The CIPS - UNIDO Memorandum of Understanding Assisting Organisations to procure from Developing Country supply chains

1. The CIPS - UNIDO Memorandum of Understanding Assisting Organisations to procure from Developing Country supply chains Presented by: Karen van Vuuren (FCIPS*) *Fellow of the Chartered Institute of Purchasing and Supply, UK General Manager, Strategic Supply Management Transnet AfrIPANet ICC, Durban South Africa 2008-10-24 & 2008-10-25

2. The CIPS and UNIDO agreed to share their plans and agendas to achieve a long-term affiliation and relationship • The initial foundations for the affiliation between UNIDO and CIPS is based on: • In the case of CIPS* • to assist the purchasing and procurement officers of private and public organizations • in gaining greater transparency on possibilities for local procurement in developing • country environments; and • in making more informed procurement decisions. • In the case of UNIDO** • to assist local enterprises in developing countries to be more visible and attractive as • suppliers; and • expand their market access through supplier contracts. CIPS* - Chartered Institute of Purchasing and Supply based in the United Kingdom UNIDO** - United Nations International Development Organisation based in Austria

3. CIPS - Chartered Institute of Purchasing and Supply WHO? WHAT? WHERE? • Provides Qualifications from Certificate to Masters to over 25,000 Students World-Wide • Accredits >50 PSCM Master DegreeProgrammes in European, Australian and Asian Universities • Trains Fortune / FTSE Company Procurement Teams in Academic and Practical Programmes • Certificates Organisations Procurement Policies, Procedures and Operations from Approved to Gold Standard • Offers Procurement Professionals a Dedicated Framework for Continuous Professional Development (CPD) • Represents PSCM as Business Discipline that contributes economically to National & International Prosperity • Europe: 29,000 Members - 120 Study Centres • Africa: 12,000 Members - 55 Study Centres • China: 3,000 Members - National Network • Australia: 2,500 Members - 15 Study Centres • In ASEAN: – 1,000 Members - 10 Centres • The Largest Procurement and Supply Chain Institute in the World • A UK Based Organisation with Members in 138 Countries • A Regulated Education Awarding Body with University Degree Conferring Powers • A Learning and Development Agency working with a Range of Private and Public Organisations Globally • A Knowledge Management Sower, Reaper and Harvester • An Advocate to Government and Industry of the Value Procurement and SCM can Deliver

4. Human capital + Technology Inputs Outputs Private infrastructure Public Infrastructure Background to the CIPS and UNIDO Memorandum of UnderstandingIN AN ECONOMY MARKET FORCES SHOULD ENSURE EFFECTIVENESS & EFFICIENY, BUT MARKET FAILURES DO OCCUR An economy is made up of a combination of physical capital and human capital that employs technology to transform inputs into more valuable outputs In the African context we have market failures. The African Union & UNIDO want to be addressed this via interventions together with TNCs*. *TNC – Trans-National Corporations

5. MARKET FAILURES CAN BE RESOLVED WITH UNIDO’s AfrIPANet* SUPPORT IN LINKING FDI**/SME DEVELOPMENT UNIDO’s Regional Programme will engage ***TNCs to increase their interaction with local African economies, supported by three components of AfrIPANet. = Investors **TNCs currently source a large % of required goods and services from outside the African Region, thus being exposed to a large degree of Supply Chain Vulnerability (SCV). **FDI – Foreign Direct Investment ***TNC – Trans-National Corporations *AfrIPANet - African Investment Promotion Agency Network

