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PROCUREMENT & LOGISTICS

Africa’s Leading Supply Chain Journal

March, 2017 Issue No.: 08/2017

KSHS. 400.00 TSHS. 8,000.00 USHS. 12,000.00 RFR. 4,000.00 USD. 5.00

Management

The unexplored goldmine of possibilities

Kenya Government plans to revive National Shipping Line - tap over Kshs 300B

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Cross−border e− commerce changing the face of Sub Saharan Africa’s retail sector

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How 5 Emerging Technologies Will Change the Services of 3rd Party Logistics Providers

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LOGISA: The connected supply chain specialist


Editor’s note PUBLISHER Proc & Logistix Consult Limited

Hallo Readers!

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Procurement & Logistics Magazine @ LogisticsProc CHIEF EDITOR Okumu S. Biko SUB EDITOR Malachi Motano PRODUCTION GRAPHIC DESIGN Nicholas Amanya BUSINESS DEVELOPMENT Linzy Otulya WRITER/CONTENT DEVELOPER Sandra Dinga, Maureen W. Njeri WRITER Antony Kanja DISTRIBUTION Valentine R. Magai EDITORIAL OFFICES Proc & Logistix Consult Ltd P.O BOX 40619 00100 GPO Nairobi-Kenya, Mobile + 254713727860 Tel +254 0204404488/0204402479 info@procurementandlogisticsonline.com www.procurementandlogisticsonline.com ADVERTISING For information on advertising in future Issues of the magazine, please contact: OKUMU STEVE BIKO +254 721 986284 SANDRA DINGA +254 713 199012 E-MAIL: adverts@procurementandlogisticsonline.com SUBSCRIBER CUSTOMER SERVICE

Procurement & Logistics Management Magazine is a monthly publication and circulated to professionals in the Supply Chain industry, members of relevant associations, government bodies and other personnel in the procurement, logistics and finance industries as well as suppliers in Eastern Africa. The editor welcomes articles and photographs for consideration. Material may not be reproduced without prior permission from the publisher. DISCLAIMER: The publisher does not accept responsibility for the accuracy or authenticity of advertisements or contributions contained in the journal. Views expressed by contributors are not necessarily those of the publisher. © All rights reserved. No part of this publication may be copied or reproduced without prior permission from the publisher.

Welcome to another edition of procurement and logistics management magazine for the month of March 2017. It is the second edition after the magazine shifted publications from bi-monthly to monthly, basis so as to address the increased activities within the supply chain industry The last three decades has seen an increasing need to shift from Lean, cost, efficiency- driven supply chains to agile, fast, and service driven supply chains. To cope up, organizations have shifted their attention from competition amid a field of companies to competition amid their entire supply chains. Failure in the performance of a firm’s supply chain results in competitive losses and can ultimately lead to collapse and the magazine is not leaving any story behind. In this issue, we look at the oil industry, where we try to establish how the government is looking at investing in LPG facilities on KPRL’s grounds with over 309 acres of land available at its Changamwe facility, a focus on technology where we tell you how Maersk and IBM are out to speed up shipping with block chain technology and the ‘blue’ economy which refers to the ocean economy The Supply chain management has emerged as a common practice across industries because it encompasses long-term strategic alliance, supplier-buyer partnerships, cross- organizational logistics management, joint planning, control of inventory, and information sharing In Kenya the public procurement function experiences a myriad of challenges due to the growing government expenditure and funding from development partners. This edition also looks at how the Government is planning to revive Kenya national shipping line (KNSL). These are just few stories you can always find more on our online version at http://www.procurementandlogisticsonline.com/ where our esteemed writers continue to give you updates of the latest in this sector

Keep reading Okumu S BIKO Chief Editor


CONTENTS COVER STORY 26 The unexplored goldmine of possibilities, Govt. plans to revive KNSL and tap over Ksh 300 B

BRIEFS 4. 6. 7. 8. 9. 10. 11. 12. 14. 15. 16. 17.

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Kenya Pipeline leases KPRL in a 3-year deal Maersk, IBM to speed up shipping with blockchain technology DHL Group goes green, commits to be emissions free by 2050 KenGen to turn 92-year-old Ndula hydro-power plant into a museum Kenya power to light up more homes in South Nyanza Kenya’s LAPSSET corridor project receives $1.93 m grant Government to subject importers to use SGR Kenya Airways joins UN campaign to end Chinese firm to employ 3,000 Kenyans as it begins SGR operations in 2018 DHL buys British delivery group UK Mail in a deal worth £242.7m DHL enters strategic partnership with Ambatovy in Madagascar Siginon Aviation wins deal to handle Qatar Airways cargo in Nairobi

BUSINESS 21. Mastercard Commits to Include over 150,000 Kenyan Merchants With Masterpass QR 22. Cross−border e−commerce changing the face of Sub Saharan Africa’s retail sector 23. How Vendor Managed Inventory (VMI) transforms business 24. 6 Important Inventory KPIs That Can Make or Break Your Warehouse 25. CDC and IFC invest up to US$35 Million to Support Kenya’s Economy through Modern Warehousing Development 33. Kenya to benefit from newly agreed TFTA

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TRADE 34. Booming cross-border e-commerce set to outperform domestic online orders

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LOGISTICS

18. What is Over Dimensional Freight? 30. The Top 5 Reports Every Logistics Manager Should Be Running 42. How 5 Emerging Technologies Will Change the Services of 3rd Party Logistics Providers

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CORPORATE PROFILE

44. LOGISA−The connected supply chain specialist

PROCUREMENT

19. Corruption in public procurement an obstacle to development in East Africa -UNCAC 20. The purpose of Service Level Agreement (SLA) in procurement? 32. E-procurement advantages

TRENDS

REPORTS 51. Purchasing Relationship: Arm’s-Length or ArmWrestling?

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48 48. Six trends HR professionals should look out for this year

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Kenya Pipeline leases KPRL in a 3-year deal

“The government is looking to invest in LPG facilities on KPRL’s grounds with over 309 acres of land available at its Changamwe facility,”

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enya Pipeline Company (KPC) has signed a 3-year lease agreement with the Kenya Petroleum Refineries Limited (KPRL) as it looks to expand the country’s oil storage capacity. The leasing agreement will see the two companies work in partnership with expected development of the current and new infrastructure. The plan is to use KPRL to increase the country’s oil storage capacity as well as set aside a portion to handle the crude oil from Turkana before export. Energy Cabinet Secretary Charles Keter said the new deal will see Kenya Pipeline and KPRL invest in an LPG handling facility on the refinery’s grounds.

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“The government is looking to invest in LPG facilities on KPRL’s grounds with over 309 acres of land available at its Changamwe facility,” he said. KPRL shut down its operations in 2013 following a disagreement between the government and India’s Essar Energy. The government bought back the controlling stake in the refinery last year for Sh500 million. Kenya Pipeline had last year hired consultancy firm PwC to carry out an audit on the refinery’s viability. An earlier audit had shown that it would cost upwards of Sh130 billion to revive KPRL. The move to lease breaks away from an earlier plan that would have seen KPC acquire KPRL ahead of early oil exports. The new agreement has thus given assurance to KPRL staff over their jobs, which had been a major bone of contention. “All existing KPRL staff will be seconded to KPC as employees with their technical expertise remaining crucial to the realization of the government’s early oil program. KPC will convert KPRL’s facilities in preparation for the export of crude and as a result we expect to not only retain existing staff, but also create additional job opportunities in the coming days,” KPC Managing Director Joe Sang said. KPRL’s Chief Executive Officer Charles Nguyai said the deal will enable the country leverage the refinery’s underutilized infrastructure as well as build capacity towards the realization of the early oil program. KPRL has 45 tanks with a total storage capacity of 484 million litres of which 254 million litres is reserved for refined products while the remaining 233 million litres is reserved for crude oil. On its part, KPC has seven storage depots with a total capacity of 612 million litres and is currently constructing four additional tanks at its Nairobi Terminal with a combined capacity of 133.5 million litres.

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Maersk, IBM to speed up shipping with blockchain technology

“The projects we are doing with IBM aim at exploring a disruptive technology such as blockchain to solve real customer problems and create new innovative business models for the entire industry. We expect the solutions we are working on will not only reduce the cost of goods for consumers, but also make global trade more accessible to a much larger number of players from both emerging and developed countries.” 6

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eading container shipping firm Maersk has partnered with IBM to use blockchain technology to conduct, manage, and track transactions across the global, cross-border supply chain. The blockchain solution, based on the open source Linux Foundation’s Hyperledger Fabric platform, will be made available to the shipping and logistics industry. The solution will help manage and track the paper trail of tens of millions of shipping containers across the world by digitizing the supply chain process from end-to-end to enhance transparency and the highly secure


BRIEFS sharing of information among trading partners. According to the two companies, the solution has the potential to save the industry billions of dollars when adopted. Ninety percent of goods in global trade are carried by the ocean shipping industry each year. IBM and Maersk intend to work with a network of shippers, freight forwarders, ocean carriers, ports and customs authorities to build the new global trade digitization solution, which is expected to go into production later this year. The solution is designed to help reduce fraud and errors, reduce the time products spend in the transit and shipping process, improve inventory management and ultimately reduce waste and cost. “As a global integrator of container logistics with the ambition to digitize global trade, we are excited about this cooperation and its potential to bring substantial efficiency and productivity gains to global supply chains, while decreasing fraud and increasing security,” said Ibrahim Gokcen, chief digital officer, Maersk. “The projects we are doing with IBM aim at exploring a disruptive technology such as blockchain to solve real customer problems and create new innovative business models for the entire industry. We expect the solutions we are working on will not only reduce the cost of goods for consumers, but also make global trade more accessible to a much larger number of players from both emerging and developed countries.” The solution enables the real time exchange of original supply chain events and documents through a digital infrastructure, or data pipeline that connects the participants in a supply chain ecosystem. This promotes sustainable transport by integrating shipping processes and partners, and establishing evaluation frameworks through increased transparency and trusted access. For shippers, the planned solution can help reduce trade documentation and processing costs and help eliminate delays associated with errors in the physical movement of paperwork. It will also provide visibility of the container as it advances through the supply chain. For customs authorities, the solution is intended to give real time visibility, significantly improving the information available for risk analysis and targeting, which may eventually lead to increased safety and security as well as greater efficiency in border inspection clearance procedures. “We believe that this new supply chain solution will be a transformative technology with the potential to completely disrupt and change the way global trade is done,” said Bridget van Kralingen, senior vice president, Industry Platforms, IBM. “Working closely with Maersk for years, we’ve long understood the challenges facing the supply chain and logistics industry and quickly recognized the opportunity for blockchain to potentially provide massive savings when used broadly across the ocean shipping industry ecosystem. Bringing together our collective expertise, we created a new model the industry will be able to use to help improve the transparency and efficiency of delivering goods around the globe.”

DHL Group goes green, commits to be emissions free by 2050

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s part of its environmental protection programme, Go Green, DHL Group is looking to expand its portfolio of green products and services to help intensify awareness on climate change and meet its target of zero emissions by 2050. The global logistics giant hopes to contribute meaningfully to achieving the goal of limiting global warming to well below two degrees Celsius established at the 2015 Paris climate conference (COP 21), as well as to the United Nations’ 2030 Agenda for Sustainable Development. “The decisions we make today will determine how our children live 30 years down the line,” said Frank Appel, group chief executive. DHL will reduce all logistics-related emissions to net zero by the year 2050. Its climate protection goal applies both to the company’s own activities and to those of its transport subcontractors. The logistics group said in a statement: “The mission of zero emissions logistics is supported by four interim milestones to be achieved by the year 2025 as part of the group’s environmental protection programme, GoGreen. “Globally, DHL Group will increase the carbon efficiency of its own activities and those of its transport subcontractors by 50% compared to the 2007 baseline.” “At the local level, the group aims to improve the lives of people right where they live and work using clean transport solutions. DHL Group will operate 70% of its own first and last mile services with clean pick-up and delivery solutions e.g. by bike and electric vehicle. “More than 50% of sales will incorporate Green Solutions, making customers’ supply chains greener.” The group will train and certify 80% of its employees as GoGreen specialists by 2025, and actively involve them in its environmental and climate protection activities. The company also plans to join with partners to plant one million trees every year. The new climate protection targets and activities are based on the group’s experience with GoGreen. The previous climate target to improve carbon efficiency by 30% over the 2007 baseline was achieved in 2016, four years ahead of schedule. DHL said that GoGreen is built on two basic principles: burn less and burn clean. The burn less approach is about reducing energy consumption without changing the energy source, such as measures to improve load capacity. Burn clean focuses on using green energy sources and fuels, such as electric vehicles for pickup and delivery. Combining both principles achieves optimum results. DP DHL’s Green Optimisation products include tailor-made logistics solutions which help customers reduce emissions in their own supply chains.

“Globally, DHL Group will increase the carbon efficiency of its own activities and those of its transport subcontractors by 50% compared to the 2007 baseline.”

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KenGen to turn 92-year-old Ndula hydro-power plant into a museum

Director General, National Museums of Kenya, Dr. Mzalendo Kibunjia and KenGen Managing Director and CEO Engineer Albert Mugo

“The station used equipment that is outdated, making it extremely expensive to operate,” KenGen Managing Director and CEO Engineer Albert Mugo said.

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dula hydro-power station is set to be converted into a power generation museum following an agreement between KenGen, KenGen Foundation and the National Museums of Kenya. The 92-year-old power plant, located in Kiambu County, was decommissioned in December 2010 due to operational challenges. “The station used equipment that is outdated, making it extremely expensive to operate,” KenGen Managing Director and CEO Engineer Albert Mugo said. Once the plant is gazetted as a national heritage site, it will become the first electric power production museum in East Africa.

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According to the MoU, the partnership will involve conservation and management of the country’s heritage of electricity generation and conversion of the station into a museum through research, documentation, construction of necessary facilities, fabrication and curation of exhibition materials and preservation of the site and existing equipment. “It will also involve the establishment of opportunities for education and training in heritage conservation and management as well as staff exchange and collaboration through training programs and workshops with special interest in evolution of power generation,” said Eng Mugo. The Director General, National Museums of Kenya, Dr Mzalendo Kibunjia, said the partnership will help in developing the country’s rich heritage by increasing the number of museums offering diverse information for research, information and education. He said they will involve local communities in the conservation and management of the power museum through relevant community engagement activities. The hydro-power plant and its associate external components like the dam, Thika River and the water falls, which will form the basic display areas, will be preserved with minimal changes so as to present them in the most authentic manner. The Ndula museum is expected to drastically cut on the influx of students and members of the public who seek to visit the Company’s power stations on a daily. The Museum will offer a better learning environment for those seeking to learn more about electric power generation complete with an historic touch. KenGen Foundation will spearhead the conversion process as well as take charge of the running of the museum and other support facilities once the process is complete.

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Cargo iQ to launch new Kenya power smart data portal to light up more homes in South Nyanza

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lobal air cargo industry group Cargo iQ is set to launch a new online portal that will give its more than 80 members – major airlines, freight forwarders, ground-handling agents, trucking companies and IT solution providers – online access to an enhanced reporting platform. The portal is part of the group’s Smart Data project which is expected to make it easier for its members to compare their performance against the overall market.

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lectricity distributor Kenya Power is constructing additional step-down substations in different parts of South Nyanza to increase capacity and improve power supply in the region. The step-down substations are expected to ensure constant supply of electricity even in times when a glitch occurs on the main lines, according to Kenya Power County Manager in Kisii Christopher Omwenga. The move is part of the government’s Last Mile Connectivity Project that aims at ensuring more homes are connected to power as well as drive a 24 hour economy which largely depends on reliable electricity supply. Mr Omwenga said one step-down substation at Kegati in Kisii is already up and running while works for a similar project at Bondeni in Nyamira County is underway. Kenya Power intends to have back-up lines for all towns and market centers in South Nyanza as well as street lighting amid rising concerns of vandalism which is a set back to the efforts made in powering the nation. The company has however decried vandalism of electricity infrastructure. The step-own substations are expected to increase capacity due to implementation of the Rural Electrification Project which Kenya Power says is on course.

According to Cargo iQ, the new three-module project will generate a broader scope of measurements, more information on specific milestones, and self-service member access to the group’s reporting platform. The portal will be demonstrated for the first time at IATA’s World Cargo Symposium in Abu Dhabi later this month. Module One of the program, which will assist with airport-to-airport data collection and benchmarking processing, is underway and due for completion later in the year. The group has partnered with IT service provider iRIX Software Engineering to develop Module Two of the online portal, which its members will be able to use to interrogate Cargo iQ data for customised reports on milestones covering individual routes, timeframes and the performance of their partners. Cargo iQ has a working group overseeing the implementation of its Smart Data project, which is working on the specification of Module Three that will incorporate door-to-door data from forwarders allowing holistic view on the air cargo distribution chain. “The Smart Data project will enable members to look at the data in a lot more detail and analyse it more easily so that they can reallocate resources to the areas where it is most needed to improve their processes, and consequently, their quality,” said Ariaen Zimmerman, executive director of Cargo iQ. “We are providing them with enhanced milestone data transparency to drive innovation along the whole door-to-door airfreight supply chain, whilst supporting individual and industry quality and process improvement,” he added. The Smart Data programme is itself just one part of a series of Cargo iQ initiatives that it hopes will improve the value Cargo iQ delivers to its members and to the industry as a whole.

