Mankodi Moitse

1
The Role of the Supply Chain Unit in Financial
Risk Management
Mankodi Moitse
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About the City

• The Citys land area is 1644 km²,
• It has a population of 3,2
• million and
• is situated in the Gauteng
• Province.
• City contributes 16
• of total Gross Domestic Product
• (GDP).
• As such the City of Joburg is a very
• active commercial centre on the
• African continent.

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SCMs scope of services
MOES JOBURG WATER CITY POWER PIKITUP JOBURG
PROPERTY COMPANY JOBURG FRESH PRODUCE
MARKET JHB ZOO METRO BUS COMPANY JHB
DEVELOPMENT AGENCY JHB CITY PARKS JHB TOURISM
COMPANY JHB ROADS AGENCY JHB CIVIC
THEATRE METROPOLITAN TRADING COMPANY JHB
HOUSING COMPANY
Service delivery to CITIZENS
CORE DEPARTMENTS HEALTH TRANSPORTATION
EMERGENCY MANAGEMENT METROPOLITAN POLICE
FINANCE ECONOMIC DEVELOPMENT DEVELOPMENT
PLANNING REVENUE CUSTOMER URBAN MANAGEMENT
RELATIONSHIP MNGT HOUSING CONTRACT
MANAGEMENT UNIT ENVIRONMENT COMMUNITY
DEVELOPMENT INFRASTRUCTURE SERVICES
SCM oversight role
SUPPLY CHAIN MANAGEMENT
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Supply Chain Management Best Practices The
Five Pillars

• fair
• equitable
• transparent
• competitive
• cost effective
• Section 217 of the Constitution

EQUITY
VALUE FOR MONEY
ETHICS AND FAIR DEALING
ACCOUNTABILITY AND RESPONSIBILITY
SUPPLY CHAIN MANAGEMENT
NATIONAL TREASURYS PUBLIC SECTOR
SCM REFORMS
Proper and successful local government SCM rests
upon certain core principles of behaviour - the
Five Pillars of Procurement best described as
pillars, because if any one of them is broken the
procurement system falls down.
SCM is accelerating internal service delivery,
enabling City departments to focus on their core
business
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Key Stakeholders Service Delivery Environment

• Politicians
• Customers
• Employees
• Community
• Suppliers
• Governments Regulators
• Construction and Industry Development Board
• National/ Provincial Treasury
• Department of Trade and Industry
• Department of Provincial and Local Government

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Financial Risk Management Defined

• Creating sustaining economic value in the City
  of Johannesburg by effecting best practices to
  manage our financial risk exposure

One of the key levers drivers in the City is
sound Supply Chain Management Culture
Practices
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SCM Contribution to Sound Financial Risk
Management

• Strategic re-focus of the SCM function enabling
  departments to focus on direct delivery of
  Services to Citizens
• Openness and Transparency in the bidding process
  all procurements above R 30 000 are advertised
  in Public including Public disclosure of all
  bidding/tenders awarded
• Improvement in the quality of service providers
  (through the accreditation and pre-qualification
  process)
• Improvement in the cost and quality of services
  delivered by suppliers e.g. multi-party
  contracting

8
SCM Contribution to Sound Financial Risk
Management

• Initiating a long term view of the business for
  acquisition planning and management which
  includes long term demand management and planning
  for City goods and services
• Strengthening of the bid committees
  specifications, evaluations and adjudication of
  high value spend items
• Implementation of an ERP system

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SCM Reforms
By using a centralised AND decentralised supply
chain model, CITY is striving to drive costs down
and improving service delivery.
Service
Costs
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Open Transparent Public Bidding Procedures
Tender Quotation Invites
Tender Awards
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As Opposed to.
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Ensuring reputable service providers

• Screening of potential service providers
• Tax Vat Clearance
• Rates and Taxes
• Municipal Accounts
• Blacklisting Disputes
• Engagement with top 100 spend service providers
  with emphasis on
• Ethical Procurement
• Engagement of indirect procurement spend on
  BEE/SMME Organisations
• Improvement in quality and lead times for goods
  and services
• Workshops with BEE SMME vendors
• Tender/BEE helpdesk assistance

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Improvement in the cost and quality of services
delivered by suppliers

• Introduction of Strategic Sourcing
• Long term contracts for repetitive purchases of
  goods and services and focus on the principles of
  Total Cost of Ownership
• Setting quality standards for direct purchase
  materials and services

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Strategic Sourcing
STRATEGIC
Sourcing
Manage Contracts
Performance measurement compliance process
TACTICAL
Manage Content / Users
Manage Suppliers
OPERATIONAL
Transactional (Procure-to-Pay)
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Improvement in the cost and quality of services
delivered by suppliers (contd)
Sustaining supply relationships will demand
embedding clear and measurable performance
measures, some of which will include..
On Time (Service) Delivery
Competitive Pricing
Customer Relationship Account Management
Product Quality Management
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The shift to Commodity Management implies a broad
focus on Total Cost of Ownership (TCO), a
continuous improvement process and a team based
approach
The Cost and Value Added by Procurement
From
To
LEVEL OF ACTIVITY
Commodity Lead
Core commodity team
Team-based process
Materials engineer
Lead Buyer
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Initiating a long term view of the business
acquisition planning and management

• Engaging internal stakeholders to conduct demand
  planning on material and service requirements
  over multiple year budgeting cycles
• Long term linkage of demand and acquisition plans
  into the budgeting process

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Enabling business and job creation opportunities
via BEE and affirmative procurement strategies

• Establishment of guidelines for vendor
  performance management and development
  especially SMME BEEs
• Engagement with Top 100 suppliers to enhance the
  indirect procurement spend opportunities and
  possibilities
• Setting up of a BEE SMME Support Centre/ Helpdesk

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Key Challenges Risks in Local Government SCM

• Giving the function strategic emphasis BEE/
  Strategic Sourcing
• No/ Poor demand management

• Coping with the bombardment of Legislation
• PPPFA, MFMA, SCM Regulations, CIDB, Promotion of
  Access to Information, Competitions Act, BBBEE,
  National Treasury Circulars, etc, etc

• Unethical Conduct of Suppliers and Employees
• Risk Management emerging SCM practice

Governance
SCM Legislation
Challenges
SCM Best Practices
Technology
Skills Shortage

• Inadequate technology to track spend
• Different IT platforms across the Organisation
  management information is invisible

• Staff shortages in the SCM
• Current inadequate skills sets to drive the SCM
  agenda

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Managing key Strategic Risks within Joburg
Challenge
Countermeasure

• Governance ethical Supply
• Chain Management

• Supplier Employee Workshops
• Fraud and Corruption Strategy
• Develop a risk management framework

• Regular forums with the National Treasury and DTI
• Affiliation with a Procurement Body Institution
  for Purchasing South Africa (IPSA)
• Implementation of City Acquisition Planning System

2. Compliance to SCM Legislation
3. Building SCM Best Practices within the
Local Govt Sphere

• Refining of BEE strategy
• Conducting of Spend Analysis and Contract
  Management

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Managing key Strategic Risks within Joburg
continued..
Challenge
Countermeasure

• Recruitment of skilled staff
• Training and development of existing staff

4. Skills Shortage

• Refinement of the SAP system
• Implementation of electronic procurement systems

5. Technology
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City Operating Model Better, smarter, at less
internal cost, while empowering BEE SMMEs
Economic consideration
Social consideration
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THANK YOU