6. BACK UP SLIDES

7. LOCAL AND INTERNATIONAL SUPPLY CHAIN PARTNERS WORK TOGETHER TO SUPPLY FINAL CUSTOMERS UNIDO’s Regional Programme wants to engage TNCs as the point of perceived strength in terms of working with local supply chains. TNCs will gain by reducing their SCV Channels for communication & distribution Suppliers to industry (Tier 2, 3 etc suppliers) Industry players (Tier 1 suppliers) Markets/ segments Competitor A (regional) TNC 1 Example: Anglo Segment A For example: Mining African Supplier I Segment B For example: Chemical TNC 2 Example: Sasol Local Organisation African Supplier II Segment C For example: Energy TNC 3 Example: Eskom Competitor B (international) TNC 4 Example: Transnet Segment D For example: Transport Planned Point of Intervention Adapted from Michael Porter

8. Practical example in Southern Africa CSDP – Competitive Supplier Development The aim of CSDP is to identify localization interventions that will leverage participating SOEs expenditure on imported goods and services in those priority areas identified in SOEs’ signed off Supplier Development Plans and that will address the market inadequacies, so as to create an environment conducive to investment in new and/or upgraded local manufacturing capacity. SOEs – State Owned Enterprises

9. Practical example in Southern Africa: CSDP Buyers identify localisation opportunities

10. Practical example in Southern Africa: CSDP Buyers set industrialization targets, formalized in Supplier Development Plans

11. Practical example in Southern Africa: CSDP Hubs are being set up with local suppliers, regional operators (buyers) & OEMs SOEs – State Owned Enterprises OEM – Original Equipment Manufacturers

12. Practical example in Southern Africa: CSDP Railways & Harbours Supply Chain Association as a buyer / supplier hub • The initial foundations for the affiliation between UNIDO and CIPS is based on: • In the case of CIPS* • to assist the purchasing and procurement officers of private and public organizations • in gaining greater transparency on possibilities for local procurement in developing • country environments; and • in making more informed procurement decisions. • In the case of UNIDO** • to assist local enterprises in developing countries to be more visible and attractive as • suppliers; and • expand their market access through supplier contracts. SARA Southern African Railway Association RRA Rail & Road Association CIPS* - Chartered Institute of Purchasing and Supply based in the United Kingdom UNIDO** - United Nations International Development Organisation based in Austria

13. Industries are adopting a collaborative supply chain approach when working with the OEMs to drive industrial development Seeking products where we can achieve local and global competitiveness Regional rail operators Mining rail operators Harbour operators Transnet Assisting OEMs to develop local suppliers which can fulfil immediate and global requirements OEM OEM OEM Assisting local suppliers in their development toward global competitiveness on a collaborative basis Local suppliers Local suppliers Local suppliers Local suppliers 13 Source: UNIDO South Africa, Herman Potgieter OEM – Original Equipment Manufacturers

14. The key objective is the deployment of a common development platform,aligning various stakeholders to accelerate supplier development Suppliers Buyers Development Financial agencies institutions • Collaborative platform • Common “Language” (Standard) • Shared IT platform • Broad industry participation • Using data for research and development monitoring purposes • Various implementation agencies (UNIDO, NFTN, NPI, various dti departments, private organisations, cluster initiatives etc) • Core development functionality is free of charge, advanced features pay for the maintenance of the platform Suppliers Suppliers Buyers Buyers Standard Alignment Financial / investment community Development Development Financial agencies agencies institutions Monitoring & Management Platform (developed to support IPAs & ITPOs) 14 Confidential and Proprietary Information

15. The Supplier Development Standard The data can be used for non-commercial research and monitoring purposes to the participating stakeholders UNIDO, the DTI, DPE, World Bank, Economic research institutions, academic institutions, economic development agencies, ASGISA National or regional level monitoring data UNIDO, the DTI, DPE, academic institutions, industry associations, cluster initiatives (NFTN), standard bodies, environmental development initiatives, trade unions etc. Industry / cluster level monitoring CIPS, IPSA, Supply Chain Council, supply chain research bodies, trade monitoring etc. Supply chain view Development donors, FDI support agencies, non-commercial development centres etc. Individual company level info (Micro Level) Monitoring & Management Platform (developed to support IPAs & ITPOs) 15 Confidential and Proprietary Information

