Risk Management

What is affecting procurement? Where is the profession going?

 

DuncanBrock_SPW.jpgThere’s a lot going on. The changing and challenging times we currently face are probably greater than they’ve ever been. What is the implication for procurement? What do we need to keep abreast of and continually work on?

Duncan Brock, Director of the Chartered Institute of Procurement and Supply, offered his insights during his opening address at the SmartProcurement World Gauteng conference in September.

Set suppliers up for success and mitigate preferential procurement risks

 

Even if organisations are not doing business with organs of state, they may well form part of the supply chain of organisations to which the PPPFA directly applies. Therefore, they need to be aware of its scope and provisions.

Corporate businesses are actively seeking and supporting black-owned and black woman-owned Exempted Micro Enterprises (EMEs) and Qualifying Small Enterprises (QSEs) as suppliers to meet the stringent Preferential Procurement Policy Framework Act (PPPFA) regulations.

If successfully implemented, this approach could stimulate the desired growth and economic transformation as the B-BBEE Act intended from the start, by providing greater opportunities for small, medium and micro enterprises (SMMEs), particularly those owned by historically disadvantaged South Africans (HDSAs).

“However, while this is positive, merely complying with the PPPFA is not going to guarantee the success of SMMEs: there are factors outside the control of regulations and policies that need out-of-the-box solution,” Terence Gregory, CEO of Ecsponent Limited, told SmartProcurement.

Turning supplier information into procurement insight

 

RudiKruger_2017.jpgDecisions and consequences go hand-in-hand. This is why having adequate, relevant information at your fingertips is a critical aspect of any decision-making process - more so when these decisions affect the operation of business and company reputation.

In procurement, the optimal goal is to manage risks and costs within a company, making it an imperative department of business. Businesses spend a significant amount of time vetting potential suppliers before embarking on a partnership, and pertinent data provides them with the right tools to make informed decisions with information that is easily interpreted by management.

However, the vetting system should not end when an agreement is reached between a business and its supplier. Intensive research and vetting on future and current suppliers should be a continual safety requirement to ensure all procurement legislation is adhered to, says Rudi Kruger, General Manager of Risk Solutions at LexisNexis Data Services, in this month’s SmartProcurement.

Do SA business travellers toe the travel-policy line?

 

TravelPolicy.jpgTraveller non-compliance is an increasing area of concern among travel buyers and managers internationally, with great efforts made to persuade travellers of the benefits of compliance that extend beyond “because the company said so”.

A recent study conducted by FCM Travel Solutions and the African Business Travel Association (ABTA) revealed that the level of non-compliance among South African travellers is limited, however. At least 42% said that their travellers rarely or never booked out of policy, with a further 39% indicating that it didn’t happen often.

4 procurement vetting pitfalls to avoid

 

RudiKruger_2017.jpgMistakes in business come with the territory, but those made in procurement ought to be considered among the most detrimental to the success of an operation. Common procurement related risks include supplier issues such as delivery delays, increases in demand, quality problems and fraud. These issues are often the result of mistakes made in the procurement vetting process, Rudi Kruger, general manager of Risk Solutions at LexisNexis Data Services, told SmartProcurement.

Vetting suppliers: avoid introducing risk into your supply chains

Takata.jpgMany Japanese car makers have recalled whole fleets of models owing to faulty airbag modules

Profit is the ultimate objective of every business operation. However, there are several threats to revenue, including market competition, internal fraud, poor leadership, high expenditure, regulatory obligations and weak links in supply chains, particularly concerning suppliers.

“Working with the wrong supplier could cost you money and a customer’s trust,” Rudi Kruger, general manager of Risk Solutions at LexisNexis Data Services, told SmartProcurement. “Simply put, businesses that receive goods or services from untrustworthy sources run a great risk of failing to meet their own obligations to customers.”

Protect the procurement process from conflict of interest

RudiKruger_2017.jpgProcurement practitioners are responsible for ensuring a fair and transparent procurement process that is free from any conflicts of interest. Despite frameworks like the Public Finance Management Act, Municipal Finance Management Act and the King IV Report on Corporate Governance, there have been numerous incidents in which procurement professionals were found guilty of allowing their personal lives to interfere with their professional responsibilities and duties.

Rudi Kruger, General Manager of LexisNexis Risk Management, points out typical types of conflict of interest that procurement professionals could potentially benefit from, in SmartProcurement.