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Kenya’s LAPSSET corridor project receives $1.93 m grant

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he Lamu Port South Sudan Ethiopia Transport (LAPSSET) Corridor Development Authority (LCDA) has received US $ 1,936,560 million grant to help in the construction of the remaining 29 berths part of the mega project. The grant was provided by the African Development Bank through the New Partnership for Africa’s Development Infrastructure Project Preparation Facility (NEPAD-IPPF). The funds will be used to procure transaction advisory services and related technical assistance which will make the project attractive to investors. The Lamu Port project is part of the LAPSSET Corridor Program, which is stipulated within the Kenya Vision 2030 strategy. The port project has 32 Deep Sea Berths estimated to cost US $ 5 billion. In the short term plan, US$ 689 million will be spent on dredging and reclamation, construction of Berths and Yards, construction of revetment, causeway and roads; construction of buildings and utilities; procurement of equipment and tug boats. The project was launched five years ago with the ground breaking at Lamu Port Site. This was followed by the construction of the various preliminary infrastructure facilities and related services at the port. Subsequently, detailed engineering studies were undertaken for the first 3 Berths of Lamu Port. The first 3 Berths are fully funded by the Government of Kenya, while the remaining 29 Berths will be funded through public-private partnership (PPP) financing for construction and

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operation which will require undertaking the preparation of financial structuring and related project financing regimes. The government is currently developing the first three berths at a cost of US$480 million, with the first berth expected be commissioned by mid-2018 and the next two in December 2020. To fully realize the development of the LAPSSET project, the government requires 2 trillion shillings, which it has been making efforts to meet. According to LCDA, the lack of a transaction advisor and technical expertise has made the project unattractive to investors thus the reason for slow implementation. Lamu port is expected to handle 13.5 million tonnes of dry cargo in 2020 and 23.9 million by 2030. Once fully completed, the Port will provide a second Sea Port and Transport Corridor Gateway link to serve the growing import and export cargo base, including the new hinterlands of Northern Kenya, South Sudan and Ethiopia. It will also will congestion on Mombasa Port and the Northern Transport Corridor.

To fully realize the development of the LAPSSET project, the government requires 2 trillion shillings, which it has been making efforts to meet

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Government to subject importers to use SGR Gilbert Lang’at, is the shippers Council of Eastern Africa chief executive. “The government would be opening itself up to legal battles if it forced importers to transport their cargo by rail. “Cargo transportation should be based on what the importer wants, not what the government wants.” Wanja Kiragu, the operations director at East Africa Online Transport Agency. Using SGR is a part of Governments’ strategy to ensure Mombasa remains the route of choice for traders in the Northern Corridor, as well as northern Tanzania, DR Congo and Ethiopia. The Mandatory Standard Gauge Rail (SGR) use is already casing unease among Importer. The directory according to Kenya Revenue Authority (KRA) was meant to ensure that SGR, which has been constructed at a cost of $3 billion in loan financing, does not lie idle come June. Julius Musyokiis the KRA Commissioner for Customs and Border Control, “Using the SGR is a part of the agency’s strategy to ensure Mombasa remains the route of choice for traders in the Northern Corridor, as well as northern Tanzania, DR Congo and Ethiopia. SGR railway line is designed to carry 22 million tonnes of cargo annually, equivalent to 40 per cent of Mombasa ports throughout.” However, even as KRA prepares to formally issue a directive on the matter, importers and transporters say it would be illegal for the government to dictate how to conduct their business. Transport agencies maintain that the government should restrict itself to building infrastructure to enable the private sector to flourish, but should not itself be an active player in the transportation business. KRA is planning to have at least 40 per cent of cargo arriving at the port

of Mombasa transported to Nairobi on the standard gauge railway for clearance at the inland container depot which is creating more anxiety among the importers. This came after the Taxman recognized that volumes of imports and exports at ICD will grow exponentially and so developed the strategy to enhance efficiency in clearance time and provide effective controls on imports, exports and transit traffic, he added. Gilbert Lang’at, of the shippers Council of Eastern Africa says that while KRA is yet to formally issue a directive on the matter, importers and transporters say it would be illegal for the government to dictate how to conduct their business. “Although SGR has the potential to bring down transportation costs by as much as 35 per cent, the company that has been awarded the contract to operate the SGR has not given importers its operations strategy, particularly on key issues regarding the last mile, pricing, reliability and efficiency. If the SGR operator comes up with the right strategy, it is possible for it to attract even 50 per cent business without government support,” Lang’at According to Transporters, giving SGR special preference in the cargo business will push them out of the market.

However,KRA is revamping and upgrading its systems at the ICD to ensure faster clearance of cargo transported from Mombasa. The Kenya Ports Authority is also expanding the depot in Nairobi to increase its capacity. At the moment, the depot has a throughput of 180,000 20-foot equivalent units (teu) per annum, but is being expanded to increase this to 450,000 teu. The battle doesn’t end with exporters, the decision to grant SGR special cargo transportation rights is also causing jitters at Rift Valley Railways, the operators of the metre gauge KenyaUganda railway. The government contracted Australian construction firm John Holland, a subsidiary of China Communications Construction Company (CCCC),to operate the SGR and is expected to commence operations in June. Statistics indicate that currently, about 97 per cent of the cargo arriving at the port of Mombasa is transported by truck, with the other three per cent being handled by RVR. The cargo is 33 per cent bulk liquid, 30 per cent containerized cargo, and at 28 per cent dry bulk. It is estimated there are 15,000 trucks in the region, with 8,000 trucks leaving the port every week.

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Kenya Airways joins UN campaign to end illegal wildlife trade

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enya’s flagship airline, Kenya Airways, announced on Friday it is partnering with UN Environment to effectively cut off one of the main transport routes used by criminals to smuggle wildlife, dead or alive, from Africa to the Middle East and East Asia. The partnership comes in the wake of a poaching crisis across Africa that is wreaking havoc on creatures great and small, from elephants and rhinos to pangolins and African Gray Parrots. “We are delighted to announce, on the occasion of World Wildlife Day, a partnership between Kenya Airways and UN Environment to help end the illegal trade in wildlife,” said head of UN Environment Erik Solheim. “The engagement of private sector companies is critical to tackling wildlife crime. Airlines in particular connect a large global consumer base and unfortunately the illegal supply chain. They can act as a front line agent for change. We applaud Kenya Airways for this initiative and are pleased to support their commitment to help end this scourge.” Kenya Airways, which flies to 51 international destinations, has a zerotolerance policy for illegal wildlife trade and works closely with governments and aid agencies, especially at its hub in Jomo Kenyatta Interna-

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tional Airport, Nairobi, to help ensure illegal wildlife products are not being transported on its aircrafts. The company now wants to scale up its efforts by working with UN Environment to provide regular messaging about wildlife crime prevention across its customer touch points, including in-flight entertainment and announcements, and staff trainings. Kenya Airways Group Managing Director and Chief Executive Officer, Mr Mbuvi Ngunze, said that the partnership with UN Environment underlines the airline’s commitment to fighting illegal wildlife trade. “The threat facing wildlife is serious, especially in Africa, where cases of wildlife poaching are rampant, largely driven by the demand for ivory and rhino horn, but impacting many species. We all have a responsibility to support the conservation of wildlife and it is imperative that everyone gets more involved in stopping the vice,” Mr Ngunze said.

“We are delighted to announce, on the occasion of World Wildlife Day, a partnership between Kenya Airways and UN Environment to help end the illegal trade in wildlife,” said head of UN Environment Erik Solheim.

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Putting an end to the illegal trade in wildlife requires the commitment of everyone from governments to the private sector and dedication of those preventing poaching on the ground. But it critically requires educating and motivating ordinary citizens, who as consumers are responsible for driving the demand for wildlife and wildlife parts, to make choices that do not harm endangered species. From pangolin scales to hornbill casques to rhino horn, elephant ivory and live animals like apes and parrots, there are endless examples of purchasing decisions that are driving species toward extinction. The illegal trade in wildlife is lining the pockets of criminal networks with an estimated $23 billion annually: putting the trade in the same league as the trafficking of drugs, arms and humans. Helping to raise awareness and mobilize public action are four celebrities, who joined UN Environment’s Wild for Life campaign on Friday, each representing a different species threatened by illegal trade: Mexican actor/director Gael García Bernal as the Jaguar; youth actor, Aidan Gallagher as the Hyacinth Macaw; , Indonesian actor Hamish Daud as the Sun Bear; and American actor Adrian Grenier as the Sawfish. Chinese actress Li Bingbing returns to the campaign as a Tibetan Antelope.


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Transport sector reforms vital for industry growth World Bank report

A new report by the World Bank and the International Road and Transport Union (IRU) indicates that efficient trucking can facilitate trade, reduce poverty and generate prosperity.

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he findings are contained in a new guide on Road Freight Transport Services Reform that recommends urgent transformation in the transport industry to boost competition, lower prices and improve quality of service. The report comes amid concerns of the future of players in the global transport sector. It is aimed at governments and policy-makers in emerging and developing economies – where mobility of cargo is almost entirely dependent on the road transport sector. In Kenya for instance, industry players along the Northern Corridor fear the new Standard Gauge Railway (SGR) may put them out of business when the railway begins operations in June this year. Previous World Bank studies have established that transport costs in Kenya are higher on these routes compared to other corridors in the world. In the latest study, the World Bank identifies many performance gaps in the global trucking industry, Kenya included. The performance gaps include high costs, reduced profitability, lack of road safety, environmental concerns, bureaucracy and corruption. It notes that while regulated carriers are often required to compete against informal operators outside typical regulatory frameworks, the guide suggests that measures should be implemented to establish a level playing.

This would improve transparency, safety and sustainability. IRU Secretary General Umberto de Pretto said, “The goal is to foster transparent regulatory environments in which start-up and established carriers can both grow and professionalise their operations, improving safety, sustainability, resilience and competition.” Offering a complete framework – from an evaluation of the existing systems through to implementation of change – the Guide demonstrates how to analyse data to identify areas of focus and then outlines how to structure a detailed action plan. “The billions invested in road infrastructure will only yield their full potential for economic growth and job creation if logistics services are operating efficiently along these roads,” explained Jose Luis Irigoyen, senior director of transport and ICT global practice at the World Bank Group. “This guide provides a set of principles to help policymakers and practitioners assess the different challenges in road transport, and select a reform path most suited to a country’s stage of economic development and its institutional capacity,” he noted. The study calls for the professional training of drivers as part of reforms in boosting the industry’s efficiency. Formalised operations, modernised freight tracking and communications systems also help to streamline the industry.

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Coast Hauliers sells assets to Seven Stars Ltd in a multi-million shilling deal

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enya based transport company Coast Hauliers is selling its assets to Seven Stars Limited in a multi-million shilling deal which will see the company transfer all its assets including motor vehicles. In the deal, Seven Stars will acquire motor vehicles, workshop tools, transport equipment, accessories and stock. Coast Hauliers will retain its debts, business contracts and tax among others. Coast Hauliers has been in operation in Kenya for over 10 decades transporting cargo from the port of Mombasa to interior of Kenya and the East Africa region including Rwanda. The company is involved in transport of general cargo, containers and “out of gauge” items such as boats and electrical transformers. As part of the acquisition, Seven Stars will also inherit Coast Haulier’s premises in Mombasa. “Sale assets belonging to Coast Hauliers shall be sold to Seven Stars who shall carry on its business from the premises under its name,” reads part of the notice. The deal indicates that Coast Hauliers is scaling down its operations. The move comes ahead of official commissioning of the Standard Gauge Railway (SGR) in June. The SGR is expected to significantly cut the business of truckers who will be disadvantaged in terms of pricing and speed of delivery.

“Sale assets belonging to Coast Hauliers shall be sold to Seven Stars who shall carry on its business from the premises under its name,” reads part of the notice Those involved in logistics along the Northern Corridor fear the SGR line will render thousands jobless and waste millions of shillings in investments, as the train replaces the bus and truck. Truck operators have dominated cargo ferrying from Mombasa to various inland destinations, with rail volumes dropping from about 70 per cent in the 1970s and 80s, to a paltry 5 per cent today. About 95 per cent of exports and imports are currently transported by road, a situation that is expected to change once the new railway starts operations.

Chinese firm to employ 3,000 Kenyans as it begins SGR operations in 2018

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t least 3,000 Kenyans will be employed by the China Communications Construction Company when they begin commercial operations on the newly built standard gauge railway in January 2018. The firm, expected to run the SGR for a period of five years has made a commitment to employ drivers, technicians and station operators. The government expects to sign an operational deal with the firm after which it will absorb between 2,000 and 3,000. The deal will see the Chinese company operate business on the SGR without public bidding. Rift Valley Railways (RVR), which operates the Kenya-Uganda railway, is expected to face competition from the new railway being built with Chinese financing from Mombasa to the Ugandan border. According to an agreement signed at the summit of East African Community heads of state, the contractors for the Mombasa-Kampala section are directed to undertake operations in the interim as the two partner states build their local capacities. Kenya Railways expects the tracks for the Mombasa to Nairobi line to be ready next year and the rail opened for commercial traffic in January 2018. RVR, which operates the ageing narrow-gauge track, will be the biggest loser. RVR has recently launched a turnaround plan to buy locomotives and wagons and refurbish the rail as it seeks to grow its revenue.

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Rail transport in Kenya accounts for only 1.5 million tonnes of the 24.8 million tonnes of cargo that pass through Mombasa port to the region every year. Government officials say that the poor performance of RVR has led to contracting of a Chinese firm to operate the SGR business. The new line is set to ferry heavier and bigger containers faster and will ease pressure on the region’s congested roads, improving Kenya’s competitiveness as an investment destination. The railway line will to cut the cost of transport and boost trade by replacing the old narrow-gauge line that has slower top speeds.

PROCUREMENT & LOGISTICS MANAGEMENT MARCH, 2017 Issue No.: 08/2017


BRIEFS

DHL buys British delivery group UK Mail in a deal worth £242.7m

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eutsche Post DHL has struck a £242.7m deal to buy British delivery group UK Mail. The move means a return to the UK domestic parcels business for DHL which sold its previous business to Home Delivery Network in 2010. With this acquisition, DHL plans to will extend its network and have a strong foothold in Europe’s three largest e-commerce markets, the United Kingdom, Germany and France, which account for over 60 per cent. of online retail in the continent. “The on-going expansion of our parcel network in Europe is driven by increasing demand within our e-commerce customer base for cross-border deliveries. Deutsche Post DHL, as the leader in the German parcel market, has already established a strong position in a number of European countries,” said Jürgen Gerdes, board member of Deutsche Post DHL. UK Mail is an established provider of quality delivery services in the UK and offers a complementary fit with DHL’s integrated offering.

“The on-going expansion of our parcel network in Europe is driven by increasing demand within our e-commerce customer base for cross-border deliveries. Deutsche Post DHL, as the leader in the German parcel market, has already established a strong position in a number of European countries,” said Jürgen Gerdes, board member of Deutsche Post DHL.

For the year ended 31 March 2016, UK Mail reported a profit before tax and exceptional items of £10.7 million (2015: £21.0 million) on revenue of £481.0 million (2015: £485.1 million). The company moved to a new automated sorting centre because its previous site was on the route of the new HS2 rail line. Problems in getting the new site up and running led to the departure of long-serving CEO Guy Buswell in November 2015. The purchase by Deutsche Post DHL gives the UK Mail shareholders the opportunities to realize their investment. Chairman Peter Kane said: “The Board believes that UK Mail will benefit significantly from becoming part of Deutsche Post DHL, and will be better positioned to continue to develop our parcels and mail businesses with the benefit of Deutsche Post DHL’s greater financial and operational resources. Our customers will have direct access to Deutsche Post DHL’s integrated global parcel network and comprehensive logistics capabilities; we will have opportunities to win additional business from Deutsche Post DHL’s existing customer base; and there will be significant synergies including additional volumes flowing through our network from Deutsche Post DHL’s global operations.” Deutsche Post DHL has received irrevocable undertakings in respect of some 60.0 per cent of UK Mail’s ordinary share capital. Peter Kane will continue to act as interim chief executive officer of the UK Mail business while assisting with the identification of a new Chief Executive Officer and supporting the continuation of the UK Mail business as part of the Wider Deutsche Post DHL Group.

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BRIEFS

DHL enters strategic partnership with Ambatovy in Madagascar

DHL Global Forwarding Industrial Projects offers services that include multi-supplier delivery and consolidation to one location over several years, transporting a 1,000-ton module across the world, or preparing a route and feasibility survey – all significant and highly technical steps in setting up industrial plants and construction sites.

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HL Global Forwarding, the air and ocean freight specialist within Deutsche Post DHL Group, has entered into an initial three-year Global Freight Forwarding agreement with Ambatovy. Ambatovy is a joint venture between Sherritt International Corporation, Sumitomo Corporation and Korea Resources Corporation and a large-tonnage, long-life nickel and cobalt mining enterprise, which at full capacity will produce 60,000 tonnes of refined nickel, 5,600 tonnes of refined cobalt and 210,000 tonnes of ammonium sulphate fertilizer annually. This agreement was secured and will be managed by DHL’s Industrial Projects team which handles very large break-bulk and complex project logistics. The agreement encompasses two contracts where DHL will provide onshore and off-shore services. For the on-shore contract, DHL is responsible for providing import customs clearance for airfreight shipments of mining spare parts into Madagascar, with delivery to the Ambatovy mine site from Antananarivo to Moramanga and to the plant at Toamasina through daily shuttle services. For off-shore services, DHL will provide international air and ocean freight for importation of mining equipment to support Ambatovy’s nickel, cobalt and ammonium sulphate production, consolidated at key DHL hubs in the US (Houston), Canada (Montreal), Europe (Antwerpen), Africa (Johan-

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nesburg) and China (Shanghai). The agreement will enable Ambatovy to benefit from the DHL Material Management System (MMS), an integrated in-house information management system that enables sharing of information and also controls business processes across various organizational borders. With the MMS, Ambatovy will have real time visibility of its shipments during the move. “This agreement is especially meaningful as it enables DHL to help Ambatovy manage its supply chain in order to sustain its operations in Madagascar. Our partnership will enable Ambatovy to tap into our global expertise in project forwarding, and extensive network spanning over 220 countries and territories – enabling us to operate efficiently even in challenging and remote locations, and more importantly, facilitate global trade flows and the development of infrastructure globally,” said Nikola Hagleitner, CEO of Industrial Projects, DHL Global Forwarding. Steven Cox, Director, Supply Chain Management at Ambatovy, said, “We are delighted to partner DHL for our freight forwarding needs. It is critical we have direct access to our global suppliers in order to keep the operations up and running. With their track record in these areas, we are convinced they are the right partner to drive improvements in our supply chain and business.” DHL Global Forwarding Industrial Projects offers services that include multi-supplier delivery and consolidation to one location over several years, transporting a 1,000-ton module across the world, or preparing a route and feasibility survey – all significant and highly technical steps in setting up industrial plants and construction sites. The focus sectors include Engineering, Procurement & Construction, Oil & Gas, Mining, Wind and Engineering & Manufacturing.

