Obtaining BBBEE procurement recognition for your organization is usually not a simple exercise. The task can be daunting even for the most pro-active procurement officers. Wade van Rooyen of IQuad Verification Services shares 7 excellent tips for quickly achieving BEE targets.
1. More than 20% of suppliers may be irrelevant
“Not surprisingly, Pareto’s principle also applies to BBBEE. It may not be necessary to liaise with all of your suppliers, when the top 10 or 20 will do. The procurement target set for companies using the generic scorecard is that 50% of its procurement spend should come from other contributors to BBBEE. If your company makes 70% of it’s purchases from one qualifying supplier, then it will not be necessary to measure the other suppliers. Conversely, if that supplier is not a contributor to BBBEE then the measurement of the others becomes vitally important,” he tells Smart Procurement.
2. All suppliers are equal, but some are more equal than others!
“In every organization there are suppliers that are critical and cannot be changed (strategic suppliers), and others that provide services that are freely available (non-strategic suppliers). Isolate strategic suppliers and accept that you might never get the desired recognition for your expenditure with them.
Non-strategic suppliers however should be the recipients of a ruthless policy that axes non-contributors, and favors contributors to BBBEE. If after axing all non-contributing non-strategic suppliers you are short of the target, then engage strategic suppliers with a request to improve their status in your interest. ”
3. Borrow from Peter to pay Paul
” If a company spends a total of R100 per year, and spends R50 with a non-contributing strategic supplier that it cannot change, it must ensure that the remaining R50 derives maximum benefit. If a non-strategic supplier can be sourced that has a procurement recognition level of 135%, then for each R1 spent with the non-strategic supplier, the company can afford to spend 35c with the strategic supplier without an adverse affect on its scorecard.”
“Money spent with non-strategic suppliers should therefore aim to yield the maximum procurement recognition available,” states van Rooyen.
4. Categorize & Customize
“Many companies launch into a supplier evaluation exercise that commences with detailed information requests from their suppliers. In reality, the process may be more effective if broken down into smaller ‘bite size’ processes.
All of a company’s suppliers can be categorized into one of the categories below. The actions for each of these categories will vary, and will be dependent on whether a supplier is considered strategic or not.
|
Those who: |
Action – |
Action – Non |
|
Know their status |
Obtain |
|
|
Are in the process of establishing their |
Await the |
|
|
Are not interested in the process |
Engage in a |
Change supplier |
|
Are non compliant |
None |
Change supplier |
5. Size does count
Suppliers with a turnover less than R5 000 000 are automatically exempt from any BBBEE targets, and may be awarded 100% procurement recognition. Collectively these suppliers may have a meaningful impact on your procurement recognition.
6. Outsource!
Many companies will be prepared to assist with categorizing, communicating with and establishing the status of suppliers. Costs for this assistance vary from R0 to around R100 per supplier contacted.
7. Key steps in evaluating procurement recognition
(i) Categorize suppliers into Strategic, Non Strategic, and Exempt
(ii) Isolate suppliers (excluding exempt enterprises) that account for 80% of your expenditure (as a general rule this will represent about 25% of your total supplier base).
(iii) Send a request to suppliers to categorize themselves into those that know their status, those that are in the process of establishing their status, those that are not interested, and those that are non compliant.
(iv) Implement customized actions for each category.
(v) Measure your procurement recognition
(vi) Implement systems to track measured procurement spend.”
Wade van Rooyen, from IQuad Verification Services (Pty) Ltd, can be contacted on 082 850 9311
