1. MAXIMISING VALUE FOR MONEY SUBJECT TO COST CONTAINMENT
OZIAS NCUBE
Senior Lecturer - Supply Chain Management
Graduate School Of Business Leadership (SBL)

2. Satisfying customers (resource the project)
OBJECTIVES OF SUPPLY CHAIN MANAGEMENT
Satisfying customers (resource the project)
Capture and retain customers (create belief and credibility in process and systems used for delivery)
Manage chain effectively and efficient (be cost effective (leverage spend) and ensure compliance with supply chain policy and regulations)

3. SUPPLY CHAIN PERFORMANCE
SUPPLY CHAIN MANAGEMENT
GOVERNMENT’S POLICIES
INFRASTRUCTURE (SYSTEMS)
DEMAND
ACQUISITION
LOGISTICS
DISPOSAL
SUPPLY CHAIN PERFORMANCE
RISK MANAGEMENT
SOURCE: (SCM Policy Framework Model): Source (Policy Strategy to Guide Uniformity in Procurement Reform Processes in Government 2003)

4. GENERIC FUNCTIONAL STRUCTURE

5. COST CONTAINMENT FOCUS
Demand Management
Demand planning
Category identification
Supply market intelligence
Budget considerations
Acquisition
Custodian of the procurement process
Implementation of the procurement strategy
Key decision: cost focus or value focus
Cost focus – Total cost of ownership (TCO) based on life cycle costing
Value focus – emphasis on desired outcome

6. Buyer-perceived value pricing
PRICING MECHANISMS
Cost plus pricing
Target profit pricing
Buyer-perceived value pricing
Competitors’ pricing
Tender-based pricing

7. WHAT IS “VALUE” ?
BENEFIT – expectations met within time frame, subject to acceptable quality! (Hard target)
OUTPUT – supplier performed to expectations, transformational targets complied with in the selection and execution (Hard + soft targets)
OUTCOME – supplier performs to expected standards, transformational targets complied with in a selection and execution, visible “growth” of transformational partner after contract seen by access to other opportunities within the value- chain (hard+ higher order soft targets)

8. Effectiveness Efficiency WHAT IS REQUIRED?
Right supplier, right products, right time
Cost a secondary factor
Efficiency
Cost containment
Ensuring effectiveness within acceptable cost
Focus on process and other performance objectives

9. NEW BREED OF SCM PROFESSIONAL A new skills set is required
IMPLICATIONS FOR COMPETENCY AND CAPABILITY PROFILE
NEW BREED OF SCM PROFESSIONAL
A new skills set is required
Commercial acumen
SCM technology
Research and analytics
Supply chain analysis
Value chain analysis
Sourcing
Source: National Treasury

10. WHAT IS THE CURRENT STATE?
Non-compliance to SCM regulatory and policy frameworks
Out-dated SCM systems and delegations
Lack of demand management
Inadequate procurement planning
Lack of monitoring and evaluation
Poor contract management
Lack of standardisation
Inadequate record keeping
Inadequate SCM structures
Source: National Treasury

11. WAY FORWARD??

12. ETHICS & GOVERNANCE - Conceptual Framework 1

13. Project Delays Treatment
Stakeholder Support
Project Manager
Shareholder
Contractors
Management
Governance Policies
Communication
Competency
Culture
Experience
Professional Registration
Attitude Responsibility Accountability
Lesson Learnt
Risk and Project Management Training
Front End Loading
Project Delays Treatment

14. CONCEPTUAL FRAMEWORK 3
Focus of Study is Sustainability Practices from a Risk Management Perspective

15. SCM CAPABILITY MATURITY
Continuous learning and improvement
Use of resources with effective results
Measuring how resources are used
Focus on compliance and control
Proper internal control framework
No proper internal control framework
OPTIMISING
MANAGED
INFORMATION
CONTROL
DEVELOPMENT 6 5 4 3 2 1
START-UP
DESCRIPTION
LEVEL
2.8
This slide reflects the SCM maturity of national and provincial departments. Some municipalities are at a similar maturity level.
The results indicate that departments are operating at a compliance and control level – average of 2.8.
The challenge is to move to higher levels of maturity where we move beyond compliance to economic, efficient and effective use of resources, performance optimisation, and continuous improvement.
3 - An internal control framework and approved policies and procedures are adequately implemented and adhered to
4 - Economic use and performance of resources are managed, measured, monitored, reviewed and reported through application of reliable and consistent service standards, delivery objectives and performance indicators
5 - Economic, efficient and effective use of resources is managed, ensuring value for money and results
6 - On-going assessment of processes, improvements and measurements results in continuous learning and performance improvement 15 1

16. FUTURE STATE Current State Future State Compliance Conformance
Tactical
Current State
Strategy
Heavy processes to ensure control
Governance structures
Focus on technical and tactical skills to get it right
Authoritative guidance
Risk averse culture
Blame and ‘us versus them’ causing frustration and tension for all
Low overall accountability for end-to-end results
SCM seen as a back-office function
Compliance
Conformance
Corruption-free
Level of process commensurate to the level of risk to the organisation
Commodity focus
Balance of strategic and technical skills
Overall capacitation for the SCM function
Processes, guidance and governance that ensures objectivity
Collaborative relationships and structures
Performance measures and regular reporting
SCM seen as a value creator
Future State
Value for Money
Efficiency and Effectiveness
Shared Accountability
Compliance balanced with performance

17. THANK YOU
ANY QUESTIONS?