PROCUREMENT & LOGISTICS MANAGEMENT MARCH, 2017 Issue No.: 08/2017


BRIEFS

Siginon Aviation wins Hass Petroleum makes deal to handle Qatar grand entry into real Airways cargo in Nairobi estate with a $195m tower in Nairobi Siginon Aviation has won the contract to provide ground and ramp handling services for Qatar Airways Cargo at the Jomo Kenyatta International Airport (JKIA), Nairobi.

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he new deal will see Siginon handle perishable products such as flowers, fruits, vegetables and meat that are the top exports from Nairobi destined mainly for Europe and Middle Eastern countries. Siginon recently invested $10m in a state of the art air cargo terminal at the airport which includes a 3,000 sq m perishables centre, 5,000 sq m for general cargo warehouse, a 2,000 sq m basement parking area for transit vehicles and specialist storage areas for dangerous, valuable and temperature sensitive cargo. Qatar Cargo has been offering services from Kenya from more than 10 years, operating freighters to seven destinations: Accra, Djibouti, Entebbe, Johannesburg, Khartoum, Lagos and Nairobi and provides belly-hold cargo capacity to 23 cities in Africa. “We are delighted to be the handler for Qatar Airways Cargo in JKIA, Nairobi. This move reiterates Siginon Aviation’s commitment to attract and serve global airlines with internationally benchmarked facilities and operations and exceptional customer service delivered at global service standards,” MeshackKipturgo, the Siginon Group Managing Director stated. Siginon Aviation, part of the Siginon Group, was set up in 1997 and is one of the four licensed ground handlers in JKIA. It also runs ground handling operations at the Eldoret International Airport handling global cargo airlines.

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ass Petroleum Group is making entry into real estate business with a planned construction of a 67-floor building in Nairobi’s Upper Hill. The oil marketing firm has entered into a $195 million (Sh20 billion) deal with China State Construction Engineering Corporation for the construction of what is touted as Africa’s tallest building. Hass towers will be a mixed-use development and will consist of a five-star Hilton hotel as one of the main features, modern offices, and a luxury retail and entertainment complex. The tower will stand over 300 metres high, taller than the current record holder, the Carlton Centre in South Africa which has 50 floors and is 223 metres tall. Construction is set to kick off in April with completion slated for 2020. “Hass Group awarding the contract to CSCEC demonstrates a stronger growing economic partnership between the Chinese Government and the Kenyan Government,” said Hass Petroleum Group chairman Mr Abdinassir Hassan. “It has not been an easy road. CSCEC went through a rigorous tender system which they won over ten international companies including European, Turkish as well as other Chinese competitors. This project will give CSCEC a majestic entry point into Africa,” he said. CSEC is currently ranked the largest construction company in the world with an integrated construction and real estate conglomerate covering housing construction, international contracting, real estate development and investment, infrastructure construction and investment, prospecting and design. “This will be the tallest building in Africa and become a landmark in Kenya. It is sure to drive regional development, promote economic growth, and attract more investment and tourism into Kenya. China State Construction understands the importance of this grand project and is honoured to be chosen as the main contractor,” noted Li Mingguang, Vice President of CSCEC Overseas Operations. The petroleum group is undertaking the project jointly with real estate developers Jabavu Village Limited and White Lotus Projects. Hass Petroleum is ranked Kenya’s eleventh oil marketer with a market share of 1.7 percent. The firm also has significant oil logistics business for countries in the east African region.

“This will be the tallest building in Africa and become a landmark in Kenya. It is sure to drive regional development, promote economic growth, and attract more investment and tourism into Kenya. China State Construction understands the importance of this grand project and is honoured to be chosen as the main contractor,” noted Li Mingguang

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LOGISTICS

What is Over Dimensional Freight? Over dimensional freight is any item that exceeds one or more of the standard legal size criteria for each state and province. While these can vary depending on the jurisdiction, a general guideline for legal parameters is: 53’ long, 8’ 6” wide and 13’ 6” tall (on the trailer). The height limit will vary depending on countries. Cargo that exceeds any these parameters and is non-reducible in size, is considered oversized or over dimensional and requires a permit before being shipped. Cargo that is taller than 16’ enters a new category called “super status.” This requires a different type of permit and often a pole car will need to dry run the route before the shipment commences. Super status shipments are complicated and require an experienced driving team.

In road transport, an oversize load (or over dimensional freight) is a load that exceeds the standard or ordinary legal size and/or weight limits for a specified portion of road, highway or other transport infrastructure, such as air freight or water freight.

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here are also load per axle limits. However, a load that exceeds the per-axle limits, but not the overall weight limits, is considered overweight. Examples of oversize/overweight loads include construction machines (cranes, front loaders, backhoes, etc.), pre-built homes, containers, construction elements (bridge beams, generators, windmill propellers, rocket stages, industrial equipment). The legal dimensions and weights vary between countries and regions within a country. A vehicle which exceeds the legal dimensions usually requires a special permit which requires extra fees to be paid in order for the oversize/overweight vehicle to legally travel on the roadways. The permit usually specifies a route the load must follow as well as the dates and times during which the load may travel.

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Process for Shipping Over Dimensional Freight

Usually your transport company must conduct a detailed route survey that takes into account all expected obstacles for a particular shipment. This can


PROCUREMENT be complicated as different countries have different regulations for transporting oversized items. For example, some countries may allow travel at night with over dimensional freight, whereas others may require that you park your truck for the evening or weekend. Depending on how disruptive the cargo might be to other vehicles on the load, quite often the truck will not be allowed to travel during peak rush hour times within city limits.

Pilot Cars/ Escort Cars/Pole Car

Depending on the nature of the cargo we may have one or two pilot cars, with a height pole attached to the lead car for cargo that is over height. By running a quarter mile ahead of the truck, the pole car can give ample warning to the truck driver if the pole hits some low hanging power lines or other unforeseen infrastructure.

Over Dimensional Freight

Transporting over dimensional freight requires concentration and experience, drivers must be looking farther ahead down the road than the average vehicle and assessing potential obstacles at all times. It also requires a team of professionals on the road and in the office to successfully deliver the cargo to its destination

Rates

In Most East Africa countries Goods or items of up to 25,000kg of oversize cargo will attract a levy of USD 50. Oversize cargo exceeding 25,000kg but less than 50,000kg will be charged USD 100 and oversized cargo exceeding 50,000kg will be charged USD 250. On dimension-based charges, cargo exceeding 2.65m maximum of the overall vehicle width projection will be charged USD 50 while cargo exceeding 4.20m maximum overall vehicle height, laden or unladen, measured from the road surface, will be charged USD 100 while . Cargo exceeding 12.50m maximum overall length of a rigid chassis goods or passenger vehicle shall be charged USD 150. That exceeding 17.40m maximum overall length of articulated vehicle including semi-trailer will be charged USD 200. Those exceeding 22m maximum of the overall length of a combination of motor vehicle and draw-bar trailer or vehicle shall be charged USD 250.

Corruption in public procurement an obstacle to development in East Africa -UNCAC Corruption in Public procurement remains a significant obstacle to development in several East Africa countries . This is according to United Nations Convention against Corruption (UNCAC ) report. According to senior advisor Anticorruption, United Nations Office on Drugs and Crime (UNODC) Mr. Tim Steele, corruption has led to funds being wasted and substandard goods and services being produced and consumed. Steele who was speaking this week during the United Nations Convention against Corruption (UNCAC) Regional workshop /Conference, said that corruption in public procurement happens mostly during all procurement phases including planning, bidding documents, advertising, bid evaluation, contract management among others. The report observes that during the bidding process there is exclusion of qualified bidders due to hidden interest in companies by officials. According to the report tender evaluation criteria in East African countries are not quantifiable. It also reveals that many tenders are not clear on submission of samples, catalogues and manufacturers authorization. The findings further suggest that communication of the results of the evaluation and award to the winning bidder and the unsuccessful tenderers should be done at different times.

Senior advisor Anti-corruption, United Nations Office on Drugs and Crime (UNODC) Mr. Tim Steele The report notes that the invitation tender does not provide a summary description of the objective, scope, key deliverables and timeline of the procurement. The February conference seeks to build and foster partnerships and create a regional platform to fast track the implementation of the United Nations Convention against Corruption in support of sustainable Development Goal 16 in Eastern Africa. As highlighted by the 2016 UK Summit on Anti-corruption, corruption poses significant threats to countries around the world. In recognition of the global character of the threats posed by corruption, which requires a comprehensive and multidisciplinary approach, the United Nations convention against Corruption (UNCAC) was adopted as the sole global legally binding international instrument against corruption. The report suggests that there is need for the government to come up with corruption risk management plan to help with public procurement process.

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PROCUREMENT

The purpose of Service Level Agreement (SLA) in procurement? If we are in Procurement and Contracts, we should know service level agreement (SLA) and its importance just like the lines in our palm and hands.

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e use this daily in life too – Don’t we ? When we give cloths for laundry, we do say ” You better deliver by tomorrow before 8am since I have you before lunch” OR “if I order the system, what’s your committed delivery – and you agree with them in advance” OR even getting your house painted or buying stuffs. So is same at work. Get used to making SLA as easy as making the contract or PO. A service level agreement (SLA) is a critical part of any outsourcing contract. SLA defines the boundaries of outsourcing project in terms of the functions and services that the service provider will deliver and identifies the service standards that the service provider must meet. A well-drafted SLA accurately sets expectations for both parties and provides guidance for measuring performance to the defined targets. Although there is no hard and fast rule governing how many measurements the parties should include in each SLA, it only makes

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While it may be nice to have system availability 100% on a 7/24 basis, it adds significant cost to guarantee 100% availability. Customer needs to understand what it needs, why it needs certain performance standards and weigh expectations and set reasonable and attainable performance standards.

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sense to measure what matters to customer. Customer may tend to think that the more measurements the SLA contains, the more control it will have over service providers. This approach rarely works in practice. Customer should choose the measurements with information that can be simply analyzed, digested and used to manage the project. SLA also needs to specify the consequences for failure to meet one or more of service levels. The consequences may include service level credit or termination right by customer. Service level credit often does not adequately compensate actual lost suffered by customer as a result of service provider’s failure to meet the service standards. If the outsourced function is business critical, it is important to identify additional consequences for failing to achieve the service standards, such as designating the critical functions as key service levels and identifying the termination triggers. Each service measurement service provider is required to meet add additional cost which will be passed on to customer. While it may be nice to have system availability 100% on a 7/24 basis, it adds significant cost to guarantee 100% availability. Customer needs to understand what it needs, why it needs certain performance standards and weigh expectations and set reasonable and attainable performance standards. The goal is to achieve customer’s business objectives at a lesser cost while the service provider is motivated to meet the achievable performance standards. SLA is a series of what, how and when two parties agree to exchange tangible and non tangible information and services. Like if you are at home, your SLA with family would be to spend xxxx time at home, provide xxx USD at home, ensure to comply with disciplines of home, how you would respect.

Article Courtesy Of: Hariharan Laxminarayan


BUSINESS

Mastercard Commits to Include over 150,000 Kenyan Merchants With Masterpass QR

Mastercard commits to empowering over 150,000 Micro, Small and Medium Enterprises (MSME) in Kenya within 2017 by giving them access to Masterpass QR.

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he mobile driven, Person-to-Merchant payment solution will be introduced through various financial institutions and other partners in the market from February onwards. Delivering efficient, secure and cost effective acceptance solutions to Kenyan MSMEs is an essential step to providing the level of support required to grow and develop their busi-

nesses. With at least 80 percent of the country’s most critical jobs are created by MSMs, according to Kenya’s Micro and Small Enterprises Authority, it is vital to introduce solutions that drive operational efficiency in these businesses. The regional commitment to impact over 150,000 MSMEs in Kenya within 2017 is in support of the Mastercard global goal of connecting 40 million micro and small merchants to its electronic payments network by the end of 2020. This expands on the company’s Universal Financial Access 2020 commitment made in 2015. Masterpass QR provides a fast, convenient and secure payment solution for consumers and a reliable and instant acceptance offering for merchants. Cash is no longer required, making transacting safer for merchants who will not need to worry about carrying large sums of cash around with them.

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BUSINESS

Cross−border e−commerce changing the face of Sub Saharan Africa’s retail sector Cross-border e-commerce is expected to increase at an annual average rate of 25 per cent between 2015 and 2020, from an estimated $300 Billion to $900 Billion, a new report by leading international express services provider DHL Express reveals.

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he report dubbed The 21st Century Spice Trade: A Guide to the CrossBorder E-Commerce Opportunity, sheds light on the evolving face of e-commerce, with both supply and demand becoming more sophisticated. Manufacturers are increasingly taking advantage of e-commerce to move to direct retail models – bypassing the ‘middleman’ and offering their products online to the end customer and expect to grow 30 per cent faster in cross-border e-commerce than other retailer groups. Customers in many markets are also becoming more discerning, citing product availability and trust, as well as attractive offers, as the motivating factors for shopping with overseas online retailers. The report also gives a detailed outlook of the markets and products that offer the highest growth potential, and the success factors for online retailers that wish to expand overseas. It focuses in particular on the opportunity for premium products and service offerings, with higher basket values accounting for a significantly higher proportion of orders in cross-border transactions. According to the report, online retailers are boosting sales by 10-15 per cent by extending their offering to international customers, with an additional boost from premium service offering. “Cross-border shipping has been made simple and retailers in Sub Saharan Africa are perfectly positioned to take advantage of international opportunities. ‘Brand Africa’ has increased exponentially in popularity in recent years and it’s time for retailers to open up their business to seamless international trade. Often, retailers choose not to promote their businesses internationally, and worse yet, will turn down international

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sales interests due to the misconception that it’s too difficult to manage and deliver,” says Hennie Heymans, CEO, DHL Express Sub Saharan Africa. Globally, every product category has the potential to upgrade to become premium, both by developing higher quality luxury editions and by offering superior levels of service quality to meet the demands of less price-sensitive customers. The opportunity to ‘go global’ and ‘go premium’ is available to retailers in all markets and DHL’s global door-to-door time definite network is well-positioned to support retailers looking to develop a premium service offering or directly reach new international markets without the need to invest in distribution or warehousing. “In Sub Saharan Africa, the opportunity for Intra Africa trade should not be ignored,” Heymans says. “Going global does not only mean trading outside of the African continent, Africa is home to one of the world’s fastest growing middle class, with an appetite for quality products and services. There are also a number of trade blocs in place to support Intra Africa trade growth and retailers should take advantage of this captive market.” The report is based primarily on research and in-depth interviews conducted by a leading global management consultancy, as well as more than 1,800 responses to a proprietary exporter survey of retailers and manufacturers in six countries. The main challenges highlighted by consumers to crossborder purchases relate to logistics, trust, price and customer experience. The report noted that the e-commerce trend has given birth to a new eco-system of facilitators and off-the-shelf solutions (such as payment providers and programs that localize a website’s check-out experience for the visitor), helping retailers to adapt their offering to the digital world and to transact with customers in foreign markets. Global logistics partners can provide support in identifying the right trade-off between centralized and local warehousing and fulfillment, while fast, reliable and flexible delivery options can be an important tool in turning speculative interest into long-term customer loyalty.

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BUSINESS

How Vendor Managed Inventory (VMI) transforms business

Vendor Managed Inventory (VMI) is a business model where the buyer of a product provides information to a vendor of that product and the vendor takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer’s consumption location. A third party logistics provider can also be involved to make sure that the buyer have the required level of inventory by adjusting the demand and supply gaps. VMI makes it less likely that a business will unintentionally become out of stock of a good and reduces inventory in the supply chain. Some vendors supply an advance ship notice (ASN) to their customers to inform them of an incoming order, which is known as EDI 856. The ASN differs from the purchase order acknowledgement in both timing and content. The 856 is sent to the customer after the shipment has been made instead of at the time of the purchase order.

Why Use VMI?

One of the benefits of VMI is that the vendor is responsible for supplying the customer when the items are needed. This removes the need for the customer to have significant safety stock. Lower inventories for the customer can lead to significant cost savings.

The customer also can benefit from reduced purchasing costs. Because the vendor receives data and not purchase orders, the purchasing department has to spend less time on calculating and producing purchase orders. In addition, the need for purchase order corrections and reconciliation is removed which further reduces purchasing costs. Cost saving can also be found in reduced warehouse costs. Lower inventories can reduce the need for warehouse space and warehouse resources. The manufacturer can gain some benefits from vendor managed inventory as they can gain access to a customer’s point of sale (POS) data makes their forecasting somewhat easier. Manufacturers can also work their customers’ promotional plans into forecasting models, which means enough stock will be available when their promotions are running. As a manufacturer has more visibility to their customers’ inventory levels,

it is easier to ensure that stock-outs will not occur as they can see when items need to be produced. VMI – when deployed correctly – is one way to help you supply your customers what they want, when they want it – because – assuming your vendors are managing your inventory in an optimized fashion – you should always have stock on hand. And will be able to ship on time. VMI can also help you keep your costs down, since the goal of VMI is to keep your inventory levels lowered and provide your resupply as needed. The disadvantages of VMI include needing to allow a non-employee access to your inventory data and sometimes your actual physical inventory. You’re also relying on a third party to keep your inventory levels where you need them to be, and that perceived lack of control can sometimes be unnerving to supply chain professionals. One of the biggest drawbacks to VMI, however, can be its impact on sourcing. Oftentimes, supply chain managers will feel like they can’t find another source for a product that is being managed by a supplier they trust. If a supply chain manager becomes too reliant on a supplier to manage its inventory, the supply chain manager may live with higher prices, reduced quality or other supplier-related issues. Supply chain managers also find it difficult, at times, to have multiple sources for a product that’s being managed by a supplier. As a supplier, if you can earn the trust of your customer and demonstrate the ability to optimize your customer’s inventory using VMI, you know that you are likely going to remain the supplier of that product for the long haul. It’s difficult enough for a supply chain manager to engage in a sourcing project when there is no VMI impact. A well-run VMI makes a re-sourcing exercise not just onerous, but a very low priority.

Article has been updated by Supply Chain & Logistics Expert, Gary Marion.

