Eskom Procurement Book 2015

PRINCIPLES OF SUPPLY CHAIN AND PROCUREMENT MANAGEMENT

Category Typical characteristics

Possible strategies

Bottleneck (high risk and low spend)

Reduce the organisation’s market vulnerability and secure on-going supply by: • Identifying alternative sources of supply and/or substitute goods or services. • Holding extra stock where possible reduces risk. • Developing supplier capabilities and/ or changing demand requirements. • Ensuring long-term agreements may secure supply from key suppliers. • Encouraging new supply participants into the market. • Considering local supplier development strategies. • Developing contingency plans to deal with potential disruptions to supply. • Developing performance or functional specifications to ensure a wider sourcing base. • Developing a mixture of technical expertise and procurement skills to manage supply. Manage relationship and performance through regimes and systems which are essential to secure value for money and reduce risk by: • Encouraging effective supplier relationship management for complex and costly bundles of goods and services. • Correctly understand supplier needs and agree on performance management criteria and interfaces. • Maintaining regular communication with suppliers to ensure innovation and continuous service level improvements. • Encouraging local suppliers with an incentive to deliver long-term value rather than suppliers for which the business is not significant. • Helping to develop suppliers’ performance levels.

Highly specialised goods, services or works. • Procurement is often undertaken by technical experts rather than procurement professionals. • Technical specifications are inappropriately detailed and limit the supply base. • Often there are only a few potential suppliers.

Strategic (high risk and high spend)

Represents goods, services or works that are critical to the organisation. • It is often a complex ‘bun- dle’ or ‘package’ of goods and associated services. • Requires innovative solu- tions and high-level exper- tise from suppliers. • The suppliers’ attitude to the organisation (whether or not they consider the organisation a valued cus- tomer) has a high impact on the value and quality of the goods, services or works delivered. • The category represents very few transactions and there are often very few suppliers available. • The costs in offering con- tracts are substantial for both the procuring organi- sation and the supplier.

19 CHAPTER 1