SA firms keen on centralised buying strategy

25 May 2011

25 May 2011 | Rebecca Ellinor in Johannesburg

In the past five years organisations in South Africa have seen a “tremendous move towards centralising procurement”, according to an overview of recent trends by Accenture.

A breakfast meeting at the 2011 CIPS Pan-African Conference hosted by the management consultancy included a presentation on activity in the local market.

Senior executive Hayley Walters, who is based in Johannesburg, said: “There’s been a tremendous move towards centralising procurement, we see this more and more. The other thing to point out here is that many of these organisations are exploring, or have already made a decision about, outsourcing arrangements.”

Walters said Accenture has also observed a significant increase in the amount of investment in technology – particularly the consolidation of ERP systems and investment in SRM tools. Some of that has been led by the drive to “cleanse and maintain quality of master data across organisations,” she added. “Until you have some of the technology and master data sorted out you can’t even start to talk about moving into the next wave of procurement.”

Next among the trends was what she termed “industrialisation”. “A number of companies are looking at making their procurement processes, particularly requisition to pay, very repeatable, whether it’s for directs or indirects they really want to have standardised, repeatable processes.” That has been happening in conjunction with very definitive category segmentation, she said. “We’ve seen organisations focus on particular sourcing approaches and strategies depending on which category they’re looking at - and there are some signs of aggregation here, but it’s very much early days.”

Meanwhile, Walters said with regards to the Broad Based Black Economic Empowerment (BBBEE) agenda private and public sector organisations are procuring in a very ad hoc way when it comes to reaching their targets. “They don’t look holistically across procurement, they don’t look at it by category, there’s no segmentation of the BBBEE supply base. That’s not necessarily sustainable for the organisations to meet their targets, but obviously it’s not sustainable in building our supply markets and the industry.”

She said procurement needed to have a clear understanding what the targets are; ensure responsibility for hitting those targets is centralised (“not left to a multitude of combined officers”); segment the supply base to identify suitable providers; drive the BBBEE agenda through all purchasing processes; and ensure the suppliers of your first-tier vendors and beyond are helping to create a sustainable supply market for the future.

“We take on this BBBEE challenge because it’s there and because we have to be compliant, but there’s onus on us as procurement professionals to really bring some of these practices and push them through BBBEE. Only through that will we see sustainable development of the supply market in South Africa.”

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