1. Kevin Jacoby Chief Financial Officer City of Cape Town South Africa
Enhancing Sustainability and Profitability for Utility Businesses through
Effective & Efficient Supply Chain Management
Kevin Jacoby
Chief Financial Officer City of Cape Town South Africa

2. Overview Supply Chain Management (SCM) vs Procurement
SCM as a tool for utility businesses
Future developments in the SCM field
Enhancing profitability through SCM
Enhancing sustainability through SCM

3. SCM vs Procurement
SCM: the planning and management of all activities involved in sourcing, procurement, conversion, logistics and disposal management
Integrating activities that procure materials and services, transform them into intermediate goods and the final product, and deliver them to customers 
The key goal: to respond to uncertainty in customer demand without creating costly excess inventory
Although some people use supply chain, procurement and sourcing interchangeably, they actually refer to different aspects of the same part of business.
SCM takes procurement outside the usual buyer role to a role that expands to include the management of functions that were separate in the past. These functions could be internal logistics, inventory management, warehousing and other functions that are related to pre-production side of the supply chain. This expended role leads to the term Supply Chain Management (where the whole chain of functions become integrated and managed together).
SCM encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. In essence, Supply-chain management is the integration of the activities that procure materials and services, transform them into intermediate goods and the final product, and deliver them to customers.
The key goal of SCM is to respond to uncertainty in customer demand without creating costly excess inventory.

4. SCM vs Procurement (2)
Procurement: managing all aspects related to inputs to an organization i.e. procuring goods, materials and services
Procurement is a sub-set of SCM
SCM includes: Planning, Vendor Management, Tenders And Contract Administration, Orders/Acquisition, Inventory And Stores Management, Disposal Management
Procurement is subset of Supply Chain Management.
Procurement deals with managing all aspects related to inputs to an organization i.e. procuring goods, materials and services.
SCM draws heavily from the areas of operations management, logistics, procurement and information technology and strives for an integrated approach.
In South Africa, the SCM function at local government level and within any State Owned Company (or service utility) is strictly legislated.
This legislation identifies Demand Management, Acquisition Management, Logistics Management and even goes as far as the DISPOSAL of goods too – so when an obsolete or broken item is found during a stock-take, or if goods are no longer useful or have reached the end of their productive life, the disposal is also managed by SCM.

5. SCM as a tool for utility businesses
SCM Policy aligned to applicable legislation –
Authorised process (approved by Board or relevant higher authority)
Gives clear direction - can be supported by SOP
Must be reviewed regularly – taking into account:
changes in legislation,
outcome of court cases,
new developments, etc
Delegations support the Policy, clearly allocating responsibility from the accountable party
1. SCM Policy
A Board or Council approved SCM Policy that is written and understood by all parties gives authority or weight to the procedures followed
It allows for all parties to know and understand the procedures that should be followed (which could be further described in a Standard Operating Procedures Manual)
It is a LIVING document that needs to be updated regularly taking into consideration any supporting information
2. Delegations
Delegations must support the policy and align with the roles and responsibilities outlined in the Policy and the SOP
Overall there must be someone who is accountable
Delegations only transfer RESPONSIBILITY

6. SCM as a tool for utility businesses (2)
Can extract Value-for-Money:
transparent competitive processes implemented with due care can result in cost savings
Only do business with those who do not owe any money to the utility
Clear and understandable specifications that do not “prescribe” a single product
Conducting a due diligence on the financial affairs of a company can identify cash flow weaknesses or capacity problems which can be taken into consideration when awarding tenders

7. While not being specifically relevant to the entities being spoken to, these examples show how bad tender specifications
can lead to unwanted outcomes – at huge expense!

9. SCM as a tool for utility businesses (3)
4. Minimise Abuse: Preventative controls built in to:
Combat fraud, corruption, favouritism and unfair and irregular practices;
Blacklist vendors or implement other sanctions;
Report on the performance of contractors/vendors
5. Ethical Standards set for SCM officials & stakeholders
6. Minimum Competency Standards/Skills sets

10. SCM as a tool for utility businesses (4)
Data: SCM is data-rich dependent
Vendor database can be established to enhance market coverage
Tenderer’s information can be compared to current service provision information
Limitations of trade (such as trade with an employee of the State) can be compared against database of employees
Employees declarations of interest can be verified against vendor information – etc

11. SCM as a tool for utility businesses (5)
Oversight Responsibilities
Accounting Officer / CEO overall accountable for SCM
Independent party for handling disputes – e.g. Company Secretary, Legal Advisor

12. Current and future developments in SCM
Facilitate social or economic imperatives
E.g. Green Economy; BBBEE; encourage joint ventures with SMME’s; enhance employment through labour-rich processes, etc
Demand management
Ensures resources required to support strategic operational commitments are delivered at the correct time, at the right price, at the right location, in the right quantity and at a pre-determined or specified quality
Determines quantities and timing of demands on tenders & orders

19. Current and future developments in SCM (2)
E-procurement
To manage tender submission volumes
Improve SCM compliance
Aid transparency
Promote accuracy of information
Speed up tender evaluations and awards

20. Enhancing profitability through SCM
Competitive processes:
Tenders; quotations, auctions and other competitive bidding processes
Promotes competitive behaviour and enhances value for money
Minimizes single sources and getting locked into a single supplier product
Cost-effective:
Significant data commonality and versatility enhancing all revenue collection actions
Comply with legislation/prescribed regulatory framework

21. Enhancing sustainability through SCM
Fair: open and transparent procedures including pre-qualification processes
Equitable: clearly identify when an entity may or must use a particular process
Flexible: when value is below a prescribed amount, use simpler processes
Transparent: procedures and mechanisms set out for each particular process including opening, registering and recording bids

22. Thank you
Dankie
Enkosi
Any Questions?