Introduction Selected Procurement Professionals were invited to attend a Procurement and Supply Chain Focus Group at Fairways Hotel and Spa on 6th September 2011. The workshop was facilitated by James Denton of Rethink Management Consulting Pty Ltd (Rethink) The workshop take-out is a high-level identification of the participants perceptions of the steate of the Procurment discipline and Profession in South Arica together with challenges and an outline of what is required to move the Profession to a desired state. The outcome of workshop is the result of the process and responses documented on the preceding pages which are located on pages 13 and 14 of this document. The workshop was conducted using the visual mapping “Participlan” tool. During the session, the facilitator poses specifically pertinent questions to the group who responds in writing on the stationery provided. The written responses are then displayed, debated and re-arranged where necessary. Essentially the outcome of the process is essentially the result of the group’s input. Background to Rethink and Kerkhoff (Joint hosts)
2
3
Rethink Management Consulting (Pty) Ltd Rethink has been in existence for over fifteen years and operates throughout Africa with offices in Cape Town and Johannesburg. Rethink is a Strategy development and implementation focused consulting company. Using our LEAN rich Total Performance Improvement (TPI) methodology we typically concentrate on streamlining processes to improve productivity and provide focus and enhanced accountability for our clients. With initiatives that reduce costs and business risks, and improve quality, service and compliance, our track record includes over 500 successful projects. Our clients include several blue chip organizations in South Africa and internationally, many of whom repeatedly use Rethink for projects. Rethink has extensive experience in defining Best Practice processes in all industries and using these to identify and direct both system and management solutions. Website – www.rethink.co.za Kerkhoff Consulting Kerkhoff is a Düsseldorf-based specialist consulting business represented worldwide with local companies in ten different countries. Kerkhoff Consulting is a consulting specialist and quality leader for projects in purchasing, procurement and supply chain management – across borders and industry sectors. The worldwide locations consult local companies in all aspects of purchasing and supply chain management. Kerkhoff Consulting frequently has cross-border projects as a result of their clients’ multiple locations and international procurement requirements. International teams of consultants ensure that clients can purchase high quality at optimum cost across the globe. Mr Gregor van Ackeren (Partner and Head of Corporate Strategy) recently presented at the annual SmartProcurement conference held at Gallagher estate, Gauteng in November 2010. The presentation addressed the four Mega-Trends in Global procurement as well as “Compliance in the South Africa and the Public Sector” and provided some comfort to anxious South Africans about solutions to our challenges. Website – www.kerkhoff-consulting.com
What follows is the feedback from the workshop…..
3
4
Summary Macro themes and scenarios identified
Economy – uncertain Legislation – changes Low cost suppliers Risk of supply Governance (priority theme) Job losses Training / skills Cost decreases Innovation Professionalisation of Procurement function (priority theme)
Purpose of the Procurement Professional
Focus on organisation goals Professionalise the discipline Sustainability Benchmark Transparency Profit Benefit the organisation
Behaving strategically Professionalising the function Managing the reputation of Procurement people Collaborating Demand management Maximising their impact on wider society Standardising the function Improving profitability
Main reasons
Pockets of excellence Natural move on the professionalisation continuum Buy-in of executive leadership
Shortage of skills and experience
Minimal Collaboration and common purpose
Approach not strategic No statuatory body Procurement not appreciated in organisations Reputation not managed Leadership among Procurement people is limited Procurement people don’t behave in an executive manner
Desired scenarios
Standardisation among Procurement people People – KPI’s and Job describers People – Credible vocational training and career management Process – Standardised processes, governance and transparency Benchmarking / comparing of what we do against industry in SA and Internationally.
5
6
QUESTION 1
What are the typical, likely or unlikely scenarios that could unfold for Procurement Professionals in South Africa over the next 12 to 36 months?
Issue Economy (1 vote)
Responses
Legislation (1 vote)
Change The economy will remain challenged Global economy supply risk opportunity Global recession double-dip Unstable Rand/Dollar exchange Rand strength = more imports = to local manufacturers Continuation of recession Uncertainty in terms of economic and political views Unlikely economy will increase by 10% Increased volatility Second recession resulting in more competitive supply market Risk:
Security of supply Political rise Changed demographics Low cost supplies
Effect of nationalisation
Low Cost (1 vote)
Political unrest in LCC
Supply
Risk of supply
BEE legislation likely to change Greater focus on local and community impact Opportunity for impact on green e – sustainability agenda
Impact of low cost suppliers
Commodities unstable across the globe Critical suppliers close down
6
7
Issue
Responses
Governance (2 votes)
Greater interference from other disciplines, practices → challenge for authenticity / credibility.
Increase in unemployment
Training on diff between tactical and strategic
Focus on input costs
Creative ways of doing procurement will manifest
Professionalism of the profession
Skill development and Jobs (1 vote)
Cost reductions
Innovate (1 vote)
Professional reputation (4 votes)
Intensity of risk management Transparency Increased risk Centralised procurement (start-up) Tactical vs strategic mindset Decentralised procurement (mature with controls) Need for stronger governance Comply with set processes Shorter more flexible contracts for change opp
Impact of job creation on costs
Skills scarcity Procurement skills are likely to remain a challenge Skills
Greater cost focus therefore rise of procurement continues Likely finance minister turns up heat on bank costs Focus on total cost of ownership Pressure to save Continued focus on cost reduction of budgets
Central procurement companies for small enterprises Further procurement diversification in industries Likely industries to consider consortium buying Likely in-source functions that you can do more efficiently and have control
Opportunity to redefine the discipline If done properly, there is a greater opportunity for senior leadership positions Stronger organisational leadership i.t.o procurement Procurement to become a strategic function Making delivery a reality → sourcing will deliver → how do you translate into AFS? Licence to practise
7
8
QUESTION 2
In your view what is the purpose of the Procurement Professional?