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BUSINESS

6 Important Inventory KPIs That Can Make or Break Your Warehouse Thus you’ll want to track your customers’ buying behaviors and tweak your purchasing habits accordingly, shooting for a higher inventory turnover rate.

2) Cost of carrying inventory

The carrying cost of inventory metric is the cost of storing inventory over a certain timeframe. When you have inventory taking up warehouse space, it comes with an array of costs, such as labor, risk/insurance, storage and freight. With a firm grasp on this KPI, you can figure out how much profit your current inventory will really bring and limit write-offs and write-downs. It’s also a smart idea to find ways to control carrying costs.

3) Receiving efficiency

Key performance indicators (KPIs) help identify and define progress towards defined business goals. Although KPIs vary across businesses and industries, they are vital to the success of an organization. Why exactly are KPIs so important?

They reflect your business goals and mission, providing ways to measure your company’s performance over time. If you don’t have a standard to measure how you’re doing, you can’t identify areas that need improvement. KPIs are essentially a performance scorecard, consisting of benchmarks that can gage progress towards your company’s goals, identify areas that need improvement, and compare your performance to that of your competitors It’s ultimately up to you to tailor KPIs to your unique operations. However, if you need help to get started, refer to the Supply Chain Operational Reference (SCOR) model. The Supply Chain Council put together a list of 200 standard KPIs to monitor overall supply chain performance. The following are six important KPIs that will help your warehouse operate more efficiently and effectively.

1) Inventory turnover

Inventory turnover is important to your business because it measures the frequency at which you sell out your inventory. Since your company likely has a significant amount of money tied up in inventory, you need to know what’s being sold and what’s not. It’s essential to know if you’re stocking items that have become obsolete or are simply not selling. Not only are you burdened with the cost of carrying inventory, you’re not making any money, either. In addition, slow-moving inventory takes up valuable shelf space and significantly decreases warehouse efficiency.

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Another KPI that can make or break your warehouse is the efficiency of your receiving area; don’t ignore it for other seemingly more important areas of the warehouse. From the space your workers need to the rate at which inventory is counted, deficiencies in receiving can cause a negative domino effect in your organization.

4) Put-away

The put-away KPI is not always the easiest to measure, but it’s not impossible. Factors to consider are:

Accuracy rate

Cost per item put away Time it takes from receiving to pick location Man hours

5) Inventory accuracy

The best way to measure inventory accuracy is to compare how many items are in stock to what’s actually recorded in your database. Doing this on a regular basis ensures that bookkeeping practices are in order. If inventory tracking is off, you’ll experience unnecessarily high costs, inventory inaccuracies and a drop in customer satisfaction levels. Paul Huffaker of Racesource, a custom manufacturer of vehicle components for the racing industry, knew


BUSINESS the woes of inaccurate inventory counts all too well. “Maintaining an accurate inventory count on Excel was time consuming and error ridden,” he said. “Often I would reorder or manufacture parts I already had simply because I didn’t know I had them, which was an unnecessary cost. After doing some research, Huffaker chose a solution that used barcodes to track his inventory. The technology easily integrated with his company’s current system, and within its first day of use, the company experienced positive results such as more effective inventory tracking and improved ordering habits. If you find inaccuracies tend to be the norm in your inventory counts, integrating a barcode inventory management system can solve those problems for your business, too.

6) Order picking/packing

In your operations, you may find that order picking is the most expensive and difficult process. It is often the most labor intensive and tends to be more complex than other processes. However, the picking/packing KPIs are significant since customer satisfaction depends on it. Five important KPIs for order picking include the following: 1. Cost per line item picked 2. How may orders picked per hour 3. Costs of picking labor 4. Use of packaging and other consumables 5. Order cycle times Since shipping’s main focus is customer service, measure for accuracy and speed. Another excellent metric is percentage of perfect pick lines. As a small business owner, you walk a fine line between success and failure during your first five years in business. Needless to say, understanding the real cost of your inventory is crucial to survive in today’s marketplace. It’s an absolute necessity to know the KPIs important to your unique business. They’re directly related to the efficiency of your supply chain and the quality and demand of the inventory you carry; they also let you know if your buying habits are on trend. When each of these is at the optimal level for your business, customers will keep coming back.

By: Paul Trujillo

CDC and IFC invest up to US$35 Million to Support Kenya’s Economy through Modern Warehousing Development CDC Group, the UK’s development finance institution, and IFC, a member of the World Bank Group, will invest up to US$35 million in Africa Logistics Properties Holding (ALP), a developer and manager of modern grade-A warehousing, filling an important gap in logistics infrastructure in the region.

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he investment – US$25m from CDC and US$10m from IFC - will be used for ALP’s developments in Nairobi, Kenya, the trading hub of East Africa, where the lack of quality international standard warehousing space has long been a constraint on business growth and economic development. Quality warehousing improves operational efficiencies by reducing waste from poor storage, increasing the speed of product delivery and improving product security. The cost of moving goods in Africa is estimated to be on average two or three times higher than in developed countries and transport costs can count for as much as 5075% of the retail price of goods. By investing in ALP, both the IFC and CDC are supporting Africa’s growing trade, both within the continent and overseas. ALP is backed by Maris, a Nairobi based private investment business focused on sub-Saharan Africa which will invest US$8million. IFC and CDC are also joined in the project by Mbuyu Capital Partners, an Africa-focused UK-based asset manager with an investment of up to $5 million, among others. ALP will be led by founder Toby Selman, an experienced emerging markets warehousing developer, and a Nairobi based team with African and international experience. “IFC and CDC not only bring capital and expertise as experienced investors in African infrastructure, but are also both committed to helping ALP deliver modern logistics parks with world-class environmental and social risk management standards,” said Toby Selman of ALP. ALP warehouses will adhere to IFC Edge green buildings standards. Ilaria Benucci, CDC’s Investment Director said:

“CDC is backing ALP because we know that logistics is a critical, yet often overlooked, part of economic development. Investment in agriculture needs to be supported by an adequate supply chain to get produce to market. Essential medication won’t work if it cannot be transported and stored in the right conditions. Our investment will support a company that’s making trade easier in Kenya, and we hope that it can be the start of an expansion into other African cities.” Mary-Jean Moyo, IFC Regional Head of Manufacturing, Agribusiness and Services in sub-Saharan Africa, said, “Introduction of modern warehousing in Kenya will support growth, employment and trade across a range of industries. With access to quality logistics, global companies will find it easier to ramp up businesses in Africa.”

Media contacts

Rhyddid Carter: +44 (0)20 7963 4741 +44(0) 7824 552 326 rcarter@cdcgroup.com

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COVER STORY

The unexplored goldmine of possibilities, Govt. plans to revive KNSL and tap over Ksh 300 B The ‘blue economy’ or ocean economy not only provides opportunities but also requires sound policies, effective leadership and innovative technologies to bring desirable results. As the government looks forward to revive the National Shipping Line (KNSL)and tap over Ksh 300 B into the economy annually. Our Writer Malachi Motano finds out more about the rich but unexploited sector, from different stakeholders in a question (Q) and answer (A) interview Q: Define ‘blue’ economy and if possible all that it entails

A: John Omingo is the head of Commercial Shipping at Kenya Maritime Authority (KMA). ‘Blue’ economy is simplyocean economy and it entails development of the existing opportunities such as deep sea fishing, aquaculture, sports fishing and artisanal fishing and future uses such as deep sea mining, Wind Energy, luxury tourism and Marinas.

Q: Estimate the potential of the Blue economy

A: Omingo; With Kenya’s territorial waters covering 230,000 square kilometers and a distance of 200 nautical miles offshore, Kenya’s maritime sector has a huge potential. Estimated annual economic value of goods and services in the marine and coastal ecosystem in Blue Economy in Western Indian Ocean today is slightly over $22 billion with Kenya’s share slightly over $ 4.4 billion with tourism sector taking the lion share of over $ 4.1 billion.

Q: How is its current state of exploitation

A: Omingo, it emerged during the lasts World Maritime Day celebrations in Mombasa that a number of factors have conspired to deny the ocean economy the great potential it has for transforming Kenya’s economy. It requires

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Revival of the shipping line, which has been dormant for decades, is part of the Jubilee Administration’s wider plan to boost the economy of the coast region as well as that of the whole country, Said Kenya Spokesman Mr. Esipisu.

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COVER STORY ferent billfish species in one day-broad bill swordfish, black, blue and striped marlin and sailfish, yet this potential has not been exploited.

Q: What about investment opportunities to exploit the blue economy is sea transport. I remember last year’s National Maritime Conference, in its resolutions proposed the restructuring of the National Shipping Line and promotion of shipping and ship registration in Kenya.

implementable projects, strong capacity, science and data and most importantly investments

Q: Describe the nature of investment in to Blue economy

A: Omingo; although over 92 percent of Kenya’s international trade is transported on the sea, looking at investment profile, local investors have not been keen to put capital in the maritime sector. The marine fishing Earlier on (2013) had an annual fish potential of 350,000 metric tonnes worth Sh90 billion. The region only yielded a paltry 9,134 metric tonnes worth Sh2.3 billion. Local investors have not invested in modern fishing gear and vessels that can exploit fish and other sea foods in high seas. Sporting activities;Kenyan coast is one of the preferred destinations for sport fishing. Malindi is the only place in the world that offers the best chance of catching five dif-

Administration’s efforts to spur growth in the region through transformational projects, President Kenyatta officially launched the resumption of Mtongwe ferry services that had been undergoing refurbishment and expansion.

Q: With over 25 metric tons of cargo coming into the country as imports, how comes Kenya doesn’t own even a single commercial ship. Doesn’t this compare poorly to her landlocked neighbor in Ethiopia, which has 18 commercial ships earning the country US $ 40 million annually

A: Manoah Esipisuis the State House Spokesperson; The Government has announced plans to revive the Kenya National Shipping Line that has the potential to contribute Sh 304 billion into the country’s economy annually. The revival of the shipping line is expected to return Kenya to its historical place as a rich seafaring nation with highly respected seafarers. The initiative is also expected to create an average of 3,000 job opportunities for youth in the first year, and thereafter progressively increase to 6,000 in five years.

A: Ms. Nancy Karigithu is the Principal Secretary (PS) of the state department of Shipping and Maritime affairs. Maritime sector is an unexplored goldmine of possibilities, a sleeping giant capable of transforming Kenya into a first world economy. Nevertheless, although cruise ship suffered significantly due to piracy earlier, it has shown signs of recovery. There are other ports such as Lamu and Shimoni that which can be considered as ports of call for cruise tourism.

Q: Talking of reviving KNSL, within what time frame should the country expect this to happen.

Q: So, what recommendation can you make asPS in the state department of Shipping and Maritime affairs

A: Esipisu; the State Department of Maritime and Shipping Affairs, through its Blue Economy Committee, has rolled out plans to restructure the ownership of the KNLS. Negotiations are at an advanced stage for the exit of foreign shareholders who have expressed desire to cease working with KNLS, due to KNSL having become a

Q: Why now, I mean it is 2017 and the general elections are juts at the corner

A: Esipisu, revival of the shipping line, which has been dormant for decades, is part of the Jubilee Administration’s wider plan to boost the economy of the coast region as well as that of the whole country. This administration has invested billions of shillings in this region to build or improve security, infrastructure and general service delivery, with the simple goal of uplifting the live of residents in an inclusive way. As part of the Jubilee

A: PS;The country needs to put in place an attractive and effective fiscal and regulatory environment that would encourage investment in local ship building, repair and maintenance, attract registration of ships in the country and discourage export of maritime services such as insurance and container cleaning. Treasury in the current budget issued a directive requiring all the cargo imports to be insured locally. Kenya largely imports through Cost Insurance Freight (CIF) forcing it to seek services from foreign firms in the exporting countries. For instance, Kenya’s economy loses Sh 17 billion annually in marine insurance.

Q: The country has long yearned to tap into the blue economy. How far are we with the dream?

A: PS; I think the elevation of the Shipping and Maritime Affairs into a fully-fledged state department was

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COVER STORY

the biggest step to realizing this dream. The department becomes the vision carrier for the sector, to articulate the policies needed and to bring fresh thinking for the benefit of the industry and the economy as a whole. This is a major milestone in this country. We are headed somewhere.

Q: Do Kenyans understand the maritime sector

A: PS; as I have stated before the maritime sector is one of the least understood sectors in Kenya and therefore even the small issues that can yield monumental gains do not become very obvious. A lot of awareness of how this sector affects the socioeconomic fabric of the Kenyan society is imperative, both within and outside government.

Q: What are the sector’s prospects?

A:PS; while the maritime industry drives 92 per cent of the country’s international trade, its full potential is yet to be harnessed and exploited. With the recent discoveries and expected exploitation of offshore oil and gas, both in Kenya and in the region, cargo volume at the Mombasa port is expected to grow and put pressure on the developments in port and auxiliary infrastructure, as well as maritime security, all of which have renewed focus on the maritime sector as a key driver to wealth and job creation.

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Q: What are some of the major challenges facing the country’s maritime sector

A: PS; the maritime sector, by definition, refers to trade facilitation; marine environmental protection; ports and transport corridors; exploitation of resource like fisheries; extractive industries like offshore mining; and recreational and leisure activities, like cruise shipping, sports fishing, diving, boating, among others. In total, the industry holds 13 sectors, 15 subsectors and 87 different activities in the public and private sector. The business of all these maritime activities is generally interconnected, and a decision in one area may adversely affect the performance in another.

Q: What does the government need to do to fully exploit our resources

A:Human resource capacity building remains key to developing the maritime domain. It will enhance the capabilities and productivity of all sectors of the blue economy, fisheries, tourism, maritime transport and their related support services such as facilitation of seamless and efficient flow of goods in trade.

With regard to seafarers education and training, Kenya can become a net exporter of workforce to the global shipping industry in line with the economic and social pillars of Vision 2030; and we can train 10,000 Kenyan seafarers and place them on foreign sea going ships

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Q: Explain the way forward for the sector

A: PS; an Integrated National Maritime Policy is the vehicle through which the entire industry’s sustainability can be ensured. The policy becomes the basis for national development plans. It drives legislation and rules that facilitate and enable the sound management of ocean and sea resources, to ensure sustainable development and optimise gains in the maritime sector. Therefore, the development and implementation of an integrated approach to maritime issues is a matter of grave urgency. Such an approach will be the best tool to harness the efforts of all government and private institutions active in Kenya’s maritime domain as well as provide the framework and actions necessary to launch Kenya’s assault towards becoming a modern blue economy.

Q: How do you see Kenya’s maritime sector in the next few years even as you conclude

A: PS; I believe in our country has the ability to transform into a major maritime nation on the eastern seaboard, become a net exporter of seafarers, a bustling maritime center in the region with two major international sea ports. With regard to seafarers education and training, Kenya can become a net exporter of workforce to the global shipping industry in line with the economic and social pillars of Vision 2030; and we can train 10,000 Kenyan seafarers and place them on foreign sea going ships.


INSIGHT BRIEFS BRIEF

Propak East Africa Conference – Nairobi 07-09 Mar 2017

East Africa’s Largest Packaging, Printing, Plastics Exhibition & Conference

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Consulting Excellence The Consulting Excellence framework drives our behaviour and resonates throughout our values. The core of the framework sits within 3 pillars, or headings: ethical behaviour; client service and value; and professional development.

We specialize in:

ropak East Africa is a 3 day event being held from 7th March to the 9th March 2017 at the Kenyatta International Conference Centre (KICC) in Nairobi, Kenya. This event showcases products from Packaging Materials, Printing & Publishing, Plastic & Plastic Products, Business Services industries. In this conference you get a wide range of products and services here in Propak East Africa such as aluminum, all flexible packaging, board, labelling, substrates, paper, polymers, tinplate, rigid plastics, suppliers of packaging, adhesives, boxes, cans, closures, containers, cartons, components, flexible packaging, glass and plastic bottles, drums, pouches, tubes, packaging and ancillary machinery, bottling, capping, canning, Chemical, cosmetic, pharmaceutical, toiletries and detergent industries processing equipment to name a few.

Registration is free: at :http://www. propakeastafrica.com/visit/register/

The professional Supply Chain practitioners

1 Organizing training workshops for procurement, logistics, professionals and stake holders. 2 Develop and design organisation magazines. 3 Market Price Survey for procuring Agencies. 4 Formulation of tender documents and advertisements. 5 Organizing bid bonds and tender security for suppliers. 6 Developing training material for institutional development. 7 Supply Chain Performance Index Research Proc & Logistix Consult Limited

P.O BOX 40619 00100 GPO Nairobi-Kenya, Mobile + 254713727860 Tel +254 0204404488/02044002479 projects@procurementandlogisticsonline.com www.procurementandlogisticsonline.com

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LOGISTICS

The Top 5 Reports Every Logistics Manager Should Be Running

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t may be overwhelming trying to decide exactly which data you should

The implementation of a TMS be analyzing. According to our TMS team, these are the top five reports you should absolutely be running: (transportation management software) is the first step to Freight Accruals automation, visibility, and Freight accruals are used to keep track of the costs associated with the ultimately, cost savings in your transportation of your goods to a customer. Costs are accrued from the supply chain. However, you won’t moment the goods are delivered, and they are discharged once the freight invoice has been paid. Tracking freight accruals allows your company to calsee ROI in your TMS investment culate your true net revenue at any given time by providing insight into any unless you’re actively taking outstanding balances that have accumulated during a specific timeframe. advantage of the visibility it provides. You now have the power Cost Allocation allocation reports break your freight charges down by the mile, the to view, analyze, and take action Cost pound, or the SKU. For multi-stop loads (or loads made up of multiple on a huge range of data. Actively POs), freight charges can be allocated to each order based on the percentmonitoring and making decisions age of distance, weight, or quantity the individual order contributed to the Tracking cost allocations will give your company valuable insight based on these reports will be key whole. into the true cost of transporting goods and can be used to identify costly to creating efficiencies and cutting SKUs or lanes. costs.

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LOGISTICS Carrier Scorecard

Carrier scorecards are used to track a carrier’s performance based on their tender acceptance, on-time pickups, and on-time deliveries. Carriers who bid low on an RFP and then proceed to decline tenders or provide poor service can either cost your company thousands of dollars in additional expenses or, worse yet, cause you to lose customers. Tracking carriers’ performance can help you reevaluate your routing guide by selecting more reliable carriers on trouble lanes, improving both costs and customer service.

