The CIPS - UNIDO Memorandum of Understanding

Assisting Organisations to procure from Developing Country supply chains

Presented by:

Karen van Vuuren (FCIPS*)*Fellow of the Chartered Institute of Purchasing and Supply, UK

General Manager, Strategic Supply Management Transnet

AfrIPANetICC, Durban South Africa2008-10-24 & 2008-10-25

The initial foundations for the affiliation between UNIDO and CIPS is based on:

In the case of CIPS*

• to assist the purchasing and procurement officers of private and public organizations • in gaining greater transparency on possibilities for local procurement in developing country environments; and • in making more informed procurement decisions.

In the case of UNIDO**

• to assist local enterprises in developing countries to be more visible and attractive as suppliers; and • expand their market access through supplier contracts.

The CIPS and UNIDO agreed to share their plans and agendas to achieve a long-term affiliation and relationship

CIPS* - Chartered Institute of Purchasing and Supply based in the United Kingdom

UNIDO** - United Nations International Development Organisation based in Austria

CIPS - Chartered Institute of Purchasing and Supply

The Largest Procurement and Supply Chain Institute in the World

A UK Based Organisation with Members in 138 Countries

A Regulated Education Awarding Body with University Degree Conferring Powers

A Learning and Development Agency working with a Range of Private and Public Organisations Globally

A Knowledge Management Sower, Reaper and Harvester

An Advocate to Government and Industry of the Value Procurement and SCM can Deliver

Provides Qualifications from Certificate to Masters to over 25,000 Students World-Wide

Accredits >50 PSCM Master Degree Programmes in European, Australian and Asian Universities

Trains Fortune / FTSE Company Procurement Teams in Academic and Practical Programmes

Certificates Organisations Procurement Policies, Procedures and Operations from Approved to Gold Standard

Offers Procurement Professionals a Dedicated Framework for Continuous Professional Development (CPD)

Represents PSCM as Business Discipline that contributes economically to National & International Prosperity

WHO? WHAT? Europe: 29,000 Members -

120 Study Centres

Africa: 12,000 Members - 55 Study Centres

China: 3,000 Members

- National Network

Australia: 2,500 Members - 15 Study Centres

In ASEAN: – 1,000 Members - 10 Centres

WHERE?

Background to the CIPS and UNIDO Memorandum of Understanding

IN AN ECONOMY MARKET FORCES SHOULD ENSURE EFFECTIVENESS & EFFICIENY, BUT MARKET FAILURES DO OCCUR

An economy is made up of a combination of physical capital and human

capital that employs technology to transform inputs into more valuable outputs

Public Infrastructure

Inputs Outputs

Technology

Private infrastructure

Human capital

+

In the African context we have market failures. The African Union & UNIDO want to be addressed this via interventions together with TNCs*.

*TNC – Trans-National Corporations

MARKET FAILURES CAN BE RESOLVED WITH UNIDO’s AfrIPANet* SUPPORT IN LINKING FDI**/SME DEVELOPMENT

UNIDO’s Regional Programme will engage ***TNCs to increase their interaction with

local African economies, supported by three components of AfrIPANet.

**TNCs currently source a large % of required goods and services from outside the African Region, thus being exposed to a large degree of Supply Chain Vulnerability (SCV).

***TNC – Trans-National Corporations *AfrIPANet - African Investment Promotion Agency Network **FDI – Foreign Direct Investment

= Investors

BACK UP SLIDES

17

UNITED NATIONSINDUSTRIAL DEVELOPMENT ORGANIZATION

Reducing poverty through sustainable industrial growth

Survey Conclusions and Suggestions

Survey data should be easily accessible

Policy advocacy role of IPAs to be strengthened

Increase the FDI benefits to local companies

Strengthen regional markets

Creation of Information platform: Allow IPAs to do their own analyses Give empirical evidence of needs

and patterns of investors to increaseIPAs‘ clout

Policy and incentive design Shortlist investors willing to partner

with IPAs

Supply chain development of local firms (with major TNCs, equity funds, IPAs, ITPOs)

Cross-border supply chain development -outsourcing, formulation of regional IPA strategies

UNIDO response

More emphasis on investor support services (aftercare)

Suggestions

LOCAL AND INTERNATIONAL SUPPLY CHAIN PARTNERS WORK TOGETHER TO SUPPLY FINAL CUSTOMERS

TNC 3Example: Eskom

Segment AFor example: Mining

LocalOrganisation

Adapted from Michael Porter

Suppliers to industry(Tier 2, 3 etc suppliers)

