transnet sd-plan-presentation 20120618

Transnet’s Approach to Supplier Development (SD)

DPE “Bootcamp” 19 June 2012

Content

1 Background and context to Supplier Development within Transnet

2 The Market Demand Strategy: an opportunity to drive SD

4 Successes and lessons learned

3 Transnet’s approach to SD

6 Transnet’s ambitions to drive SD into the future

5 Implementation of SD within Transnet

Background and context to the Supplier Development Strategy: key messages

* Source: Team Analysis , Transnet Supply Chain Policy 2012

Transnet Supply Chain Policy Overview of the Supplier Development (SD) requirement for

Transnet

• Transnet’s mandate is to lower the cost of doing business in South Africa whilst promoting shared growth and transformation

• The new Corporate Strategy, the Market Demand Strategy (MDS) provides an opportunity to accelerate South Africa’s economic transformation and industrialisation objectives through leveraging the planned capital investment of R300bn. Longer planning horizons provide better opportunity for sustainable economic development

• In late 2007, Transnet began its participation in and focus on the CSDP and produced its first Supplier Development Plan (SDP) February 2008.

• The SD Plan is aimed to include a view of how the capital

investment plan and other planned procurements will be leveraged to achieve Government’s objectives of job creation, industrialization, skills development and transformation

• The purpose of this document is to present an overview of the SDP

• Transnet shall apply section 217 of the Constitution

of the Republic of South Africa, (Act No 108 of 1996,

as amended) by contracting for goods and services in

accordance with a system which is fair, equitable,

transparent, competitive and cost effective.

• Transnet shall reform all its procurement activities in

order to align them in an integrated manner with

national developmental goals, relevant legislation

that enforces the goals and relevant governmental

supply chain management approaches that are cost-

effective.

• Transnet shall also provide for a preferential procurement system in line with the Constitution and ensure good governance via SCM

• The following Policy Statements are relevant to and

have been considered in the development of the SD

Strategy and Plan:

Policy statement 6.1: Transnet as a Public Entity

Policy statement 6.4: Transformation &

Empowerment

Policy statement 6.5 and all sub-sections:

Economic Growth & Development Initiatives

Policy statement 6.6: Localisation of Supply

Policy statement 6.7.2: Social Economy

PAGE Source: Team Analysis

Corporate Strategy (MDS) drives various other strategies and frameworks inside Transnet to cascade and align with its objectives

Supply Chain Policy (SCP)

Corporate Strategy (MDS)

Document reference Key objectives (not exhaustive)

• Corporate Plan

• iSCM Strategy

• Increase volume and revenue growth • Create greater capacity • Increase operational efficiency • Maintain financial strength • Improve safety and health • Develop Suppliers: growth, transformation

• Optimise value from sourcing activities • Increase supply chain efficiency • Proactively manage compliance risk • Integrate SD strategy • Develop supplier base

• Supplier Development Strategy

• Support NGP objectives through leading empowerment and transformation of the supplier base

• Leverage procurement to develop local suppliers to support localisation and industrialisation; creating jobs and reducing the unemployment rate

• Identify key areas to target for SD within the IC3 framework, together with their Strategies

• Provide implementation framework for SDP • Transnet SDP

Supplier Development Plan (SDP)

SD Strategy

Integrated Supply Chain Management

(iSCM) Strategy

• Supply Chain Policy

• Carry out procurement cost-effectively while meeting commercial, regulatory and socio-economic goals

• Ensure good governance via integrated Supply Chain Management

Key Transnet guidance framework’s / strategies / plans

3

Focus area

PAGE

Transnet’s Supplier Development journey began in 2008 and has evolved to service current opportunities within MDS and align with broader SA objectives over time

4

Initiation of CSDP within Transnet

Transnet applies SD in first transactions

SD begins to be rolled out to all transactions

Transnet launches Market Demand Strategy with significant SD opportunities

• Transnet was the first SOE to launch the DPE’s Competitive Supplier Development Programme (CSDP) as an initiative within the Transnet group

• The first SDP developed and submitted to DPE in 2008

• Transnet designs SD structure into business procurement operating model

• Plans in place to expand SD to all transactions

• R5,2bn committed to local content via CSDP contracts, including: 100 GE locomotives Additional 43 loco’s Long-term parts

agreements for the locos

32 Mitsui/Venus 15E locos

STS and mobile harbour cranes

Draft gear components

• The experience gained in CSDP transactions enabled Transnet to refine policies, processes and procedures

• In 2011 the SD concept broadened beyond CSDP

• Pursuing a broader range of SD opportunities through the supply chain could lead to improved industrial capability building and economic transformation

• Transnet launches its R300bn Capital expansion programme over 7 years

• SD becomes a cornerstone of the overall programme

• The SD strategy and SDP is updated to ensure maximum realisation of SD over the course of MDS

• The revised SD Strategy and SDP is integrated into the new SCM Policy and Framework

NIPP

• Post tender process not offering much leverage

• Investment not necessarily industry-related (30% of contract)

• Penalties were negligible and often built into price

• DTI programme mandatory for all SOC’s imports over US$10 million

• Suppliers were clear of what was expected of them at outset

Pre 2008 2008 2010 2011 2012

Source: Team Analysis *New Growth Path ** National Development Plan *** Industrial Participation Action Plan

PAGE

• Transnet has a significant role to play in driving economic growth and transformation in South Africa. The historical under-investment in infrastructure and exclusion of disadvantaged individuals from the mainstream economy over the past 3 decades, has resulted in:

an un-transformed manufacturing base and a decline in manufacturing capabilities and capacity monopoly structures within the local economy worsening of the gap between rich and poor as evidenced through the Gini coefficient

ratio which rose from 0.66 in 2007 to 0.679 in 2009 to 0.7 in March 2012

• The New Growth Path (NGP1) has set job creation as a country priority and has identified infrastructure development as a means to achieve this. Transnet will be spending R300 billion on infrastructure programmes over the next 7 years, as well as R325 billion on Opex. This significant spend will create a massive opportunity to develop competitive local supplier industries through Supplier Development

• The Department of Public Enterprises (DPE) developed the Competitive Supplier Development

Programme2 (CSDP) - a policy for its State Owned Companies (SOC) to harness such opportunities. Participants in the CSDP are required to develop and submit Supplier Development Plans (SDP’s), which set out how they will capture opportunities. Transnet signed up to the CSDP in 2007 and produced its first SDP in 2008.

