Implementing a world-class sourcing process at Eskom with specific reference to the supplier selection process for large transformers.

Abstract

The research aims to identify ways to enhance the supplier selection process for large transformers at Eskom. The research was based on the hypothesis that there are significant opportunities to increase the effectiveness and efficiency of transformer purchases at Eskom. Large transformers are a strategic commodity for Eskom, due to the criticality and impact of the commodity on Eskorn's business. Eskom plans to spend R2.2 billion on transformers over the next five years. This indicates a substantial financial spend on the commodity. The opportunities that could be derived from transformer purchases are not only quantitative but also qualitative. The commodity, therefore, requires strategic effort in order to maximise the opportunities. The key findings of the research were as follows: • Transformer purchases and the organisational entity is complex, as it entails numerous stakeholders, complex systems, people and processes. • Eskom has not progressed from 'procurement management' to 'supply management'. • Eskom has a decentralised approach to transformer procurement, despite the strategic nature of the commodity and the fact that it purchases across the three main Eskorn Divisions. Procurement requirements are not consolidated. • There is a lack of communication and collaboration across and within Divisions. • There are no purchasing strategies, methodologies or tools to enhance the procurement process. • Procurement Officers lack knowledge on many well known methodologies, commodity knowledge, market knowledge, and supplier knowledge. • There is no focus on supplier relationship management. • Suppliers have indicated substantial opportunities for transformer procurement at Eskom. Implementing 8 World-Class SourcingProcess at Eskom with specificreference to the SupplifJr Selection Process for Large Transformers Pagei . The key recommendations based on the findings of the research are as follows: • Supply management personnel should be trained in world-class methodologies like total cost of ownership (TeO), strategic sourcing, supplier economics, supplier analysis, market research, etc. • A centralised approach to the procurement of strategic items must be instituted. This should result in a single person being responsible and accountable for Eskom's Supply management. • A collaborative approach must be encouraged by means of cross-functional teams. • Opportunities identified in the research must be implemented by a cross-functional team whom should be responsible and accountable for the implementation of the opportunities identified. • Supplier relationships must be initiated and effectively managed by the cross-functional team leaders. • The implementation must be monitored and tracked by the project sponsor. If the above recommendations are implemented Eskom would realise significant opportunities in large transformer purchases at Eskom. Should the recommendations be implemented on other commodities Eskom would achieve quantum leap improvements to Supply Management.