‘Supplier enablement’ is a key component for successful procurement processes in South Africa

This article appeared in the May newsletter with certain technical inaccuracies. SmartProcurement apologises for the error and would like to thank Quadrem for bringing the mistake to our attention and permitting us to re-print the article with the necessary corrections.

The outsourced management of suppliers is of special significance in South Africa as a component of a successful procurement / tender process in the market place, Catherine Hills, Quadrem’s Client Services Director, told SmartProcurement in a recent interview.

“Another factor to be considered as ‘Africa centric’”, she continued, “is the need for procurement departments to have a means of communicating with and developing the SME-BEE category of service providers, suppliers and vendors. Today it is accepted as ‘good practice’ and a corporate imperative, to ensure you can down-stream the inputs needed on the larger contracts for which small BEE suppliers would normally not qualify for. This is particularly significant in the South African environment where, traditionally, only your larger suppliers had the resources and infrastructure to win tenders.”

“Nowadays the tender puts the responsibility for including the small local supplier in the tender process firmly on the shoulders of the party to whom the tender is awarded, as a spin-off of the tender itself.”

Clearly, technology is an important tool in this communication mechanism and, it is one of the reasons that Quadrem is a preferred services provider to many public sector customers. “We have adapted global systems combined with our supplier networking services to cater for ‘African conditions’. What is cardinal is a clear understanding of the whole concept and valued-add of ‘supplier enablement’ (SE). An extremely detailed treatise on this subject, a report by the Aberdeen Group dated May 2007, is very relevant to today’s circumstances”.
According to Aberdeen Group’s 2007 report ‘Supplier Enablement’, the need for SE arose from the disconnect between an organisation and its suppliers, which can present a wealth of problems (and headaches) for any procurement division.

SE is the outsourced connection and engagement of suppliers to an organisation’s supply chain, known as ‘enabling’, which can help to ensure that organisations meet customer demand by procuring materials from preferred suppliers at the right speed and for the right cost.

Supply chain disruptions, insufficient or lack of appropriate supplier information, revenue leakage and missed cost savings are genuine issues that are plaguing companies. Organisations ultimately lack a high degree of visibility into the interactions with suppliers, placing these supplier relationships at risk.

While enterprises are focused on the financial impact of enabling suppliers and how to increase the volume of automated/electronic transactions, it is clear that a critical component is the effective utilisation of information.

SE, offered by eMarket-place service providers like Quadrem, offers organisations an opportunity to increase the percentage of transactions conducted electronically. Aberdeen Group reports that best in class organisations also realise significantly lower transaction costs as a result of supplier enablement and are able to drive down their costs 71% lower than before supplier enablement strategies were deployed, while also realizing an average cost that is over 45% lower than their peers.

By enabling more of their suppliers, Best in Class organisations are able to process more of the transactions in the procure-to-pay cycle electronically as opposed to using manual, paper-based methods. Aberdeen Group found that electronic processing of Purchase Orders (POs), invoices, and payments occurs at least 30% more frequently in Best in Class organisations compared to all others, resulting in improved transaction processing cycle times and cost savings.

A significant benefit of enabling more suppliers is to drive more expenditure under the management of procurement. Aberdeen Group found that Best in Class organisations manage at least 1,5-times more of their expenditure through procurement than average and laggard enterprises. This leads to greater visibility into and increased ability to analyze and report on this spend, which subsequently allows an organization to leverage opportunities for spend aggregation and cost savings.

The major challenges driving enterprises to focus their resources on supplier enablement are reducing procurement operating costs (47%) and enabling business-to-business e-commerce with suppliers (39%).

Enabled supplier relationships include capabilities such as the automated exchange of business documents and communications, the online management of content cataloguing and the active management of supplier information. Quadrem manages supplier information through an automated or self-service process supported by manual processes that enable suppliers of all levels of technological sophistication to participate in the supplier database registration process. This includes collecting, verifying, cleansing, updating and maintaining supplier data.

Improved electronic connections to a company’s supply base offer procurement departments an opportunity to reduce procurement operating costs by utilising more automated and streamlined processes instead of manual systems. Effective supplier enablement also results in improved communication and improves the quality of supplier relationships, which keeps materials and services flowing without the increased fear of breaks in the supply chain.

Nearly half (47%) of the participating organisations indicated that their top strategy for supplier enablement is to utilise a supplier information management system, reports Aberdeen Group. Those organisations recognise that unless they are able to not only collect supplier data (through automated or self-service methods), but also verify, cleanse and actively manage the information (including regular updates and internal distribution to as appropriate), then their supplier enablement strategies will not be as effective as planned.

Aberdeen reports that 53% of organisations represented in the survey pool have indicated that supplier enablement is a high priority task for their respective procurement departments in 2007. Previous Aberdeen research found that although the number one and three challenges for CPOs may shift between people and spend, the number two challenge is always a constant – suppliers.

“Where your SE capability (as a bidding contractor) becomes important is in the evaluation phase before the award”, Hill continues. “Typically this process involves:

• excluding tenders that, for any of several reasons, are defective or not-compliant; and then
• evaluating the capabilities and qualifications of the remaining, and qualified, bidding parties.

At this stage the fact that you are in a position to satisfy the need for including small or even micro suppliers” she points out, “could become a deciding factor in the final allocation of scoring preferential procurement points.

Coupled with their supplier networking solution, Quadrem is geared to assist in this ‘supplier enablement’ process as an acknowledged trade facilitation partner and shared services provider for large and small players, with their electronic trading system that is geared to communicate with the suppliers electronically and at ground level by email, fax or SMS. No one, not even a one-man show, is excluded, provided you at least have a cell phone or acce
ss to a fax machine”.

For further information, Catherine Hills Director of Client Servicesfor Quadrem Africa can be contacted on direct line: +27 (0)21 680 4600 or via email: chills@quadrem.com


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