Transcript Slide 1

Supplier Development & Localisation
CIVILUTION CONGRESS 2014
April 2014
We have distilled five main development
objectives from different government programmes
Programmes
Development objectives
ASGI-SA
NGP
Transformation
B-BBEE
Job creation
NIPP
Localisation
CSDP
Industrialisation
IPAP
Skills Development
NIPF
NDP
• We have aligned ourselves along development objectives rather than
individual policy and government programmes
• This has allowed us to address the requirements of multiple programmes
simultaneously, without having to create new departments or functions
2
Source: Introduction to the Competitive Supplier Development Programme; B-BBEE Act 53 of 2003; ESKADAAT6
This approach has created economic
development and significant transformation impact
Initiative
Examples of impact
ASGI-SA
• Guided our initial job creation and skills
development achievements
NIPF
• Driving industrialisation and localisation through our
Supplier Development and Localisation Plan
IPAP
CSDP
NIPP
•Created ~40 000 jobs and developed new local industries
•R722m invested in plant
•We are positioned to drive development further through
CSDP2
B-BBEE
• B-BBEE incorporated in all our transactions
• B-BBEE spend of R72,1bn - 73,2% of total spend
against a target of 70% in FY11/12
NGP
• Created an Execution Support team to support job
creation as part of our overall SD&L capability
NDP
• Shifting spend to black owned suppliers – will shift 50%
of total procurement spend to BO suppliers by FY16/17
3
Source: Introduction to the Competitive Supplier Development Programme; B-BBEE Act 53 of 2003; ESKADAAT6
We have learned valuable lessons resulting from
our implementation journey
Focus
• Supplier Development and Localisation won’t happen as a “nice
to have” add-on to tenders in the form of “SD&L Targets”
Strategy
• Distill the core impact areas from a diverse policy environment and
concentrate on key development objectives common to all of
them
Integration
• Integrate strategic sourcing, design of technology and our
SD&L objectives into our procurement strategies for all
transactions
Spend
• Consolidate our long-term spend forecasts and plans as
investment in industry will need time and long-term commitment
• Move away from an “arms-length”, transactional based
Engagement relationship with suppliers towards a more integrated,
partnership based model
4
Source: Eskom Supplier Development and Localisation Department
We are driving five overall priorities to use our
spend for economic development
Drive economic development through our 5
focus areas…
1
Industrialisation to foster the
establishment of new competitive
industries, mainly in the energy sector
2
Localisation to develop South African
supplier capability relevant to the energy
sector
3
Skills development to increase the skill
base (number and skill level) of South
African workers
4
Job Creation to enable the creation of
new jobs by suppliers as a direct result of
Eskom business
5
Supplier Development to increase the
number and the capability and capacity of
specifically black owned suppliers
5
Source: Eskom Supplier Development and Localisation strategy
• Accelerating
transformation of
local industry through
Increased focus on
Supplier Development
to create black
industrialists
We have defined our development priorities and
designed a clear approach to create impact
Our Priorities
• Embedding
SD&L into our
organisation
• Enhancing our
Strategic
Sourcing
process
• Making
transformation a
key focus
• Creating our
SD&L Plan
Our Approach
1
2
3
“Design for
local”
Integrate
Supplier
Development and
Localisation
Accelerate
transformation
• We are reviewing technical specifications to identify
spend areas for design for local manufacturing
• Supplier Development and Localisation has been
included into our strategic and project sourcing
process
• To accelerate transformation we have identified key
spend focus areas as enablers to foster the
emergence of black industry
6
Source: Eskom Supplier Development and Localisation Department
Our operations and expansion programme enable us to
drive development through sustained procurement
spend
Our business
Generation
Transmission
Distribution
The future picture
• Projected spend
includes:
• Top 20 utility in the world • New build programme will
− Operating costs
by generating capacity
add a total of 17GW of
(maintenance
• Net generation capacity
capacity by 2018/19
etc.)
