Supply chains in South Africa need to be local, future-focused and world class
Unless we build a strong, inclusive economy, South Africa (and every company in South Africa) is in big trouble. Supplier development and transformed supply chains are key to this. GLENDA NEVILL reports.
The work many South African companies do in terms of supplier development is quite “remarkable” because they have to make both their SMME suppliers, as well as their customers, the focus of their supply chain management activities.
Supplier development and supply change management (SCM) don’t sit comfortably together, says IMM Graduate School SCM lecturer Marzia Storpioli. “Typically in SCM, the focus is on superb service to the customer and enhanced customer experience, and not the number of jobs added to a specific sector in the economy and the financial security of the suppliers,” she explains.
That is why initiatives highlighted in the latest Absa Business Day Supplier Development Awards are quite “remarkable”.
“Supplier development generally involves achieving a sort of partnership where the buyer achieves lower costs and higher quality and the seller consolidates his business by ensuring continuity of supply for the buyer through innovation,” Storpioli explains.
“This is not generally the case in South Africa’s supplier development programmes because the aim is to uplift small, black-owned and black female-owned businesses. Most often this results in paying slightly higher prices because small businesses are supported. The benefits lie in the number of jobs created or the revenue stream guaranteed to such SMMEs,” she says.
The reasons for doing this are, in the main, aligned to political and socio-economic demands. The Absa Business Day event recognises efforts in developing suppliers in line with B-BBEE initiatives, Storpioli says. “This has little to do with supply chain management itself but rather more about spreading wealth and opportunities through a business’ procurement spend,” she adds. “As a professional I can only applaud what is being done by Absa and commend the winners on their achievements (immensely hard to do in a sluggish economic environment).”
Founder of the awards, Fetola CEO, Catherine Wijnberg, says no company is an island and leaders in business are hyper aware that unless we build a strong, inclusive, economy South Africa (and every company in South Africa) is in big trouble.
“For this, our supply chains need to be local, future-focused and world class,” she says. “Transformation ensures broader participation in the economy, and resultant growth in national wealth and increased wealth and well-being is critical to all our futures.”
Wijnberg says the purpose of the awards is threefold:
- To make visible the good work of big businesses
- To acknowledge and encourage best practice in supplier development
- To encourage collaboration and shared learning, building a community of best practice so that the whole industry can advance
Despite being only three years old, they have had an impact. “We see an increase in corporates collaborating within and between industries. We see that when supplier development is driven as a strategic imperative from the boardroom, there is distinctly greater success and long-term impact. We see that leading companies are passionate about doing supplier development right – going beyond the scorecard to a genuine desire to support lasting growth in the supply chain as a way to build an effective and transformed economy,” Wijnberg points out.
She acknowledges that supplier development is not always the most economical way of doing business but in South Africa, it is vital in the socio-economic sense. So, how do big companies balance economic imperatives with socio-economic ones?
“The Absa Business Day Supplier Development Awards are about going beyond the scorecard – so moving away from the tick box of compliance to real strategic thinking,” Wijnberg explaines.
“Investment into supplier development is investing in the future competitive advantage of the company – so, selecting the right suppliers and working together for shared benefit. The decision-making needs to move away from the cost or ticking the supplier development scorecard and become more about the cost of NOT developing competitive, diverse and healthy local suppliers,” she adds.
While there are hundreds of worthy and honest initiatives, IMM Graduate School SCM lecturer, Dr Myles Wakeham, warns against “window dressing”. What is supplier development in a South African context, he asks?
“Some see it as a financial investment in a supply organisation and if that is the case, then quite honestly there are too many charlatans/shady operators in this space. All you have to look at is the failure of B-BBEE, particularly in small to medium enterprises as well as corruption and blatant theft. I do, however, support supplier development in terms of training and helping organisations to become more adept in outsourcing. Give them the fishing rod and help them to fish!”
Wakeham believes medium sized organisations would do a better job if there were some tax incentives to get involved. “Remember that this will become a long-term project and so there should be mutual commitment on both sides,” he says. “Businesses should commit themselves for the medium to long term. Supply chain development is not supplier development so businesses should consider including medium and small entities in their chains. The problem here is that by doing so they will be exposed to greater risk.
