The role of procurement in moving enterprise and supplier development from transactional to strategic

By Sabin Musinde

The enterprise and supplier development (ESD) pillar of supply chain management aims to create an economic environment favourable to black-owned businesses and small businesses in particular, providing them with not only financial and non-financial support, but also with access to market through preferential procurement.

This places procurement practitioners at the core of sourcing transformation and it requires them to become change agents.

Furthermore, because procurement officers are ideally positioned to identify shortfalls in SME suppliers and provide them with adequate support, it is essential to ESD that procurement is through preferential procurement.

For a winning ESD programme the goal cannot be mere compliance
Corporates that have adopted a compliance-driven approach to ESD have defeated the intrinsic purpose of transformation as well as the opportunities offered by the Broad-based Black Economic Empowerment (B-BBEE) Codes.

The problem is worsened by a lack of inclusive leadership commitment, proper planning and the failure of procurement officers to own ESD and drive it through preferential procurement.

Furthermore, an important reason why many ESD programmes do not yield expected results is that many companies jump into ESD initiatives without clearly-defined objectives and a comprehensive roadmap that translates the company's ESD vision into executable actions.

For those few companies that do have an ESD strategy, even fewer have developed their strategy as an integral part of the broader corporate environment. A winning ESD strategy should be entrenched in the fabric of an organisation, deeply alter the structural arrangement and challenge the status quo.

So, how do you break the vicious circle of ESD failure?
To challenge the status quo, implementing ESD should be:
- Strategically planned and executed
- Driven by willing leadership with objectives and performance targets that cascade from the organisation to the business functions and down to individual staff members
- Executed by capable and skilled teams with the right attitude towards change
- Measured to monitor progress, but also to identify deviations or emerging strategy

Leadership has to demonstrate passion and commitment to the broader community through various transformation initiatives, ESD being one of them. This passion and commitment should be guided by a clear ESD vision for the company and keep the entire organisation continually engaged in the pursuit of that vision.

Commitment can be measured by looking at how much procurement officers buy into transformation and support SMEs, without which transformation is merely a catchphrase. Organisations fail the test of corporate citizenship and in their commitment to broader communities if they follow a compliance-driven approach.

At its core, ESD requires a paradigm shift at an organisational level, which requires a great deal of organisation-wide inclusive planning. ESD planning should be aligned to the overall corporate strategy to ensure that the ESD strategy does not threaten the sustainability of any organisation. The planning phase is crucial as the ESD team gets to visualise success and answer critical questions, such as how to achieve the goal, beneficiary profiles, the support to be offered, delivery mode, operating model, governance structure, etc.

After developing an ESD plan, it is important to put in place tools, processes and technology to support the implementation and monitoring of the plan. Processes should consider the ESD function within the context of the entire organisation to establish linkages and understand how the ESD function interacts with the rest of the organisation. Therefore, it is critical to develop an actionable roadmap supported by appropriate monitoring and control systems which cascade from corporate to functional and individual levels to drive performance and accountability.

Lastly, it is crucial that an ESD agenda is driven by open-minded people with the right experience, attitude, and who are culturally fit and attuned to their organisation's direction. Nimble organisations are those who acknowledge and seize the opportunities brought about by the B-BBEE Codes, leveraging ESD to build competitive advantage and mobilising both internal and external stakeholders to drive real economic transformation whilst creating a better and equitable future for all.

ESD and enhancing economic performance
ESD is a proxy to wealth redistribution and seeks to include previously disadvantaged groups in the mainstream economy whilst driving economic growth. ESD benefits both the macro and micro levels.

At the macro level, there is increasing consensus on the role of small and medium enterprises (SMEs) when it comes to enhancing economic performance. The most prominent benefits to growing SME participation at the macro level include:
- The ability to promote wealth redistribution by de-concentrating economic ownership
- Renewal and restructuring of the economy
- Supplier proximity through localisation