Supplier Development will play an important role in Transnet into the future

5

1. The NGP was launched in Dec. 2010 2. CSDP was launched end 2007 Source: Team analysis

Content







The Market Demand Strategy (MDS) provides an opportunity to accelerate national growth and transformation through Supplier Development

MDS will also provide an opportunity to accelerate economic growth and transformation

MDS is a R300bn CAPEX programme that will increase capabilities and capacity to meet market demand

• Transnet will leverage procurement spend to

drive industrialisation and transformation of

the local supplier base

• Become the main thermal coal supplier for

India as well as key supplier to china

• Capture its rightful place as a leading

manganese exporter globally by providing

additional freight capacity and by lowering the

cost of doing business

• Maintain its position as credible supplier of

iron ore for both the domestic and export

market

• Create a reputation of world-class operational

efficiencies

• Become the port of call for global container

lines

• Position itself as the leading logistics hub in

the region

• Enable Transnet to continue its financial stability and strength

• Result in significant productivity and operational-

efficiency improvements

• Stimulate economic growth

• Increase capacity to meet market demand

• Promote a modal shift from road to rail, reducing the cost of doing business and carbon emissions

• Influence SADC regional integration

• Substantially increase Transnet’s on-going MRO spend (~R328 bn)

Source: Team Analysis

Capex and Opex spend allows for the development of manufacturing capability and can be linked to specific MDS opportunities

MDS opportunity Estimated spend over 7 years Rbn Main areas of opportunity

40,871 47,318

56,190

47,927

38,716 37,219 31,096

2017 2016 2018

53.7

45.9 40.3

2015

37.4

2014

33.1

2013

31.4

2012

27.3

Machinery and equipment

Locomotives

Pipeline

Land, Buildings & Structures

Wagons

Port Facilities

Perway

Other Operating Costs

Personnel Costs

Electricity

Fuel

CAPEX

OPEX

• While MDS Capex spend is set to peak in 2016, Operating expenses will continue to rise as the operating tempo of the company increases with increased volumes being moved

• Capex spend of R300m over 7 years whilst Opex spend will be R328 million • Significant opportunity to extract SD through both Capex and Opex plans

Source: Team analysis

PAGE

The majority of the investments will be in General Freight and Freight Rail

Commodity split (Rbn)

Divisional split (Rbn)

Major programmes

GFB rail capacity growth to meet market

demand volumes from 79,7mt to 170,2mt

Completion of the

New Multi-Product Pipeline (NMPP)

Increase export coal

to 97,5mt – including

Waterberg

Increase export

iron ore to 82,5mt

Increase export

manganese to 16mt

Increase in fleet

and improvement

to the infrastructure

24

25

32

151

30

3

26

9

Containers (Ports)

Export Iron Ore

Export Coal

GFB

Bulk

Piped Products

Break Bulk

Other

4 11

33

47

4

201 Other

TPL

TPT

TNPA

TRE

TFR

Other

PAGE

The revised SDP breaks down spend associated with the MDS by division, asset and commodity

Land Buildings and Structures

Wagons

Locomotives

Perway

Machienary and Equipment

Port facilities

Pipeline

Other

OD Business unit (Rbn) Asset type split (Rbn)

Divisional split (Rbn)

31

33

3

9

24

25

32

143

77

72

11

66

9 16 1

48

Other

Bulk

Break Bulk

Piped Products

Containers (Ports)

Export Iron Ore

Export Coal

GFB

201

47

4

11

4

33 TRE

TFR TPT

TNPA

TPL

Other

Source: Consol 10 V15, Team Analysis

MDS will develop and transform Transnet by 2019

Contribute to job

creation and skills

development

• Increase Transnet employees: +25% (~14 700 jobs)

• Increase indirect jobs: +85% (~78 800 jobs)

• Qualification of 5 000 artisans and 1 000 train drivers (over 4 years)

• Training spend of R7.7bn over 7 years, especially first line management and supervisory skills

• Training students from the ODs in Transnet’s schools of ports, rail and pipelines

Promote a modal shift

(road to rail)

• Rail market share growth: From ~25% to 35%

• 6 200 track reduction p.a.

• 28 Mt low cost C02 emissions (over 7 years)

Capacity & capability

building* and

transformation

• Localisation program for rail and port equipment, e.g., increase local content share of contract value to 40% by FY16/17 (CSDP); partnership with IDC, coordination with Eskom

• Improving Transnet BBBEE level from 5 to 3 (within 2 years), e.g., increase preferential procurement to 80% of spend by FY16/17

Reduce the cost of

business

• Reduction of logistics costs: 4-7% (0.5% as a % of GDP) through rail initiatives alone

• Modal shift from road to rail (from ~25% to 35%)

• Operational efficiencies and reduced transport times (e.g., reduction of loading times)

• Economies of scale (e.g., attracting larger vessels through berth deepening)

• Coastal trans-shipment (trans-shipment hub at Port of Ngqura)

Influence SADC

regional integration

• Increase maintenance, regional connectivity, especially through trans-shipment hub at Ngqura, growth of the Maputo corridor and construction of the Swaziland rail link

• Increase over-border rail volume (+14% within 7 years)

SD Focus

15,000 direct jobs 60% local content – electric locomotives 55% local content – diesel locomotives 70% local content – wagons 20% local content – port equipment**

* Previously referred to as localisation ** All target s to be validated by baseline survey Source: Transnet EXCO presentation of MDS January 2012

PAGE

Transnet’s SD strategic objectives support MDS whilst ensuring alignment with Government’s objectives of growth and transformation

12

Transnet’s MDS Objectives Government’s Objectives

• Increase the employment intensity of the economy

• Facilitate diversification beyond our current reliance on traditional commodities and non-tradable services

• Increase the education level and skills capability to address shortfall in artisan and technical skills

• Promote an equitable socio-economic society through the integration of historically disadvantaged persons into the main stream economy

• Enable small businesses to compete successfully in the economy

• Balance spatial development of rural areas and poorer provinces

Source: Transnet Corporate Plan, NGP, B-BBEE, CSDP

• Volume and revenue growth

• Creating capacity

• Operational efficiency

• Financial strength

• SHEQ

• Development

The SD Strategy aims to support the key Govt. objectives through infrastructure develop-

ment by:

• Leading the transformation of its supplier base

• Leveraging procurement to

develop local suppliers, in order to grow localisation

and industrialisation

Content







PAGE

Transnet’s SD approach is to leverage the MDS infrastructure programme to foster economic growth and promote transformation

14

• Achieving SD objectives through leveraging high-value procurement by including:

Industrialisation Localisation Promoting technology

transfer Job creation and

preservation Developing industry-

specific skills Enterprise development Rural integration

• Ensuring transactions to bring HDI’s* into the economic mainstream through the advancement of HDI ownership

• Address economic disparities and entrenched social inequalities through the use of:

FRC (current, future)**

Generic B-BBEE scorecard • Ownership • Management Control • Employment equity • Preferential

procurement • Enterprise development • Socio economic

development • Skills development

SD objectives

Driv

e e

co

no

mic

Tra

nsfo

rma

tion

(E

mp

ow

erm

en

t) Fa

cil

ita

te e

co

no

mic

Gro

wth

Transformation Growth

SD approach SD objectives

Enterprise

Development

Focused

Strategic

Programmatic

* HDI = Historically Disadvantaged Individuals as per the B-BBEE Act 2003 ** FRC = Further Recognition Criteria Source: Team analysis

