9 August 2012 | Rebecca Ellinor and Kathryn Manning
The CIPS Pan-Africa Awards 2012 saw five organisations win recognition for their procurement work. Rebecca Ellinor and Kathryn Manning look at the projects that seized the prizes.
Best capacity development initiative
Between 2005 and 2012, procurement at the South Africa division of global paper and packaging company Mondi underwent a number of changes. Staff were given new responsibilities and continual change meant the full potential of the organisation could not be reached. This led to a number of problems including a deterioration in teamwork and low morale.
Management conducted reviews in mid-2010 to define critical areas for improvement and it was recognised that employees needed empowering. This required both the individuals and the organisation to change.
“Internal change is about building up a person’s self-confidence and ownership to make decisions and to take responsibility for solving issues. External change is creating an environment where they are able to act,” said the division’s head of procurement at the time Sebastian Bartosik.
Job titles and descriptions were changed and the function restructured. Gaps in skills were identified and training organised. Knowledge was improved through participation in professional organisations such as CIPS, seminars on Broad-Based Black Economic Empowerment policy, knowledge sharing with Mondi’s operations in Europe, internal training on contract drafting and the fundamentals of procurement and a mentoring initiative.
Improvements included an increase in contract coverage, process automation rising as a result of a focus on optimisation of individual work and information sharing in procurement and savings were boosted.
Judges said: “The proposal clearly showed gaps in skills and a road map to identify the right training programme and to track the progress of the individuals with tangible outcomes.”
Best corporate social responsibility
Procurement professionals at Vodafone Ghana spearheaded a corporate social responsibility project that resulted in community benefits and boosted profits. The Healthline initiative, launched by the country’s health minister, involved staff from supply chain, marketing, sales, finance and the Ghana health service working together on a project that would raise awareness and even pay for some medical treatments.
Names of individuals with particular illnesses who were unable to afford treatment were requested from the country’s health service and the public was also invited to submit suggestions. Hour-long TV and radio programmes were run over the course of 13 weeks, with a different subject discussed by a three-strong panel of doctors. The show was aired on seven TV and seven radio stations, reaching around eight million viewers a week. Roadshows were also conducted and health topics brought to life by engaging staff through activities such as free eye tests, blood pressure checks, dieting seminars and exercise sessions.
Vodafone undertook the work to boost its brand (and through this, sales and profitability), raise health awareness among staff and increase employee engagement. Supply chain helped to run the closed tender process, negotiate a US$300,000 saving, manage internal stakeholders and monitor ongoing supplier performance.
Enoch Dugbatey Dugbartey, a marketing and services specialist in the supply chain management team at Vodafone Ghana, said: “The creativity with which the supply chain team conceptualised, planned and rolled out the mobile health initiative clearly demonstrates companies can innovatively stretch their limited CSR budget as well as realise long-term benefits if supply chain process custodians are involved.”
Favourable brand awareness led Vodafone Ghana to become the second operator in the country. “We extended market share through procurement and supply chain management. This initiative has not only had a positive impact on Vodafone’s brand in the community at large, but also improved overall revenues and bottomline performance,” he added.
Best process improvement project
In the case of the ‘best process improvement project’ category, judges said both ABSA bank and mining group Exxaro were excellent in their own right, deriving benefits within different areas in procurement, so they recognised the efforts of both.
In 2010, ABSA bank spent just over R13.3 billion with 7,852 suppliers, of which 53 per cent was spent with the top 30 suppliers. Given this concentration, the bank decided to develop and roll out a framework, as part of its supplier relationship management (SRM) programme, to extract as much value from these contracts as possible.
The process framework is based on three building blocks: performance management, risk management and value release. The objectives were to communicate the importance and implications of releasing value to the SRM community – especially to the supplier relationship managers of ‘very integrated partner’ (VIP) suppliers from ABSA’s various business units; ensure a consistent approach in realising value from strategic supplier relationships; equip supplier relationship managers of strategic suppliers with the knowledge and tools to extract value from their relationships (named ‘value release in a box’); and monitor and measure the programme to track and report on benefits achieved.
The company’s supplier relationship managers were guided through an easy-to-use tool, which gave them the guidance and templates for each stage and training was given to help them implement the process.
The work achieved a number of benefits. It led to a marked improvement in the capability of the bank’s supplier relationship managers, which has in turn increased tactical and strategic collaboration between the company and its VIP suppliers, including better cost control. The framework acted as a major catalyst between ABSA and Barclays and its outcomes are discussed at almost every monthly joint SRM forum. And in financial terms it has led to a combined pipeline of R45 million post-contract savings.
