By Niyi Fadipe, FCIPSMN, MCIPS (Lond), MNIM Chairman, CIPSMN Board of Fellows
34
The Contribution of mainstreamed Procurement Practice towards the attainment of transformation agenda of Government : the Private Sector perspective. By Niyi Fadipe, FCIPSMN, MCIPS (Lond), MNIM Chairman, CIPSMN Board of Fellows.
By Niyi Fadipe, FCIPSMN, MCIPS (Lond), MNIM Chairman, CIPSMN Board of Fellows
By Niyi Fadipe, FCIPSMN, MCIPS (Lond), MNIM Chairman, CIPSMN
Board of Fellows.
Slide 2
Transformation: During 2011-2105, the policies and programmes
of Federal Government of Nigeria are directed at addressing
governance and will focus especially on the public services,
security, law and order, the legislature, anti- corruption measures
and institutions, the judiciary, economic co-ordination, and
support for private investment.
Slide 3
Federal Government Transformation economic agenda Creation of 3
million new jobs in the economy. Increasing Foreign Direct
Investment (FDI) inflow by at least 300 percent by year 2015.
Improving Ease of doing Business ranking by a minimum of 103
points. Enhancing the corruption perception ranking by a minimum89
points by Year 2015. Improving Nigeria Global Competitiveness
ranking by 75 points and growing the country's enabling trade
ranking by 77 points by Year 2015.
Slide 4
Transformation: This can be defined as a thorough and dramatic
change in form or appearance. If one keeps on doing the same thing
while expecting different results is a sign of madness, according
to the genius, Albert Einstein.
Slide 5
Transformation plan: Develop partnership and secure expertise,
forge links with the World Bank and international financial
agencies, monitor key reform indicators, identify and implement
high impact quick wins, strengthen and publicize ongoing reforms
and build momentum across the board.
Slide 6
Transformation: Transformation is a strong word that portends a
radical, structural and fundamental reappraisal of the basic
assumptions that underlie our reforms and developmental efforts.
The challenge before government is how to move the nation away from
an oil-dominated economy, institute the basics for a private sector
driven economy, build the local economy on international best
practices, transform a passive oil industry to a more pro- active
one, and restructure the country along the lines of more
decentralized federalism.
Slide 7
Transformation: But beyond this, there are management and
leadership challenges to contend with building an efficient and
effective polity, inspiring a shared vision, remodeling a corrupt
polity, building character and integrity in our leaders, redefining
the imperatives of transformation leadership, and creating the
Nigerian dram that will inspire patriotism and commitment in the
citizenry. ( Prof. Benjamin C. Osisioma)
Slide 8
Comment on PHCN 18 companies emerged from the privatized PHCN.
6 Generating, 11 Distribution companies and 1 TCN. Dayo Salami,
Economist and Faculty member at Lagos Business School stated that
we need $3.5 billion to achieve 40,000 megawatts by Year 2020.
Currently, we generate at peak period 3,849 megawatts. South Africa
generates 41,000 megawatts. Federal Ministry of Power stated that
6,000 mws are generated through diesel and petrol generators.
Slide 9
Comment on PHCN Global Business Integrity stated that the
country spent $455 million (N705 billion naira ) on generators in
Year 2011.
Procurement risk management: The ultimate goal of risk
management is to protect and enhance what the enterprise is
primarily there to do. In the private sector the aim is profitable
survival. The public sector equivalent is to deliver maximum
service and organizational effectiveness within the constraints of
the resources provided to do it. This includes money. But is the
risk catching net being cast wide enough? Focusing on risks
external to the company tells only half the story. What is less
well known is that risks exposures also exist inside the company
and can just as damaging.
Slide 12
The Risk Catcher External dependencies ( e.g. supply chain
robustness, supplier viability; Market conditions and behaviours (
e.g. competitive or not; supply availability); Procurement process;
Management controls;
Slide 13
Risk Management: CIPS, UK defined risk as the probability of an
unwanted outcome happening. Risk management involves three key
activities: risk analysis, risk assessment and risk mitigation all
of which facilitate the taking of decisions and actions to control
risk appropriately by providing a disciplined and objective
approach
Slide 14
Risk Analysis This is the process of identifying all the
potential things that can go wrong with an activity, and then
estimating the probability of each happening. Risk analysis is part
of the strategy development process. Risk management is a process
including the identification and analysis of risk, and the decision
to either accept or mitigate the exposure to such risk when
compared to the potential impact on the achievement of the
organization's objectives.
Slide 15
Risk Assessment: This is the process of assessing the likely
impact of a risk on the organization.
Slide 16
Risk mitigation: Having assessed all the risks and identified
those that require action, plans need to be drawn up and
responsibilities assigned to control and mitigate these risks.
Risks then should be allocated an owner, who is responsible for
managing them, and possibly with help of other team members.
Slide 17
Role of procurement personnel in risk management Identify and
promote the business need for risk management in procurement.