16. The Supplier Development StandardLinking the developed and developing economies to fast-track industrial development Stakeholders • UNIDO SPX • Supply Chain Council (SCC) • World Bank • Local Governments (including Dept of Trade and Industry) • The global buyers are increasingly trying to gain access into the • developing economies. The frustrations trying to work across • geographic, cultural and language barriers are enormous. • The means to assess and develop suppliers in these countries is very • limited, compared to the requirements of the modern supply chain. • The developing economies often have excellent suppliers, who do not • have the exposure towards the rest of the world. • This supports suppliers’ efforts to collaborate as a cluster to • deliver against the requirements of a global buyer organisation. Stakeholders • UNIDO • Local Governments • Industry Bodies (Chambers of Commerce) • World Bank (and similar organisations) • Industrial development normally has to go through certain • development phases. • Lumus greatly speeds up this process, by driving this process • on a roadmap basis down to a individual company level. It • provides UNIDO, governments (and organisations) with the means • to monitor development and to support it by means of focused policies • and interventions. Stakeholders • UNIDO SPX • Local Governments • Support networks consisting of experienced individuals (Often experienced retired executives) • Unions • Donor organisations • The ability of smaller suppliers to firstly expose themselves and • survive the growth into the mainstream economy is daunting. • Small companies often fail either by not being exposed to more • business or by taking on work which is above their means and • capabilities • These companies normally require a hand-holding approach. • Although there is often substantial national initiatives to assist these • organisations, Lumus provides the means to monitor development • and intervene on a micro level.

17. The CIPS and UNIDO Memorandum of Understanding Bring together buying potential & supplier development tools to enrich the procurementexperience and deepen local supply chains Roles and Responsibilities of UNIDO 1. Establishing SPX centres in countries within the context of ongoing UNIDO technical assistance projects, with a view to setting up institutional structures and operational tools and methodologies for linking of buyers and suppliers, contractors and sub-contractors. 2. Bring together the buying potential of CIPS members and the supplier development tools of UNIDO to enrich the procurement experience and deepen the local supply chains of large enterprises in developing countries. 3. Ensure that supplier development initiatives of individual institutions are supported by the SPX initiatives and they add synergy to the overall development objective of the SPX network. 4. UNIDO will on a similar basis, actively promote CIPS membership to those suppliers who came on board through the CIPS membership or activities. 5. UNIDO will refer organisations with supply chain development gaps to CIPS who will provide training courses, consulting and/or mentorship interventions to address these gaps within the development framework. 6. UNIDO will proactively promote membership of CIPS throughout all of its networks. UNIDO will recognise CIPS on the preeminent leading Purchasing and Supply Association in the world. 7. UNIDO will introduce and provide access to the CIPS and its global networks including governmental procurement and institutions. Roles and Responsibilities of CIPS 1. Develop capabilities of supplier organizations to upgrade their practices and performance to match the requirements of buyers. 2. Develop the capacities of purchasing and procurement officers toutilize the SPX methodology for increasing efficiency and transparency. 3. Design and implement joint training programmes for buyers and suppliers. 4. CIPS will design, offer and deliver training to both buyer and supplier organisations through the SPX initiatives. 5. CIPS will provide access and make available their organisational certification programmes to the aforesaid. 6. CIPS will facilitate research and design through its network of universities and business schools to assist UNIDO in collation and delivery in both of its surveys as benchmarking tools. 7. CIPS undertakes to introduce and broker relationships for UNIDO across its extensive global networks of members, organisations and institutions. 8. CIPS shall enable a free flow of knowledge management through utilising its portfolio of tools, techniques and methodologies, expert groups and individual practitioners to best effect for the CIPS/UNIDO co-joint projects. Draft version

18. QUESTIONS Presented by: Karen van Vuuren (FCIPS) General Manager, Strategic Supply Management Transnet Karen.van_vuuren@transnet.net Mobile +27 (0)83 274 9926