The challenge facing any procurement transformation is the one of enacting tangible and lasting change. As organisations seek to realign their procurement and supply chain functions to become more strategic and drive growth, they must thrive in the environment characterised by constant change and pressure to deliver cost savings. This may be due to Procurement and Supply Chain functions historically being seen as a cost centre and back-office that places orders, processes invoices and polices spending. But the reality is far from the truth. Procurement plays an integral role to any organisation, and its growth enabled by digital transformation will be required to positively impact organisational success and growth.
As the Group Executive Procurement and Contract Management of Telkom SA, Ben Van Zyl has been tasked to deliver procurement transformation. Van Zyl looks forward to leveraging his 20-year career in strategic sourcing, procurement and supply chain management gained from working for leading financial and telecommunications organisations around the world. His first challenge was communicating the true value of procurement to his customers at Telkom. “When you listen to business owners, you are able to translate their vision and strategy for their business into a sourcing strategy that will enable them to succeed,” he says. “It’s about getting the language right. You do not say that you’re going to come in and implement new control because what scares people is the idea that you are there to police a policy and put in new processes that are going to delay them.”
“Resistance stems from lack of acknowledgement of the dependency on procurement in delivering their business objectives aligned to their performance plans. Whatever I bring forward has to have a client focus on not only how we are going to enable them to achieve their objectives but also clearly demonstrate advantages thereof.” Van Zyl counts himself lucky. He says his messaging was well received by the business made up of people and a Board that understands the critical role of procurement and welcomes recommended changes.
Last year, Van Zyl moved from Openserve, the provider of the wholesale network, to Corporate Centre with the goal to address some procurement and supply chain issues. The key focus was on driving cost savings and tightening on supplier performance requirements. But why stop there? Van Zyl put together a seasoned cross-functional team of subject matter experts to resolve issues stemming from failed system implementations or misfires of the recent past. In his own words, he “steadied the ship” but acknowledges that it is only the beginning of a long and exciting journey. “We were under pressure from a cost perspective,” he says. “I was asked to come in and steady the ship but also to take our procurement and supply chain environment to the next level.”
Defining that next level was crucial to making lasting and meaningful change for the business going forward. The first step was to engage stakeholders to identify real pressure points and outline “building blocks” to enable Telkom’s customers to deliver against their deliverables. Thereafter, Telkom conducted a comprehensive maturity assessment to paint a clear picture of challenges facing procurement and supply chain as well as various business units. Issues facing procurement and customers were interlinked with recent audit findings highlighting several and significant challenges. Through careful engagements with its customers, suppliers, analysis of maturity assessment, and recent audit findings, Van Zyl and his management team formulated a comprehensive plan, with a focus on setting a strong foundation.
“My initial focus was on getting the basic building blocks in place, by setting up a centre of excellence (COE) as well as ra evised procurement governance framework and policy, while streamlining the operating model. We also focused on improving a cumbersome supplier onboarding process,” says Van Zyl.
“Alongside this was a focus on identifying opportunities from a cost savings and value perspective to strategic suppliers, to enable business to achieve their strategic objectives in support of the overall group strategy. It was a challenge, but I think listening to our stakeholders and sharing with them to say this is where we are, here are the things that are critical, and this is going to be my approach and my timeline – which they approved – was key to getting things started.”
One of those building blocks, the centre of excellence, was the key to all of this. Establishing and implementing would pave the way. But what is a COE? A core team of experts that fulfils holistic procurement services within the organisation that drives scale and repeatable outcomes with application of best practice. Van Zyl highlights an example of this in action. A cross-functional team, including COE members, assessed issues stemming from multiple ERP systems and processes, to recommend options underpinned by practical implementation considerations. “They provide knowledge-based services across different procurement processes, platforms and standards designed to drive scale and focus on delivering value-added performance throughout the procurement organisation, to enable the growth strategy,” he explains.
