Centralised Procurement
Lessons Learnt from the Gauteng Shared Service Centre
Government Supply Chain and Procurement Summit
Gallager Estate - 13th & 14th October 2008
Namhla Siqaza: GM - Procurement
Gauteng Shared Service Centre
Outline
• Procurement Environment
• Decentralized/Centralised vs.
Shared Services
• Prior to Shared Services
• Gauteng Shared Service
Centre
• The Next Chapter
• Lessons Learnt
2
The Procurement Environment

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 & PFMA

Commitment to Black Economic Empowerment through PPFA practices

Scarce procurement skills

Possible effect of global financial crisis
3
Decentralised/Centralised vs. Shared Services
Decentralization
• Variable
standards
•Different control
environments
•Higher costs
•Duplication of
Effort
• Manual
intensive &
repetitive
Shared Services
• Independence
of business
• Economies of
•Dept.
skill
maintain
• Lean, flat
control of
organization
decisions
• Enhanced
career
•Responsive to
Progression
needs
• Synergies
• Recognition of
•Maintenance
Group
of business
functions
units
• Dissemination
decisions
of best
practices
• Center of
excellence
•Common
systems &
support
•Consistent
standards &
controls
•Economies
of scale
Centralized
•Remote from
business
•Unresponsive
•No Dept. control
of central
overhead
•Inflexible to Dept.
needs
Prior to Shared Services
Process
Technology
People
BASELINE
INFORMATION
–Highly manual &
paper-based
processes
–Lack of integration
between systems
–Unclear roles &
responsibilities
 No. of entities - 58
–Limited
standardisation /
consistency
–Excessive delays
in transactions &
communication of
information
–Poor compliance
to regulatory/
legislative
requirements
– duplication
–Duplicate data entry –Tasks were
into multiple
associated with
systems
people, not
processes or
–Manual processes
departments
due to lack of
appropriate
–Multiple contacts
technologies
across service
tiers
– Poor spend
analysis
–Inadequately
skilled staff, “a
dumping ground"
 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 vendors
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
 Serve 160,000 employees
 Does business with over
12,000 active suppliers
Service Depth
 Serves 14 Provincial
Departments’ geographically
spread over 126 physical
locations
Business Functions
Business Processes
Systems
People
6
GSSC Procurement –
The Operational Mandate
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
Develop & implement sourcing strategies
that will assist GPG Departments purchase
goods &services effectively from suppliers,
balancing financial efficiency with socioeconomic outcomes.
Optimise & support the utilisation of
procurement processes & systems,
including updating & maintaining the
materials catalogue & provide tender
administration services.
Develop & govern Customer Departments &
Supplier business agreements over the
lifecycle of the contracts ensuring that the
involved parties fully meet their respective
obligations in order to deliver the business &
operational objectives required from the
contracts.
Promote viable working relationships with
vendors, specifically BEE / SMME vendors,
in support of GPG’s B-BBEE Strategy by
focusing on balancing commercial
imperatives with social responsibility.
7
GSSC Procurement –
The Mandate Continued
The P2P process was envisioned as the official vehicle through which
GPG procures goods & services, and subsequently pays suppliers
1.
Identify Need
2.
Source
3.
Contract
4.
Requisition
5.
Order
6.
Receive
7.
Pay
8.Reporting
 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)
8
GSSC Procurement –
The Mandate Continued
Department
Procure Goods and Services
Start
3
Buyer sources
goods and/or
services
4
GSSC places
order with
vendor on behalf
of Dept
Vendor
GSSC
2
GSSC receives
/ request
requisition
5
Dept receives goods
and/or services and
acknowledges receipt of
the goods to the GSSC
1
Department
completes request
and forwards to the
GSSC
0
External Process
Vendor Receives
business requirement
from the GSSC
6
GSSC receives
acknowledgement
of receipt of goods
and/or services
and invoice
0
External Process
Vendor dispatches
goods and/or
services to the Dept
7
GSSC pays
vendor on behalf
of Dept
Vendor submits
invoice to the GSSC
8
Contract
amendments
End
9
GSSC Procurement –
Realising the Promise
 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% spend
 Doing business with 12,000 active suppliers
 Process an average of 7500 purchase orders per
month – an increase of 450% over the last 3 years
 Reduced turnaround times from req. decision to
PO placement by 50% over the previous year.
 Achieved cost savings of between 5% in isolated
target areas
 60% P2P spend
10
GSSC Performance Data as at March 2007
Our Challenges
 Demand planning
 High “touch points” still causing the most headaches!
 Invoice mismatches & payment delays
 Non-acknowledgement of goods & services received
 Use of un-registered suppliers
 Our processes are still perceived as very complex
 The compliance/leakage problem
 Maverick spend
11
The Next Chapter – Higher Levels
of Maturity
Going forward, we will focus on 4 critical factors to drive full value from
our GPG-wide Investments
 Automate & integrate further with
mySAP ERP; e- registration; ecatalogue; e - auction; e- tendering ;
P- Cards; e-Invoicing; etc
 End to end P2P process
 Establish strategic partnerships
 Prequalify; train & develop vendors
 Achieve and exceed GPG Annual
PP Spend targets
 Attract, develop, retain the right
cadre of people!
4 Focal Points: Process; Customer; People; Finance
12
Lessons from the Frontline
 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!
Just do it!
It’s not about sharing – it’s about transforming
the way Government does business!
13
Thank you!
Namhla Siqaza
General Manager – Procurement
[email protected]