Government Supply Chain and Procurement SummitGallager Estate - 13th & 14th October 2008

Centralised ProcurementLessons Learnt from the Gauteng Shared Service Centre

Namhla Siqaza: GM - ProcurementGauteng Shared Service Centre

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• Procurement Environment

• Decentralized/Centralised vs. Shared Services

• Prior to Shared Services

• Gauteng Shared Service Centre

• The Next Chapter

• Lessons Learnt

Outline

· The role of procurement is to buy quality goods and services at a demonstrably competitive cost to be delivered at the right time and place.

· Facilitates efficient service delivery in the public and private sectors

· Positioned as a strategic partner with other senior level executives

· Procurement is viewed as key business advisor on industry and supply market trends

· Compliance to regulatory requirements: Constitution & PFMA

· Commitment to Black Economic Empowerment through PPFA practices

· Scarce procurement skills

· Possible effect of global financial crisis

The Procurement Environment

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Decentralised/Centralised vs. Shared Services

Decentralization• Independence

of business• Economies of

skill• Lean, flat

organization• Enhanced

career Progression

• Synergies• Recognition of

Group functions

• Dissemination of best practices

• Center of excellence

Centralized

• Variable standards

• Different control

environments

• Higher costs

• Duplication of Effort

• Manual intensive & repetitive

• Remote from business

• Unresponsive

• No Dept. control of

central overhead

• Inflexible to Dept. needs

• Common systems & support

• Consistent standards

& controls

• Economiesof scale

• Dept. maintain control of decisions

• Responsive to needs

• Maintenance of business

units decisions

Shared Services

Prior to Shared ServicesProcess Technology People

–Highly manual & paper-based processes

–Limited standardisation / consistency

–Excessive delays in transactions & communication of information

–Poor compliance to regulatory/ legislative requirements

– duplication

–Lack of integration between systems

–Duplicate data entry into multiple systems

–Manual processes due to lack of appropriate technologies

– Poor spend analysis

–Unclear roles & responsibilities

–Tasks were associated with people, not processes or departments

–Multiple contacts across service tiers

–Inadequately skilled staff, “a dumping ground"

BASELINE INFORMATION

No. of entities - 58

SLA for RFQ – 19 days

SLA for RFP – 70 days

19,54% spend on P2P process

80.46% Maverick spend

Three IT systems

No pre qualified vendors

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Systems

People

Business Processes 14 P

rovin

cial

Gov’t D

epts

12,00

0 acti

ve

supplie

rs

Procu

remen

t

Finance

Human R

esource

s

Audit

Tech

nology Support

Organ

isatio

nal

Reach

Business Functions

Serv

ice

Dep

th

GSSC Business MandateThe Gauteng Shared Services Centre was established in 2001 as a key

transformational initiative to revitalise service delivery in the public sector

Provides back-office transactional support services in 5 functional areas

Serves 14 Provincial Departments’ geographically spread over 126 physical locations

Serve 160,000 employees

Does business with over 12,000 active suppliers

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The aim of GSSC Procurement is to provide procurement related services to GPG departments. It is our intent to be ‘best in class’ organisation in the areas of Sourcing, Contracting and Purchasing whilst proactively contributing to GPG socio-economic objectives

GSSC Procurement –The Operational Mandate

Develop & implement sourcing

strategies that will assist GPG

Departments purchase goods

&services effectively from

suppliers, balancing financial

efficiency with socio-economic

outcomes.

Develop & govern Customer

Departments & Supplier business agreements over

the lifecycle of the contracts ensuring that the involved parties fully meet their respective obligations in

order to deliver the business &

operational objectives

required from the contracts.

Promote viable working

relationships with vendors,

specifically BEE / SMME vendors, in support of GPG’s B-BBEE Strategy by focusing on

balancing commercial

imperatives with social

responsibility.

Optimise & support the utilisation of procurement processes &

systems, including updating &

maintaining the materials

catalogue & provide tender administration

services.

GSSC Procurement –The Mandate Continued

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1.Identif

y Need

2.Sourc

e

3.Contr

act

4. Requisition

5.Order

6.Recei

ve

7.Pay

8.Reporting

The P2P process was envisioned as the official vehicle through which GPG procures goods & services, and subsequently pays suppliers

From the outset, the goal was to drive the creation of public value through tight integration of the end-to-end process

We defined P2P activity ownership, staked out territories, re-examined relationships, shared roles & responsibilities of GSSC vs. Customer Departments

Measure, Measure, Measure performance and compliance through a P2P scorecard (e.g. # of PO per FTE ; % of invoices paid within SLA; etc)

Automate through best of breed system tools (SAP purchasing platform; mySAP SRM; Catalogues (MDM); BI; Workflow; etc)

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1Department

completes requestand forwards to the

GSSC

Procure Goods and Services

GSS

CVe

ndor

Dep

artm

ent

Start

2GSSC receives

/ requestrequisition

3Buyer sourcesgoods and/or

services

4GSSC places

order withvendor on behalf

of Dept

0External ProcessVendor Receives

business requirementfrom the GSSC

0External Process

Vendor dispatchesgoods and/or

services to the Dept

5Dept receives goodsand/or services and

acknowledges receipt ofthe goods to the GSSC

Vendor submitsinvoice to the GSSC

6GSSC receives

acknowledgementof receipt of goods

and/or servicesand invoice

7GSSC pays

vendor on behalfof Dept

End

8Contract

amendments

GSSC Procurement – The Mandate Continued

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Reduced turnaround times from req. decision to PO placement by 50% over the previous year.

Exceeded the GPG Preferential Spend target of 50% by achieving a 53.5% spend

Doing business with 12,000 active suppliers

Process an average of 7500 purchase orders per month – an increase of 450% over the last 3 years

Reduced turnaround times from req. decision to PO placement by 50% over the previous year.

Achieved cost savings of between 5% in isolated target areas

60% P2P spend

GSSC Procurement – Realising the Promise

GSSC Performance Data as at March 2007

Our Challenges

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Demand planning

High “touch points” still causing the most headaches!

Invoice mismatches & payment delays

Non-acknowledgement of goods & services received

Use of un-registered suppliers

Our processes are still perceived as very complex

The compliance/leakage problem

Maverick spend

Automate & integrate further with mySAP ERP; e- registration; e- catalogue; e - auction; e- tendering ; P- Cards; e-Invoicing; etc

End to end P2P process

Establish strategic partnerships

Prequalify; train & develop vendors

Achieve and exceed GPG Annual PP Spend targets

Attract, develop, retain the right cadre of people!

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The Next Chapter – Higher Levels of MaturityGoing forward, we will focus on 4 critical factors to drive full value from

our GPG-wide Investments

4 Focal Points: Process; Customer; People; Finance

Optimise business processes through further automation & integration

Improve customer & supplier collaboration

Pursue the People Agenda

Sound fiscal management &

increased BEE spend

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This is a Programme NOT a Project!

It’s about more than cost. It’s about service.

Measure performance. Demonstrate achievements.

Importance of stakeholder management.

Engage in an open and frequent opinion exchange with

your suppliers.

Need for a solid technology platform.

Do not forget about the PEOPLE!

Lessons from the Frontline

It’s not about sharing – it’s about transformingthe way Government does business!

Just do it!

Namhla SiqazaGeneral Manager – ProcurementNamhla.siqaza@gauteng.gov.za

Thank you!