“This model allows for improved knowledge management so that you can create step changes in the skills of the team.” This is of particular interest to Van Zyl as there is a notable shortage of sourcing talent, rendering knowledge management critical. Talent comes and goes and the people within the business, including critical procurement experts, may take with them key information and knowledge, “leaving you to develop resources from scratch,” adds Van Zyl. “Again, what’s critical for us in the centre of excellence model, is our knowledge management along with everything else.”
When discussing procurement transformation, it’s not long before we fall victim to subscribing to the notions of trend. Flexibility and agility are two of the biggest and often used words. But why? What do they mean to Van Zyl? “I’ll be honest. These were not words normally associated with procurement for Telkom. Procurement used to be an organisation with structured and strict procurement processes and gateways, so those words were not associated with the whole procurement process environment.” There is sound reasoning for this. Telkom has unique and different business units within its portfolio.
Telkom company consists of divisions namely Openserve, Telkom Consumer, Telkom Small and Medium Business and subsidiaries are BCX, Gyro and Yellow Pages. Their services include, but are not limited to, fixed line and mobile, mast and tower, property solutions, commerce platform, financial services and an IT outsource. Each business unit has its own strategy, complexities and budget. For Van Zyl and his team, it was vital to acknowledge that a one-size-fits-all process was out of the question.
“A standard procurement process with no flexibility and the inability to respond to individual business unit requirements will become unnecessarily controlling and restrictive. It would create a direct negative impact on the individual business units that would struggle to achieve and maintain a competitive advantage in the open market. We had to consider that in our development of new procurement governance framework policy and processes, as well as the selection of digital tools we would like to implement. This allows us to be more flexible and holistic in our approach to shorten process timelines as applicable to sourcing, contracting and general procurement transactions.”
Easier said than done, admits Van Zyl, in that this is a process that will never be ‘perfect’. Improvements have been made with more to be implemented in the pipeline, but this is an ever-evolving journey, and he and his team will continue to review and address emerging gaps.
Procurement is a numbers game. It always has been. Numbers count now more than ever, to support and justify the significant transformation with fact-based analysis. Van Zyl and his team addressed the control environment through the design and implementation of a new procurement policy, governance framework and processes that enables the business to pivot and respond more quickly. The development of Telkom’s Spend Cube, with real-time ERP data, enabled the building of reports and dashboards to track savings, cashflow, procurement SLAs and supplier performance. “It sounds like basic stuff,” says Van Zyl. “But we had some contradicting views on procurement spend across the different businesses. Depending on the perspective from suppliers, contracts or business, you could get different numbers. Now, there’s one version of the truth and the intent is to build on this analytical capability to provide insights to the sourcing teams and business that can support strategic decision making.”
But what of the successes in the eyes of the CFO and CEO? These are, ultimately, the key stakeholders for procurement. During Telkom’s financial year 2020, a dedicated cross-functional team made up of Procurement, Treasury, Finance and IT implemented a supply chain financing programme to free up cash flow and reduce working capital. A key focus for the group CEO and CFO, “The supply chain financing programme allows all suppliers and specifically small suppliers, to trade their invoices at a low interest rate allowing them instant cash injection,” he says. “That was very helpful during this COVID period and yielded cashflow improvements, as highlighted in our year-end results.”
Success is one thing, but failure is another. Admitting that things haven’t gone according to plan is often the place where real change is found. Van Zyl recognises this as an incredibly important part of any journey. “It’s a journey and there’s always room for improvement. It’s critical to continuously review and evaluate new processes and tools that you implement, not only to ensure that the originally envisaged benefits are obtained but also to adjust to changing needs. Human factor should never be ignored because dramatic change can bring tremendous resistance. It requires ongoing change management to ensure success.”
Technology and process digitalisation play a real key role in the procurement transformation journey. Established and emerging technologies enable businesses like Telkom to become smarter and scale faster. For Van Zyl, digital innovation will enable procurement to move away from repetitive manual tasks to a mix of more analytical and creative thinking roles that’s focused on driving a competitive advantage and strategic value. “The procurement function must develop and create innovative business models to become a valuable strategic business partner,” he says. “We must become a partner backed by real-time data and market trends to advise and support strategic decision making in the business. This also significantly improves on timelines for contracting, transacting and approvals. That’s what digital procurement means to us.”
