UNIT 1: LEGISLATIVE FRAMEWORK FOR SUPPLY CHAIN

MANAGEMENT IN GOVERNMENT SERVICES

SUPPLY CHAIN MANAGEMENT

• Definition: Collaborative strategy to integrate procurement and provisioning

processes to eliminate non-value added cost, infrastructure, time and activities to
serve end-users better and more competitively.
o Supply – raw materials and goods needed to produce a product
o Chain – network of interconnected steps involved in getting goods from
suppliers to final customers
o Management – active process of planning, co-ordinating and controlling
flow of goods/services throughout chain

• Key aspects:
o Integrated planning of operations
o Tactics
o Strategies

• Elements
Demand management Forecast and planning procurement needs
Acquisition Procurement of goods/services through structured
management processes
Logistics management Efficient movement, storage & distribution of goods
Disposal management Proper disposal of obsolete goods
Supply chain Measure efficiency and effectiveness
performance
Risk management Mitigating risks in procurement and supply chain

• Legislative Framework that regulates Supply Chain Management

RSA Constitution, States that when any organ of state (sphere/institution)

Section 217 identified in national legislation, contracts for goods/services it
must do so in accordance with a system that is:

Page | 1
 ✓ Fair, Equitable, Competitive, Cost-effective, Transparent

Public Finance Ensures financial accountability & proper procurement systems

Management Act
(1999)
Preferential • Establishes framework for preferential procurement for
Procurement historically disadvantaged individuals.
Policy Framework • To give effect to section 217(3) of the RSA Constitution by
Act (2000) providing framework for implementation of procurement
policy contemplated in section 217(2) of the Constitution; and
to provide for matters connected therewithin.
Preferential Provides guidance of preference point systems
Procurement
Regulations (2022)
Public Modernizes procurement regulations, allows e-procurement &
Procurement Act State Tender Board functions
(2024)

___________________________________________________________________

Page | 2
 UNIT 2: PROCUREMENT MANAGEMENT

• Procurement: process whereby government purchases goods/services and

works through regulated supply chain processes.
• Steps in Public Procurement:
1. Identifying needs
2. Specifying requirements
3. Inviting and evaluating bids
4. Awarding contracts
5. Managing delivery and payments

• Procurement Management: involves (NLT) planning, execution and control of

processes related to acquisition of goods/services/works for an organisation.
• Key success factors for effective procurement management
o Consulting affected departments to ensure items procured meet users’
needs
o Strong supplier relationships
o Market condition monitoring to ensure value for money
o Ensuring timely delivery of the right quality and quantity of goods
o Sufficient experienced staff for purchasing

• Public Procurement vs Private Procurement

o Public: Profit making, focused on efficiency and effectively
o Private: Quality service delivery, strict regulation
• Establishment of the Office of the Chief Procurement Officer
o Purpose of office: modernizing & overseeing SCM in public sector
o Roles:
▪ Ensuring procurement management is fair, equitable, cost-
effective, competitive, transparent
▪ Policy formulation and advice
▪ Administration of national legislation
▪ Oversee procurement reforms
▪ Implement e-procurement systems

Page | 3
 • Bid Committees & Their Roles

Ensure that contracts are awarded fairly and in compliance with the relevant
regulations.

Bid •
1/+ official (manager)
Specification •
Responsible for drafting specifications for goods/services/or
Committee works to be procured.
• Ensure specifications are clear, precise, and aligned with
needs of the gov. entity.
• Ensures requirements comply with applicable laws and
regulations.
Bid • SCM practitioner, technical expert from department requiring
Evaluation good/service
Committee • Assesses received bids based on criteria such as price,
quality, compliance with specifications, and the bidder's ability
to fulfill the contract.
• Conduct technical evaluations, verify compliance with legal
requirements, and score bids to make recommendations on
which bidder should be awarded the contract. All bids must be
opened simultaneously.
Bid • Min. 4 seniors managers including CFO, min. 1 senior SCM
Adjudication • Responsible for making final decision on awarding contract.
Committee • Review recommendations made by the BEC and make final
adjudication on which bidder will be awarded tender.
• Ensures that selection is in line with the procurement policies
and legislation, such as the PFMA and PPPFA.
___________________________________________________________________