“Risk management should be used when assessing supply partner suitability and there should be continued supplier evaluation. There has to be a comprehensive and mutually binding service level agreement (SLA) in place that spells out exactly the mutual obligations of both parties,” says Wakeham.
Still, the challenges are legion, as Wakeham points out. “The unhealthy economy, Covid-19, poor business ethics, the lack of transparency and trust, self-reference criteria, the racial divide, the continuing narrative of costly mistakes in this regard, opposing business cultures and a ‘I look after myself philosophy etc…”
How to overcome all this? “Government support and new business models applicable to the development of suppliers and supply chain development to foster inclusion…”
Wijnberg has some ideas too. “We can reduce the inefficiency in supplier development through increased levels of collaboration between businesses and across industries,” she says. “As more companies move beyond the ticking of supplier development boxes and work together to build a national network of world-class, local suppliers’ funds will be released to do bigger and more impactful work.”
There are also plans afoot to bring small and medium enterprises on board, Wijnberg reveals. “We have lots of smaller businesses already playing their role in supplier development and local supplier support. In 2021 we plan to encourage this with recognition for SMEs that support the transformation of their own supply chains,” she says.
Wijnberg acknowledges winners of the overall award, the Spar Group, for its commitment to local economic growth via their rural farming supply chain. “While their programme is far from being the largest, their inspirational approach shows strategic leadership commitment, aligning company purpose with actual delivery of local economic growth,” she says.
“Collaboration with local and international role players in the development of their rural vegetable farming scheme, the active enabling of these small farmers to access competitive supply chains and the vision for community-owned facilities illustrates an inclusive, strategic approach which embodies the spirit of the Absa Business Day Supplier Development Awards.”
Distell, too, stood out this year with places across a range of categories and their commitment to stay the distance with small suppliers despite the ravages of Covid-19, she says. “This long-term commitment to building healthy supply chains is central to their future strategic advantage and makes them leaders to watch and emulate.”
And then there’s the V&A Waterfront who “showed why they are leaders in the retail precinct industry, with their project that actively brings ‘buy-local’ opportunities for small suppliers alongside international brands. The V&A are a great example of innovative collaborative thinking as a way to strengthen the long-term, competitive advantage of their mall”.
Newcomer Award: V&A Waterfront for its Joy from Africa to the World programme. They partnered with 140 artisans and smaller suppliers – at every level of the supply chain – to reimagine their festive season décor. The category runner-up is Goodyear.
Local Manufacturing Award: V&A Waterfront for its investment of R336 million in small suppliers representing 38% of their total procurement spend. Runner up was Tiger Brands.
Youth Development Award: Distell for the group’s Green Up Recycling and Bansela Taverner programmes, which provided 320 job opportunities to mostly youths. Runner-up was Tiger Brands.
Black Women Development Award: Empact Group has 30% of total procurement spend going to SMME’s – of which 39% was channelled to support black women suppliers. Runner-up was the V&A Waterfront.
Rural and Township Development Award: SPAR Group Ltd won the award for their SPAR Rural Hub programme in which markets have been created to support small-scale farmers in the production and sale of their vegetable products. Runner-up is Distell.
Skills of the Future (4IR) Award: Unilever South Africa for their Isazi Farming Technology project that is providing technological solutions in the agriculture sector through the use of artificial intelligence and machine learning. Runner-up was Distell.
Collaboration Award: This year’s joint winners were Distell and Tiger Brands.
Small Supplier Development Award: SAB with runner-up being Goodyear.
Impact Award: It acknowledges a company whose supplier development initiatives have substantially impacted the value chain. This year’s winner is Tiger Brands, with Distell being named runner-up.
Overall Winner: A discretionary award for the company that stands out as the leader in supplier development in South Africa. With their purpose-driven strategy to address challenges such as food security, nutrition, job creation and transformation, this year’s winner is SPAR Group Ltd. Distell was named as the runner-up.
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