PAGE

Transnet’s approach to SD will centre around driving both growth and transformation

15

Transformation Growth

Strategic

Focused

ED

Programmatic

Job creation/ preservation

Enterprise

Development

Focused

Strategic

Programmatic

Industrial-isation

Technology transfer/ sustainability

Skills development


Enterprise development

Rural integration

Localisation*

Technology transfer/ sustainability

Skills development



Rural integration

Localisation

Skills development



Rural integration

• Ownership

• Management

control

• Employment

equity

• Preferential

procurement

• Enterprise

development

• Skills

development

• Socio-economic

development

Decreasing emphasis on evaluation criteria categories

Sphere of influence

B-BBEE FRC

Rural integration

Source: Team Analysis *capacity and capability building

• Ownership

• Management

control

• Employment

equity

• Preferential

procurement

• Enterprise

development

PAGE

Source: DPE Policy * These values serve as a GUIDELINE only

‘Programmatic’ Focus Areas: • Creating sustainable new industries

• Development of new technology and innovation

• Active Industrial Policy through CSDP and Programmatic policies outlined by the DPE

• Investment in infrastructure and manufacturing industries

• Skills development amongst scarce resources enhancing the intensity and quality of jobs available in South Africa

>R1bn value of transaction/s*

‘Strategic’ Focus Areas: • Preference and

development will be used to transform and grow local industry

• Skills development amongst scarce resources, increasing the quality of jobs

• Transfer of technology and innovation to local suppliers from foreign OEM’s

>R70m and <R1bn value of transaction/s*

‘Enterprise Development’ Focus Areas: • The focus will be on providing small enterprises with opportunities and preferential trading terms

• Empowering HDI’s to create their own business resulting in quality job creation

< R35m value of transactions*

‘Focused’ Focus Areas: • Preferential Procurement and B-BBEE used to develop local

industry owned and managed by HDI’s • Development of quality job creation reducing the lower income

inequality and reducing poverty

R35m to R70m value of transaction/s*

The IC3 framework classifies SD opportunities into four quadrants: each with its own focus, though transformation is all pervasive

Value leverage

Hig

h

Lo

w

High Low

Focused Enterprise

Development

Program-matic

Strategic

Ind

ustr

ial

leve

rag

e

Not currently a focus area

16

PAGE

‘Programmatic’ Supplier Development will secure South African economic growth & build a competitive supplier base

‘Programmatic’ initiatives follow a longer than normal planning horizon and generally exceed the funding capacity of Transnet’s balance sheet. They are identified either in IPAP II & III or through the SOC as designated fleets. Collaboration between the SOC and Government is achieved through focused task teams whereby infrastructure development and industrialisation is achieved through joint support and in some cases public spending. Investment is focused in plant, technology and skills in both intermediate and advanced capabilities to develop competitive advantage

Opportunities for Transformation* Key Opportunities for Growth

• Securing economic growth and building a competitive local supplier base, resulting in job creation • Development of new manufacturing capability and enhancement of existing capabilities • Development of globally competitive suppliers within the local industry, creating quality jobs • Continuing to influence downstream development and transformation of local suppliers • Promoting transformation of manufacturing supplier base through FRC & B-BBEE scorecard criteria • Policy Statement 6.6 (Supply Chain Policy): “Transnet shall identify programmatic/strategic procurement

and develop long-term procurement and local content plans. Tender requirements shall include local procurement and supplier development which will also address the transformation agenda and aim to achieve industrialization and localisation objectives”

Desired Outcomes

• Create sustainable new industries • Ability to build new industry and increase competitiveness

of existing industry through: Investment in plant IP transfer Industry-specific skills development in support of

industrial objectives Setting targets for local content on specific

components

• Ability to transform industry through the entire supply chain by means of: Black equity with the emphasis on “active

equity” - i.e. ensuring daily operational involvement by Black people

Promoting transformation through preferential procurement, Enterprise Development, skills development and management control

• Further transformation opportunities exist within the usual B-BBEE scorecard categories (e.g. employment equity etc.)

17 Source: Team analysis * Explored in more detail in the MS Word version of the SD Strategy

NOT EXHAUSTIVE

PAGE


Desired Outcomes

• Ability to develop new capability with appropriate government support

• Enhance existing capability by influencing OEMs to transfer skills and know-how on products and manufacturing process

• Develop manufacturing capability and skills transfer related to maintenance

‘Strategic’ Supplier Development will encourage growth through the development of a competitive local supply base, supported by OEM’s

‘Strategic’ initiatives follow a 3 to 5 year planning horizon, involving investment in at least plant, technology and/or skills in intermediate capabilities. This enforces the need for multinational corporations and original equipment manufacturers to develop a certain percentage of their products locally. Strategic initiatives can therefore be used to achieve capability & capacity building (localisation) objectives by increasing the competitiveness, capability and efficiency of local suppliers. Strategic initiatives can sometimes focus on advanced capabilities but will in most cases require government support to develop local capability

• Increasing the competiveness of South African supply base where comparative advantages can be achieved in the local supply chain by influencing foreign suppliers and OEMs to develop identified local suppliers resulting in job creation and retention

• Promoting transformation of manufacturing supplier base through FRC & B-BBEE scorecard criteria • Policy Statement 6.6 (Supply Chain Policy): “Transnet shall identify programmatic/strategic procurement and

develop long-term procurement and local content plans. Tender requirements shall include local procurement and supplier development which will also address the transformation agenda and aim to achieve industrialisation and localisation objectives”

• Include Black equity in tenders • Promote transformation through the supply

chain through preferential procurement and Enterprise development, skills development

• Further opportunities exist within the usual B-BBEE scorecard categories (e.g. employment equity etc.)