Page | 4
 UNIT 3: PROCUREMENT & BROAD MANAGEMENT ISSUES
1. Procurement Principles:
• Procurement – ethical, competitive & transparent.
• Strong accountability measures should be in place. Fairness & impartiality -
critical.
• Protection of interests of citizens, suppliers, and customers.
• Swift and decisive violation procedure.
2. Best Practices:
• Enhance flexibility in buyer-supplier negotiations.
• Leverage digital communication technologies.
• Limit negotiations to exceptional cases.
• Evaluate bids based on pre-set specifications.
• Assess economic and financial feasibility of suppliers.
• Use benchmarking to ensure competitive pricing.
• Facilitate efficient procurement processes.
• Decentralize decision-making for efficiency.
• Avoid bureaucratic delays in procurement.

3. Economic Policy Issues:

• Stabilize the macroeconomy through responsible budgeting.
• Improve service delivery via efficient resource allocation.
• Promote job creation through procurement initiatives.
• Support historically disadvantaged individuals (HDIs) in economic development

4. Social Policy
• Seeks to eradicate effects of the past. PPPFA makes provision for certain
advantages in procurement for SMME’s and PDI’s

5. Working Capital
• Align procurement with budgetary constraints.
• Ensure spending matches cash flow availability.
• Seek economies of scale to maximize cost savings

6. E-Procurement
• Use of internet in purchasing goods/services = efficiency & effectiveness
• Digital procurement enhances efficiency, transparency, and compliance

7. Computer Systems
National & provincial gov should use Logistical information system (LOGIS). The
system is designed to:
• Administer stores
• Monitor stock levels
• Generate procurement needs,
• Asset management facility

Page | 5
 UNIT 4: PROCUREMENT THROUGH TENDER PROCESSES

TENDERING

Tendering - crucial practice and exercise of procurement and provisioning.

Acquisitions must be made in accordance with relevant legislation

• Competitive bidding/tendering.
• Tenderers must respond nature of competitive nature of bidding process.
• High consideration for optimal value-for-money
• Specifications and conditions of the tender must be documented and made
accessible.
• Process must be fair, equitable, transparent, competitive, and cost-effective

INFORMATION FOR TENDERERS:

• Advertised tenders must indicate where tenderers may collect document

required for their applications.
• Where and when briefing will be held (if applicable)
• Where completed forms and proposals may be delivered.
• Advert must indicate a strict closing date and time for submission.
• Bids/tender applications must be accompanied by:
1. Comprehensive proposal addressing requirements as specified within bid
document
2. All associated forms (SBDs) attached to the bid document; and
3. Valid tax clearance certificate issued by SARS

Page | 6
STAGES OF PROCUREMENT THROUGH THE TENDER PROCESS

1. Compiling bid documents

• Standard Bidding Document (SBD) to contain conditions of contracts, price, tax
clearance.
• Participation in the National Industrial Programmes’ declaration.
• Technical specifications, quantity & quality of the products/service to be procured.
• Timeframe for delivery and additional factors relevant to the purchase and usage
of the product.
• Warranties and after sale maintenance to be specified
• Pre-qualifying criteria for bidders to comply with set standards for bid eligibility.
• SCM Unit to issue a tender.
• Inviting government bodies, representatives of the industry to comment on draft
specifications
• Considering recommendations of quality service providers

2. Inviting bids
• SCM decides on the method of procurement depending on the type and value of
the contract.
• SCM units to obtain a minimum of three telephonic/advertised quotations from
suppliers (preferably off a database of suppliers)
• SCM units to run competitive bidding procedures.
• For any contract R30 000+, provisions of the PPPFA apply.
• Criteria used to evaluate bids should be clearly described
• Pre-qualifying requirements needs to be visible in both tender documents and
adverts

3. Receiving bids
• To ensure transparency & fairness, all bids received are opened simultaneously/
• SCM units check documentation for completeness.
• All bidders are checked against the National Treasury database of defaulters to
ensure eligibility to take part in the bidding process.
• SCM units summarize bids and prepare comparative schedule for the BAC