Industry players(Tier 1 suppliers)

Markets/ segmentsChannels forcommunication &

distribution

TNC 1Example: Anglo

Competitor B(international)

Competitor A(regional)

African Supplier I

UNIDO’s Regional Programme wants to engage TNCs as the point of perceived strength

in terms of working with local supply chains. TNCs will gain by reducing their SCV

Segment BFor example: Chemical

African Supplier II

TNC 4Example: Transnet

TNC 2Example: Sasol

Segment CFor example: Energy

Segment DFor example:

Transport

Practical example in Southern AfricaPractical example in Southern Africa CSDP – Competitive Supplier Development

The aim of CSDP is to identify localization interventions that will leverage participating SOEs expenditure on imported goods and services in those priority areas identified in SOEs’ signed off Supplier Development Plans and that will address the market inadequacies, so as to create an environment conducive to investment in new and/or upgraded local manufacturing capacity.

SOEs – State Owned Enterprises

Practical example in Southern Africa: Practical example in Southern Africa: CSDPCSDPBuyers identify localisation opportunities

Practical example in Southern Africa: Practical example in Southern Africa: CSDPCSDPBuyers set industrialization targets, formalized in Supplier Development Plans

Practical example in Southern Africa: Practical example in Southern Africa: CSDPCSDPHubs are being set up with local suppliers, regional operators (buyers) & OEMs

SOEs – State Owned Enterprises OEM – Original Equipment Manufacturers

The initial foundations for the affiliation between UNIDO and CIPS is based on:

In the case of CIPS*

• to assist the purchasing and procurement officers of private and public organizations • in gaining greater transparency on possibilities for local procurement in developing country environments; and • in making more informed procurement decisions.

In the case of UNIDO**

• to assist local enterprises in developing countries to be more visible and attractive as suppliers; and • expand their market access through supplier contracts.

CIPS* - Chartered Institute of Purchasing and Supply based in the United Kingdom

UNIDO** - United Nations International Development Organisation based in Austria 1

www.rhsupplychain.com

R&HSCA

Workgroup Meeting

14th October 2008

Practical example in Southern Africa: Practical example in Southern Africa: CSDPCSDPRailways & Harbours Supply Chain Association as a buyer / supplier hub

SARASouthern AfricanRailway Association

RRARail & Road Association

13

Industries are adopting a collaborative supply chain approach

when working with the OEMs to drive industrial development

TransnetRegional

rail operatorsMining

rail operatorsHarbour operators

OEM OEM OEM

Local suppliers

Local suppliers

Local suppliers

Local suppliers

Seeking products where we can achieve local and global competitiveness

Assisting OEMs to develop local suppliers which can fulfil immediate and global requirements

Assisting local suppliers in their development toward global competitiveness on a collaborative basis

Source: UNIDO South Africa, Herman Potgieter

OEM – Original Equipment Manufacturers

Confidential and Proprietary Information 14

The key objective is the deployment of a common development platform,

aligning various stakeholders to accelerate supplier development

Collaborative platform• Common “Language” (Standard)• Shared IT platform• Broad industry participation• Using data for research and development

monitoring purposes• Various implementation agencies (UNIDO,

NFTN, NPI, various dti departments,

private organisations, cluster initiatives etc)• Core development functionality is free of

charge, advanced features pay for the

maintenance of the platform

Suppliers Buyers

Development agencies

Financialinstitutions

Alignment

Suppliers Buyers

Development agencies

Financialinstitutions

Suppliers Buyers

Development agencies

Financial /investmentcommunity

Standard

Monitoring & Management Platform(developed to support IPAs & ITPOs)

Confidential and Proprietary Information 15

Individual company level info (Micro Level)

Supply chain view

Industry / cluster level monitoring

National or regional level monitoring data

UNIDO, the DTI, DPE, World Bank, Economic research institutions, academic institutions, economic development agencies, ASGISA

UNIDO, the DTI, DPE, academic institutions, industry associations, cluster initiatives (NFTN), standard bodies, environmental development initiatives, trade unions etc.

CIPS, IPSA, Supply Chain Council, supply chain research bodies, trade monitoring etc.

Development donors, FDI support agencies, non-commercial development centres etc.