Procurement and supply chain are a people and relationship-oriented function. This is nothing new, but as we discuss transformation through processes and digital tools one can be forgiven for forgetting that they are meaningless without the right people striking the right relationships. “The people in your team are your biggest asset. You need experienced, reliable, and strategic sourcing professionals in every corner of procurement and supply value chain. Whether it’s somebody that focuses on analytics to drive insight, or actively reviewing and managing a specific procurement operations environment, they are the people driving true transformation. You rely so much on them. I certainly do.”
With the right people, the right process and ongoing discussions with the suppliers, the relationships between both Telkom and said suppliers can evolve to take on new and fruitful shapes. This can be realised through a contract and supplier relationship management program that allows Telkom to navigate geopolitical tensions and restructuring of global trade dynamics. This, coupled with individual supplier management account plans based on the supplier’s risk segmentation and the implementation of joint balance performance scorecards, allows Telkom to continuously assess suppliers’ performance and to better manage the risk in the supply chain.
Van Zyl points to substantial improvement of the supplier performance and noteworthy reductions in contract value leakage. “Visibility of the balanced performance scorecards clearly identifying performance gaps, risk and improvement opportunities also opened up communication between us, the suppliers and the internal business partners. We perform annual supplier surveys to understand their experience in dealing with us, looking at the entire procurement process from the tender stage through contracting, onboarding and further engagement with the procurement team and end-users, right through to the payment process. This greatly assists us in identifying and addressing supplier challenges with the view to making suppliers’ interactions with Telkom as seamless as possible. Telkom prioritises supplier experience because, as Van Zyl notes, Telkom wants to be viewed as the customer of choice, thereby gaining access to not only the best suppliers in the market but also to unique supplier value opportunities.
In early 2020, COVID-19 pandemic swept the globe. Through adversity however comes opportunity and for Van Zyl, along with many procurement professionals, this crisis highlighted the need for a new approach where agility and change are not only essential, but unavoidable. Telkom was able to identify concentrated supplier risk and likely points of failures of its critical supply. In acting fast, Telkom was able to put alternative supply sources in place where required. Thanks to business continuity plans for its strategic and high-risk suppliers, through the strategies that Van Zyl and his team implemented during the past few years, Telkom did not experience any significant supply chain disruptions. “We were quite fortunate in that, thanks to what we had in place, the disruption to our business was actually not that significant,” he says. “Our analytical capability and the role of analytics will continue to play an important role, as this coupled with a detailed understanding of our suppliers and supply networks allowed us to make sound decisions based on a comprehensive understanding of our current and potential future supply sources and developing trends, supported by detailed cost and risk analysis.”
Given the tumultuous path that 2020 has put many businesses on, what changes await Telkom and the rest of the world? Many speculate that we will see a new world of procurement and supply chain thanks to a rethinking of what is truly effective and strategic, in light of COVID-19. For Telkom, the road ahead looks promising. Van Zyl and his colleagues from finance and IT work closely to make business changes come to life. His current focus is on improving Telkom’s cashflow and the bottom line. Delivering sustainable cost savings through strategic sourcing, effective contract management, digitalisation, as well as identification and implementation of value levers, are his efforts to improve time to market and enable business units to best service customers. His highest priority is the delivery of seamlessness procurement services while improving on efficiency gains, building on the COE’s Spend Cube to improve analytics, through streamlined and automated reports, and ultimately drive fact-based analysis to underpin comprehensive strategy development and execution. All this, and continuous engagement with his stakeholders, customers and his team, is where he spends most of his time. But what will be key for Van Zyl in order to succeed?
“If you always look for that opportunity to provide more value to the business, you’ll earn your seat at the table,” he says, acknowledging this often-used expression. “It doesn’t take away that you need to be competent, and the need to execute well. But unless you have a seat around the table, you don’t even get the opportunity to play a strategic role, and you remain just a typical support function. Seek that opportunity to provide value to the business through greater focus towards innovation and collaborative opportunities with business that are focused on driving sustainable growth, competitive advantage and strategic value.”