Page | 7
• The schedule comprises a comparison of the specifications regarding
environmental criteria. Suppliers may claim to meet the minimum standards in the
bid. SCM must verify whether the submissions are complete and include
documents supporting the supplier’s claim

4. Evaluating bids
• The accounting officer delegates the responsibility for evaluating bids to the BAC.
• The Committee sit at regular intervals to evaluate bids in line with set criteria from
the bid documents.
• Bids are evaluated on the basis of price, functionality, and preferential
procurement.
• Bids meeting standards should be considered by BAC.
• Scorecards for environmental criteria may be included in the evaluation.
• Evaluation process formulae driven

5. Clearing bids & awarding contract

• None of BEC members should have influence over the awarding of the
Contract.
• Greater degree of objectivity and more views in the final decision.
• Clearing certain bidders by performing a vendor assessment.
• Vendor assessment should focus on establishing the:
o financial standing of company,
o past performance in delivering services,
o checking legal compliance about taxation, labour, corporate law,
o inspecting the capacity of the company to delivery where necessary.
• A contract and service level agreement are prepared for sign-off by the
Accounting Officer.
• Once the contract is awarded, SCM becomes responsible for contract
management functions such as;
o Monitoring performance and compliance with socio-economic objectives
o The vendor assessment also includes validating the green credentials
and past environmental performance of suppliers
o Contract include penalties for not adhering to green minimum standards

Page | 8
 UNIT 5: PREFERENTIAL PROCUREMENT

WHAT IS PREFERENTIAL PROCUREMENT?

• Policy that encourages businesses to give contracts to SMMEs owned by PDIs

• Goal: to help marginalized communities and generate income for them.
• Government awards preferential procurement points to businesses owned by
people who have faced disadvantages.
• Government requires that procuring organs of state set aside bids for
businesses owned by people who have faced disadvantages.
• Government must distribute goods and services to its inhabitants to meet the
requirements of justice, referred to as distributive justice
• National Treasury compiled a guideline document: Policy strategy to guide
uniformity in Procurement Reform processes in Government
• National Treasury address the following difficulties:
o Implement of the PPPFA that is not correct.
o Departmental policies that are not clearly formulated – targets and
sunset provisions
o Procurement practitioners are not trained
o Costs and outcomes not assessed to evaluate merits of the system
o Inadequate provision for capacity building amongst PDI
o Set aside contracts instead of prescribed preferential procurement
o Departmental policies are in conflict with PPPFA

WHO DOES THE PPPFA BENEFIT?

• Black people
• Black women
• Women
• People with disabilities
• SMMEs owned by these people

Page | 9
1. POINT SYSTEM FOR BID ADJUDICATION
• 10 points are allocated for specific goals with a rand value (R50 million) above a
certain amount provided the lowest acceptable tender scores 90 points for price

• Equal or below a certain rand value (R50 million) a maximum of 20 points are
allocated for specific goals provided the lowest tender scores 80 points for price

Page | 10
 UNIT 6: BEST PRACTICES IN PROCUREMENT
• Budget Compliance
o The budget is dictated by the Appropriation Act.
o Procurement must align with the allocated budget.
o Includes designated transfer payments.

• Value for Money

Achieved through the three E’s:

o Economy – Obtain resources at the lowest cost.

o Efficiency – Maximize output from given resources.
o Effectiveness – Achieve the intended objectives.

• Cost-Effective Procurement
o Procurement must be cost-efficient.
o Avoid unnecessary costs & delays.
o Regularly monitor and reassess supply arrangements.
o Ensure continuous improvement of internal processes.

• Open & Competitive Procurement

o Requires transparent laws, policies, and procedures.
o Encourages competition suited to market conditions.
o Aligns with the PPPFA (soon the Public Procurement Act).
o Procurement opportunities should be published (e.g., Government Tender
Bulletin).
o Adequate and timely information provided to supplier for bidding purposes
o Elimination of biasness and favouritism

• Fairness & Ethical Conduct

o All parties must comply with ethical standards.
o Engage in mutual trust & fair dealings.
o Public officials must:
▪ Avoid conflicts of interest.
▪ Deal with suppliers even-handedly
▪ Not accept gifts/hospitality that could compromise integrity.
▪ Eliminate fraud and corruption.
▪ Be scrupulous in their use public property

Page | 11
• Accountability & Reporting
o Officials must be answerable for procurement plans, actions and outcomes.
o Transparency through public reporting.
o Accountability hierarchy:
▪ HoDs → Report to Ministers.
▪ Heads of Procurement → Report to HoDs.
▪ Procurement officers → Report to Heads of Procurement.

