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  • Unlocking the R500 bn
Articles:

Unlocking the R500 bn

22 April 2020

What are the implications of COVID-19 on already struggling supply chain management processes and an economy that was already flirting with a recession?

Before COVID 19, we had an established way of thinking – sourcing services, goods and capital works.  Structured timelines and hard copy submissions were the order of the day in both the public and private sector. However, looking back at the past few years, budgets were slow to be confirmed by line mangers, procurement committees followed slow bureaucratic processes and by the time services, goods and capital works were eventually procured, the needs would have changed or efficiencies were not attained by the time the services, goods or works were rendered.

We all still need services to be rendered, and in some instances the need is even more urgent than before COVID-19. 

 

RELIEF PACKAGE ANNOUNCED BY CYRIL RAMAPHOSA ON 21 APRIL 2020

The President’s relief package is indicative of the actual impact on life as we know it.  Small business and individuals are hardest hit financially by COVID-19 and depend on Government’s supply chain management processes to WORK.

Organisations with simple and complex supply chains, like manufacturing and retail, will face a number of major challenges such as:

  • How can they ensure reliable replenishment?
  • How much inventory needs to be stocked and where?
  • How can supplier networks be expanded and best utilised?
  • What about local sourcing? 
  • How to stimulate local sourcing through the dti predetermined local production criteria?
  • What impact is the crisis having on demand?
  • What about pricing and how to adjust pricing?

 

Government now needs to think outside the proverbial box about how to source strategically and efficiently, with absolute value for money and speed of delivery in mind.

But how do we ensure that we enhance efficiencies and truly respond to the identified needs? And how can we ensure procurement processes are ethical in such a chaotic and very real struggle we are all facing?

While we need to collectively manage and improve the economy the Government will play the biggest role in stimulating our economy and we need to ensure that through strategic sourcing linked to annual performance plans supply chain managers rise to the occasion.

Government’s economic and social response to COVID-19 announced on 21 April 2020 will go some way to addressing the drastic decline in supply and demand and protect some jobs. But it is not sustainable in the longer term.  Most of the relief provided to businesses will culminate into loans, apart from certain tax relief suggested.  Only through changing bureaucratic and overly regulated supply chain processes will fast and firm relief happen for people with small business.

We all have a responsibility to ensure the following is addressed:

  • Strategic Procurement needs strategic foresight by decision makers at all levels in both public and private sectors.  Focus must be on the Public Sector and the Non-Profit Organisations as the aim would be to achieve the principles as set out in Section 217 of the Constitution.
  • Procure what is needed, as determined through appropriate planning. Planning is key during and after COVID-19 and this can only be done after appropriate needs analysis has been concluded for each service, good and works required.  
  • We know the Minister of Finance will pronounce on amended budgets in the forthcoming days.  All departments, municipalities and entities must redraft Demand and Procurement plans to re-align the actual needs and timing thereof.
  • Appropriate market analysis has to be conducted by supply chain managers – which is a key regulation in the updated Preferential Procurement Policy Framework Regulations applicable since April 2017.
  • Government must implement Strategic Sourcing processes.  National Treasury has already mentioned the need for strategic sourcing in the new proposed procurement regulations.
  • The HOW is critical.  It results in delays, poor quality and even poor value for money if not done appropriately. The proposed procurement regulations are under review and comments have been requested from implementers.  However, they are silent on how to procure strategically, and they need to be finalised urgently. We need to:
    • Move from paper to digital. Governments and businesses with strong technology infrastructure, enabling regulations including e-signature and e-transactions laws, are dealing with the supply chain disruptions much better than those without.
      • Government must implement an e-platform for submission of tenders at each of its entities
      • This will immediately save prospective suppliers’ money by not printing 5 – 10 packs as often required
      • This will immediately stimulate business through services / goods and capital works than can be delivered – while remaining mindful of the “new unknown and uncertain ways” post hard and soft lockdown
      • Bid committees can function through online meetings. Information submitted electronically can be evaluated faster without the need for lengthy evaluation committee meetings
      • Travel costs can be re-allocated to IT infrastructure and networks required for national and international relations
      • Physical office space needs will reduce
    • Focus on cash flow.  The President’s R500 billion support package will stimulate cash flow to a point for individuals.  Government must pay for services rendered to decrease its accruals and to stimulate the financial impact of cash in the economy.
    • Ensure data privacy for suppliers. Data privacy through the PoPI Act, Competition Act and others needs to be firm and implemented.  Shared data must be protected to truly enhance processes.
    • Understand and activate alternative sources of supply.  Government must consider all sources of supply and appropriately alternate between sources.  
    • Start early – don’t assume the current disruptions will never happen again.  The Black Swan event has occurred and is still ongoing.  We are not certain of when and how the lockdown will be lifted
    • The impact of 12 million school-going children on employers and employees related to relaxing the lockdown will be another disruption that supply chain management must be geared for.
  • National Treasury should assist with research in each of the spend and supply categories in the public sector. Strategic sourcing is linked to a firm understanding of the market you want to procure from and a detailed market analysis has to be done by Supply Chain Managers.  
  • Strategic sourcing is built on the principles of fair, transparent, cost effective and equitable supply chain management process. Open communication with successful suppliers should include ensuing they know they are involved in strategic sourcing processes.
  • Government must initiate processes to benchmark and track results.  Each entity must monitor results and ensure that full value is being achieved in terms of goods delivered.

 

Supply chain management will result in a real unlocking of the R500 bn package announced last night. Let’s not waste this opportunity.

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