Issue
Responses
Risk management
To eliminate risk
Focus on organisational goals
Contribute to organisational goals
Allow business to understand and control operating costs sustainably and commercially
To lead the organisation to better procurement practices Costs down Process standardisation Upskilling of staff Supplier relationship
Address skills shortage and gaps, To ensure my staff is properly skilled resourced
Ensure sustainability and credibility of process
Benchmark
Benchmark, monitor against world class organisations
Transparency (fairness)
Achieve competitive but fair pricing
Profits
Innovative ways to increase profit
Purpose is to benefit of organisation
Increased Professionalism
Sustainability
Kerkhoff Perception
To have an impact on Sustainability Governance Shareholder value of company To support the organisational aims To get return on investment Support / achieve triple bottom line efforts
Licence to practice Build professional brand / image Increase skills and reputation of procurement in Africa Facilitate the professionalism of the profession Enhance procurement profession Advocate strategic importance of profession
Help create sustainable SMME’s Create a sustainable supply market through ethical engagements
Encourage fair practice
Reduce costs and improve profit To buy the right goods at the right time at the right price Manage costs relative to functional requirements Increase tax base
Based on these scenarios and your purpose … What are we doing well or what are we doing right and what are we not doing well or not getting right?
Issue
DOING WELL
Strategic focus
Acknowledge importance of the function
Professionalising procurement
Cost control
Focus on improvement
Sustainability and responding to legislation
Technology
Acknowledge the role of technology
Contracting
Contracting
Manage end to end procurement related issues strategically
Increased focus on control and risk and not just cost reduction
Professionalism
Cost control
Sustainability
Recognising the need for multi-discipline procurement teams Creation of jobs What’s good for the company holistically Organisational awareness of value we can bring “positioning”
Improving recognition of procurement Working towards licence to practice Transformation (employment) Increased reputation and remuneration Pockets of excellence i.t.o professionalism Objective player / credibility Engagement across industries for procurement discipline SME’s / subject matter experts
Pockets of excellence Natural move on the professionaling continuum Presence of skills Flexibility to adapt to business Organisation recognising the need / benefit of procurement Buy-in of executive leadership Maturity of organisation
10
11
QUESTION 6
Consider what is NOT GOING WELL – what are the main causes of the gaps?
Issue
NOT WELL
Strategic importance
Acknowledge strategic importance
Reporting to Finance is not a good idea.
Too few procurement professionals represented at board at strategic level
Procurement reporting lines Professionalism
Making procurement a strategic topic Linking activities to strategy Strategic sourcing Manage procurement as a value centre vs a cost centre
Creating a sustainable procurement capability in organisation Lack of appreciation for procurement as a profession Too many practitioners, too few professionals
Not confident and assertive in organisation Leads to…
Formally recognised training (vocational programmes) Leads to….
Collaborate
Demand management Social impact
Branding of discipline
Accepting that change is a gradual process
Too reliant of systems rather than skills
Risk management
Should be consolidating our processes
Leverage of profession and networks
Demand management
Supplier development
Procurement legislation not benefitting man-in-the-street
Marketing and selling ourselves
Flexibility and agility
Collaboration Cohesion vs collusion Lack of collaboration in the profession Developing standards for discipline
11
12
Issue
NOT WELL
Standards
Credible reporting / metrics / benchmarks
Impact on revenue streams
Increase profit
QUESTION 7
International standards vs local practicalities Thorough benchmarks of the leading practice
Translation of activities to the bottom line
What are the main reasons for the gap?
Responses
Media focus and slant plays a role Non-alignment of strategy Part of the journey Depends on maturity of procurement Continuous improvement innovation Not many people understand the subject Due to current economic environment procurement is becoming topical (It’s never been topical in the past) More able than confident Skills (consistent with quality of delivery) Experience (ability to adapt) Statutory recognised professional body Value is not clearly translated / articulated Lack of appreciation of procurement as a profession Collaboration by procurement professionals Lack of common purpose
12
13
QUESTION 8
Imagine that in March 2012, we (as Procurement Professionals in South Africa) are achieving our purpose and are a role-model for developing countries. What are we doing and how are we structured? Remember, we have achieved our purpose, what are we doing?
Issue Response Identify gaps and address them Legislation to support professionalism drive
Executive recognition (1 vote)
Collaboration (2 votes)
Legislation Pro procurement “pull” King? Economic crisis?
Legislation to support “legitimising” procurement
Natural seat / position in the senior structure
Collaborate monthly with CIPS and SDE’s (state owned enterprises)
Providing leadership to professionalise the profession
Have a strategic fit There is a “board” seat Recognises at the executive level Making our presence felt Communicating value-add and business contribution Advocacy Representation
Today – start a new blog tripartite alliance between SDE CIPS Private Registering CIPS as a statutory body Encourage communities of practice
13
14
Issue
Response
STANDARDISATION 8 votes PROCESS
Processes and practices reflect performance
Standard descriptions for job profiles
Registering all P & S officials with a professional institute
PEOPLE SKILLS
Recognised tertiary journey map
PEOPLE CAREER
Leadership: A chosen profession Track record
BENCHMARK
Benchmarking the procurement division
PEOPLE KPI’s
Clear description of how the discipline is held accountable