• Control Principles
o Goods must meet required standards.
o Payment is made only for needed & received goods.
o All purchases must be accurately recorded.

• Avoid Unacceptable Procurement Practices

o Unauthorized Expenditure: Spending beyond the approved budget.
o Fruitless & Wasteful Expenditure: Costs that could have been avoided with
proper care.
o Irregular Expenditure: Transactions that violate laws or regulations.

Page | 12
 UNIT 7: SUPPLY CHAIN MANAGEMENT
THE CONCEPT OF SCM

• What is supply chain?

Sequence of identifiable parties and their activities from point of origin of a decision
to meet a gov objective, right through to end point of consumption or possibly
disposal of good/service.

• What is SCM?
o Co-ordination of activities of all parties that will deliver inputs + outputs to
meet requirements
o Planning, implementing and controlling operations of supply chain
o Movement + storage of raw material, work in progress, inventory and
finished products.
o Planning + management of sourcing, procurement, conversion and
logistics management
o Co-ordination and collaboration with channel parties (suppliers,
intermediaries, third-party service providers and customers)
o Integrates demand, acquisition, logistics and disposal management

• Advantages of SCM:
o Cut costs and streamline inventory
o Boost value and customer satisfaction
o Maximize logistics efficiency
o Enhance inventory and delivery performance
o Drive productivity and forecasting accuracy
o Deliver better value-for-money and risk management
o Spark innovation and improve need definition
o Spot bottlenecks and improve quality
o Reduce supplier count and strengthen communication
o Speed up repairs and improve equipment readiness
o Access reliable info and sharpen strategic SWOT analysis

• Management stages

Page | 13
 UNIT 8: MANAGEMENT OF THE SUPPLY CHAIN
Hugo identifies two approaches to the management of the SC:

• Looking at tasks of management

• Systematically analysing elements of management process

Tasks at the core of the management assignment:

1. Designing supply chain for strategic management

• Strategy structure, goals and objectives linked to org and SC
• Joint vision to gain strategic advantage

2. Create seamless SC operation by co-ordinating all activities and processes

• Optimising resources (tech, finances, physical facilities, human skills and
knowledge), SC manager has major co-ordinating task to fulfil

3. Implementing long-term relationships

• Relationship management – NB tasks in SCM
• SC manager must create collaborative relationships by partnering, strategic
alliance and informal associations

4. Managing supply chain information

• IT enables tech of SC
• Access to info – essential
• Structuring and maintaining info integrity
• Ensure security of info system (loss – undermines integrity)

5. Assess performance of SC

• Performance assessment – to understand capabilities

• Ensure continuous improvement of SC

Page | 14
Management process of SC

1. Planning

• Linked to overall strategy of institution

• For process that occur in SCM
• For intricate relationships typical of SC
• Resources available to SC

2. Creating sustainable organisational structure

• Cross functional teaming
• Centralisation/decentralisation
• Functional integration
• Organisational hierarchy
• Creation of internal and external linkages

3. Implementation of supply chain

• Barriers experienced:
o Humans – resistance to change
o Information systems – IT limitations
o Cultural differences – language/traditions
o Resources available – funds
o Lack of management experience – managerial expertise
• Guidelines for implementation
o SC strategy – support corporate strategies
o Identify goals and develop plans
o Develop system for market intelligence and feed it back into SC
o Integrate & manage supplier database
o Specialised logistics network
o Develop integrated supply chain information system
o Develop performance measurement system
o Control supply chain
o Measurement of performance
o Adapt and review control processes

Page | 15
 UNIT 9: B-BEE & SMMEs
1. BROAD-BASED BLACK ECONOMINC EMPOWERMENT

What It Is:

• A transformation tool to fix racial inequalities caused by colonialism & apartheid.