18 Source: Team analysis * Explored in more detail in the MS Word version of the SD Strategy

NOT EXHAUSTIVE


Desired Outcomes

‘Focused’ initiatives include all high value transactions with limited industrial leverage and medium to low strategic importance. These initiatives address short to medium term contracts that can be leveraged to encourage supplier development, with a focus on investment in technology or skills that enhance existing local capability. Emphasis will largely be placed on benefiting Historically Disadvantaged Individuals (HDI’s), especially through job creation. The overall result improves the socio-economic environment by creating competitive local suppliers and furthers objectives of empowerment, transformation and regional development

Transnet will undertake ‘Focused’ Supplier Development to enhance the capacity & capabilities of the local supply base

• Industry and firm-related skills development with an emphasis on women, disabled and youth

• Encourage enterprise development and use of local suppliers and local labour especially in construction related activities

• Discounts in addition to normal ED support practice • Minority investment in Black-owned EME’s and QSE’s • ED investment with lower dividend to financier • Investment into 3rd party ED service providers • Professional Services rendered at no cost and supporting ED • Professional services rendered at a discount and supporting

ED • Time of employees productively deployed in assisting ED

• Providing opportunities for Black business • Promoting skills development with a focus on scarce skills in related industry • Supporting local innovation • Promoting development of rural communities • Policy Statement 6.5 (Supply Chain Policy): “As the main economic agent in the South African transport

and logistics infrastructure, Transnet’s planned capital expenditure forms the bulk of Transnet’s procurement spend. As a result, Transnet shall ensure that the majority of its spend results in creation of long term and sustainable economic growth resulting in job opportunities”

• Specific skills and technology transfer to enhance capability of local industry to increase global competitiveness of firms

• Encouraging and supporting innovation by local firms

• Job creation

Source: Team analysis * Explored in more detail in the MS Word version of the SD Strategy

NOT EXHAUSTIVE

Opportunities for Transformation Opportunities for Growth

Desired Outcomes

• Introduction of new suppliers into the complete Transnet SC

• Focus on Black women owned, Black youth owned, Black disabled owned etc

• Focus on local community development and participation

• Interest-free loan with no security requirements

• Standard loan to Black-owned EME or QSE

• Standard loan to other Beneficiary Entities

• Guarantees provided on behalf of beneficiary

• Lower interest rate

• Grant and related contributions

The underlying outcome of ‘Enterprise Development’ is the promotion of emergent Black businesses

‘Enterprise Development’ transactions are typically of low value and have no industrial leverage as it is characterised by low complexity goods and high competition. These initiatives concentrate on increasing the capability of small local suppliers and are targeted toward Historically Disadvantaged Individuals and communities, providing basic skills development and improving local employment and quality job creation. It includes a wide range of non-financial services that help entrepreneurs start new business and grow existing ones

• Skills development with an emphasis on women, disabled and youth

• Discounts in addition to normal business supporting ED practice

• Minority investment in Black-owned EME and QSE

• ED investment with lower dividend to financier

• Investment into 3rd party ED services provider

• Professional Services rendered at no cost and supporting ED

• Professional services rendered at a discount and supporting ED

• Time of employees productively deployed in assisting ED

• ED points for Transnet • Involvement of local communities and Black businesses • Job creation • Policy Statement 6.4 (Supply Chain Policy): “In evaluating and awarding tenders for procurement of goods and

services, Transnet shall award preference points in regard to the contribution that a supplier makes towards the achievement of B-BBEE objectives”

• Policy Statement 6.5.4 (Supply Chain Policy): “Transnet shall explore opportunities of procuring goods and services in rural areas with the aim of creating employment” Source: Team analysis * Explored in more detail in the MS Word version of the SD Strategy

NOT EXHAUSTIVE

Content







PAGE

Since the inception of the SD journey Transnet has had successful SD transactional impact…..

22

Successes

Venus / Mitsui

32 X Class 15E Locomotives

• The SD value as a percentage of the contract (R1,312m) is 40% including: Skills development (1%), local assembly by UCW (12%) and purchasing from

local suppliers (27%) 734 jobs were preserved and R79m realised to date, as a result of this build

GE

100 X Class 43 Diesel Locomotives

• The SD value as a percentage of the total contract (R2,300m) is 54% including: Skills development at TRE & TFR (17%) over 4 years, local assembly (15%) Purchasing of local content and services (17%) over a ten-year period and

other commitments (5%) R388m or 31% spent on SD as at Jan 2012

Source: FINCO dashboard March 2012 *contracts recently awarded or in the process of being awarded

GE*

43 X Class 43 Diesel Locomotives

• The SD value of the contract is R631m or 65% of the total contracted value • The CSDP has been finalised and signed off by GCE* • Implementation meeting scheduled for 5 April 2012

Cruzaco*

Draft gear

• CSDP signed off by all stakeholders as of March 2012 • Contract valued at R128m with SD portion R15m or 5% (imported goods) • Training and IP transfer is the key component of this CSDP agreement, including finding ways to improve efficiencies, reducing costs

RTA Alesa*

Pneumatic Ship Unloader

• Total contract value is R125m • R16 of contract value is committed to SD over the life of the contract • SD obligation amounts to 12% of contract value

Liebherr*

6 X Mobile Harbour Cranes

• Total project contract is worth R248m • 23% of this or R58m is committed to SD

Evaluation criteria have been designed for “designated commodities” to ensure that governance, development and transformation objectives have been met

Source: PPM *Only applicable in designated sectors. **Only if RFP document provided for PTN

Method 1 (Preferred Method)

Successes SD Organisational successes to date

Processes integration

• SD has been incorporated in a high-value gateway review process • SD is a formal participant in the Sourcing Centre Of Excellence (COE) since 2012

Management support

• A dedicated SD Executive Manager has been appointed within the Group Supply Chain function

• A dedicated senior B-BBEE manager, with responsibility for Enterprise Development, has been appointed to Group

Approvals

• The Supply Chain Policy which incorporates the SD Strategy and Plan has been approved by the Board

• SD is now fully integrated into Transnet’s Supply Chain Policy framework

Capacity & capability

• Group SD structure has been signed off • The new Transnet Procurement Academy provides e-learning for staff wishing to

develop related skills via a 12-18 month programme. Bursaries are available • Procurement skills are being honed via the Chartered Institute of Purchasing

and Supply (CIPS) programmes, with several employees already graduated. More graduates expected in 2012

Mind-set

• The SD COE has gained “traction” in 2012 with full commitment from its various members since inception in 2010

• BADC* fully supports SD across the organisation

24

…. Transnet has also had some success in terms of its internal procurement capability and skills development efforts, though this is on-going

Source: Team analysis *Board Acquisition and Disposal Council

PAGE Source: Team analysis

However, a number of valuable lessons have been learnt through Transnet’s SD implementation experience to date (1/3)

Lesson Theme Lessons learnt

Capacitation of SD teams • The implementation and monitoring of SD requires dedicated teams to ensure full value

capture

Integrated planning and demand forecasting

• Earlier integration with business users is needed to fully understand the SD opportunities • Business requires further training on SD initiatives that a transaction could offer (Skills

development, Enterprise development ideas)

SD tender specifications • A better SD response from suppliers comes from clearly articulating the SD requirements,

based on market intelligence and a thorough understanding of Transnet’s regional development objectives, opportunities and requirements

High-value asset steering committees

• Conducting regular high-value Asset Steering Committee meetings with SD firmly placed onto the agenda, ensures integration of SD in major asset transactions

Syndication with approval committees

• Detailed syndication with all divisional Approval Committees has led to greater compliance and a higher number of transactions with SD integrated into the sourcing strategies

25

Stakeholder engagement • Dissemination and embedding of policy and procedure must be adequately communicated to

the entire business to create awareness and ensure compliance • Adequate understanding of the various stakeholders’ mandates and environments is key to

successful and meaningful engagement

Supplier readiness • The capability and capacity of local industries needs to be taken into account , when

thinking about Transnet’s procurement requirements • A development plan - ensuring local companies are incubated and supported to further

develop their ability to service Transnet's future requirements could be created

PAGE Source: Team analysis


Lesson Theme Lessons learnt

SD Interpretation • Suppliers each have a unique way of understanding SD and therefore of

interpreting and responding to the SD requirements in Tenders • Unclear calculation methodologies in certain current categories complicates SD

evaluation e.g. how the value of IP or technology transfers is calculated

Confusion on methodology

• Generally Suppliers are still unsure as to how SD will be evaluated and what exactly is required from them in order to comply with bid requirements

• Suppliers are still confused around the definition of certain SD categories (even

with explanations in tender documents)

• Multiple “tender returns” are required from suppliers.