Least Cost Carriers

Least cost carrier reports are used to identify loads where the carrier with the lowest cost did not haul the freight, the reason why, and the additional freight charges that occurred as a result. By tracking least cost carrier usage, your company can identify potential problem areas, resolve the underlying issues, and prevent unnecessary expenses from occurring in the future. If you are looking to cut freight costs, this report makes it clear and simple to see missed opportunities where money could have been saved. Since cost isn’t the only factor when selecting a carrier, you can also use this report to identify carriers who are repeatedly passed over despite offering lower rates, providing an opportunity to work with these carriers to set up a service level agreement before you decide to award business solely based on cost.

DHL launches online freight market place for shippers and transporters DHL has launched an online freight marketplace that connects shippers and transport providers on demand called CILLOX. This system makes it easy for shippers to find reliable transport providers in a matter of clicks – and helps transport providers find suitable loads to optimize your truck capacity.

Power Lanes

Power lane reports are used to identify new lanes and provide a benchmark for negotiating contracted rates with carriers. You can identify a new lane as an origin-destination pairing that occurs a set number of times. Once a new lane has been identified, the spot market rates paid to move the lane can be broken down by load, mileage, pound, etc. and can be used as a point of reference when negotiating rates with carriers. By identifying power lanes, you can secure fixed rates on a lane, making it easier to predict future freight costs.

Note: Most transportation management software products have the ability to run the five reports listed above. If yours does not, or if you are interested in implementing a TMS into your supply chain, feel free to request a consultation with our logistics consultants, who can help assess your needs!

Our main objective is to make the platform as convenient as possible to simplify our customer’s lives and we will continuously evolve the platform according to user needs and feedback. I’m confident we will shake up the freight forwarding business, and the digital transformation of our industry will benefit all parties involved,” said Amadou Diallo, executive vice president value added services & integrated logistics at DHL Global Forwarding and CEO of Cillox. DHL says the service offers transport providers a platform to present their company’s assets and capabilities to a large audience of shippers. For companies with freight shipping needs, Cillox- a real time logistics application gives access to transport providers for their particular cargo – without time-consuming negotiations and difficult comparisons of prices and services. For companies with freight shipping needs, CILLOX gives access to reliable and suitable transport providers for their particular cargo – without time-consuming negotiations and difficult comparisons of prices and services. Shippers get immediate access to pricing information based on their shipment characteristics, availability of trucks and last-booked rates. This enables a better comparison and booking of incoming quotes from transport providers. CILLOX offers the freedom of choice of a marketplace, as shippers choose and book the transport provider that best fits their requirements yet enjoy a single point of contact with CILLOX as their contract partner.

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PROCUREMENT

E-procurement advantages E-procurement advantages are becoming more evident as the wider understanding of its many uses become apparent. The main reason companies have embraced e-procurement is to increase productivity, provide visibility into day-to-day transactions and make it easier for users to get the supplies that they need.

through an on-line requisition and ordering system. Procurement staff can be released from processing orders and handling low value transactions to concentrate on strategic sourcing and improving supplier relationships.

Controls

Standardized approval processes and formal workflows ensure that the correct level of authorization is applied to each transaction and that spend is directed to draw off existing contracts. Compliance to policy is improved as users can quickly locate products and services from preferred suppliers and are unable to create maverick purchases.

Using technology

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t has not been an easy road for eprocurement as implementation has its challenges and it has taken time for business managers and procurement departments to fully accept it. The advantages of e-procurement are slowly being understood:

Reducing costs

Costs can be reduced by leveraging volume, having structured supplier relationships and by using system improvements to reduce external spend while improving quality and sup-

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plier performance. E-procurement eliminates paperwork, rework and errors.

Visibility of spend

Centralized tracking of transactions enables full reporting on requisitions, items purchased, orders processes and payments made. E-procurement advantages extend to ensuring compliance with existing and established contracts.

Productivity

Internal customers can obtain the items they want from a catalogue of approved items

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E-procurement advantages can only be fully realized when the systems and processes to manage it are in place. Software tools are needed to create the standard procurement documentation: electronic requests for information (e-RFI), requests for proposal (e-RFP) and requests for quotation (e-RFQ). These are proven methods to source goods and make the framework agreements that offer the best prices. An adequate, fully integrated e-procurement approach is needed for overall success. Additional programs provide the framework for the supplier databases and spend management as well as holding key vendor information and being an electronic repository for contracts. All these facilities cost money and a clear business case must be made for e-procurement. In most cases this is fairly clear that cost savings are possible. It pays for companies to spend money on e-procurement technology, this investment will boost efficiency. The longer term reduction in costs will enable companies to direct their resources to more strategic initiatives. E-procurement advantages are significant bottom-line benefits, including cost reduction, process efficiencies, spending controls and compliance.


BUSINESS

Kenya to benefit from newly agreed TFTA After seven years of negotiation, the signing of the Tripartite Free Trade Agreement (TFTA) in June is being heralded by many in Kenya as a turning point in regional integration. Continued in from February Issue 2017

The TFTA and the Continental Free Trade Area agreements launched [in 2015] provide an opportunity for Kenya to become a manufacturing hub for Africa, and this needs to be harnessed,” Phyllis Wakiaga, CEO of the Kenya Association of Manufacturers, told local media in July.

Mixed results

However, the effect the TFTA will have on other economic sectors is less clear. Many countries included in the agreement remain heavily dependent on agriculture, including Kenya, where agriculture directly accounts for over 27% of the country’s GDP, 20% of formal jobs and more than half of total employment. At present, agricultural products enjoy some of the most protective tariffs in sub-Saharan Africa, with an average tariff of 24.9%, according to the World Bank’s Overall Trade Restrictiveness Index, compared to 14.4% for total trade in the region. Perhaps foreseeing the difficulties inherent to liberalising the sector, the signatories of the agreement restricted the movement of goods deemed “sensitive,” many of which are agricultural products, until at least 2017. Agricultural goods like sugar, maize, wheat and rice will be subject to duty and quota restrictions, as will other products such as cement, plastics, electronics and paper. The intention is to give these industries time to adjust to increased competition from players in other markets included in the TFTA.

Challenges & solutions

Other aspects of the deal have also prompted concerns about its feasibility. The sheer scope of what the TFTA aims to achieve – the unification of extremely dif-

ferent economies and regulatory frameworks – is an ambitious goal in itself, particularly in a region often characterised by institutional inefficiencies. According to Transparency International’s annual survey on the perception of corruption in the public sector, sub-Saharan African countries consistently rank as some of the worst performers in the world. For its part, Kenya ranked 145th out of 174 nations in 2014, compared to 136th in 2013. In physical terms, a lack of transport infrastructure and connectivity amongst member states could prove to be another stumbling block for intra-regional trade growth. In East Africa alone, transport costs are estimated to be 60% higher than in the US and Europe. According to the 2015 East Africa Logistics Performance Survey, the average dwell time for a container in the ports of Dar es Salaam and Mombasa stood at nine and five days, respectively, compared to a global average of just three days. This, however, may be an area on which the bloc can improve. Across the continent, a raft of large-scale transport infrastructure projects are under way. This should help ease some of the stress on road networks, which remain the primary means of transporting goods across the continent. In Kenya alone, ongoing transport projects include the $4bn Mombasa-Nairobi standard gauge railway, with plans in place to extend it through to Naivasha and eventually connect to Uganda via the Kenyan city of Malaba. The Lamu Port-Southern Sudan-Ethiopia Transport Corridor, a $24.5bn package of projects stretching across northern Kenya including a railway, highways, and a crude oil pipeline, amongst other features, is also in the works. These projects are taking place alongside significant upgrades and expansions to the Port of Mombasa, worth some KSh34bn ($333.1m), and the country’s airports, including longterm expansion plans at Nairobi’s Jomo Kenyatta International Airport, at a cost of around $653m, according to the Kenya Airports Authority.

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TRADE

Booming cross-border e-commerce set to outperform domestic online orders A new survey reveals that cross-border e-commerce is predicted to grow at twice the rate of domestic online retail, with an estimated 25 per cent compound annual growth rate (CAGR) until 2020 worth $900bn.

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he survey provides a detailed analysis of the markets and products that offer the highest growth potential, the preferences of customers making international online purchases and the success factors for online retailers that wish to expand overseas. The report‒ The 21st Century Spice Trade: A Guide to the Cross-Border E-Commerce Opportunity focuses on the opportunity for premium products and service

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offerings, with higher basket values accounting for a significantly higher proportion of cross-border orders, suggesting that retailers can grow 60 per cent faster with a premium service offering. The report reveals that cross-border e-commerce offers aggregate growth rates not available in most other retail markets: cross-border retail volumes are predicted to increase at an annual average rate of 25 per cent between 2015 and 2020 (from $300bn to $900bn) – twice the pace of domestic e-commerce growth. Chief executive of DHL Express, Ken Allen said: “Going global and going premium is an opportunity for retailers in all markets.” The report finds that online retailers are also boosting sales by 10 per cent-15 per cent on average “simply by extending their offering to international customers”. An additional boost comes from including a premium service offering: retailers and manufacturers that incorporated a faster shipping option into their online stores grew 1.6 times faster on average than other players. “Shipping cross-border is much, much easier than many retailers believe, and we see every day the positive impact that selling to international markets can have on our customers’ business growth,” said Allen. “We also see that virtually every product category has the potential to upgrade to premium, both by

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TRADE developing higher quality luxury editions and by offering superior levels of service quality to meet the demands of less price-sensitive customers. “The opportunity to ‘go global’ and ‘go premium’ is there for many retailers in all markets. Our global door-to-door time definite network is perfectly positioned to support any retailer that is developing a premium service offering or simply looking for a way of reaching new overseas markets directly without investing resources in warehousing or distribution.” The report is based primarily on research and indepth interviews conducted by a “leading global management consultancy”, as well as more than 1,800 responses to a proprietary exporter survey of retailers and manufacturers in six countries. It casts a light on the evolving face of e-commerce, with “sophisticated manufacturers” using it as a tool to direct retail models – by passing the ‘middleman’ and offering their products online to the end customer – and expect to grow 30 per cent faster in cross-border ecommerce than other retailer groups. The main challenges highlighted by consumers to cross-border purchases relate to “logistics, trust, price and customer experience.”

Mombasa readies for Africa’s biggest maritime conference Africa is experiencing a major surge in trade supported by growing cargo volume across its ports.

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ith nearly 90 per cent of international trades in Africa happening by sea, government authorities across the continent are investing millions to increase port capacity to take advantage of commercial trade opportunities. New announcements are also being made, creating exceptional maritime business opportunities as ports strive to deliver world class service, facilities and efficiencies However, old, outdated and cramped port infrastructure has become a major hindrance, which is why there’s a push to improve port infrastructure and unlock Africa’s full maritime potential. As such, the African Ports Expansion Conference will congregate major stakeholders in the maritime industry including government authorities, port authorities, contractors, technology providers, suppliers of port equipment, consultants and more as they discuss their biggest challenges and debate best-practice methodologies from 20-21 March 2017 in Mombasa, Kenya. Some of the key speakers attending the event include: • Catherine Mturi-Wairi, Managing Director, Kenya Ports Authority • Nancy W. Karigithu, Principal Secretary, State Department of Shipping and Maritime Affairs,

• • •

Ministry of Transport, Infrastructure, Housing & Urban Development Karl-Xhanti Socikwa, Chief Executive Officer, Transnet Port Terminals, South Africa Rev. Dr. Peter Issaka Azuma, Director General, Ghana Maritime Authority Innocent Ogbuji, General Manager Commercial & Government Relations, West Africa Container Terminal, Port Harcourt, Nigeria Kenneth Mwige, Secretary General, Intergovernmental Standing Committee on Shipping (ISCOS) John Omingo, Head of Commercial Shipping, Kenya Maritime Authority

Companies including Royal IHC, Keller Holding, Phaeros, Bedeschi, and more will be exhibiting at the event to showcase their products and solutions.

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PRODUCTS & SERVICES

Seven reports every supply chain executive needs

Supply Chain Performance Management with IBM

With increasing requirements for better service, new products, and quicker delivery the manufacturing sector remains one of the most competitive. Everyone across the supply chain must help reduce costs, streamline production, and speed delivery in order to help their company compete and remain profitable. To accomplish this, companies worldwide are turning to Supply Chain Performance Management (SCPM) solutions that can improve efficiencies and streamline processes. And while these systems have achieved success, not all of them are created equal. Only the best SCPM systems give executives the easy, ondemand access to current performance data they need to drive change and improve supply chain operations.

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Business problems

Manufacturers around the world have invested millions in enterprise and supply chain management systems (e.g. SAP, i2, Manugistics, and others) and various supporting software applications to help them improve the performance of their supply chains. This approach has improved efficiencies, centralized data storage and collection, and streamlined key processes. Yet for the volumes of data that they generate, these systems have not delivered whatsupply chain managers truly need—complete visibility so they can answer the burning questions, and take corrective action across every aspect of the supply chain.

Business drivers

Several critical questions drive business decisions for today’s supply chain executives. These include: • Which suppliers are the most reliable? Which have balances outstanding? • How many days of inventory exist in each warehouse? Are we meeting demand? • How close are material forecasts to actual results? • What lead times are required to fulfill an order? • Which plants have completed the highest number of work orders on time? • Which plants are performing best against costs? Has this changed over time?

The solution: IBM Cognos SCPM

IBM Cognos® Supply Chain Performance Management (SCPM) solutions encompass the complete range of capabilities executives need to

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PRODUCTS & SERVICES build and manage a highperformance supply chain: • Interactive scorecards and dashboards • Business event management • Reporting and analysis • Data integration • Planning • Budgeting • Forecasting • Consolidation.

Seven critical reports

Here are examples of seven IBM Cognos SCPM reports that supply chain executives will find most valuable: 1. Plant Performance Maps: IBM Cognos SCPM solutions provide a graphical, at-a-glance representation of all production facilities and how they are performing. By simply clicking on a location, supply chain professionals are able to detect performance issues and drilldown into each facility. 2. Plant Performance Dashboard: An IBM Cognos digital dashboard can display visual reports of each plant’s operations. Users can drill down into the key metrics of each report, such as procurements, material management, production, customer demand, and safety to gain greater insight into overall plant performance. 3. Material Management Report: IBM Cognos SCPM solutions allow supply chain personnel to manage inventory at optimal levels by identifying usage and coverage trends. This visibility helps reduce excessive or unnecessary carrying costs and inventory write-downs, enabling organizations to free up working capital and boost profitability. With IBM, companies can see how trends in the value of inventory compare with inventory turns and days of coverage so they can uncover opportunities and issues in material management. 4. Production Scheduling Report: IBM Cognos SCPM solutions enable full visibility of upcoming jobs and priorities by combining information from routings, existing production schedules, and plant capacity. Companies can also factor in downtime, vacation schedules, and preventative maintenance to meet customer demand and commitments, helping the organization run at optimal capacity

5. Event Notification: With pro-active event notifications, any user across the organization or value chain can be kept informed of critical events— material part shortages, quantities required, quantities rejected, customer shipments at risk—whether the shipment is in the office or on the road. Early notification of potential disruptions enables corrective action or alternative measures to meet material, production, and customer requirements. 6. Supplier Relationship Scorecard: Effective suppliers are critical to success. With IBM Cognos SCPM solutions, supply chain professionals can monitor key performance indicators— such as on-time delivery, quality performance, reliability, and average lead-time— across multiple locations and suppliers. They can analyze current status and trends versus previous periods. They can identify strategic suppliers, optimize their suppliers across materials, and negotiate better terms. The result: reduced cost of goods sold, higher quality of materials, and increased reliability of supply. 7. Downtime Analysis: By identifying variances in material usage, downtime, labor and overhead by shift, operations, and suppliers, organizations can drive maximum productivity across all areas of the enterprise.

Customer success

IBM Cognos SCPM solutions provide rapid deployment and ease of use. Integration with common industry portals and extranets lets customers, partners, and suppliers access dashboards, reports, alerts, and other important content. IBM also has strong partnerships with the leading ERP and supply chain application vendors including SAP, SSA, QAD, INFOR, Oracle, Manugistics, Kinaxis, Acorn Systems, Smarttime, and Agile. In addition, IBM Cognos Supply Chain Analytics (part of IBM Cognos Performance Applications) deliver hundreds of prebuilt reports, metrics, and connections to standard data sources to help you understand your supply chain performance, throughput, quality, productivity, inventory, and costs. With the all steps for building analytics delivered out-of-the-box, IBM Cognos Supply Chain Analytics brings decisionmakers and IT together with a fast solution for maximizing operations. IBM Cognos SCPM solutions have brought tremendous value to some

of the world’s largest manufacturers. Thirty-eight of the largest 40 manufacturers use IBM Cognos solutions, including all of the top 10 automakers. Our solutions also are used by 86 of the top 100 companies in the Fortune 500. With IBM Cognos SCPM solutions acting as the performance management layer on top of their existing supply chain applications, companies such as Zarlink Semiconductor and Hyundai Car (UK) have all experienced demonstrable improvements in their supply chain performance. For example: • Zarlink Semiconductor saved $40 million through increased efficiencies using IBM Cognos reporting and analysis. • Hyundai Car (UK) identified savings of £75,000 over two years by reducing spend on external supplier data.

Conclusion

As manufacturers continue to feel the pressure of increased competition and customer demands, supply chain executives finally have the tool they need to support operational excellence. IBM Cognos SCPM software enables supply chain executives to provide a strategic approach to improving supply chain performance by providing visibility into critical processes, customer needs, inventory requirements, areas for cost reduction, and the reasons behind the results.

About IBM Cognos BI and Performance Management

IBM Cognos business intelligence (BI) and performance management solutions deliver world-leading enterprise planning, consolidation and BI software, support and services to help companies plan, understand and manage financial and operational performance. IBM Cognos solutions bring together technology, analytical applications, best practices, and a broad network of partners to give customers an open, adaptive and complete performance solution. Over 23,000 customers in more than 135 countries around the world choose IBM Cognos solutions. For further information or to reach a representative: www.ibm.com/cognos Request a call To request a call or to ask a question, go to www.ibm.com/ cognos/contactus. An IBM Cognos representative will respond to your enquiry within two business days.