Monitoring & Management Platform(developed to support IPAs & ITPOs)

The Supplier Development StandardThe data can be used for non-commercial research and monitoring purposesto the participating stakeholders

The Supplier Development Standard

Linking the developed and developing economies to fast-track industrial development

Stakeholders UNIDO SPX Supply Chain Council (SCC) World Bank

Local Governments (including Dept of Trade and Industry)

Stakeholders UNIDO SPX Supply Chain Council (SCC) World Bank

Local Governments (including Dept of Trade and Industry)

• The global buyers are increasingly trying to gain access into the developing economies. The frustrations trying to work across geographic, cultural and language barriers are enormous.• The means to assess and develop suppliers in these countries is very limited, compared to the requirements of the modern supply chain.• The developing economies often have excellent suppliers, who do not have the exposure towards the rest of the world.• This supports suppliers’ efforts to collaborate as a cluster to deliver against the requirements of a global buyer organisation.

• Industrial development normally has to go through certain development phases.• Lumus greatly speeds up this process, by driving this process on a roadmap basis down to a individual company level. It provides UNIDO, governments (and organisations) with the means to monitor development and to support it by means of focused policies and interventions.

Stakeholders UNIDO Local Governments

Industry Bodies (Chambers of Commerce)

World Bank (and similar organisations)

Stakeholders UNIDO Local Governments

Industry Bodies (Chambers of Commerce)

World Bank (and similar organisations)

• The ability of smaller suppliers to firstly expose themselves and survive the growth into the mainstream economy is daunting.• Small companies often fail either by not being exposed to more business or by taking on work which is above their means and capabilities• These companies normally require a hand-holding approach.• Although there is often substantial national initiatives to assist these organisations, Lumus provides the means to monitor development and intervene on a micro level.

Stakeholders UNIDO SPX

Local Governments

Support networks consisting of experienced individuals

(Often experienced retired executives)

Unions Donor organisations

Stakeholders UNIDO SPX

Local Governments

Support networks consisting of experienced individuals

(Often experienced retired executives)

Unions Donor organisations

Roles and Responsibilities of UNIDO

1. Establishing SPX centres in countries within the context of ongoing UNIDO technical assistance projects, with a view to setting up institutional structures and operational tools and methodologies for linking of buyers and suppliers, contractors and sub-contractors.

2. Bring together the buying potential of CIPS members and the supplier development tools of UNIDO to enrich the procurement experience and deepen the local supply chains of large enterprises in developing countries.

3. Ensure that supplier development initiatives of individual institutions are supported by the SPX initiatives and they add synergy to the overall development objective of the SPX network.

4. UNIDO will on a similar basis, actively promote CIPS membership to those suppliers who came on board through the CIPS membership or activities.

5. UNIDO will refer organisations with supply chain development gaps to CIPS who will provide training courses, consulting and/or mentorship interventions to address these gaps within the development framework.

6. UNIDO will proactively promote membership of CIPS throughout all of its networks. UNIDO will recognise CIPS on the preeminent leading Purchasing and Supply Association in the world.

7. UNIDO will introduce and provide access to the CIPS and its global networks including governmental procurement and institutions.

The CIPS and UNIDO Memorandum of Understanding

Roles and Responsibilities of CIPS

1. Develop capabilities of supplier organizations to upgrade their practices and performance to match the requirements of buyers.

2. Develop the capacities of purchasing and procurement officers to utilize the SPX methodology for increasing efficiency and transparency.

3. Design and implement joint training programmes for buyers and suppliers.

4. CIPS will design, offer and deliver training to both buyer and supplier organisations through the SPX initiatives.

5. CIPS will provide access and make available their organisational certification programmes to the aforesaid.

6. CIPS will facilitate research and design through its network of universities and business schools to assist UNIDO in collation and delivery in both of its surveys as benchmarking tools.

7. CIPS undertakes to introduce and broker relationships for UNIDO across its extensive global networks of members, organisations and institutions.

8. CIPS shall enable a free flow of knowledge management through utilising its portfolio of tools, techniques and methodologies, expert groups and individual practitioners to best effect for the CIPS/UNIDO co-joint projects.

Bring together buying potential & supplier development tools to enrich the procurement experience and deepen local supply chains

QUESTIONS

Presented by:

Karen van Vuuren (FCIPS)General Manager, Strategic Supply Management Transnet

Karen.van_vuuren@transnet.net

Mobile +27 (0)83 274 9926