Performance Management in Supply Chain Management
The broad objectives of Supply Chain Management in the Public Sector are improved governance and preferential procurement for socio-economic empowerment.
Governance is defined as “the interface with stakeholders, the source of the strategic decisions that shapes the organisation and its work, and ultimately accountability for the work and the actions of the organisation” (The Institute on Governance).
Performance Management and its application to specific functional areas like Supply Chain Management (SCM) can therefore be seen as a key driver in the institutionalisation of good governance practices within the Public Sector.
What is Performance Management in SCM?
Performance Management depicts the final element in the SCM cycle but should not be seen in isolation as the monitoring processes often occur concurrently with all the other elements in the SCM cycle. The process consists of a retrospective analysis to determine whether the proper process was followed and whether the desired outcomes were achieved.
An effective SCM Performance Management System should be developed and implemented in accordance with departmental policies and procedures and applicable legislative requirements. Broadly speaking, SCM Performance can be measured in terms of the following:
- Suppliers of goods and services
- The SCM Unit
- Service Delivery Realisation and or Value for money
The Monitoring of Suppliers
The monitoring of suppliers should form the basis of Contract Management activities where certain aspects should be monitored and reported on. These reporting elements include but are not confined to the following:
- A database of contracts awarded, conclusion of Service Level Agreements
- Monitoring of the supplier according to the stipulations of the SLA,
- Documenting any deviation or non-performance by the supplier,
- It is also recommended that at the completion stage of each project, an assessment of the supplier/service provider (including consultants where applicable) be undertaken and that this assessment be available for future reference i.e. Close out Report with final payment made to supplier.
- A review of the relationship with suppliers and the improvements needed to enhance efficiencies across the supply chain.
Monitoring of the SCM Unit
The various elements of the SCM Cycle should be monitored for adherence to the relevant legislative requirements and internal departmental policy and procedure.
The SCM Unit should further be monitored for key requirements under the following elements:
- Monitoring and evaluation of SCM policy and its delegations, training obligations, the constitution of bid committees and all relevant statutory requirements;
- Planning and budgeting for all procurement and service delivery needs;
- Compliance to SCM policy and prescripts in respect of acquisitions; logistics; disposal and contract management;
- Reporting requirements to key stakeholders
Service Delivery Realisation and or Value for money
Monitoring of procurement for:
- The extent to which the objectives of the organisation were met through procurement activities i.e. Socio-economic targets, financial targets etc.
- Adherence to the five pillars of procurement especially value for money, which is defined as the best available outcome when all relevant costs and benefits over the acquisition period is considered.
This article is one of a series on Supply Chain Performance Management. Future articles will expand on aspects contained in this article with an emphasis on the following overarching areas:
- SCM Performance in the Public Sector institutions, their structures, roles and responsibilities and control mechanisms
- Contract Management of suppliers
- Supplier Relationships