POST CONTRACT MANAGEMENT Unlocking the Potential

Mira Ristovich

Senior Consultant: Group ProcurementCIPS Sothern Africa Pan African Conference

24 - 26 May 2011

Agenda

• As MTN, we…

• Business Growth

• Political risk map

• Procurement Helix

• Sourcing Methodology & Relationship Life Cycle

• L&D Vendor Rationalisation – Background

• Pre-Contract: Planned Achievement Against Project Goals

• Sourcing: Vendor Filter Process

• Contract: From “Purchasing”.........To “Procurement”

• Post Contract Management Relationships

• Savings Realisation Model

• Supplier Positioning for Sourcing Strategy

• Managing Critical Supplier Relationships Model

• Organisational benefits achieved

© 2009 Accenture. All rights reserved. 2

As MTN, we…

• Connect people with family, friends and jobs

• Create jobs, directly in the operations with entrepreneurs who sell

airtime, cleaning services, advertising services, office rentals, security

services – which generates the economic multiplier

• Create a positive atmosphere for other investments into the country

• Pay taxes which enable government to invest back into the communities

with infrastructure development

• Create infrastructure where non exists (in place of rail, roads)

• Inspire the youth

• Invest in the communities in which we operate

© 2009 Accenture. All rights reserved. 3

2000 2005 2010

Operations 5 11 21

Population 68m 344m 552m

Market cap (ZAR bn) 58 (31 March 2000) 103 (31 Dec 2005) 253 (31 Dec 2010)

Revenue (ZAR bn) 6 29 115

EBITDA 2 12 50.5

Subs(m) 2,3 12 141,7

Business Growth

National Player African Player Emerging Market Player

Political risk map - High growth is in high risk markets

5

Procurement Helix

6

Sourcing Methodology & Relationship Life Cycle

7

Identify

Opportunity

Post

Contract

Management

Contract

ManagementSolution

Definition

Seller’s activities:

Develop offeringAdvertise Create needsConditionSell

Buyer’s activities:

Buyer has needSpecifies need SearchCondition

Negotiate frame

agreements with

key suppliers to

ensure better price

and more

efficiency

Detailed

agreement

Implementation

Initial delivery

Refining

Ongoing delivery

Continuous

improvement

Business development

Extension

Completion

Termination

Sourcing

Methodology

Process

Relationship

Life Cycle

Model

Diagnostic

Phase

Business Case

Development

Approval by

Technical

Committee

Cross Functional

Team approval

CFT defines the

scope RFx issued Evaluation process

(desktop,

presentation,

additional questions,

price review)Short listed vendors

identifiedHigh level plan

L&D Vendor Rationalisation - Background

MTN Group Learning and Development (L&D) aims

to rationalise its learning vendor base to:

• Realise the potential savings opportunity

• Enable and sustain a rationalised learning vendor

base and

• Improve the quality and consistency of learning

delivered

8

Pre-Contract:Planned Achievement Against Project Goals

Goal Planned Result

Rationalise the vendor base In the targeted competency clusters by 25 – 50%

Achieve cost savings Between 7% and 20% in net nominal savings opportunity. MTN’s strategic

objective is to be a least cost operator

Achieve economies of scale Negotiate price, screen the quality and content

Standardisation of vendors per competency cluster

In line with critical skills required

Identify suppliers and rationalise supplier base

Assess suppliers on full set of criteria, including capabilities, offerings, price and quality

Incorporate leading practices of sourcing of Learning Vendors into MTN

Remaining four sourcing steps to be used to realise the savings opportunities

Reduce administrative efforts Standardise learning vendor management processes and improve integration between L&D, Procurement and Finance functions

The business case findings indicate that the rationalisation of L&D vendor management

will lead to costs savings, a reduced vendor base and consolidated programme catalogue

9

Sourcing: Vendor Filter Process

10

Shortlisted vendors from RFP process and

selected priority vendors will proceed to the next

sourcing event (auction/negotiation)

Final vendor selection will be made to align with

the project mandates of vendor rationalisation

and cost savings

Final

Proposal

Minimal Requirements

Value Add

Supplier pool identified via internal

and external research

Screen 3

Screen 2

RFI information provides input to

this processScreen 1

Final

Agreement

MTN

Vendor

External

Vendors Total

No. of

vendors

invited

160 33 193

No. of

vendors

responded

60 17 77

No. of

vendors

shortlisted

26 7 33

No. of

vendors to

be

contracted

15 4 20

• Combination of RFP and RFI issued

• MTN incumbents and external vendors were sent the RFP’s based on their capabilities

Operating Guidelines - MTN

Procurement Programme

• Comparisons will be made based on total cost of

ownership, including cost of switching and qualitative

aspects• Strategies will optimize group scale and align

approaches to match individual business needs• No group company will be worse off in the current

environment than they were pre-strategy• “The Contract” -Once potential suppliers, evaluation

and risk criteria and implementation plans are defined

by the operating companies, all sourcing decisions

are to be honoured.

Contract: From “Purchasing”...To “Procurement”

Contract Prioritisation

and Assessment

Contract Strategy

Development

Contract Plan

Implementation

Results Tracking and

Reporting

Supplier Relationship

Management

The earlier Procurement is involved in the sourcing process, the

greater the savings achieved

Procurement Ambassador Mira Ristovich – ristov_m@mtn.co.za

Savings Realisation Model

© 2010 Accenture. All rights reserved. 13

Savings report will be compiled in LADDS and will be calculated in USD, Rands and Local Currency.

Approved Vendors

Approved Courses

Prices per Vendor

% of Savings

Data Input

LADDS monthly reporting

Savings Report:

• Total Savings in USD

• Total Savings in Local

Currency

• Total Savings in Rands

• Spend in vendors/courses not

approved

LADDS

Data Output

Managing Supplier Relationships Model

15

Supplier Performance Management

Organisational benefits achieved

– Robust approach

– Selective scope

– Benefits tracking

– Cross-functional teaming

– Change management

– Business case targets

• Well-exceeded the business case targets, with 26.82% (vs. 20%) savings

• 92% (vs. 50%) reduction in vendors for the in scope competency clusters

• The estimated number of attendees for the in-scope courses showed that

MTN expected to train 49% more people than in the previous year

• The total training costs would actually reduce in real terms.

• The quality and consistency of courses being delivered has increased and

stabilised respectively.

© 2009 Accenture. All rights reserved. 16