing and supply chain functions to be performed

The Purchasing Role “ 1995” 20

Issues and Challenges faced by the Purchasing Professional  The prodigal buyer  ERP systems seen as the panacea and not the training  Treated as a admin clerk and a paper pusher  Low morale  High staff turnover  Reporting structure  Cost over runs  Blamed for  late deliveries  High inventory due to lack of coordination  Rejects and waste  Downtime in the factory  Systems integrity problems  Customer service problems  Manufacturing problems  Relatively low salary 21 *Based on the prevailing exchange rate during that period

22 A Procurement Professional shall be expected to understand all the issues within a supply chain: Logistics, Customer Service, etc Suppliers Customers Civic society Government

Effect on the Supply Chain “After” 23 Consumer USA UK Ireland Wholesaler Retailer T2 CHEMICAL COMPANIES Eg SHELL etc T1 BULK PHARMA CHEMICALS Eg FINE CHEMICALS..Ireland and Ponders End-UK PHARMACEUTICALS MANUFACTURING FOCAL COMPANY eg UK T1 WHOLESALERS GLOBAL T2 RETAILERS T3 CONSUMER T3 Petro-chemicals E.g. SHELL BP T1 IT SUPPLIER SAP//ORACLE T1 IT SUPPLIER SAP//ORACLE T1 IT SUPPLIER SAP//ORACLE T1 IT SUPPLIER SAP//ORACLE SUPPLY CHAIN MANAGEMENT

The Effect of the Paradigm Shift on Procurement Related Activities! 24

The world is a volatile place which affects confidence, creates risk and increases costs. In this context professional procurement has to deliver: Lower Total Cost and increased Value Reduced Risk Increased Security of Supply Greater Sustainability Stronger Governance CIPS Southern Africa Corporate Solutions What is expected from Procurement in 2011? “Procurement is one of the fastest growing professions in business today”

CIPS Southern Africa Doing the right things: Value add procurement Increasing value and developing supply ‐ side capabilities Value Proposition Role of Supply Management …ultimately stimulating smart demand and Increasing business value derived from spend (and supply markets) rather than simply reducing level of spend. Reduction of unneeded demand activity, complexity, \ Urgency and variability; …and by reducing total supply costs. …and at the right price; Expertly harnessing the power of supply markets for competitive advantage Customer relationship management; money management; Demand/ specification influence Cost modelling; supplier/market analysis; Supplier management; SRM; supply planning; Project management; risk management. Negotiator Site-level tactical sourcing, ordering and expediting LEADING Influencing business strategy EXCEEDING Supporting business strategy ACHIEVING Cost reducer LAGGING Fire-fighter Value Management Demand Management Total Cost of Ownership reduction Purchase Cost Reduction Security of Supply PROCUREMENTS’S ACCEPTED ROLE VALUE ADD PROCUREMENT WORLD CLASS PROCUREMENT Right stuff, right place, right time;

Mission Vision Goals Objectives Capacity And Capability Plan Institutional Strengthening Model Procurement Capability Assessment (Organisational) Environmental Mapping Procurement Capability Assessment (Individual) POLICIES PROCESSES PROCEDURES KNOWLEDGE SKILLS ATTITUDE PORTERS FIVE FORCES PESTLE SWOT STAKEHOLDERS RISK

Procurement Capability Assessment Current State Analysis makes Interventions more effective

Framework & Governance This section assesses whether there is a clear hierarchy of objectives which flows from government objectives through to procurement objectives and subsequent procurement strategy including: Ownership and leadership including permanent secretary and ministerial awareness and support Hierarchy of purchasing policies and procedures Recognition of the need for a procurement strategy at departmental level Link to development plans Awareness of legislation High level procurement policy Regional development – trade agreements, Harmonisation of legislation etc..

Managing the operational purchasing & supply management process This section assesses the ability of the procurement team to manage the operational aspects of the procurement and supply management process including: Operational purchasing planning Approval of suppliers Approach to negotiation Specifications Qualifications / bidder selection Preparation of bidding documents against donor agency requirements Inviting and receiving bids whilst meeting the procurement Principles Award criteria and evaluation Terms and conditions of contracts Contract award and management

MOBALIZATION SELF ASSESMENT MATCHING EXPERT ASSESMENT GAP ANALYSIS DESIGN PLAN IMPLEMENTATION BENCHMARKING STRATEGIC CHOICES 9 MPAT 9 Step Action plan

The journey CIPS / NIGP Procurement maturity model

State Owned Enterprise Forum

Using Technology as an Enabler Some facts on social media!!! CIPS Southern Africa

Using Technology as an Enabler CIPS Southern Africa Visioning Panel CIPS Southern Africa

Using Technology as an Enabler Challenges CIPS Southern Africa

Using Technology as an Enabler Ideas CIPS Southern Africa

Performance of Suppliers CIPS Southern Africa Buyers enter supplier recommendations based on previous exposure to the supplier. Peers can view this in their review of the supplier

Performance of suppliers Ideas CIPS Southern Africa Buyers enter supplier ratings (out of five stars) based on previous interaction. Peers can view this in their review of the supplier. An average of all buyers’ ratings is shown on the supplier search screen.

Supplier Management Ideas CIPS Southern Africa

Africa definitely not the only culprit World map Index of Perception of Corruption CIPS Southern Africa

African Ethics-The Ethics of Duty, Not of Rights “Thus, everyday, and during every hour of our time beyond sleep, the demons embedded in our society, that stalk us at every minute, seem always to beckon each one of us towards a realizable dream and nightmare. With every passing second, they advise, with rhythmic and hypnotic regularity – get rich! get rich! get rich! And thus has it come about that many of us accept that our common natural instinct to escape from poverty is but the other side of the same coin on whose reverse side are written the words – at all costs, get rich!” (Thabo Mbeki- Nelson Mandela Lecture) Rules, regulations and laws related to ethics and corruption are abundant- therefore what is the problem? CIPS Southern Africa Is this the reality?

Leadership, Leadership, Leadership! CIPS Southern Africa “Corruption destroys the capacity of the state to deliver basic services to the most vulnerable members of our society. Only upon sound, ethical foundations will we be able to build a truly great country.” (Goldstein –Chief Rabbi of South Africa)

Drawing the line… ‘If you don’t stand for something you may fall for anything.’ ‘Tone at the Top’ What are the norms of behaviour? What is valued and rewarded? CIPS Southern Africa

Can I make a difference? “Personal Integrity is the cornerstone of professional ethics in procurement” How sometimes small things have a massive effect – The Tipping point Malcolm Gladwell Public smoking example CIPS Southern Africa

“Many top managers are not yet aware that purchasing can be a profit and value generator. The name of the magic formula is: Procurement optimization. An immediate and sustained increase in profit and value is achieved by modern procurement management and not by price hammering” Gerd Kerkhoff Thank you CIPS Southern Africa