Part of the 2013 plan is to roll this framework out into Barclays Africa and, as such, further promote best practice, SRM capability and value to the organisation and the continent.
Exxaro Resources (Exxaro) is a South-African based mining group with a diverse commodity portfolio in coal, mineral sands, base metals and industrial minerals.
The company was formed through a merger between Kumba Resources and Eyeziswe. With the formation of Exxaro, it was a huge challenge to align and standardise the codes and records used for the procurement of goods and services. The cataloguing process was causing search problems and duplication leading to excess inventory, inaccurate forecasting and replenishment cycles. This hampered strategic sourcing initiatives and inventory management. A new codification strategy was developed via a cross-functional process improvement project of more than two years which covered three phases: the implementation and go-live of the solution; the data extraction and data migration.
The co-operation, involvement and support of stakeholder groups was critical for the success of the project. Exxaro needed a technology partner and an RFQ was issued to selected vendors in 2008. The successful supplier became part of the project steering committee. Benefits included the reduction of Exxaro procurement spend that was not codified from 38 per cent at the end of 2007 to 20 per cent by the end of 2011. The target is to have this below 15 per cent by the end of 2012. Exxaro improved compliance to the adopted standards from 9.6 per cent at the end of 2007 to 65 per cent four years later and the target is 75 per cent by the end of 2012.
The company reduced the number of master records for materials and services from 232,000 items to 117,000, despite more items being given codes to reduce non-coded ‘free text’ spend.
This project was a key enabler for standardised data migration and procurement compliance.
Best procurement project
In 2010, Exxaro’s diesel consumption and cost was in excess of 70 million litres. Together with fluctuating operational demands, increases in energy costs and fluctuating crude oil market conditions, the cost for Exxaro is expected to grow. So the company’s plant and energy commodity team began work on a cross-functional improvement process to identify and maximise potential value.
A team was established, including experts from various operations and disciplines such as purchasing, engineering, mining, safety control, energy control and logistics. Together, the team analysed the key drivers of cost that had the biggest possible impact on the total cost of ownership of diesel, as well as possible actions to reduce influence of these drivers. In the diesel strategy phase, all ideas for improvement generated from each business operation were assessed, grouped and prioritised into the short-, medium- and long-term plans that formed part of the commodity strategy per operation and Exxaro as a whole. It was then vital to design and develop a measurement and tracking system to determine the actual impact and value release from the initiatives.
In terms of lowering total cost of ownership for diesel through operational improvement, optimisation and cost reduction, an accumulative set of initiatives was generated with a potential diesel saving of approximately six million litres at approximately R30 million, which can be realised in the next five years. Exxaro also aimed to start moving to cleaner diesel fuels, reducing the sulphur content. Once savings were generated, the savings in diesel litres would be converted to tonnes of CO2 as a result of fuel not being combusted, which has a positive impact reducing CO2 emissions.
Judges said this submission highlighted the taking of procurement to a strategic level with regard to commercial aspects, operations improvement and environmental awareness. In so doing, Exxaro demonstrated the role that procurement plays – not only as a commercial entity.
Best supplier development initiative
FNB, which trades as a division of FirstRand Bank Limited, is the single largest contributor to FirstRand’s bottom line and serves more than six million customers across South Africa.
The company was seeking to make savings in the goods and services provided by vendors so focused on the largest supplier area, based on value and business impact, which was courier and delivery services. The plan was to apply the knowledge and benefits gained from this exercise to other suppliers and parts of the supply chain.
Key business stakeholders tasked FNB strategic sourcing to analyse courier delivery services and their costs in July last year. They found the majority of total spend for this category was with UTi Mounties.
FNB and UTi Mounties entered into a supplier/customer collaboration, running a series of workshops over an eight to 10-month period, where both parties examined ways to reduce costs, increase delivery efficiency and eliminate waste.
The team focused on ideas that would best serve end customers. The collaboration resulted in many business benefits, including on-time deliveries, reduced risk and no compromise made on service. There was also a significant reduction in costs – in excess of 20 per cent – and a reduction of waste as a result of reduced deliveries. This resulted in improved customer satisfaction for UTi Mounties and FNB, valuable input and perspective for other projects and useful information on which to base other decisions on courier services.