of 41,7GW with 237 291
• Kusile and Medupi will be
− Infrastructure
GWh of electricity
the world’s 3rd and 4th
and Projects
produced in 2012
largest coal-fired plants
(expansion,
upgrading and
• Our transmission grid
• New build programme will
refurbishment)
spans an area similar to
add 9 004km of new high
− Primary energy
Western Europe,
voltage transmission lines
costs
reaching across South
• 41 645 MVA of installed
• The potential
Africa with 28 995 km of
capacity in substations by
spend on our
transmission lines and 153 2018/19
portion of the
substations
Integrated
Resource Plan
• Connected over 4,2m
• We plan to reach
(IRP) 2010,
households since 1991
universal access by 2020
beyond known
• The largest power line
in support of government’s
projects, is still
system in Africa with 343
objective of advancing
not fully clarified
014 km of distribution
electrification
at this stage
lines
7
Source: Interim Integrated Report for the six months ended 30 September 2012; The Eskom Factor 2011
We are using our comprehensive Supplier
Development and Localisation Plan as the key
driver for our development efforts
SD&L Plan
Analysis
Demand
Forecasts
Supply
Analysis
Government
objectives
8
Source: Eskom Supplier Development and Localisation Plan
Identification of
extended list of
Strategic Focus areas
188 Strategic
focus areas
Identification of
key Spend Focus
areas
42 Spend
focus areas
Transformation is one of our key focus areas and we
will support the emergence of black industrialists
We are proud of our B-BBEE achievements.
We are resolved to further contribute to tangible
transformation and we will:
• Focus on additional “broad-based transformation impact”
• Focus on “changing the ownership patterns” of the local
energy supply base
• Incorporate transformation and Supplier (Enterprise)
Development into all our transactions
• Support an increase in the numbers of black industrialists in
areas of high value, high impact procurement spend
• Improve the capacity and capability of black owned
businesses through various intervention mechanisms, e.g.
shifting procurement spend and providing dedicated support
• Establish strategic internal and external relationships to
foster integration and collaboration
9
Source: Eskom Supplier Development Strategy
We will provide emerging suppliers with direct
support to become competitive and sustainable
We will develop suppliers through:
1
Creating an
enabling
environment for
new suppliers
• Technical and management interventions to address
the challenges facing new suppliers wanting to do
business with Eskom
• This will be achieved through a range of interventions
e.g. incubation through established suppliers (such
as Roshcon and Rotek)
2 Developing and
growing existing
emerging
suppliers
• Targeted interventions to support existing
suppliers to increase their capacity and
capability to take on larger and more complex
contracts
3
Grow emerging
suppliers into
large and medium
enterprises
• Assist with access to sustainable work
opportunities and innovation to grow emerging
suppliers into established, internationally
competitive enterprises
10
Source: Eskom Supplier Development Strategy
Interventions of a Supplier Development nature are key
to develop a Black Owned supplier base across al
Commodity categories
Developing and
growing existing
suppliers
Creating new
suppliers
Large and Medium
Enterprises (LMEs)
• Established business
‒ Complex governance
structures
‒ Aligned strategies and
• Improved level of business
Emerging Micro Enterprise
performance
sophistication
(EME)
management
‒ Refinement of operating
‒ Highly developed
model and processes
• Operations set up and business
operating model
‒ Established value
begins
‒ Enhanced capabilities
proposition
‒ Market presence established
• Turnover of R5m to R35m per • Turnover >R35m
‒ Core business function
• Growth levers for further
annum
launched
expansion:
• Growth needs include:
• Turnover <R5m per annum
‒ Annuity revenue
‒ Exposure to more complex
• Growth needs include:
‒ Exposure to large
business
‒ Gain experience
projects
‒ High increase in revenue
‒ Increased revenue
‒ Development of IP
‒ Exposure to and
‒ Skills development
‒ Improvement to
generation of best practice
‒ Access to IP
governance structures
IP
Qualifying Small
Enterprise (QSE)
Supplier type
Start-ups
Characteristics
• Business idea launched off the
ground
• Business plan created
• Financing to be secured
• Development needs across all
areas of growth
Intervention types • Support capitalisation
• Work experience & technical
skills development through:
‒ Joint ventures
‒ Sub-contracts
‒ Incubation
• Managerial and
entrepreneurial skills training
• Support capitalisation
• Access to markets , IP and
capability building through:
‒ Enterprise development
‒ Joint ventures
‒ Sub-contracts
‒ Set asides
• Managerial training
• Facilitate generation of IP
through promotion of local
designs in commodity
strategies
• Access to work opportunities
