Gallager Estate 13 th amp 14 th October 2008 Centralised Procurement Lessons Learnt from the Gauteng Shared Service Centre Namhla Siqaza GM Procurement Gauteng Shared Service Centre ID: 236026
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Slide1
Government Supply Chain and Procurement Summit
Gallager Estate - 13
th
& 14
th October 2008
Centralised ProcurementLessons Learnt from the Gauteng Shared Service Centre
Namhla Siqaza: GM - Procurement
Gauteng Shared Service CentreSlide2
2
Procurement Environment
Decentralized/Centralised vs. Shared Services
Prior to Shared Services
Gauteng Shared Service CentreThe Next Chapter
Lessons LearntOutlineSlide3
The role of procurement is to buy quality goods and services at a demonstrably competitive cost to be delivered at the right time and place.
Facilitates efficient service delivery in the public and private sectors
Positioned as a strategic partner with other senior level executives
Procurement is viewed as key business advisor on industry and supply market trends
Compliance to regulatory requirements: Constitution & PFMACommitment to Black Economic Empowerment through PPFA practicesScarce procurement skillsPossible effect of global financial crisisThe Procurement Environment3Slide4
Decentralised/Centralised vs. Shared Services
Decentralization
Independence of business
Economies of skill
Lean, flat organizationEnhanced career Progression Synergies
Recognition of Group functions Dissemination of best practicesCenter of excellence
Centralized
Variable standards
Different control environments
Higher costs
Duplication of
Effort
Manual intensive & repetitive
Remote from business
Unresponsive
No Dept. control of central overhead
Inflexible to Dept. needs
Common systems &
support
Consistent standards &
controls
Economies
of scale
Dept.
maintain
control of decisionsResponsive to needsMaintenance of business units decisions
Shared ServicesSlide5
Prior to Shared Services
Process
Technology
People
Highly manual & paper-based processesLimited standardisation / consistencyExcessive delays in transactions & communication of information
Poor compliance to regulatory/ legislative requirements duplication
Lack of integration between systems
Duplicate data entry into multiple systems
Manual processes due to lack of appropriate technologies
Poor spend analysis
Unclear roles & responsibilities
Tasks were associated with people, not processes or departments
Multiple contacts across service tiers
Inadequately skilled staff, “
a dumping ground"
BASELINE
INFORMATION
No.
of
entities -
58
SLA for RFQ – 19
days
SLA for RFP – 70
days
19,54%
spend on
P2P
process
80.46% Maverick
spend
Three IT
systems
No pre qualified
vendorsSlide6
6
Systems
People
Business Processes
14
Provincial
Gov’t Depts
12,000
active suppliers
Procurement
Finance
Human Resources
Audit
Technology Support
Organisational
Reach
Business Functions
Service Depth
GSSC
Business
Mandate
The Gauteng Shared Services Centre was established in 2001 as a key transformational initiative to revitalise service delivery in the public sector
Provides back-office transactional support services in 5 functional areas
Serves
14
Provincial Departments’ geographically spread over
126
physical locations
Serve 160,000 employees
Does business with over
12,000
active suppliersSlide7
7
The aim of GSSC Procurement is to provide procurement related services to GPG departments. It is our intent to be
‘best in class’ organisation in the areas of Sourcing, Contracting and Purchasing whilst proactively contributing to GPG socio-economic objectives
GSSC Procurement
–The Operational MandateSlide8
GSSC Procurement –The Mandate Continued
8
8.Reporting
The P2P process was envisioned as the official vehicle through which GPG procures goods & services, and subsequently pays suppliers
From the outset, the goal was to drive the creation of public value through tight integration of the end-to-end process
We defined P2P activity ownership, staked out territories, re-examined relationships, shared roles & responsibilities of GSSC vs. Customer Departments
Measure, Measure, Measure performance and compliance through a P2P scorecard (e.g.
# of PO per FTE ; %
of invoices paid within SLA
;
etc)
Automate through best of breed system tools (SAP purchasing platform; mySAP SRM; Catalogues (MDM); BI; Workflow; etc) Slide9
9
1
Department
completes request
and forwards to the
GSSC
Procure Goods and Services
GSSC
Vendor
Department
Start
2
GSSC receives
/ request
requisition
3
Buyer sources
goods and/or
services
4
GSSC places
order with
vendor on behalf
of Dept
0
External Process
Vendor Receives
business requirement
from the GSSC
0
External Process
Vendor dispatches
goods and/or
services to the Dept
5
Dept receives goods
and/or services and
acknowledges receipt of
the goods to the GSSC
Vendor submits
invoice to the GSSC
6
GSSC receives
acknowledgement
of receipt of goods
and/or services
and invoice
7
GSSC pays
vendor on behalf
of Dept
End
8
Contract
amendments
GSSC Procurement –
The Mandate ContinuedSlide10
10
Reduced turnaround times from req. decision to PO placement by
50%
over the previous year.
Exceeded the GPG Preferential Spend target of 50% by achieving a 53.5% spendDoing business with 12,000 active suppliers Process an average of 7500 purchase orders per month – an increase of 450% over the last 3 yearsReduced turnaround times from req. decision to PO placement by 50% over the previous year.Achieved cost savings of between
5% in isolated target areas60% P2P spend
GSSC Procurement –
Realising the Promise
GSSC Performance Data as at March 2007Slide11
Our Challenges
11
Demand planning
High “touch points” still causing the most headaches!
Invoice mismatches & payment delaysNon-acknowledgement of goods & services receivedUse of un-registered suppliersOur processes are still perceived as very complexThe compliance/leakage problem Maverick spendSlide12
Automate & integrate further with mySAP ERP; e- registration; e- catalogue; e - auction; e- tendering ; P- Cards; e-Invoicing; etc
End to end P2P processEstablish strategic partnerships
Prequalify; train & develop vendorsAchieve and exceed GPG Annual PP Spend targets
Attract, develop, retain the right cadre of people!
12The Next Chapter – Higher Levels of MaturityGoing forward, we will focus on 4 critical factors to drive full value from our GPG-wide Investments4 Focal Points: Process; Customer; People; FinanceSlide13
13
This is a Programme
NOT
a Project!
It’s about more than cost. It’s about service.Measure performance. Demonstrate achievements.Importance of stakeholder management.Engage in an open and frequent opinion exchange with your suppliers.Need for a solid technology platform.Do not forget about the PEOPLE! Lessons from the Frontline
It’s not about sharing – it’s about transformingthe way Government does business!
Just do
it!Slide14
Namhla SiqazaGeneral Manager
– ProcurementNamhla.siqaza@gauteng.gov.za
Thank you!