GROUP MERCHANDISE PROCUREMENT
Selwyn Eagle
POSITIONING
The group’s procurement base has changed fundamentally over the last few years both domestically and internationally, and will continue to change in an evolutionary manner. These changes represent the group’s responses to developments in the broader economy of South Africa and further afield and its insights into better ways of doing business.
Within the broader economy there is increasing cost pressure on retailers and increasing competitiveness within the retail world stemming ultimately from easy access to information and, with it, the services of suppliers of all types of merchandise who may be geographically distant. Investors are also beginning to exert pressure aimed at ensuring fair labour practices in the retail supply chain.
South Africa is thus located firmly within the global trading environment, but also contends with economic factors that are purely indigenous.
Sensing that modern trading conditions called for extraordinary responses, the group entered into its supply chain initiative approximately two years ago, aimed at leading it to become a world-class retailing organisation with a highly efficient system from start to finish of procuring stock and placing it in its stores.
As one of many steps in this process the group recognises that it now needs a division dedicated to highly efficient procurement of merchandise and this led in the latter half of the 2010 year to the creation of the Group Merchandise Procurement division. To some extent the new division was spun out of the Sourcing department of the old TFGA division and will now, with a new vision and a new set of controls, continue with those functions. There are also new functions and goals which are aligned with the group’s overall strategies.
To set the new division on its way, a well-structured operational team with clearly defined roles and responsibilities has been assembled.
This new division is responsible for the strategic development of merchandise procurement from both domestic and international suppliers. This overall task breaks down into a number of components including the establishment and enforcement of supplier conformance norms, measuring supplier performance and establishing and recording scorecards, applying group quality assurance standards, overseeing group shipping and assuring compliance with all local and international legislation.
The division aims to deliver healthy supplier relationships in terms of reliability, speed, quality, value and flexibility, while also ensuring the maintenance of appropriate ethical, labour and environmental standards, in keeping with the needs of an efficient and responsible fast fashion retail organisation.
To meet these objectives the division is in the process of formalising procedures and norms for supplier assessment, approval procedures and performance measurement in order to maximise best-practice methodologies that can be shared across the group’s divisions.
REVIEW OF THE YEAR
A start has been made on developing a process of continuous analysis of global procurement trends. This has already led to the opening up of opportunities for potential new suppliers and geographical regions in which to seek suppliers.
The test phase is under way of a set of group merchandise policies and procedures for both formerly approved and new suppliers. It incorporates a new and updated group quality assurance and quality control system and process.
The division has a unique value proposition through the implementation of measurement processes to facilitate supplier development, the provision of technical support where needed and, in extreme cases, the rehabilitation of suppliers after lapses have occurred.
The division aims to enhance the level of skill of its personnel and to develop and share best-practice concepts with all stakeholders, both internal and external.
One of the division’s responsibilities is to ensure that all applicable contractual obligations are being met and this includes compliance with all applicable legal, ethical, environmental, employment, and health and safety rules. A revised supplier auditing system has commenced and a new scorecard will be rolled out to the group’s suppliers in the new year.
Through the Shipping department and partnerships with service providers, the division manages all of the group’s payments for freight, international logistics, foreign exchange and merchandise.
By implementing a number of supply chain initiatives the division has been able to reduce transit times in order to facilitate speed to the market-place.
The diagram above illustrates the basic structure and functions of the division.
STRATEGY
The management team has identified key strategic objectives for the near and more distant future and these are being disseminated throughout the division and the group.
These objectives are built on the pillars of profit, people, process and suppliers, underpinned by effective communication.
PROSPECTS
The division’s immediate task is to ensure that the group acquires and maintains a comprehensive and fully documented database, which is used to map, record and report on all suppliers in terms of their strengths and weaknesses. This includes implementing a formalised standard supplier take-on process to ensure consistency throughout the group.
A further aim in the next year is to implement upstream quality assurance processes both locally and internationally, covering all merchandise categories in which the group trades.
An assessment is being made of a fully integrated foreign exchange management and logistics visibility system, which the division expects to acquire and bring into use during the course of the next year. This will provide the group with updated currency and logistics positions, enabling better and faster decisions to be made.
The division has played a pivotal role in the successful introduction of @home franchise stores in the United Arab Emirates and will play a similar role elsewhere as the group expands further into Africa.