through set asides
• Technical and managerial
training
• Limited Supplier
Development involvement
• Access to more business
through set asides
Early SD&L strategy development allows us to
influence the sourcing process as seen in valves
Developing our valve SD&L strategy before the sourcing strategy allows us to
influence the sourcing process and proactively develop the valve industry
We identified valves as an opportunity
to drive localisation
Our SD&L strategy aims to
holistically develop the industry:
• Large portion of our generation spend
• Standard valves
• New Build Programme has increased
our demand
• High pressure/ high temperature
valves
• Previous ad hoc approach to use of
local industry
• Valve spares
• Underdeveloped local supply industry
• Downstream foundry industry
• Underutilised downstream foundry
business
• Designation of valves for local
procurement by the DTI
• DST has identified valves for
technology advancement
Source: Eskom Valve Supplier Development and Localisation strategy
• Maintenance and refurbishment
We are working towards pooling demand where
our own demand is not big enough to sustain
local industry
Valves and actuator market
(% revenue by end user)
100
16
27
17
29
11
Water Mining Energy Petro- Other
chemicals
Source: Eskom Valve Supplier Development and Localisation strategy
Total
• Eskom accounts for 17% of
total valve and actuator
demand
• We are driving
consolidation of demand
to provide a sustainable
demand view through:
− Collaboration with mining
and petrochemical industry
− Establishment of a working
group to develop industry
wide standards
− Standardising
specifications
Working together with industry has ensured that
all stakeholders have a voice
Lessons from our past have taught us to work with industry to drive localisation
Mobilising the
industry
• The Valve and Actuator Manufacturers Cluster of South
Africa (VAMCOSA) represents local manufacturers and provides
a platform to:
‒ Understand supplier capacity and capability
‒ Work with government to encourage local procurement of valves
‒ To share challenges facing the valve industry
‒ Share long-term investment, localisation and transformation plans
“Design for
local” Working
Groups
• Technical working group to review and create “standard
specifications” for local manufacture
• Despite initial challenges, technical and commercial are working
together with government and industry to drive localisation
Industry
Champions
• Appointing industry champions to drive the valve development
initiatives
• Ensure a deeper understanding of local industry capability
Downstream
input
• Incorporating the downstream foundry industry ensuring there is
a sufficient demand picture to upscale their capacity and
capability
14
Source: Eskom Valve Supplier Development and Localisation strategy
Realisation of our development efforts will benefit
Eskom, local industry and South Africa – without
increasing the cost of procurement
Driving economic development...
Enhanced
industrialisation
Localised
energy industry
Will benefit….
The South African economy:
• Reduced cost of doing business
• Investment in plant and technology
• Greater export potential
• Reduced unemployment and poverty
• Larger and more skilled workforce
• Increased diversity in work
• Improved quality of life
Greater local
skills base
Accelerated
job creation
Investment in
building local
communities
15
Source: CSDP; IPAP2; Group Technology and Commercial
Eskom operations:
• Reduced supply chain costs
• Greater security of supply
• Shorter lead times
• Improved efficiencies and quality
• Co-development of solutions for
operation specific problems with
manufacturers
To realise these benefits, we need to collaborate
and engage on this development journey
How can you support us:
The opportunity:
Engage and communicate with us and your downstream suppliers
• Ability to grow your
business on the
back of sustainable
business
opportunities
Share your innovative development ideas and solutions
Collaborate within industry hubs to coordinate development; align
capacity to future demand and jointly find solutions to challenges
Establish strategic long-term relationships with us and emerging
suppliers to enable the emergence of BO suppliers
Make sustained development part of your core value proposition – We
are moving away from a transaction and compliance/process focused
mind-set
• Insight into a
consistent way of
doing business with
us
• Access to a team of
professionals to
support your
development efforts
OEMs to integrate development objectives into your long-term plans to • Development of a
local up and
make SA part of your global supply chain
downstream supply
chain to support
Innovate and invest on the back of long term and sizeable opportunities
your operations and
to do business with us. Local industry needs to be competitive and
strengthen your
efficient
16
value chain
Source: Eskom Supplier Development and Localisation Department