Quality of submissions

• Low quality of bidder responses to SD is experienced, due to confusion and interpretation of SD (seen in documentation and other issues already mentioned), resulting in a cumbersome evaluation process

• Transnet must consequently ask for clarification on bid documents, further delaying the evaluation process

Confusion of policy • Underlying SD policy is not well explained in regard to those suppliers who have

current NIPP obligations, resulting in suppliers ‘being confused about the

differences

• Suppliers often want a return to NIPP-only obligations

26

PAGE


27

Setting tangible goals • Targets should be as detailed and clear as possible to prevent them from being open

to interpretation • Targets which are not clear at the onset often do not get delivered

Creating clear milestones for delivery

Monitoring for delivery

Driving compliance

Key lesson learnt around monitoring of SD

commitments

Lessons learnt

Meaningful reporting • Reporting is needed to provide a status of all elements of SD (not just BBBEE) • It is vital that meaningful reports area created which provides insight into

performance by department/division since this assists in surfacing areas where interventions are needed

• Suppliers attempt to reduce SD obligations, once contracts are awarded. Setting

clear deliverables based on their proposal is key to ensuring that value is delivered

• Setting periodic milestones is often a more effective way to manage performance,

since it gives suppliers time to correct areas of underperformance before it is too

late

• Monitoring should be both outwards (ie suppliers performance) and inwards

(Transnet's SD performance)

• Ensuring that the right metrics are being monitored is key to ensuring that delivery

from suppliers as well as internal performance against plans

• Compliance must be encouraged pre contracting (via insertion of legal clauses

placing ones on suppliers to deliver on commitments)

• Compliance should also be enforced by post contracting mechanisms (eg random

audits and enforcing penalties where deviation from commitments are found)

Transnet has a long tradition of “learning by doing” which provides a useful framework for implementation of SD going forward …


Strategy Over the years Transnet has

updated its strategy to include

changing government objectives

such as NGP and integrating SD

into the corporate plan

Planning Transnet has moved to

incorporating SD in the planning

stage as opposed to execution

and the movement towards longer

term demand planning has

increased SD opportunities

available

Execution • From the first GE 100 loco

transaction to current

transactions, Transnet has

improved upon processes and

evaluation criteria to better

integrate growth and

transformation opportunities

• Included SD as a key criterion in

negotiations

Monitoring Feedback

Strategy Over the years Transnet has

updated its strategy to include

changing government

objectives such as NGP and

integrating SD into the corporate

plan

Planning Transnet ‘s move to incorporate

SD in the planning stage as

opposed to execution and the

movement towards longer term

demand planning has increased

SD opportunities available

Execution • From the first GE 100 loco

transaction to current

transactions, Transnet has

improved upon processes and

evaluation criteria to better

integrate growth and

transformation opportunities

• Included SD as a key criterion

in negotiations

Monitoring Monitoring and reporting to the

DPE (on key KPIs) and process

of collection between OEMs and

Transnet, have been updated and

are now more closely linked to

contractual obligations and SD

criteria

Feedback Listening to suppliers, SD

managers and key stakeholders

after each major transaction

together with annual SD strategy

updates results in a continuous

cycle of improving SD value

capture in each transaction

PAGE

There is a requirement to streamline and simplify SD evaluation criteria

29

To From

• A large number of unfocused evaluation criteria

• A smaller number of evaluation criteria focused on the outcomes Transnet wishes to achieve

• Uncertainly in divisions about which evaluation criteria to use and their weightings

• Guidelines are created to aid divisions in selecting evaluation criteria and their weightings

• Reluctance from suppliers to commit to SD obligations made at a granular level

• Higher level commitments with an emphasis on outcomes

• Uncertainly from suppliers on definitions and calculation formula

• Clear definitions and calculation formula

Source: Team Analysis

PAGE

Currently Transnet has an excessive number of evaluation criteria which are often impossible for suppliers to complete accurately (1/4)

Main SD category

Secondary SD category Functional category

Proposed percentage use of local content as percentage of total contract

Localisation

No. of local manufactures / suppliers used to fulfil contract

Proposed value & percentage use of local content in plant machinery

Value of investment in plant & machinery sourced from SA suppliers Industrialisation

Potential percentage increase in Export content resulting from bid

Value of New SA Manufactures in supply chain

Potential percentage reduction in Import leakage Value of spend on B-BBEE

Value of spend on EME

Value of spend on Black Owned enterprises

Value of spend on Black Women Owned enterprises

No. of QSE’s suppliers

No. of EME’s suppliers

No. of Black Owned suppliers

No. of Disabled suppliers

Value of spend on People with Disability

Value of spend on Black Youth Owned enterprises

No. of Black Owned Women suppliers

No. of Black Youth Owned suppliers

No. of B-BBEE suppliers

* Transnet is the only organisation which splits the support into financial and non-financial, other organisations include this in one bucket under Small Business Promotion ** Transnet uses rural community, other organisations use local community Source: Team analysis

Proposed percentage of local parts in relation to BOM as percentage of total spend

Transnet specific All encompassing: Eskom, Department of Health, Department of Education

Value of proposed IP transfer to SA Sustainable / Technology & IP transfer

Non-Financial support

Number of new local suppliers evaluated for integration into OEM supply chain

30

PAGE

Currently Transnet has an excessive number of evaluation criteria which are often impossible for suppliers to complete accurately (2/4)

Main SD category

Secondary SD category Functional category

* Transnet is the only organisation which splits the support into financial and non-financial, other organisations include this in one bucket under Small Business Promotion ** Transnet uses rural community, other organisations use local community Source: Team analysis

