Eskom Procurement Book 2015

PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES

• Identify the impact of different cost elements, including quality non- conformance. • Track in real terms cost improvements over time. • Gain management’s attention regarding the areas where cost-reduction efforts will have their greatest payback. • Target specific areas for improvement or elimination. • Make fact-based rather than subjective supply-chain decisions. • Gain a better understanding of the supply chain. Although this list probably could be longer, it gives the idea. Prior to the economic meltdown of 2008, importers were experiencing serious product and logistics cost increases. Asurvey byArchstone Consulting and the Supply Chain Management Review reported that 35% of manufacturers experienced a 25% to 50% increase in material and component costs from foreign suppliers over a three-year period. Over 50% of survey respondents reported up to a 25% increase in product costs. Similar increases were reported for logistics and transportation costs. Total cost is measured because in uncertain times the need to understand every element of cost is greater than ever [6]. E-sourcing is the process of obtaining bids from different suppliers via a single online portal. The benefits of e-sourcing include streamlining the sourcing process, reducing prices by maximising supplier competition, and creating a repository for sourcing information. The benefits of e-sourcing include streamlining the sourcing process, reducing prices by maximising supplier competition and creating a repository for sourcing information. While over 90% of businesses do use e-procurement strategies to some extent, most place e-sourcing under the wider umbrella of meaning: using the Internet to assist in the purchase of goods and services needed by a business. The reality is that e-sourcing is a separate category of techniques that focuses primarily on the quality and price of products used in the creation of a business’s product. Obviously, e-sourcing can save money, but there are other equally important benefits. For example, e-sourcing can improve worker collaboration because these web-based applications can be accessed by all of the departments in a company. Therefore, if a Request For Proposal (RFP) is being prepared to purchase the materials needed for a new project, then all of the teams and departments involved in the project can use the applications to contribute to the RFP. The end result is a clearer, more exact explanation of what the project entails. And because everyone is involved at that level, there is less resistance to the project in later stages. Another important benefit of e-sourcing is that it does help companies find the ideal suppliers for their materials. Normally it is difficult for businesses to sort through all of the information about potential suppliers and to compare one with another before making a final decision. Even judging by proposed cost alone may be difficult because one must take into consideration delivery time, quality of the

4.5.7 E-SOURCING

79 CHAPTER 4