Procurement benefits most from supply chain digitisation

RudiKruger.jpg
The age of 1s and 0s has revolutionised the way we consume and share information. In the commercial environment, there is hardly a business function that does not make use of technology to perform even the simplest of tasks. Supply chain has been one of the departments to embrace technology the slowest. However, the SC Digest Supply Chain Digitization Benchmark Survey 2016 revealed a shift in mind-set, with about 80 per cent of respondents identifying digitisation as a key focus area.

Rudi Kruger, general manager at LexisNexis Risk Solutions discusses the key advantages of the IT shift for supply chain, which include enhanced safety, reliability, reduced carbon footprint and cost saving.

Identifying and mitigating global sourcing risks

SanetShepperson.jpg

Before you start, ensure that you have the best global sourcing and product experts that you can afford, says Sanet Shepperson (MCIPS) in this month’s SmartProcurement.

Procurement fraud - why does it continue to thrive?

 

procurement-fraud-scandals.jpg“Procurement fraud happens within the entire value chain of organisations. Because decisions are made on every level, some procurement officials get a chance to manipulate the system, and accept bribes,” says Lebogang Letsoalo, Director at Sincpoint Pty Ltd.

 

Case study: Supply chain risk assessment

 

Nico_Snyman.jpgIn this month’s SmartProcurement, Crest Advisory Africa’s Nico Snyman outlines a case-study on supply chain risk assessment.

Failing to identify supply chain risk is a business risk in itself

 

DavidNoble.jpgA procurement and supply function that does not have a good understanding of how to identify, mitigate and avoid supply chain risk is itself a significant risk for an organisation.

This is just one of six internal risk influencers highlighted in a CIPS good practice guide for developing end-to-end supply chain resilience in organisations.

“With the risk landscape getting bleaker, supply chain professionals should be talking more about resilience, any negative impact on how consumers perceive a business can rattle around for years,” said David Noble, CEO of CIPS.

Overpricing is where government's real leakage sits, says Treasury's Kenneth Brown


Kenneth_Brown.jpgIt is South Africa’s equivalent to the proverbial $640 Pentagon toilet seat — a paper binding machine that the government buys from its suppliers for the rand equivalent of almost $2,000, about 13 times what it should cost.

Chief Procurement Officer Kenneth Brown cited the binding machine as an example of the massive waste that means as much as 40% of the government’s R600-billion budget for goods and services is being consumed by inflated prices from suppliers, and by fraud.

Addressing this would mean that "without adding a cent, the government can increase its output by 30%-40%," he says. "We could be building more roads, more schools without even adding more money to the current budget."

SA 42nd for global supply chain resilience

 

SA-flag.pngMeasured according to different dimensions of supply chain risk, South Africa was ranked 42nd out of 130 measured countries and territories in 2016.

Insurer FM Global's Resilience Index ranks countries most and least exposed to different dimensions of supply chain risk, having measured their resilience to supply chain disruptions.

The survey data examines nine key drivers of supply chain risk and groups into three categories: supply chain, risk quality and economic factors.

The trade-off between clean audits and innovative government

 

HelenZille.jpgIt took Western Cape Premier Helen Zille years in government to learn that South Africa is the only country in the world that has developed the concept of a ‘clean audit’. And there is a good reason why other countries have not; trying to achieve a clean audit can actually become a stumbling block to service delivery. It also puts a brake on innovation in government, said Zille in a recent article for the online newsletter of the Premier of the Western Cape.


The Auditor-General’s announcement of provincial audit outcomes is a topical news item. The Holy Grail is a ‘clean audit’. This year the Western Cape achieved 12 clean audits out of 13 departments. But what does this actually mean?


When asked what action would be taken against the Minister and Head of the only Western Cape department that did not get a clean audit, Zille’s answer was “none”; because failing to achieve a clean audit does not imply financial mismanagement or corruption.

How collaboration reduces global supplier risks

 

CollaborateRiskManage.jpgOwed to increasing globalisation, organisations are doing business with partners outside of their traditional comfort zones, complicating supply chains with an array of risks and variables that must be managed to avoid disruptions like quality issues, shipment delays or product shortages.


Deciding on the best approach to reduce global supply chain risks has long been analysed by supply chain management professionals.


Collaboration as a method of risk management is one of them: it involves improving visibility and sharing risk-related information across the entire supply chain. This method allows for risks to be spread out across a trading partner network as a practical way of distributing the ability to control risks in the respective areas of each link in the supply chain.


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