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PROCUREMENT LOGISTICS July - August, 2016 Issue No.: 04/2016

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Eastern Africa Premier Supply Chain Magazine KSHS. 400.00 TSHS. 8,000.00 USHS. 12,000.00 USD. 5.00

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Kenya: East Africa Logistics Outperformer

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Six in Ten Digital Adverts are not seen by Humans

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How to Manage Your Fleet Management Company

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SUPPLY

Supply Chain Performance Accelerator A Powerful Solution from Cognos and Deloitte Successful Supply Chain Performance Management (SCPM) is about connecting performance strategy and measures.

I

t’s also about aligning your demand plan with your supply plan and then monitoring the operation so that issues are resolved and success is assured. It’s also about prioritization and management by exception and knowing what to do with the alerts and status changes as they occur. Cognos, an IBM company, is the world leader in business intelligence and corporate performance management software for the enterprise. Deloitte is one of the world’s leading professional services firms delivering supply chain performance. Together, our partnership can help you design and implement an effective SCPM solution. You can leverage our combined experience in helping organizations create, improve, and manage their supply chain operations. This is about much more than the implementation of a supply chain planning, execution, and reporting application. Performance management hits people where it counts; in their wallets. Cognos and Deloitte understand that what gets measured is what gets done. We can help you get what you want done via SCPM.

A strong partnership for proven results Deloitte is a charter member of the Cognos Global Partner program. The membership recognizes Deloitte’s ability to perform SCPM implementations for Cognos customers globally. The supply chain is the crucial link in your business, linking suppliers, your production operations, and your customers with all of the logistics and transportation links in-between. The complexity and the need for speed and responsiveness calls for new tools and approaches in driving supply chain performance. Cognos scorecards, dashboards, and business intelligence allow you to define the supply chain measures, continually monitor performance to alert you to situations needing attention, and provide the depth of understanding to correct supply chain issues at the source. Deloitte provides the expertise to combine supply chain planning with effective execution and tune your supply chain for optimal customer satisfaction. Combine knowledge of past performance, predictive information about future demand with immediate visibility into current operations. Stay lean, efficient, and customer-centric.

How the partnership works for you

Organizations that have implemented SCPM with Cognos and Deloitte have benefited in many ways. We know how to make SCPM work with your organization. Here are the keys to our success:

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SUPPLY

• Start by defining the business objectives that you are trying to achieve through improved SCPM. • Define a balanced mix of measures between leading and lagging indicators, between operational and financial measures and between customer-focused and internally focused measures. • Focus on gaining organizational understanding and buy-in to the key performance measures. • Carefully define the hierarchy of underlying business intelligence including data, reports and cubes that will enable drill-down capability and more specific insights into performance. • Be diligent about the precise source and definition of the data and calculations required to accurately represent supply chain performance. • Select a software application that will support your business and technical requirements including the ability to scale to other functional areas. Cognos is the first choice for manufacturers Manufacturers choose Cognos for our unsurpassed expertise in delivering the information and insight they need to reduce costs, manage inventory, streamline processes, and increase profitability. Cognos has delivered solutions to manufacturers in sectors including consumer packaged goods, computers and electronics, furniture, automotive, aerospace and defense, chemical products, transportation equipment, and more.

Some facts:

• 19 of the 20 largest CPG manufacturers use Cognos. • 9 of the top 10 high tech companies rely on Cognos. • Cognos has been implemented by the top 10 automakers. • 80 percent of the Fortune 1000 use Cognos.

Benefits of Cognos SCPM

Cognos business intelligence helps you improve production processes, supplier performance, materials management, and customer responsiveness by providing key insight into your supply chain. The benefits include: Analytics to support SCOR best practices: analyze trends and identify opportunities that help you Plan, Source, Make, and Deliver. Live dashboards: display reports of plant or process operations. Drill down into key metrics such as procurement, scrap rates, or quality to gain greater insights.

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Define the key measures and provide measurement so that the supply plan stays on-track. Audit production facilities from your desktop: maintain inventory investment at optimal levels by identifying usage and coverage trends. Reduce excessive or unnecessary carrying costs and inventory write-downs to free-up working capital and boost profitability. Drive supplier performance: monitor key indicators—ontime delivery, quality performance, reliability, price performance and average lead-time—across multiple locations and different suppliers, and view current status and trends versus previous periods. Identify strategic suppliers, optimize them across materials, and negotiate better terms. Carry the right inventory: get visibility of upcoming jobs and their priority by combining information from routings, existing production schedules, and plant capacity. Factor in downtime, vacation schedules, and preventive maintenance to meet customer demand and commitments so you can run at optimal capacity with fewer surprises. Eliminate production delays and disruptions: Event notification/business activity monitoring keeps you informed of critical events whether you’re in the office or on the road. Be notified about materials part shortages, quantities required, quantities rejected, or customer shipments at risk Efficient Six Sigma: monitor performance throughout the DMAIC process.

About Deloitte

Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of 120,000 people worldwide, Deloitte delivers services in four professional areasaudit, tax, consulting, and financial advisory services-and serves more than one-half of the world’s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies.

About Cognos, an IBM company

Cognos, an IBM Company, is the world leader in business intelligence and performance management solutions. It provides world-class enterprise planning and BI software and services to help companies plan, understand and manage financial and operational performance. Cognos was acquired by IBM in February 2008. For more information, visit www.cognos.com

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PORTS

Globalisation in crisis the rise of populist currents shake up global trade Free trade agreements have created many opportunities for almost all countries over the past few decades

countries over the past few decades. The international division of labour and cross-border production processes have become core to the modern global economic order. Globalisation is by no means a winning situation for everyone, but heightened protectionism is certainly not the answer. When it comes to protectionist measures it is often the developing countries that loose. These countries rightly expect us to develop fair and balanced trade agreements.

Global trade and marine insurance

By Dieter Berg, IUMI President

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lobal trade has been growing for decades - but, owing in no small part to faltering economic activity, we saw a significant decrease in 2015 which is likely to be replicated in 2016. Any hope of a quick recovery is doubtful due to a strong increase in protectionist trends in western countries - such as US President Trump’s threat to introduce import tariffs. If trading partners were to hit back, the impact on global trade and economies worldwide would be significant. And such difficulties are likely to impact the international marine insurance industry where market volumes have been declining steadily in recent years.

The increase of protectionism

The International Monetary Fund (IMF) cited last year that – besides the weakening global economy – protectionist measures were a cause of negative trade growth, which includes custom tariffs and export subsidies

as tariff-based barriers, and quotas as non-tariff barriers. Since 2009 there has been a continuous increase in protectionist measures, with a rapid upsurge since 2012 when global trading volumes stalled. More than ever free trade agreements are currently in jeopardy, particularly in Europe and USA, where there is a political trend to blame globalisation for domestic problems, strengthening populist movements and an upsurge of nationalism. Massive protests in Europe against the Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the United States, the US withdrawal from the Trans-Pacific Partnership (TPP) deal and perhaps the North American Free Trade Agreement (NAFTA) could have significant consequences for the other trading partners involved. If existing or planned liberal trade agreements are scrapped, protectionism could reach alarming levels. Free trade agreements have created many opportunities for almost all

Globalisation seems to be in crisis and this is also impacting marine insurance. In parallel with global trading volumes premium income has also been falling in all segments since 2012. Even when adjusted for currency translation effects from the rise in the US dollar, premium volume is stagnant. In 2015 global premiums of approximately US $30billion were down to 2010 levels. Stronger growth in the USA, the probable end to the recession in Brazil and Russia, and a recovery in other commodity exporting countries due to higher prices should accelerate global trade in 2017, but these benefits could be countered by a rising move towards greater protectionism. The USA’s current trade policy and its withdrawal from the TPP or the effects of Brexit all have the potential to significantly influence international trade and slow down globalisation. The European Parliament has, after all, approved the trade agreement between Canada and the EU, so parts of the agreement may soon come into force, subject to approval by individual Member States. Time will show the impact these will have and marine insurers should not bank on a significant increase in the premium volume for the current year. Free global trade and the global exchange of goods is the foundation for growth and prosperity across the world economy. Going back to nationalistic isolation and protectionism is likely to have a negative impact on all those involved – industrial countries, emerging markets and developing countries – including global marine insurance.

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LOGISTICS

How 5 Emerging Technologies Will

Change the Services of 3rd Party Logistics Providers

Technology has always been the driving force behind logistics and even more so after deregulation of the transportation industry as 3rd party logistics providers offered technology solutions to customers. In the past centuries, people looked for ways to move goods faster, in greater bulk and more economically. The problems were solved primarily by the invention of the railway, automobiles (including trucks), modern ships and airplanes. The invention of the computer, the Internet, and related technologies revolutionized the logistic industry with such technologies as web-based programs like transportation management systems. Now the industry is on the brink of another revolution.

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oday’s emerging technologies are more concerned with speed, accuracy, security and seamless delivery. These technologies include 3D printing, drone, the internet of things (IoT), driverless vehicle and augmented reality. Here is a brief discussion of how each of these technologies will change the way 3rd party logistics providers work in the future.

3D Printing will shorten the supply chain

The concept of 3D printing has been around since as far back as the 1980s. However, it was only recently that the technology turned into a reality and became available on a mass scale. This revolutionary technology makes it possible for anyone to create products or parts of products using metals, plastic, mixed materials and even human tissue. So how is it going to affect logistics and supply chain management? Additive manufacturing will democratize the manufacturing process, according to Ed Morris, director of the National Additive Manufacturing Innovation Institute (NAMII). It will enable manufacturers to “print” on demand, which will shorten the supply chain by making it unnecessary to have large quantities of finished products stacked in warehouses. The implication of 3D printing for the logistics industry has potential upside implications. 3rd party logistics providers of the future will deliver raw materials instead of many finished products and may even provide 3D printing services at the point of delivery, which will be an additional source of revenue.

The Internet of Things (IoT) will increase transit visibility

Visibility is one of the biggest problems for goods in transit. The application of the Internet of Things (IoT) along with cloud-based GPS will make it possible to keep track of individual items and their conditions. IoT makes use of

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Radio Frequency Identification (RFID) chips that “talk” to each other. Chips attached to individual items will transmit data such as identification, location, temperature, pressure, and humidity. The implication of this capability will be immense. Goods will no longer be lost or misplaced in transit since each product will transmit its location. With immediate notification comes direct action and the avoidance of damaged goods when the chip signals oncoming adverse weather conditions, such as high temperature or humidity. Not only that, they will also be able to transmit traffic conditions and drivespecific data, such as average speed and driving patterns back to the central office. As supply chain and transportation visibility is a hot topic for Logistics Managers and Directors, 3rd party logistics providers, who adopt this type of technology, are surely to reap the rewards of highly satisfied customers.

Drones will increase the speed of delivery

A drone is an unmanned aircraft that can either be controlled remotely or left to fly autonomously through software-controlled flight plans embedded in their system. Drones are small, light, inexpensive to operate and can go where other modes of transportation cannot. Although 3rd party logistics providers haven’t started using


LOGISTICS the trucker shortage and the long withstanding capacity crunch may cease to exist with the availability of driverless, autonomous trucks. Another advantage of using driverless vehicles is that they are better drivers than people are, and thus the risk of accidents will be almost zero. They will not get drunk, race with other cars, take risks, become angry, lose concentration, doze off, talk on the phone, or send messages while at the wheel.

Augmented Reality will increase Improve the handling of goods and speed of delivery

the technology yet, there is little doubt that they will embrace it in the future. In the future, 3PL companies will use drones to deliver small packages quickly in both urban and remote areas. Because of their high speed and precision, the use will shorten the supply chain and significantly reduce the costs of transportation. The only things, which are preventing the widespread use of this technology are issues related to government regulations, safety, size and weight limitations.

3rd party logistics providers augmented reality Augmented reality (AR) provides a direct or indirect view of the real world augmented by computer-generated sensory inputs, including sound and video. AR gives you an enhanced view of the world around you in real time and makes you more aware of your environment. In the future, employees at 3rd party logistics providers will use AR technology, such as wearable devices, to gain critical information about the freight they are handling, such as contents, weight, and destination. Understandably, such visibility through AR technology will improve the handling of goods, increase the speed of delivery, and reduce overall costs. How do you think these technologies or other emerging technologies will change the service offerings for the way business is done by 3rd party logistics providers? Let us know in the comment section below!

The ability of driverless vehicles to sense the environment and navigate with zero human interventions makes these futuristic cars/trucks ideal for delivering products to customers

Driverless vehicles will cut the costs of transportation

Although still in the trial phase, driverless vehicles have shown great potential as tools for logistics and supply chain management. The ability of driverless vehicles to sense the environment and navigate with zero human interventions makes these futuristic cars/trucks ideal for delivering products to customers. A big part of transportation costs is the driver’s salary. 3rd party logistics providers may substantially reduce their overhead by using driverless vehicles for delivery. Furthermore, such hot topics in the trucking industry as

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CORPORATE PROFILE

LOGISA−The connected supply chain specialist Logistic Information and Innovation System East Africa (LOGISA)prides itself in filling a gap in the transport industry by providing sophisticated solutions aimed at connecting freight transport players across East Africa as it continues to diversify its supply chain offering and footprint. By Sandra Dinga

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n a market that is competitive with a steady rise in economic growth, logistics industry players are faced with the task of coming up with innovative methods as well as products that will be able to meet clients’ needs with factors such as time frame and cost put into consideration. LOGISA provides advanced customer-specific solutions through its value-creating services and IT technology in supply chain management. The firm’s comprehensive service network and platforms will allow you to make all the right moves for your business. Its dedicated and experienced professionals always provide you with tailor-made logistics solutions, customized to your particular needs. LOGISA focuses on serving customers with global sourcing and supply-chain-management needs, creating value through innovative end-to-end international logistics programs. Founded in 2015 by three partners TransportLAB, Cofano and DSM corridor Group, LOGISA continues to lead the way in East Africa’s supply chain market and a concerted focus on further strategic developments prepares the budding logistics and supply chain specialist for varying market conditions across East Africa. The company’s influence in East Africa is fast growing as the region’s transport sector continues to take shape. The firm has its headquarters strategically located in Dar es Salaam, Tanzania. The company is partially funded by Trade Mark East Africa’s Logistics Innovation for Trade (LIFT) fund and it set to transition to a legal entity, LOGISA BV (Ltd) to be launched in March 15, 2017. Headed by Paul J. Swaak, LOGISAworks as a network organization andis a member of the Impact Hub Amsterdam and Nairobi.

Connected Supply Chain

Forming a key component of the company’s proactive continuous improvement strategy, is the connected supply chain, bringing its world class logistics capabilities to yet another sector of African business. LOGISA’s insourced IT personnel ensures world class connected operations which are secure, cloud based infrastructure to enable an efficient and reliable electronic supply chain with reduced costs. The supply chain specialist enables regional enterprises to securely share information across the latest B2B market place in the region. Its intelligent connected supply chain is cloud-based and provides robust connectivity and communication to organizations of any size or location.

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Paul J Swaak- K- Head LOGISA LOGISA provides the perfect example of the recent explosion in the Internet of Things (IoT) where global firms are leveraging smart, wireless and connected products to drive efficiency and scale up revenues. LOGISA’s online platform is specially tailored to meet the needs of logistics professionals in East Africa where they can meet and share information on varied industry solutions. LOGISA is the place where industry players send out transport requests, quotes, and carry out bookings and deliveries are done with full track and trace functionality. The firm is neutral and its online platform is easy to use, offering customers the best solution for their transport requirements. The combined effort in pioneering innovation in East Africa’s transport industry cements LOGISA’s position as the clear industry leader across the region, as the company continues to leverage synergies to service its brand-owner principals.

Diversified solutions

LOGISA’s supply chain drive derives from a continuous monitoring and adaptive philosophy regarding industry trends and fluctuations, and subsequently identifying the most profitable areas of business moving forward. This philosophy also comprises the ability to customise its own service offerings for each client, catering for a general rise in customers requiring multiple logistics services. “We are expanding our exposure to our clients through

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CORPORATE PROFILE

connected and innovativesolutions including our community module and the supply chain module,” says Mr Swaak. “With our top-notch solutions, have been able to secure multiple engagements based on our integrated

logistics planning and execution services,” he notes. Community module is a platform designed for business purposes whereindividuals and organizations meet, connect and share information. Here, any content can be uploaded and published by any member. Organizations can also create their own private or public community to serve its members, employees or stakeholders at a fee. “At Logisa, we pride ourselves in offering the best customer friendly solutions. Community module takes care of our customers’ requirement through increased effectiveness by offering a platform for interaction and engagement among employees, logistics professionals and stakeholders with a refreshing community approach,” Mr Swaak explains. “Our community module has since seen 640 members register and new ones are trickling in on a daily basis. Community module keeps the communication going,” says Mr Swaak. In the module, membersget to market their offerings through contributions and shared opinions while creating awareness at the same time. Supply chain moduleon the hand is a secure and closed market place where the company connects shippers and transporters based on selection criteria. Shippers can publish their request for quotation for specific shipment and transporters can quote to this. Once a quote is accepted the process starts rolling.The transporter

Angel Mgawe Country Director LOGISA Tanzania at AfriLogistics Conference in Nairobi- Kenya

adds trucks to orders and trips, drivers to trucks and the planning is shared (automatically) with the respective shipper. Any status update or change planning is being shared automaticallyby means of inbox messages and e-mail alerts on the website. Used documents can also be added to the specific trip, so that the driver can access these while on transit. The system uses predefined locations or geofences where additional alerts can be triggered. Once the transport has been executed the transporter can send his online invoice to the shipper, who can pay online (via 3rd party supplier) directly after approval. The payment details and confirmation is directedback into LOGISA. Value added services like insurance and inspections can be ordered via trusted third parties.The module offers free subscription and a minimum transaction fee for every transaction made. According to Mr Swaak, the fee is kept minimum to allow more firms to access and use the service. The fee ranges from 0-3% of the total transportation costs for both the shipper and the transpoter.