Development of skilled staff Skills Development

Development of unskilled staff

No. of skilled staff trained

No. of skilled Black staff trained

No. of skilled Black female staff trained

No. of skilled disabled people trained

No. of skilled Black youth trained

No. of unskilled staff trained

No. of unskilled Black staff trained

No. of unskilled Black female staff trained

No. of unskilled Black youth trained

No. of unskilled disabled people trained

Transnet specific

All encompassing: Eskom, Department of Health, Department of Education

Creation of skilled jobs

Job Creation

Creation of unskilled jobs

No. of new skilled jobs created

No. of new skilled jobs created in rural areas

No. of new skilled jobs created for Black female

No. of new skilled jobs created for disabled people

No. of new skilled jobs created for Black Youth

No. of new skilled jobs created for Black people

No. of new unskilled jobs created

No. of new unskilled jobs created in rural areas

No. of new unskilled jobs created for Black female

No. of new unskilled jobs created for Black Youth

No. of new unskilled jobs created for Black people

No. of new unskilled jobs created for disabled people

No. of job maintained by respondents

No. of jobs maintained by Sub-contractors

Job Maintenance No. of jobs maintained by Other

No. of jobs maintained by Suppliers

31

Content







PAGE

As a result of the lessons learnt, three key enablers and their action points have been identified to guide SD implementation

33

Process Enablers

Capacity and Capability Enablers

Mind-set and Behaviour Enablers

Key “Process” Action Points: – Demand Planning • On-going initiatives to improve demand-

planning and involve key internal and external stakeholders must continue

• SD evaluation criteria & targets to be refined, standardised, communicated

• KPI’s for SD monitoring, reporting & compliance to be developed, integrated and implemented across departments

– Supplier Intelligence

• Full analysis of the local and international Supply market to be conducted and a repository for this intelligence established

– Stakeholder Engagement

• PPM changes (long contracts) to be

effected and signed off

– Integration

• A formal SD Policy to be finalised &

integrated into the PPM

• Divisional SDP’s to be integrated into

Group SDP and Corporate Plan

– Risk & Compliance

• PPM will be updated on an on-going basis

with SD changes

• Negotiation teams must be prepared

around risk-management for new contracts

Key “Capacity & Capability” Action Points

– Skills Development

• Update procurement and SD skills programmes, ensuring adequate skills

– Internal Support & Structures

• Refine and communicate SD roles & responsibilities throughout Transnet

• Include SD targets in staff’s SPO’s

• Investigate required system (ERP, etc.) changes for SD

• Continue to recruit for and staff SD positions

Key “Mind-set & Behaviour” Action Points: • A Change Management Strategy is required to ensure stakeholders

are on board for SD and are enabled for change

• Re-examine SD “uptake” parameters within OD’s to ensure efficacy

• Educate stakeholders (both internal and external) around SD

requirements and evaluation criteria

• Conduct SD Road shows both internally, across OD’s and externally

with suppliers

Source: Team analysis * Railway Harbour Supply Chain Association of which Transnet is a founder member

Initiatives to improve demand planning and involvement of key stakeholders internally and externally are underway

• Accurate demand forecasts as input to the SD opportunity process • Accurate fleet plans for key capital commodities • Identification of SD opportunities should take place pre-procurement

and be executed throughout all phases of the Sourcing process • SD incorporated into the “business as usual activities” • KPI’s developed for monitoring, reporting and compliance

Demand Planning

Processes

Supplier Intelligence & Market Analysis

• Knowledge & understanding of local and international supplier base developed • Economic & capabilities analysis of the supply market conducted • Supplier repository set up to capture critical supplier intelligence and inform

target setting process

Stakeholder Engagement

• Supplier industry informed of SD requirements • Mechanism designed and deployed for suppliers to communicate SD issues • Required changes (contract lengths) agreed and applied to PPM • Relevant updates to PPM finalised to encourage compliance • Board sign-off on SD incorporation into Corporate Plan obtained • Revive the RHSCA as a communications and collaboration platform

Integration

• Divisional SDP’s obtained for Group to incorporate into Group SDP • All relevant SD related supporting documentation made readily available for

immediate use to expedite the tender process. (e.g. appropriate legal documents, inserts into tender stacks)

• A formal internal SD policy finalised and integrated into the existing Policy Procurement Manual - PPM

Risk & compliance

• Governance as the key driver of performance ensured by finalising a formal internal SD policy

• SD Policy integrated into the existing Policy Procurement Manual – PPM • Relevant updates to PPM finalised to encourage compliance • Negotiation team prepared on risk management


35

Capability and capacity constraints are critical enablers for successful SD implementation

• Create capacity to conduct meaningful and effective monitoring activities

• Create and capacitate dedicated teams to ensure full value-capture

• Continue to staff the SD and iSCM functional areas with the correct numbers of people

• Identify “relevant” positions in relevant business areas • Create time-line and plan for their recruitment, engagement • Include SD targets into individual's strategic performance objectives

(SPOs) and balance with required commercial outcomes • Investigate system (ERP/SAP, etc.) changes required

• Update Procurement and SD skills development programme • Continue to staff the SD and iSCM functional areas with the

correct skills

Capabilities &

Capacity

Internal Support & Structures

Skills Development


Key requirements

36

The correct mind-set and behaviour is a key enabler for Transnet staff and stakeholders

• Group-wide Executive sponsorship is required to ensure SD is incorporated into “business as usual activities” across the organisation

• A Change-Management Strategy to ensure all stakeholders are addressed company wide and are on board (understand SD)

• Clear articulation and communication of Transnet SD in relation to Govt. policy and Transnet mandate is required

• Engage the supplier industry around benefits to Transnet’s SD programme

• Collaborate with “relevant value adding organisations ( be it -United Nations Industrial Development Organisation (UNIDO), etc.) to understand SD global trends, opportunities, partnerships

Mind-set & behaviour

Stakeholder

Engagement


Key requirements

PAGE

Overview of the Supplier Development Plan (SDP)

37

Current Position • Transnet is currently embedding the

foundation for SD based on an MDS-aligned Strategy and SDP

• The SD Strategy is integrated with the Supply Chain Policy Framework which has been adopted by the Board

• Processes are underway to improve the enabling environment at all levels

• The organisation is engaging with the OD’s to better understand and implement SD and will start engaging suppliers holistically, to the same end

• OD’s will be guided in the development of their divisional SDP’s

• Transnet has developed a high-level “journey” for SD for the next 7 years

FY 13/14

Process activities Q1 Q2 Q3 Q4 Q1

Stakeholder Engagement Apr-Jun 12 Jul-Sep 12 Oct-Dec 12 Jan-Mar 13 Apr-Jun 13

Supplier summit

Board sign-off on formal SD incorporation into Corporate Plan and process

Integration, reporting, supplier intelligence

Develop knowledge and understanding of supplier base

Conduct economic and capability analysis of supply market

Initiate random audits of supplier obligations

Develop and refine KPI's for SD monitoring, reporting and compliance

ongoing

ongoing

ongoing

ongoing

Finalise SD evaluation criteria sheet for inclusion in Tenders

SD related documentation made readily available for use in Tenders

Refine SD Dashboard Reporting

Integrate tracking of SD commitments with contract timelines

Embed SDP categorisation process

FY 12/13

ongoing

ongoing

ongoing

SD Implementation Plan Transnet Group: Key enablers

Inform supplier industry of Transnet SD requirements through tenders, RFP's

Design & deploy mechanism for suppliers to communicate SD challenges/queries to Transnet

