When considering Supplier Development as part of your ESD plan it is wise to consider the two different processes of supplier development as defined by Krause, Handfield and Scannel (1997). The one process is reactive in nature while the other is strategic in nature. The reactive process is what you focus on to assist companies to improve their performance. Suppliers are struggling to meet performance expectations from the buying company and will therefore be targeted through a supplier development intervention.
Most of the companies in South Africa will be applying reactive supplier development strategies due to the lack of black owned/ black woman owned QSE/EME’s in current supply chains and the perception that these small companies need development. Most of the ESD strategies in South Africa will further target job creation and growth in turnover of the beneficiaries.
Reactive supplier development could have problems though, consider for a moment the following scenario. Let’s say three major mining companies in the same region were to decide that they don’t have any black woman owned survey companies in supply chain. This is not so difficult to imagine as survey companies are normally small in nature and the barriers to entry are not that high. Let’s now say all three of these companies decide to follow the same target regarding supplier development. What would be the outcome of this process? What we might find over the short term is the following:
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All three mining companies would compete for the same resources (black woman owned surveyors) in the same region.
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It might occur that the three mining companies might develop the same company, but the more likely scenario is that they would develop three different companies
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All three mining companies would claim that they have created jobs
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After three years of contracting with the surveying supplier that they have been supplying from at a premium (due to being the only black woman owned company) they would send out a tender into the region and might find that there are now three companies to choose from
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As the only differentiator is that the company would be black woman owned the only other differentiator would be price which means that only one of the three companies can be the most cost effective. Over the long term there would therefore be limited sustainability (1/3 of the companies would survive) and no job creation.
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An even worse outcome might be that the companies were also loaned money and now are having to also repay debt after they no longer have any contracts.