Competitive Edge

Complementing all solutions and growth strategies is LOGISA’s unwavering focus on improving the competitiveness of its clients, customising its services through the company’s experience in a closed supply chain system. Evidence of this lies in its ability to retain, expand and gain engagements with its strategic partners and other clients alike. “The fact that we combine the use of a community system and a supply chain module is a plus for us,” says Mr Swaak. “We try to be innovative in all our activities because in the end, it adds value to all.” LOGISA banks on extensive marketing and existing networks to remain on top. “We strongly believe in a network strategy whereby we partner to forge ahead. We do not pay but barter” Although still on trial stage, the LOGISA platform has registered companies across East Africa including Kenya and Tanzania and are willing to expand its footprint to the rest of Africa.

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CORPORATE PROFILE “Customers want services across the supply chain spectrum and we are delighted by the shear fact that quite a number of companies are registered for our beta version. Their willingness to test this trial version is a tick for us,” says Mr Swaak. Moving forward, LOGISA wants to grow slowly but consistently as it increases its quality and expand into Africa through leveraging its capabilities and partnering with the appropriate industry specialists. “LOGISA is open for any kind of collaboration. We invite all organizations in the sector to join us in making this a success.” LOGISA believes in a connected future, where data is key to successful operations while easing work load and lowering operational costs. “I would say that without exploring technological possibilities, there is no future in logistics,” Mr Swaak concludes.

“I would say that without exploring technological possibilities, there is no future in logistics,” Mr Swaak concludes. Service delivery

Adding a further string to LOGISA’s bow has always been its dedication to not only its profit margins and business success, but also its commitment to deliver efficiency to its clientele. Being a SaaS application specialist, the firm provides a platform where shippers get the value for their money while getting a fair price for every request. “At LOGISA, all companies that register will have GPS Track and Trace systems installed, providing real-time tracking and deviation monitoring.” The shippers are therefore able to monitor all their shipments, regardless of multiple transport operators, and at their own convenience. The company’s internal rating system also ensures an increasing perception to quality and all parties registered under the platform get to have full view on all ratings. For an organization to beregistered under LOGISA, they have to undergo basic vetting where they obtain registration numbers to be allowed to enjoy the diverse services.

Future growth

Having systems in place to engrain sustainability and consistency within the organisation complements the flexibility of LOGISA’s supply chain operations, making the resulting combination a formidable one for industry competitors, and critical for the future aspirations of the company, also. “Our transport business, which is our area of specialty remains key to us and our network” Swaak

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MANAGEMENT

TQM Implementation and Systems

Constant employee awareness and feedback on status are provided and a reward/recognition process is established. Examples of Total Quality Management System Strategies

Strategy 1: The TQM element approach

The TQM element approach takes key business processes and/or organizational units and uses the tools of TQM to foster improvements. This method was widely used in the early 1980s as companies tried to implement parts of TQM as they learned them. Examples of this approach include quality circles, statistical process control, Taguchi methods, and quality function deployment.

Strategy 2: The guru approach

Total quality management (TQM) as a term to describe an organization’s quality policy and procedure has fallen out of favor as international standards for quality management have been developed. Please see our series of pages on Quality Management Systems for more information.

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hen planning and implementing a total quality management system or quality management strategy, there is no one solution for every situation. Each organization is unique in terms of the culture, management practices, and the processes used to create and deliver its products and services. The quality management strategy will then vary from organization to organization; however, a set of primary elements should be present in some format.

Generic Strategy Model for Implementing TQM Systems

Top management learns about and decides to commit to TQM. TQM is identified as one of the organization’s strategies. The organization assesses current culture, customer satisfaction, and quality management systems. Top management identifies core values and principles to be used, and communicates them. A TQM master plan is developed on the basis of steps 1, 2, and 3. The organization identifies and prioritizes customer demands and aligns products and services to meet those demands. Management maps the critical processes through which the organization meets its customers’ needs. Management oversees the formation of teams for process improvement efforts. The momentum of the TQM effort is managed by the steering committee. Managers contribute individually to the effort through hoshin planning, training, coaching, or other methods. Daily process management and standardization take place. Progress is evaluated and the plan is revised as needed.

The guru approach uses the teachings and writings of one or more of the leading quality thinkers as a guide against which to determine where the organization has deficiencies. Then, the organization makes appropriate changes to remedy those deficiencies.

Strategy 3: The organization model approach

In this approach, individuals or teams visit organizations that have taken a leadership role in TQM and determine their processes and reasons for success. They then integrate these ideas with their own ideas to develop an organizational model adapted for their specific organization. This method was used widely in the late 1980s and is exemplified by the initial recipients of the Malcolm Baldrige National Quality Award.

Strategy 4: The Japanese total quality approach

Organizations using the Japanese total quality approach examine the detailed implementation techniques and strategies employed by Deming Prize–winning companies and use this experience to develop a long-range master plan for in-house use. This approach was used by Florida Power and Light—among others—to implement TQM and to compete for and win the Deming Prize.

Strategy 5: The award criteria approach

When using this model, an organization uses the criteria of a quality award, for example, the Deming Prize, the European Quality Award, or the Malcolm Baldrige National Quality Award, to identify areas for improvement. Under this approach, TQM implementation focuses on meeting specific award criteria. Although some argue that this is not an appropriate use of award criteria, some organizations do use this approach and it can result in improvement. Excerpted from The Certified Manager of Quality/ Organizational Excellence Handbook, pages 293-294.

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TRENDS

Six trends HR professionals should look out for this year We’re seeing the pace of change in human resources (HR) accelerate as digital technologies change the way we work, as digital natives enter the workplace, as labour law evolves and as competition for the best talent heats up. During 2017, we expect to see HR departments turn to technology to automate more of their work and to become more data-driven in their decision-making. Some of the key trends for this year are as follows: 1. The mobile device will be the HR department’s most imperative touch point.

From recruiting talent to interacting with employees, the mobile phone is becoming the most important HR touchpoint for job candidates, employees, managers and other stakeholders. Today’s employees and jobseekers want it to be as convenient and easy to deal with an employer as it is to bank online or via a mobile app. Employers who want to attract young talent should make sure that their online job advertising and application processes are seamless, convenient and optimised for mobile devices. Many companies already allow employees to use mobile apps to file expense reports and leave applications, change personal details, and access their payslips. In future, employees will increasingly access career and training information, performance feedback, and other important data from mobile apps. Such apps must be attractive, easy to use, and functional so that users will love coming back to them. Managers will also want to be able to access information such as performance reviews from their smartphones.

2. Data will drive decision-making

HR is about to change dramatically with data analytics becoming a way of life for HR directors and HR managers. As HR professionals have more data (gathered through digital interfaces like employee self-service) about employees and the business at their fingertips than ever before; they will begin to use analytics to make better decisions and to shape superior employee experiences. Data will help HR and the business to answer questions such as: • Where did we find the best hires for our business, i.e. top performers who have we retained for a goo while? • How many people will we need in our service de-

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• •

partment to support our forecasted revenue growth of 10% for the next financial year? What are the possible reasons for high employee turnover in the call centre? What skills gaps do we have in our organisation?

3. Integrated HR systems will stretch from recruitment to performance management

We are seeing the worlds of payroll, HR and business management solutions move closer together as organisations adopt integrated solutions to gain better control over their workforce costs and create stronger engagement with employees. One benefit lies in the fact that data and transactions don’t need to be captured multiple times across different business applications. In addition, such systems give HR teams a complete view of their relationships with employees, from onboarding to engagement, talent development and performance management. This empowers HR to react to the needs of the workforce and the business in a more agile manner.

4. Performance management is changing

We have seen a lot of discussion in the past year or two about the value of annual performance reviews, and many large organisations around the world have streamlined performance management or even done away with annual reviews. Though I don’t foresee most companies scrapping annual reviews, I expect that performance management will change to cater for a changing work world. We’ll see companies give employees feedback more frequently, perhaps each month or even each week, rather than once a year. This will help managers and employers to constantly monitor performance, identify challenges and opportunities and recalibrate employees’ alignment with its strategic objective. Annual reviews are useful in this regard, but they’re not frequent enough in a business world where the pace of change is so fast.

5. Online recruitment will continue to take over Recent research by the Society of Human Resource Management shows that in the past five years, recruitment using social media has increased by 54%, with one out of five candidates applying for a job through social channels. There are many tools that can streamline the recruitment process, from managing job applicants and filtering CVs, to interviewing and screening candidates, and right up to the on-boarding process. Though the human touch will always be important in HR, companies will extend their tools such as online applicant tracking, talent communities, social media and internal career portals. Online platforms such as Sage Skills Map give organisations direct access to people in Africa and abroad who are looking for jobs, as well as the tools they need

PROCUREMENT & LOGISTICS MANAGEMENT MARCH, 2017 Issue No.: 08/2017


TRENDS

to publish their jobs to the Web and track the applications they receive. These tools help automate a lot of the paperwork for them, while providing access to high quality candidates.

6. Employer branding will be a focus

According to a recent EY Sub-Saharan Talent Trends and Practices Survey, the strength of the employer brand is the most important factor in attracting talent. Companies must focus on creating a positive culture; a quality workplace and a good employee experience since employees value this as much as they do money. Given that top professionals in most fields can choose where they work, employers need to sell their workplace experience and the benefits they offer to employees with as much enthusiasm as marketing departments sell the company’s products and services.

Differentiating HR in the sea of same

H

iring in 2017 isn’t going to be completely different than it was in 2016 but there will be nuances. Recruiters however, will be much busier in 2017. This is according to LinkedIn’s 2017 Global Recruiting Trends report, which surveyed 3,973 talent acquisition decision makers who work in corporate and non-corporate HR department in 35 countries. In no particular order we look at what 2017 holds when it comes to HR trends.

Trend #1 Quality of hire and turn around time

Relationship-building gives the recruiter opportunities to know potential candidates on a much deeper level. It’s important to improve your hiring experience if you want to stand out in 2017!

Change and adapt – here’s what to look out for:

1. When top performers enter the job market, they are likely to be quickly inundated with recruiting requests and offers, which means that often they will only be on the job market for a matter of days. 2. Top candidates don’t have to come at a hefty price tag – be quick! However, once a bidding war starts with a candidate because you have dragged your heels with your recruiting process, their salary demands will

invariably increase once they realise their true market value. You will also become known as a slow decision-maker and lose the talent to your opposition. 3. The longer you take to recruit, the lower the quality of candidates in the pool will be - top candidates get placed quickly. 4. You can lose revenue, productivity and even core staff because vacant positions are open for too many days. Most importantly, your customers will feel the negative impact of slow hiring.

Trend #2 Enrich the UX in your recruitment process:

It’s all about hyper-personalisation. Do something that no-one else is doing. Recruit like no-one else is recruiting! Your recruitment process should resemble more of a consumer experience on social media platforms or e-commerce sites. As an employer, you should design an experience your future and existing staff will never forget. Meet candidates where they work and live or even after hours – be more flexible in your recruiting process. Develop innovative recruitment tools. Provide guidance and support. Celebrate achievements.

Trend #3 The digital employee:

Today employees have digital competencies that would have been almost unthinkable a decade ago. These employees belong to the ‘internet generation’. They don’t know a world without the web or indeed a mobile phone – and they seamlessly

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TRENDS integrate their offline and online lives. These tech-savvy employees expect to access services, tools, content or information / communication via digital channels anytime, anywhere. This will result in empowering your staff but also result in resolving operation problems quickly and efficiently.

Trend #4 Telecommuting / virtual employees:

The digital workplace is an HR mega-trend concept.

Virtual workplaces in tech and specifically the creative industry is fast becoming the way of the future – these highly talented virtual-employees are able to get things done around the clock, work unconventional hours, with no commuting, less interruptions and have a higher productivity rate. Setting up an infrastructure to support telecommuting employees allows managers to hire the best person for the job, regardless of location. Telecommuting options can also help you retain top talent if an employee needs to relocate. As technology continues to improve, we’ll see changes in how companies approach and embrace telecommuting in their workforce.

Trend #5 Improving employer engagement:

Employee engagement will be the buzzword for business leaders and HR departments in 2017. Remember that recognition drives engagement. It’s your ROI. By having an emotional connection with your employees, you show them you care. Start recognising and rewarding their efforts. In a workplace that overlooks employee recognition – you stand to lose out in terms of attracting talent, let alone keeping it. Disengaged staff has a negative effect on fellow colleagues, customers, productivity and general retention in your business.

Trend #6 VOE (voice of the employee) will take centre stage in 2017:

Voice of the Employee initiatives deliver insights that help you engage your workforce to deliver across your business objectives. These engagement tools will give employers a deeper insight about their organisations.

Trend #7 ERPs: Employee Referral Programs will be the rage in 2017:

Recent studies found that the HR professionals surveyed agreed that employees hired through referrals stay longer, feel more satisfaction and are better cultural fits.

How to make your ERP work:

Annual employee engagement surveys. Touchpoint, or employee insight, surveys. 1. Offer incentives: It could be money, a tech device, study program or even a holiday. 2. Let employees know the moment you have an opening in the company – it has to be in the news and current. Use social tools to inform them of upcoming talent needs. 3. Make sure the job descriptions are not vague – this way you will eliminate lower-quality candidates. 4. Engage with your staff – provide quality feedbacks on their referrals Open communication is how employers keep these programs alive and thriving. 5. Implement global or local recognition platforms for “referral rock stars.”

Trend #8 Digital Interviews:

Rethink how you reach out. Online interviewing is becoming increasingly popular for both job seekers and employers, especially as an initial screening tool. Even a short drive across town can be impractical for a candidate who only has a lunch hour for the interview. Employers can interview distant candidates and save thousands on travel and hotel expenses. On-demand digital interviews allow employers to standardize the interview process. You can see firsthand how candidates answer the same important questions you set them. Also, several of your managers can view the interview questions for collaborative decision-making. Digital interviews have brought some much-needed positive disruption to the recruiting process, while satisfying the employer and job seeker alike.

Trend #9 Employers become brand ambassadors

Smart solutions bring creative agencies, marketers, brands, and recruiters together. We are all strategic partners, who need to join forces – to create a mega-brand experience for future employees. Employers are becoming more specific about who they want to target and employ. Whether you are a recruiter hiring on behalf of a client, or a talent manager hiring internally – be a true brand ambassador. Sell the benefits of the company, the culture, the brand and values, but also the key aspects of the job. Your team needs to live and breathe the brand – differentiate the employee experience by setting an example and inspiring your team in 2017!

ABOUT YOLANDA GIBBON Recruitment specialists in Advertising, Branding, Design, Digital, PR, Communications, Retail, Financial, Research, Media, Marketing & Sales Staff.

360 feedback surveys - providing a holistic view on an individual’s performance and a powerful tool for career development.

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REPORTS

Purchasing Relationship: Arm’s-Length or Arm-Wrestling?

If one organization representative is asked about its competitiveness, rarely are procurement aspects considered immediately. After discussing a while, a conversation about cost reduction emerges. Indeed, nowadays, there is an incessant fixation on cutting costs. It is naive to believe that competitive advantage will be based on decreasing spot costs instead of understanding the complexity of the business and developing shareholder value.

O

Buyer’s perspective

Supplier’s perspective

Variability of products/services under his/her responsibility

High

Low

Time

Time pressure, limited possibility of postponement

No huge time pressure, able to wait if necessary.

Dependability

Product/Service dependent

Market dependent

Quality

Best possible

Range of different alternatives/qualities

Cost/Pricing formulation

Lower price

Value added and profitability

Flexibility

Specification lock-in

Specification lock-in

Market complexity

High

Low

Individual capabilities

Broad, need to know the entire process for every single source

Narrow, focus on specific product, need to know his/ her market and competitiveness

Yearly Annual investment in training/rewards

Low

High

Product-process matrix

Hard to understand

Easy to evaluate due to expertise

Common behavior

Doubtful - Need to demonstrate power due to supplier dependability

Sensitive - Need to demonstrate openness in order to gain buyer confidence

Information sharing

Sense of losing control when sharing information

Need information to mitigate risks and formulate the right offer

By Cristiane

n the other hand, when the buyer-supplier relationship is considered, the first question is:why is it so hard to align both sides in order to create value? There is a chronic discussion of the buyer-supplier relationship, particularly regarding the inherent conflicts between the two sides. The main gap is the identification of the most relevant trade-offs between purchasers and sales personnel. One may consider that the challenge comprises the perspective (world view) of both sides. While one is more focused on its own product and market (sales personnel), Purchasing Executives need to acquire a broad perception due to the number of different products and services procured. It seems to be more complex and harder to identify the value of what they have been buying. As a matter of fact, sometimes, buyers are under huge time pressure to place orders, and, in most cases, they are measured by narrowed KPIs like Annual Procurement Value (price evolution) instead of value creation or its contribution to shareholder value. In brief, one should summarize the most important perspective conflicts between both sides:

The answer to this challenge relies on two actions: firstly, it is necessary to rethink the purchasing role within the organization. It is mandatory to align purchasing strategy to corporate strategy by addressing clear assignments and coherent ways of measuring purchasing performance, ultimately to attend shareholder value. Second, Purchasing Executives must abandon their arrogant stance and understand the real needs and limitations. By promoting a transparent, serious environment, both sides have to be open to sharing knowledge and information instead of playing tricks or fake win-win games. Only the wearer knows where the shoe pinches, but purchasers and sales personnel need to put their feet into the others’ shoes and be open to clear, complex, coherent discussion for developing business.

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ECONOMY

Regulatory reforms across numerous Kenyan sectors stimulate new activity The telecommunications sector in Kenya has seen tremendous growth and change in the past 12 months, as industry players grapple to position themselves competitively in an increasingly saturated market. The recent exit of Essar Telecom Kenya through a unique divestment of licences and subscribers to the two largest competitors in the market left the sector with three industry players. Recognising the convergence of telecommunications services with mobile money and banking services, in April 2014 the Communications Authority of Kenya awarded the first mobile virtual network operating licence to Equity Bank, one of the largest retail banks in sub-Saharan Africa, which will ride on Airtel’s network. After successfully fighting court challenges to the use of “thin SIM” technology, Equity Bank officially launched its Equitel product, offering an overlay SIM card with value-added services like mobile money. Continued from our February Issue 2017

Derivatives Market

The 2013 amendments to the Capital Markets Act introduced a framework for a derivatives market. The CMA has since gazetted various regulations to make this market operational and the derivatives market is expected to be launched by the end of 2015. The CMA has approved the NSE’s application to operate as a futures exchange and it is expected that trading will commence in elementary derivative products, such as futures and options, immediately upon the market becoming operational.