• Aims to uplift previously disadvantaged individuals (PDIs)
• Recognized by the 1996 Constitution as vital for socio-economic justice.

How It Works:

• Uses preferential procurement, enterprise development, and skills training.

• Focus on black ownership, management control, and economic inclusion.
• Supports SMMEs to grow and become suppliers for government & corporates.
• Encourages skills acquisition and investment in rural areas.
Legal Backbone:
• B-BBEE Act of 2003, amended in 2013.
• B-BBEE Commission established in 2016 to monitor progress.

___________________________________________________________________

2. ELIGIBILITY AS A QUALIFYING SMALL ENTERPRISE (QSE)

• QSE - Measured Entity with annual revenue between R10 million and R50 million
& complies with all B-BBEE elements for scoring and recognition.

• Enhanced B-BBEE Recognition Levels:

o 100% Black-owned QSE → Level One B-BBEE recognition.
o At least 51% Black-owned QSE → Level Two B-BBEE recognition .

• To stay compliant, a QSE must annually confirm on a sworn affidavit:

o Revenue is ≤ R50 million
o Level of Black ownership

___________________________________________________________________
3. ENTERPRISE AND SUPPLIER DEVELOPMENT (ESD)
• Measures extent to which:
o entities purchase goods and services from Empowering Suppliers with
strong B-BEE recognition levels
o enterprises carry out supplier development & enterprise development
initiatives
• initiatives intend to assist and accelerate growth and sustainability of black
enterprises
• The Socio-Economic Development & Sector Specific Contributions:
Page | 16
 o Measures extent to which entities carry out initiatives that contribute
towards Socio-Economic Development
o Sector Specific initiatives that promote access to economy for Black
people
___________________________________________________________________

4. SMMES IN SOUTH AFRICA AND BLACK ECONOMIC EMPOWERMENT

Introduction

• SMMEs are key economic role players in any country.

• They form a vital part of national economic strategies.
Justification for Purchasing from Small Businesses

• Global examples (China, Japan, UK, EU, USA) show success in supporting
small businesses.
• In South Africa, the government uses measures like the PPPFA to empower
PDIs and SMMEs.
• Business-related motivations include:
o Addressing social inequality and demographic shifts.
o Supply chain management (SCM) trends encourage outsourcing to
SMMEs.
o Management sees supporting SMMEs as both morally right and
economically smart.

SMMEs in the Supply Chain

• Many SMMEs play critical roles in supply chains - Young and adaptable,
making SCM adoption easier.
• SMMEs tend to have an integrated business approach.
• Information systems are increasingly tailored to SMME needs.
• They face strong competition despite their size.

Best SCM Practices for SMMEs

Key practices include:

• Aligning business and SCM strategies

• Risk and benefit sharing
• Open communication and joint problem solving
• Supplier assessment and development
• Just-in-time (JIT) inventory systems
• Use of multi-disciplinary teams
• Adoption of information technology

Page | 17
 UNIT 10: DEMAND MANAGEMENT
Definition & Purpose

• First phase of the SCM process.

• Ensures that needed resources identified in strategic plan are delivered at the
right time, price, place, quantity, and quality to support the strategic plan.

Principles (7 Rights)

1. Right amount
2. Right product
3. Right time
4. Right place
5. Right price
6. Right condition
7. Right information

Key Considerations

• Link needs to strategic and budget planning.

• Consider past expenditure, best sourcing method, and order frequency.
• Conduct economic order quantity, lead time, and industry analysis.
• Apply Preferential Procurement Regulations (2022) to promote BEE and
PDIs.
• Specifications must balance competition and performance requirements.

Page | 18
 UNIT 11: ACQUISITION MANAGEMENT
Purpose

• Preferential Procurement policy objectives are identified that could be met

through specific contract
• Determines market approach and total cost of ownership (life cycle and
depreciation, inventory cost).

Roles & Responsibilities

• Branch Management + SCM Unit decides how to approach market.

• SCM Unit sets procurement strategy, prepares bid documents, ensures cost
evaluations.
• Bid Evaluation Committee scores bids based on criteria.
• Branch Management + Legal Services and Branch Management finalize
contracts.

