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PRESENTATION TO FOURTH EAST AFRICAN PROCUREMENT FORUM 14TH – 16TH NOVEMBER, 2011 BY: Ruth Wamae Senior Assistant Director of Supply Chain Management MEAC, KENYA “THE EXPERIENCE OF THE PUBLIC SECTOR ON THE PERFORMANCE OF SUPPLIERS-KENYA” PRESENTATION OUTLINE 1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction Type of contracts The role of the Procuring Entity Why manage and monitor supplier’s performance? At what stage of the purchasing process do we measure supplier performance? Dealing with poor performance Supplier performance management checklist Supplier performance measurement: KEMSA case study Conclusion Ladies and gentlemen, in accepting to represent Mr. Charles Juma of KEMSA at this Forum, I knew I was putting on oversize shoes. Intro Should I stumble please don’t let me fall. It might be painful 4 INTRODUCTION: Public buyers are operating in an increasingly dynamic commercial and technological environment. Effective procurement planning and monitoring of supplier performance is critical to controlling the risks and costs involved in purchasing. Buyers must develop a contract management plan. Types of Contracts in the Public Sector There are four types of Public Procurement Contracts: Goods Contracts Works Contracts Service Contracts Consultancy Contracts The Role of the Procuring Entity Procuring entities are responsible for ensuring that the contracts are delivered in accordance with the specifications the terms of the contract, All associated risks are identified and managed Effective communication is maintained between the parties. PEs arrange for the routine contract administration activities such as:variation to the contract, bank guarantees and security deposits processing claims for payment. Why Manage and Monitor Suppliers’ Performance? Sound supplier performance monitoring and management strategies offer the following opportunities: Assist Organizations to:1. reduce internal transaction costs associated with purchasing. 2. manage risks 3. develop of strategic relationships with suppliers. 4. Develop supplier capability. 5. develop supply chain management strategies. 6. Improve supplier and purchaser performance. At what stage of the purchasing process do we measure suppliers’ performance? supplier measurement will commence at the Contracting Stage of the procurement process. Actual monitoring and managing performance takes place during the implementation phase However, effective supplier performance management relies on integrating performance monitoring and management approaches throughout the whole purchasing process. Namely:Procurement Planning, Tendering & Contract Management Dealing With Poor Performance There are a number of strategies for dealing with a supplier’s poor performance. These include: Progress meetings and reviews. Agreed problem-solving mechanisms and dispute resolution processes. (e.g Negotiation, Mediation, Expert Appraisal and Arbitration) Enforcing the terms of the contract, including through legal action. As a last resort, terminating the contract and seeking damages from the supplier. SUPPLIER PERFORMANCE CHECKLISTS The following checklists are not exhaustive. They are intended to provide a starting point for the types of issues that should be monitored if a supplier’s performance is to be effectively managed. Delivery Consider whether the supplier: 1. Delivers on time. 2. Meets due date without expediting. 3. Offers a competitive lead time. 4. Delivers correct items and quantities. 5. Provides accurate documentation and information. 6. Responds to emergency delivery requirements. SUPPLIER PERFORMANCE MANAGEMENT CHECKLISTS Pricing: Consider the following factors: 1. 2. 3. 4. Competitiveness. Price stability. Volume or other discounts. Manner in which price changes are introduced. Product: 1. 2. 3. 4. Meets specifications. Reliability/durability. Product or contract service quality. Quality and availability of documentation, instructions, technical manuals. 5. Packaging suitability, environmental aspects. SUPPLIER PERFORMANCE MANAGEMENT CHECKLISTS Customer Service: Consider the following factors for each supplier: 1. Compliance with contract terms and conditions. 2. Supplier representatives have sincere desire to serve. 3. provides feedback to the purchasing organization from manufacturer. 4. Effectiveness of sales support. 5. Market insight. 6. Training provided on equipment or products. 7. Support on professional or technical matters. 8. Administrative efficiency (including order acknowledgment and accurate invoicing). 9. Adherence to their company policies. 10.Adherence to their company quality systems. SUPPLIER PERFORMANCE MEASUREMENT: KEMSA CASE STUDY Supplier performance measurement is done from the tendering stage to contract administration stage. Assessment of supplier’s capability is incorporated into the Tender Document, through use of third party accreditation (Global Fund & WHO Pre-Qualification & ISO Standards) Delivery lead times are measured & late deliveries penalized at 0.05% per week SUPPLIER PERFORMANCE MEASUREMENT: KEMSA CASE STUDY The World Bank procedures also provide penalty for the same. Inspection of the quality of medical commodities is done both at Pre-Delivery, Delivery & Random field quality assessment of the Drugs is done to ensure effective performance of the drugs. Recall of batches that fail the quality test. • Most Kenyan PEs don’t plan for supplier performance evaluation due to capacity challenges except in a few procurement units that are fully professionalized. • We are in process of developing a supplier performance evaluation tool • There are cases of errant suppliers that are get away with it Scott free. • The culture of supplier performance should be entrenched in the respective EAC procurement laws THANK YOU Asante Sana!