Agree and apply required changes (contract lengths) to the PPM

DPE Bootcamp

Send Group SD Strategy and Plan to OD’s as guidance for their own SDP’s

ODs receive high level business targets from Group (subject to Base Line study)

ODs create Divisional SDP’s, submit end Q2

ODs submit Divisional SDP's to Group for incorporation into Corporate Plan

FY 13/14

Capabilities & Capacity Q1 Q2 Q3 Q4 Q1

Internal support Apr-Jun 12 Jul-Sep 12 Oct-Dec 12 Jan-Mar 13 Apr-Jun 13

Skills Development

Mind-set & Behaviour

Enterprise Development Hub

Finalised ED strategy

Establish Transnet ED Hub

Launch ED Hub

Launch mobile ED Hub

Roll ED hub to other provinces

ongoing

ongoing

ongoing

ongoing

ongoing

ongoing

ongoing

ongoing

Include SD target into individuals' performance objectives

Fill SD positions

Set up SD training sessions at Group, OD's and regions (use Training Pack Oct 2011) ongoing

SD Implementation Plan Transnet Group: Key enablers FY 12/13

Sign off updated SD training pack at Group level for use

Identify vacant positions, skills required, create recruitment plan

Articulate and communicate Transnet SD in relation to Govt. policy and Transnet mandate

Engage the supplier industry around benefits to Transnet’s SD programme

Collaborate with UNIDO to understand SD opportunities, partnerships

ongoing

Run SD training sessions at Group, OD's and regions (Use Training Pack Oct 2011)

Continue to upskill the relevant divisional SD departments

Obtain Group-wide Executive sponsorship to ensure SD is “business as usual”

Investigate other system (e.g. ERP) changes/needs (e.g.. B-BBEE reporting automation)

Develop a focused Change-Management Strategy around MDS and SD

Key SDP activities have been identified and assigned

Specific Commodity Strategies have been drawn up for wagons, rails & straddle carriers


Implementation Plan for Wagons

Implementation Plan for Rails

Implementation Plan for Straddle Carriers

Content







PAGE

Transnet has plotted a proposed SD journey that meets its aspirations to be a world class SD organisation

Short-term (1-2 years)

Long-term (5 years+)

Capture SD value

• Refresh the OD 2011/12 SD Plan

• Embed SD organisation-wide in

standard procurement policy (PPM)

• Strengthen long-term relationships

with Suppliers to secure export

opportunities by embedding local

suppliers in OEM supply chains

• Develop sustainable category

COE’s in the rail industry (e.g.

traction motors)

• Leverage internal knowledge to

enhance Transnet's Supplier

Development initiatives

• Strongly contribute toward the

Transnet B-BBEE score though

focused ED initiatives

• Negotiate best value contracts that

integrate SD objectives

• Create appropriate governance

structure allowing for longer

contracts

• Build internal procurement skills

• Develop demand planning

capability and process

“World Class SD”

• Lead the supplier development

thought leadership domain with

an established COE for SD

• Extend supplier development

goals beyond supplier base

into the client base through

PSP agreements (Customer

Supplier Development)

• Collaborate with suppliers to

develop required products to

promote operational efficiency

• Recognised as the benchmark

• Develop supplier intelligence

function for key areas for local

and international suppliers

• Collaborate with external

stakeholders to determine

skills requirements for industry

• Move from commodity-based

SD to technology-based SD

where common technologies

exist (e.g. transformers)

Embed the Foundation

• Develop SD Plan (2011/12)

• Adoption and Embedding IC3 Framework to

Embed Holistic Focused approach to SD

• Programmatic

• Develop Programmatic Loco Plan

• Commence Programmatic procurement

of locomotive fleet and focus on related

industrialisation opportunities inherent

in this procurement

• Strategic

• Further embed the CSDP Foundation

• Capture SD value from CSDP plans

developed by OEMS

• Monitor CSDP successes

• Focused

• Identify focus spend

• Develop the Focused SD Plan

• Embed Focused SD foundation

• Capture SD Value

• Small Enterprise Development

• Identify Spend

• Develop the Small Enterprise Plan

• Embed Small Enterprise Development

• Capture ED Value

Medium-term (3-4 years)

40 Source: Team analysis

Current Position:

QUESTIONS

PAGE

Back-Up

42

PAGE

The SD Planning process has been integrated into the development of the Corporate Plan

43

End Feb: Corporate Plan submitted to Minister of DPE (requirement)

Sept-Jan: OD’s and Group develop & refine business, SD plans

OD’s develop detailed targets and plans per OD

Sept: Group gives OD’s guidelines (top-down) and rules for business plans

June: Finance, Strategy, Exco set high-level business targets

Annual Corporate Planning Process

Receive corporate plan/ annual budget & Transnet SDP

Understand requirements and set SD targets

Perform spend and value analysis

Determine industrial leverage

Categorise SD opportuni-ties

Prioritise opportuni-ties

Develop 7yr SD category strategic plan

Develop high level key commodity plans and initiatives

Update SDP

IC3 four-step process

Annual SD Planning Process

• The Transnet SDP process has been integrated into the overall Transnet annual planning process

• The SDP is triggered once the initial Corporate targets are received

• Over a 5 month period the SDP is rigorously developed between the ODs and Corporate

• Utilising the approach described earlier, the SDP is checked against the SD category plans

• Once key commodities for the next review period have been selected, the SDP is finalised and submitted to Corporate centre for

consolidation


PAGE

Three step strategy (with technical and SD criteria thresholds)

• The evaluation will a follow a 3 step process, starting with a SD/B-BBEE evaluation. It is then followed by a Technical

evaluation, and finally an overall submission evaluation including price

• A minimum threshold of XX% will be set for the SD/B-BBEE criteria evaluation. This threshold needs to be equalled or

exceeded for the submission to qualify for technical evaluation

• A minimum threshold of XX% will be set for the technical criteria evaluation. This threshold needs to be equalled or

exceeded for the submission to qualify for the final step

• Once the minimum criteria thresholds are both met or exceeded, the supplier’s submissions will be evaluated against

Price, SD and B-BBEE including FRC*

*Further Recognition Criteria ** To be used for non designated commodities

44

Evaluation criteria have also been designed for “non-designated” commodities

Minimum SD/B-BBEE Threshold**

Minimum Technical criteria

Price – XX% SD – XX% BBBEE/FRC – XX%

Minimum SD/B-BBEE criteria

Minimum Technical Threshold*

Substantive responsiveness

Administrative responsiveness

Pre-qualification

Returnable documents/ schedules


PAGE

A reporting framework has been created to monitor the progress of SD initiatives within Transnet

