Supplier Development in South Africa for Enterprises

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Even thoughLean Supplier Development Supplier Development in South Africa is relatively new to landscape, it has a rich international history.  One of the benchmark companies that have made use of Supplier Development has been Toyota. This has led to such a level of success that companies across the world have made use of the practices in the Toyota Production System.  These practices have mostly been branded by a concept called Lean Manufacturing.
Toyota had a view that if they were to develop their suppliers that advantage would positively impact on Toyota itself.  Put very simply therefore Toyota believed that if they could develop their suppliers they would have a reduction in cost, an improvement in quality and an increase in delivery or throughput.  These then are the major goals of most international supplier development programmes.
The methods in which the above outcomes have been achieved has been to use techniques such as Value Steam Mapping, 5S, Just-In-Time Delivery, Theory of Constraints, Kanban and various others methods.  The core methodology however is to understand how the customer views value and to increase this value to the customer, while reducing waste.  This is a significant principle and is the reason why lean has been successful in established companies and is now also gaining recognition in many entrepreneurial start-ups.

What makes South Africa unique regarding Supplier Development?

South Africa’s needs are slightly different to that of the rest of the world when we think through what is required in the area of Supplier Development.  Many SMME’s that have been developed in the past are facing serious barriers to enter the supply chains of large South African companies.  Some of that is in relation to the quality of the products that are being manufactured, but most of the problems are in terms of the volumes that is required by Corporate South Africa at very low profit margins.
Previously supplier development could be done on any size of company that was more than 25% black owned.  Now however the amended codes (Dec, 2013) specify that Enterprise and Supplier Development can only take place on suppliers that have a turnover of less than 50 ZARM and are more than 51% Black Owned.  Further to this added bonus points for ESD were created in the codes for job creation.
The goal of supplier development in South Africa is therefore not only to focus on the quality of products and services, but also the sustainability and growth of SMME’s in our country.

The requirements expected from a Business Development Support Provider

In the past much of the attention given in the area of Enterprise Development support has been associated with sales.  For this reason you will find many companies seeking to assist in the refinement of the sales pitch or investor pitch.  This will not change as it will always remain the focus of any small company.  Attention will also remain on increased turnover, managing the sales pipeline and managing cash flow, but due to the change in the codes closer emphasis will now be placed on the delivery mechanisms associated with the increased demand.
A strong emphasis will now also in the future be placed on Operational Management and Continuous Improvement methodologies linked to quality improvement. Service Level Agreements will start to become an important instrument in the Supplier Development process which will emphasize areas such as Mean Time to Deliver and Delivery in Full on Time.

Will Lean Manufacturing benefit Supplier Development in South Africa?

If we define Lean as a method to enhance and deliver consistent value then it becomes quite rational to see how Lean will benefit South African organisations.  Working in the supply chain of a multinational company I have been surprised at how many companies have sought to compete based on the business they have conducted in the past.  These companies have assumed that they will deliver in the future and have not been able to define the value that they add to the companies that they are supplying to.

Lean Supplier Development

When their contract comes up for renewal they realise that they are offering a commodity and suddenly find themselves negotiating based on cost.  Lean supplier development will assist companies in determining value from the customer’s point of view, embedding practices of continuous improvement in consistency of delivery and leading to value offerings rather than commodity offerings.  If done correctly Supplier Development in South Africa will add significant benefit to both the customer as well as the supplier.

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