Identify who in their organization is / should be responsible for
this. Work with them in analyzing and assessing the risks. How is
the supplier managing its risks.
Slide 18
Role of procurement personnel: Make a value added input to
commercial risk assessment Be fully conversant with a range of
contract strategies that can be applied when setting up contracts
to achieve best value in meeting organizational objectives.
Slide 19
Identifying where risk is located: strategic Political.
Economic Social Technological Legislative / Regulatory
competitive
Types of Risk Factors: Escalating costs of fuel, energy, and
raw materials. General lack of internal risk management capability
on the part of the supplier. Exchange rate fluctuations. Financial
instability of the suppliers leading to suppliers failure.
Conflicts in supply chain caused by cost cutting and survival
activities.
Slide 22
Types of risk factors: The amount of emphasis on cost cutting
over quality improvement. Supplier failure to deliver on contracted
obligations. Sole sourcing arrangements. Changes in environment or
legislation that affect the supply base. Product with no available
alternatives. Changes that result in obsolete technology and / or
products, or new unproven technology or products.
Slide 23
Methods and Tools to Identify Risk: Brainstorming sessions to
identify risks. Establishment of cross- functional teams. Risk
registers. Total Risk Profiling. SWOT Analysis. Balance sheet
analysis. Site observation. Close collaborative working with
suppliers.
Slide 24
Vendor Managed Inventory, Purpose: A way to reduce inventory.
Integration of suppliers by giving them a good visibility. When a
company implements a VMI, then the company transfers stock
/inventory management and associate risks to suppliers.
Slide 25
VMI requirements Supplier mature enough to accept a supply
chain project. Supplier integrity. Distance with the supplier
plant. Flexibility of the supplier. Lead time. Determination of
stock levels. Define a VMI contract.
Slide 26
VMI Implementation: select the supplier. Select a product.
Define the mini/ maximum stock levels. Agree on the information
flows. Define the storage areas. Agree on a VMI contract. Define a
test period for the VMI Define other products to go to VMI if
needed.
Slide 27
Procurement Ethics: Ethics is concerned with the moral
principles and values which govern our beliefs, actions and
decisions. Ethics is important in supplies chain management since:
Supplies staff are the representative of their organisations in its
dealing with suppliers. Sound ethical conduct in dealing with
suppliers is essential to the creation of long term relationships
and the establishment of supplier goodwill. Supplies staff are
probably more exposed to the temptation to act unethically than
most employees. It is impossible to claim professional status
without reference to a consideration of its ethical aspects.
Slide 28
Procurement Ethics: Ethics is primarily concerned with such
issues as bribery and confidentiality. However, ethics is also
concerned with values. Values are concerned with questions relating
to what is right, good and just, and the basis on which make
ethical decisions. Thus individual behaviour will defer according
to whether we base our ethical decisions on : The utilitarian view
conduct is good which secures the greatest number.
Slide 29
Ethics: The individualistic view conduct is good which promotes
my personal interests or my organisation irrespective or my
organisation irrespective of how this affects the interests of
other people or organisations. The human rights view conduct is
good which respects fundamental human rights shared by all human
beings. The justice view. Justice is standard for judging legal and
moral questions. Conduct is just which is impartial, equal and
fair.
Slide 30
Ethics: They remind staff of aspects of their work where they
may experience conflicts of interest between their self interests
and duties to their employers. They highlight practices which may
compromise the professional objectivity and integrity of staff.
They provide standards for the staff to attain.
Slide 31
Ethics: Be open as possible within commercial and legal
constraints. Do not disclose suppliers confidential information to
third parties. Do not withhold important bidding information.
Unsuccessful suppliers should be told why they have failed.
Suppliers should not be asked to incur costs if there is little
chance of obtaining the business.
Slide 32
Ethics: Supplies staff are forbidden to accept gifts of any
kind and those received must be returned. Staff may retain gifts
that are clearly of an advertising nature, e.g calendars, diaries
etc Staff are allowed to decide for themselves whether a proffered
gift of hospitality is an appreciation of cordial business
relationships or an attempt at commercial bribery.
Slide 33
Equity: Fairness and impartiality towards all concerned, based
on the principles of evenhanded dealing. Equity implies giving as
much advantage, consideration, or latitude to one party as it is
given to another.
Slide 34
References: Nexans, France, VMI with a Supplier. Public
Procurement Practice, Risk Management. A Short Guide to Procurement
Risk by Richard Russil, Gower publication. Managing Risk in the
Procurement Process, by Kenneth E. Barden. Supplier Risk
Management, Presentation to CIPS Harrow branch, May 2011, Ernst
& Young. CIPS, UK Knowledge Summary, Risk management in
Purchasing and Supply Management. NIM publication; Nigeria's
transformation Agenda, The Management and Leadership Challenges, by
Prof. Benjamin C. Osisioma