45

Group prepares SD reports for DPE

Group consolidates SD reports from OD’s

OD consolidates SD reports for Group

Supplier reports on contractual SD obligations to OD

Frequency Monthly Monthly Quarterly Quarterly

SD reporting Process

Reporting Guidelines/ Supporting Documen- tation

• Localisation as % of contract

• Skills development as % of contract

• Investment in plant as % of contract

• Identified Initiative • Contract Value • SD target • Localisation as % of

contract • Skills development as %

of contract • Investment in plant as %

of contract • New SD tenders • DOA* 1-6

• Quarterly report by spread-sheet, by supplier: • Localisation as % of

contract

• Skills development as %

of contract

• Investment in plant as %

of contract

• New SD tenders

• DOA 1-6

• Investment in Plant by supplier

• Investment in Skills by supplier

• Investment in Skills by SOE/SOC

• Last Procurement Capability Benchmark

• Projected SOE/SOC lifecycle costs

Source: Team analysis * DOA=Degrees of Attainment

PAGE

Mind-set and behaviour towards SD is already being monitored in Transnet, with tracking showing reasonable uptake

46

Supplier Development Adoption funnel

Awareness Buy In Adaptation Consideration Adoption

Have heard of it

Have thought about implementing it

Targets accepted and forms part of scorecard

People have started to implement it in their own OD

Process is embedded i.e. is in regular use

SCM

Business

• From a monitoring and tracking perspective, initiatives have been put into place to ensure that the OD’s are fully aligned with Transnet’s Supplier Development programme

• Adoption levels are monitored monthly, both by the OD’s themselves and by Group • In most cases, OD’s have progressed beyond mere “awareness” • At least 3 OD’s have already reached the stage of adopting SD into both the business cases and Supply Chain Management

TFR

TCP

TRE

TNPA

TPT

Source: Jan 2012: iSCM dashboard report

Transnet has progressed significantly in transforming its supplier base in line with a Broad Based Black Economic Empowerment supply base

Recognised B-BBEE % spending against TMPS

• Transnet is fully committed to empowering small, medium and black enterprises in supporting Government's policy on B-BBEE

• Significant focus has been placed on B-BBEE spend evidenced by the large increase in spend in recent years

• Emphasis will be placed on improving direct Enterprise Development which is led by the Supplier Development Centre of Excellence (COE)

• 62% of the R25.81bn TMPS spend in 2011/12 FY was from B-BBEE-compliant companies that are certified on levels 1 to 4

Black-Owned Enterprises R3.96bn (~15% of B-BBEE spend)

Black Woman-Owned enterprises R2.25bn (~10% of B-BBEE spend)

Qualifying Small Enterprises R2.91bn (~11% of B-BBEE spend)

Exempted Micro-Enterprises R2.2bn (~9% of B-BBEE spend)

+46%

2012

25,8

2011

19,4

2010

13,5

2009

11,6

2008

6,9

2007

3,9

2012

80%

2011

75%

2010

65%

2009

59%

2008

41%

2007

37%

B-BBEE spending (Rbn Total Measurable Procurement Spend )

31 March 2012

Source: Team analysis, iSCM Dashboard

PAGE

Capacity constraints exist within the organisation but are at critical levels at TFR, TCC and TNPA

Required staff Current staff Vacancies Heat map

SOURCE: TFR Supply Chain Services Structure, November 2011; Revised Group iSCM Structure, December 2011; TCP Procurement Org Structure, November 2011; TNPA SCM

Structure, 2011-2012; TPT Supply Chain Management, December 2011; TRE SCM Structure, November 2011

% Vacancies

Stable

Concerning

Critical

TFR 489 299 190 39%

75 35 40 53%

TCC 113 43 70 62%

62 21 41 66%

TPT 88 56 32 36%

16 12 4 25%

TNPA 39 16 23 59%

22 8 14 64%

TCP 57 41 16 28%

54 39 15 28%

TRE 58 45 13 22%

37 27 10 27%

TPL 14 13 1 7%

9 8 1 7%

All functional areas

Focus functional areas

PAGE

Content

1

2

Background and Context

Integration of CSDP / SD into iSCM

4 Lessons learnt

3 Capacity to deliver on SD across the organisation

5 Back up

PAGE

The overall vacancies that exist within MDS related functional areas are at critical levels

Sourcing

Governance

Supplier

development

135

4141314

42

1929

84

414117

29712

-38%

Total TP

L

TR

E

TP

T

TNP

A

TC

P

TC

C

TF

R

41

52361411 12

2106

21

-71%

Total TP

L

TR

E

TP

T

TNP

A

TC

P

TC

C

TF

R

*Includes the following functional areas: iSCM strategy and operational support; strategy and continuous improvement

SOURCE: Team analysis

*Other

4

2218

37

4

-68%

TR

E

TNP

A

TC

P

TF

R

TP

T

Total TP

L

TC

C

77

1

18

15611

35

47

111

0148

22

TF

R

TC

C

TR

E

TC

P

TNP

A

TP

L

TP

T

-39%

Total

13

9

5

2

Support

personnel

Specialised

personnel

Middle

management

Senior

management

18

26

6

1

Support

personnel

Specialised

personnel

Middle

management

Senior

management

16

10

2

2

Support

personnel

Specialised

personnel

Senior

management

Middle

management

4

4

7

Support

personnel

Specialised

personnel

Middle

management

Senior

management

275

150

Total

51

49

20

5

Support

personnel

Specialised

personnel

Middle

management

Senior

management

45%

No. of vacancies

No. of vacancies

PAGE

Several short term initiatives have been identified within the capacity constraints to accelerate procurement

Immediate improvement plans Medium term initiatives

• Adopt “bandage approach” to deploy temporary staff and consultants and increase admin staff so HR can focus on recruitment

• Establish MDS champion at Group dedicated to drive MDS requirements in ODs

• Accelerate organisational structure approval

• Allocate support staff for Human Resource consultants to enable HR personnel to accelerate the recruitment process

• Initiate external MDS recruitment programme through a credible, specialised recruitment agency

• Revitalize the Human Capital COE

• Review and modify current compensation model for specialised procurement positions to current market level value

• Place strong emphasis on Employee Value Proposition to ensure staff retention and retraction

• Establish a “class of” developmental programme to ensure development, mentoring and coaching of staff

• Introduce graduate recruitment program to start bridging the gap and building the organisation from the bottom up with new talent

Capacity

SOURCE: Team analysis

transnet sd-plan-presentation 20120618

Documents

sd strategy

sd plan

transnet page

sdp transnet

supplier development

skills development

transnet transnets mandate

new corporate strategy