Foreign Investment

In June 2015 Kenya removed the 75% foreign shareholding restriction in respect of listed companies. However, the cabinet secretary for the National Treasury may still prescribe the maximum foreign shareholding holding in a listed company that is considered of “strategic interest”. It is hoped that the removal of restrictions on foreign shareholding will have a positive effect on liquidity in the capital markets.

Capital Gains Tax

The start of 2015 saw the re-introduction of capital gains tax at the rate of 5% on listed shares causing trading volumes to dip significantly, with no indexation for historical gains. As a result the Treasury moved to salvage the situation by abolishing capital gains tax on listed shares with effect from January 1st 2016. This has provided certainty and predictability to the capital markets.

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Movement Expected

As a result of the implementation of the changes discussed above, significant movement is expected in the Kenyan capital markets in 2015 and 2016. In addition, insurance companies are expected to look to the capital markets to raise funding as the Finance Act requires a significant increase in the core capital of banks in stages by August 2018.

Competition Law

Competition law is playing an increasingly larger role in the mergers and acquisitions horizon. Kenya’s competition framework was substantially revised by the introduction of a new competition regime under the Competition Act, Act 12 of 2010, which took effect on August 1, 2011 and created the autonomous regulatory body, the Competition Authority of Kenya. However, Kenya is also a member of the regional Common Market for Eastern and Southern Africa (COMESA). Therefore, Kenyan mergers and acquisitions may also be subject to COMESA Competition Regulations and Competition Rules where the merger involves companies from two or more COMESA member states. COMESA’s competition regime took effect in early 2013 when the COMESA Competition Commission (CCC) was established. In addition, the East African Communities (EAC) Competition Act of 2006 is expected to become operational in 2016.

The Competition Act

The Kenyan Competition Act, modelled on South Africa’s Competition Act, regulates mergers, abuse of dominance and unwarranted concentrations of economic power, consumer welfare, cartels and other restrictive trade practices and exemptions. Mergers cannot be implemented in Kenya without the Competition Authority’s approval. Failure to obtain approval prior to the implementation of a merger can lead to a maximum penalty of 10% of the combined turnover of the merging parties. In addition, the merger will not have any legal effect. The Competition Act gives the Competition Authority substantial investigative powers in respect of anti-trust investigations, including the power to conduct “dawn raids” on corporations for the purposes of obtaining evidence.

Mergers

For listed companies, a merger is notifiable to the Competition Authority in any case where a takeover offer (an offer for 25% or more of the share capital of a listed company) is made. For non-listed companies, a merger occurs where

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ECONOMY

there has been a direct or indirect change of control in the whole or a part of the business of another company. A change of control occurs where there has been an acquisition of more than 50% of the voting shares of a company, where the buyer has the ability to appoint or veto the appointment of a majority of the board of directors of the company, or has the ability to materially influence the policy of the company. The Competition Authority has issued the Consolidated Guidelines on the Substantive Assessment of Mergers under the Competition Act, which state that where the majority of the voting shares are not acquired or the majority of the board cannot be appointed or vetoed, the Competition Authority will consider whether decisive influence can still be exercised over the target to consider whether there is a deemed change of control. In these cases, the Competition Authority will examine whether the acquirer can veto rights or determine the appointment of senior management, the strategic commercial policy, and the budget or business of a company. Therefore, even where an acquisition or investment in a Kenyan company results in the acquirer owning less than 50% of the share capital, the acquisition may require approval. Helpfully, the authority has clarified that were the acquisition is for less than 25% of the voting capital of a company and where the shares are acquired solely for investment purposes or in the ordinary course of business, such a merger is not notifiable. However, an application for exclusion from notification must be made. There are no block exemptions for mergers so transactions are reviewed on a case-by-case basis.

Thresholds

A merger is only notifiable if it meets certain thresholds. Otherwise, parties can make an application for exclusion from notification. If the combined turnover or assets of the merging parties in Kenya is between KSh100m ($1.1m) and KSh1bn ($11m), then it falls below the notification thresholds. In the case of the health care sector, the threshold is between KSh50m ($550,000) and KSh500m ($5.5m). In the carbon-based mineral sector, if the value of the reserves, rights and associated exploration assets held as a result of the merger is below KSh4bn ($44m), then it falls

below the notification threshold. These merger thresholds have been issued as non-binding guidelines by the Competition Authority and may be subject to change once they go through the parliamentary process.

Fees

In 2014 the Competition Authority introduced filing fees for merger applications from August 1, 2014. For notifications where the combined turnover or assets of the merging parties is between KSh500m ($5.5m) and KSh1bn ($11m), the filing fees are KSh500,000 ($5500). Where the combined turnover or assets exceeds this range but is below KSh50bn ($550m), the filing fees are KSh1m ($11,000) and where the combined turnover or assets are above KSh50bn ($550m) the filing fees are KSh2m ($22,000).

Merger Assessment

For each merger the Competition Authority considers whether it is likely to prevent or lessen competition or create or strengthen a dominant position and whether there are any consumer welfare concerns. The Competition Authority has recently begun imposing conditions on its merger approval, particularly in relation to the retention of employees. In general, approvals for applications for exemptions are granted within a month and approvals are typically received within 60 to 75 days, although in some cases this timeline can be significantly longer. As part of the assessment process, the Competition Authority may conduct a site visit to the target company’s premises and may contact its customers, suppliers and distributors.

Enforcement

The Competition Authority has begun clamping down on mergers of which it was not notified prior to implementation. In the case of Tusker Mattress and Ukwala Supermarkets, two prominent chain stores, the merger occurred without prior approval and the Competition Authority unwound certain aspects of the transaction as well as issued a fine. The Competition Authority can impose a fine of up to KSh10m ($110,000) and up to 10% of the combined annual turnover or assets of the merging parties in Kenya. The Competition Act also provides for a prison sentence, which currently would

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ECONOMY

have to be imposed by the High Court although the Competition Authority has indicated that it is proposing the removal of criminal sanctions from the Competition Act. The Competition Act envisages the creation of a Competition Tribunal to weigh in on these cases, which is currently in the process of being formed.

COMESA

The COMESA Council of Ministers meeting in March 2015 adopted new rules, which happily addressed the two controversial aspects of the COMESA competition regime regarding thresholds and fees. In terms of thresholds, to fall within the scope of the COMESA Competition Regulations, either or both of the acquiring firm and the target firm must operate in two or more COMESA member states. Furthermore, the merger participants must meet two additional criteria: (i) the combined annual turnover or combined value of assets, whichever is higher, in the common market of all the parties to the merger must equal or exceed $50m; and (ii) the annual turnover or value of assets, whichever is higher, in the common market of each of at least two of the parties to a merger must equal or exceed $10m, unless each of the parties to a merger achieves at least two-thirds of its aggregate turnover or assets in the common market within one and the same member state. In terms of costs, the fee cap for COMESA mergers has been reduced to $200,000. Merging parties should factor in that COMESA notifications are laborious to complete and have to be submitted within 30 days of the decision to merge. Therefore, where there is a COMESA angle, it is important that the COMESA filing forms be prepared concurrently with the transaction documentation. The CCC has up to six months within which to approve a merger notification, which time-line may be extended by the CCC. Unlike the Kenyan regime, the CCC parties can implement the merger while awaiting approval. However, this exposes parties to the risk that the CCC approves the merger with conditions or does not allow the merger, in which case the merger would have to be unwound potentially after six months or more after being implemented. Failure to notify the CCC of a transaction can also lead to penalties of a maximum of 10% of the combined turnover of the merging parties in COMESA. The COMESA competition regime envisages a one-stop shop to facilitate the procedures for merging businesses. However, currently Kenya requires that notifications be made to the Competition Authority as well as to the CCC. When the EAC Competition Act becomes operational, there is a potential that three notifications would have to be made

54

in parallel to each of the three authorities. The three regulators are currently in discussions on how to streamline this process.

Increased Capacity

The Competition Authority significantly increased its capacity at the beginning of 2015 and has commenced several investigations this year. The Competition Act prohibits agreements which have as their object or effect the prevention, distortion or lessening of competition in Kenya. Specifically, it prohibits any practices that involve directly or indirectly fixing prices or trading conditions; dividing markets by allocating customers, suppliers, areas or specific types of goods or services; collusive tendering; minimum price maintenance; limiting or controlling production, market outlets or access, technical development or investment; applying dissimilar conditions to equivalent transactions with other trading parties; making the conclusion of contracts subject to acceptance of supplementary conditions; and for intellectual property where the use goes beyond the limits of fair reasonable and non-discriminatory use. The Competition Authority has signed a number of memoranda of understanding with other regulators and is expected to commence cartel investigations in 2015. The Competition Act was amended at the end of 2014 to introduce a leniency provision so that where an anti-competitive agreement is voluntarily disclosed, the Competition Authority has the authority to waive all or some of the penalty on the disclosing party.

Exemptions

There are currently no block exemptions, although certain block exemptions are expected to be published in 2016. Therefore, all investors presently engaging with an exclusive distributor or franchisee in Kenya are expected to apply for an exemption. Thus far, only a limited number of exemptions have been granted. Mergers and anti-trust regulation have become increasingly central to the Kenyan investment climate and investors are advised to seek competition advice in the early stages of the investment process. In addition, investors are advised to closely review any and all existing arrangements to ensure that they do not include exclusivity or any price-fixing considerations.

PROCUREMENT & LOGISTICS MANAGEMENT MARCH, 2017 Issue No.: 08/2017


TENDERS PROCURING ENTITY

TENDER PARTICULARS

IMPORTANT DATES

EAST AFRICAN PORTLAND CEMENT

Outsourcing of Bissel Quarry Mining Operations

Publication Date: March 10, 2017 Closing Date: March 15, 2017 15:12 Opening Date: Wed, Mar 15th 2017, 15:12

Downloadable documents from the website are FREE while hard copies are available from our offices at Ksh 1,000 Geothermal Development Company Limited

Pre-qualification for Insurance Brokerage Service for Year 2017-2019

STATE DEPARTMENT OF IRRIGATION

CONSULTANCY SERVICE TO UNDERTAKE LAND DEGRADATION ASSESSMENT (LADA) FROM 1990s AND MODEL DEGRADATION IMPACT TO 2030 FOR LAKE MAGADI BASIN KENYA

DOCUMENT :The office of Manager, Supply Chain at Kawi House, South C off Mombasa Road, Red Cross Road

OBTAIN DOCUMENTS: www.water.go.ke or supplier.treasury.go.ke Kenya Film Commission

PROVISION OF WORKMAN INJURY BENEFIT (WIBA) PLUS SCHEME AND PUBLIC LIABILITY The tender documents can be viewed and downloaded free of charge from the following website: www.kenyafilmcommission.com and IFMIS portal http://supplier.treasury.go.ke

Publication Date: Fri, Mar 10th 2017, 00:00 Closing Date: Mon, Mar 20th 2017, 14:00 Opening Date: Mon, Mar 20th 2017, 14:00 Publication Date: Mon, Jan 30th 2017, 00:00 Closing Date: Wed, Feb 15th 2017, 11:00 Opening Date: Wed, Feb 15th 2017, 11:00 Publication Date: Wed, Feb 1st 2017, 00:00 Closing Date: Fri, Feb 17th 2017, 11:00 Opening Date: Fri, Feb 17th 2017, 11:10

Application fee Kshs 1000 KENYA TRADE NETWORK AGENCY

PROCUREMENTOF THE KENYA TRADENET SYSTEM SECONDARY SITE HOSTING SERVICES http://www.kentrade.go.ke/index.php/procurement/tenders

CENTRAL BANK OF KENYA

BATTERIES FOR UNINTERRUPTIBLE POWER SUPPLY SYSTEMS A complete set of tender document containing detailed information may be obtained from Central Bank of Kenya, Head Office.

NATIONAL HOSPITAL INSURANCE FUND

SUPPLY, DELIVERY AND INSTALLATION OF OFFICE FURNITURE FOR NYERI, MOMBASA, KISUMU, MERU AND ELDORET REGIONAL OFFICES NHIF Website www.nhif.or.ke and from the National Treasury IFMIS Website http://suppliers.treasury.go.ke

Publication Date: Thu, Mar 9th 2017, 00:00 Closing Date: Thu, Mar 23rd 2017, 10:00 Opening Date: Thu, Mar 23rd 2017, 10:00 Publication Date: Thu, Mar 9th 2017, 00:00 Closing Date: Tue, Mar 14th 2017, 10:30 Opening Date: Tue, Mar 14th 2017, 10:30 Publication Date: Wed, Mar 8th 2017, 00:00 Closing Date: Thu, Mar 23rd 2017, 10:00 Opening Date: Thu, Mar 23rd 2017, 10:00

The tender is open to all Disadvantaged Group under “Women”. NATIONAL HOSPITAL INSURANCE FUND

MOTOR VEHICLE LEASING SERVICES NHIF Website www.nhif.or.ke and from the National Treasury IFMIS Website http://suppliers.treasury.go.ke

NAIROBI CITY COUNTY

SUPPLY AND DELIVERY OF POLYTHENE TUBES Prices quoted should be net inclusive of all taxes and delivery must be in Kenya Shillings and shall remain valid for 30 days from the closing date of the tender. 1. Only prequalified candidates with Nairobi county are eligible to apply for this tender

Publication Date: Wed, Mar 8th 2017, 00:00 Closing Date: March 15, 2017 15:12 Opening Date: Wed, Mar 15th 2017, 15:12 Publication Date: Wed, Mar 8th 2017, 00:00 Closing Date: Fri, Mar 17th 2017, 12:00 Opening Date: Fri, Mar 17th 2017, 12:00

Obtain Documents: www.nairobi.go.ke/www.supplier.treasury.go.ke -tender portal

PROCUREMENT & LOGISTICS MANAGEMENT MARCH 2017 Issue No.: 08/2017

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TENDERS PROCURING ENTITY

TENDER PARTICULARS

IMPORTANT DATES

EAST AFRICAN PORTLAND CEMENT

Addendum No. 2 Disposal of Idle Assets

Publication Date: Wed, Mar 8th 2017, 00:00 Closing Date: Wed, Mar 15th 2017, 15:12 Opening Date: Wed, Mar 15th 2017, 15:12

Downloadable documents from the website are free while hard copies can be obtained from our offices at Ksh. 1,000/=

THE NATIONAL TREASURY

Procurement of the IFMIS primary site infrastructure refresh and disaster recovery solution http://treasury.go.ke/tenders.html

THE NATIONAL TREASURY

Provision of onsite support and improvement of IFMIS application oracle e-business suite financial, purchasing, budgeting http://treasury.go.ke/tenders.html

THE NATIONAL TREASURY

Provision of IFMIS security solution http://treasury.go.ke/tenders.html

Publication Date: Tue, Mar 7th 2017, 00:00 Closing Date: Tue, Mar 21st 2017, 10:00 Opening Date: Tue, Mar 21st 2017, 10:00 Publication Date: Tue, Mar 7th 2017, 00:00 Closing Date: Tue, Mar 21st 2017, 10:00 Opening Date: Tue, Mar 21st 2017, 10:00 Publication Date: Tue, Mar 7th 2017, 00:00 Closing Date: Tue, Mar 21st 2017, 10:00 Opening Date: Tue, Mar 21st 2017, 10:00

RURAL ELECTRIFICATION AUTHORITY

TENDER FOR UPGRADE OF WEBSITE AND SOCIAL MEDIA INTERESTED BIDDERS MAY INSPECT AND DOWNLOAD THE TENDER DOCUMENT AT WWW.REA.CO.KE OR FROM THE IFMIS PORTAL AT SUPPLIER.TREASURY.GO.KE

Publication Date: Tue, Mar 7th 2017, 00:00 Closing Date: Tue, Mar 21st 2017, 10:00 Opening Date: Tue, Mar 21st 2017, 10:00

RURAL ELECTRIFICATION AUTHORITY

TENDER FOR DATA CENTER INFRASTRUCTURE SUPPORT & MAINTENANCE CENTRAL UNITERRUPTIBLE POWER SUPPLY (UPS), AIR CONDITIONING SYSTEM

Publication Date: Tue, Mar 7th 2017, 00:00 Closing Date: Tue, Mar 21st 2017, 10:00 Opening Date: Tue, Mar 21st 2017, 10:00

INTERESTED BIDDERS MAY INSPECT AND DOWNLOAD THE TENDER DOCUMENT AT WWW.REA.CO.KE OR FROM THE IFMIS PORTAL AT SUPPLIER.TREASURY.GO.KE Kawi House, South C, off Red Cross Rd, Behind Boma Hotel EAST AFRICAN PORTLAND CEMENT

Addendum No. 1 -Supply and Delivery of One Hundred and Twenty Thousand (120,000) Metric Tonnes of Coal -Consignment Basis Downloadable documents from the website are free while hard copies can be obtained from our offices at Ksh. 1,000/= Drop tender documents in the tender box at customer care offices in Athi River off Namanga road ,East African Portland Cement Co Ltd on or before 12.00 noon

Publication Date: Tue, Mar 7th 2017, 00:00 Closing Date: Wed, Mar 15th 2017, 15:12 Opening Date: Wed, Mar 15th 2017, 15:12

CENTRAL BANK OF KENYA

TENDER FOR SUPPLY, DELIVERY, TESTING AND COMMISSIONING OF UPGRADE OF THE CORE NETWORK FOR CENTRAL BANK OF KENYA

Publication Date: Tue, Mar 7th 2017, 00:00 Closing Date: Wed, Mar 22nd 2017, 10:30 Opening Date: Wed, Mar 22nd 2017, 10:30

A complete set of tender documents containing detailed information may be obtained from Central Bank of Kenya, Head Office, along Haile Selassie Avenue, Procurement and Logistics Services Department on 5th Floor upon OR Down loaded from the Central Bank Of Kenya website. Application fee Kshs 1000

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PROCUREMENT & LOGISTICS MANAGEMENT MARCH, 2017 Issue No.: 08/2017


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March 2017 Issue  
March 2017 Issue  
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