Governance

• Procurement must be fair, equitable, transparent, competitive, and cost-

effective (PFMA).
• Delegation of roles to avoid conflict of interest.
• Bid Evaluation Committees – evaluate and score tenders
• Bid Adjudication Committees - recommend awards.

Performance Audit Check

• Was the process timely, cost-effective, and did it ensure quality contractor
appointments?

Procurement Prescripts

• No use of brand names.

• Bid conditions must be completed clearly and in English.
• Require tax clearance, official advertisement, standard bid documents, and
full documentation.
• Site inspections/explanatory meetings should be provided.

Page | 19
 UNIT 12: LOGISTICS MANAGEMENT
Definition & Scope

• Logistics = uninterrupted flow and coordination of materials and information

across the supply chain.
• Ensures the right material, in the right quantity, quality, and time reaches the
right customer.

Key Functions

• Plans, implements, and controls:

o Movement of goods, services and information (forward & reverse)

o Storage, distribution, order fulfilment

Activities Include

• Transportation (inbound & outbound)

• Fleet and warehouse management
• Inventory control, vendor performance review
• Third-party logistics services

Stages in Supply Chain

• From supplier to plant, plant to distribution, distribution to stores, and stores to

customer

Logistics Function

• Sourcing and procurement

• Production planning and scheduling
• Packaging and assembly and customer service

Integrative Role

• Coordinates with:

o Marketing, sales, finance, manufacturing & IT

SCM Unit Responsibilities

• Set inventory levels.

• Manage storage and distribution.
• Receive materials and issue orders.
• Evaluate suppliers.
• Collaborate with Finance Division to process payments.

Page | 20
 UNIT 13: DISPOSAL MANAGEMENT
Purpose and Process

• Disposal Management is part of the SCM process focused on the responsible

removal of unneeded or obsolete goods.

• Outlines which goods will be disposed of in current financial year. Plans define
whether there is a need to replace disposed goods.

• Disposal Management Plans:

o Identify goods for disposal in the financial year.

o Determine if replacements are needed.
o Input into the Procurement Plan.

Key Steps in Disposal Management

1. Link needs to disposal planning.

2. Prepare for disposal (e.g., identify, assess).
3. Execute the disposal process.
4. Control and document disposal activities.

Roles of the SCM Unit & Disposal Committee

• Conduct obsolescence planning.
• Maintain a database of redundant items.
• Analyze potential for reuse.
• Develop and apply a disposal strategy.
• Execute physical disposal.
• Update the asset register.
Disposal and Letting of State Assets

Disposal

• Immovable property: Sold at market value, unless treasury states otherwise.

• Movable assets: Sold via tender, auction, or at market value—whichever
benefits the state most.
• Computer equipment: Must first be offered to educational institutions (they
cover transport costs).
• Firearms: Require approval from the National Conventional Arms Control
Committee.

Letting of State Assets

• Immovable property (excluding official residences) must be let at market-
related rates unless otherwise approved.
• Annual review of all related fees, tariffs, and charges is required.
Page | 21
 UNIT 14: APPOINTMENT OF CONSULTANTS
When to Appoint Consultants

• If the institution lacks internal expertise, consultants may be hired.

• Requires motivation and approval from the Accounting Officer, regardless of
cost.
• Conduct a capacity assessment before hiring.
Alternatives to Consultants

• Train or develop existing staff.

• Hire new employees.
• Extend hours/pay overtime to current staff.
Criteria for Appointing Consultants

• Must have necessary skills and resources not available internally.

• Training or recruitment not feasible within the available time.
• Ensure realistic and clear specifications.
• Match project goals with the institution’s ability to implement and sustain.
Important Considerations

• Develop rating criteria (e.g., experience, capability).

• Contracts must include skills transfer clauses.
• Skills transfer should target multiple employees for continuity.
• Consultants must provide:
o Hands-on training
o Mentorship
o Staff involvement

Administrative and Legal Issues

• Address intellectual property rights in contracts.
• Assess total cost vs. benefit of using consultants.
• Rates must be established before appointment.
• Complete and store close-out reports for future reference.

Page | 22