The strategic sourcing value proposition : a Sasol case study
Thesis (MBA)--University of Stellenbosch, 2010.
The value-add of a functional department in the corporate environment is continuously being challenged. Functions regularly find themselves in a state of restructuring in order to reduce cost structures which speaks volumes about an organisation’s view of its functions. What is however extremely important to take into account, is that functions can in fact add a great deal of value to the business, but before a function can be recognised as a value-adding partner, it needs to transform itself from a traditional transaction-driven service to a strategic value-adding function which contributes to the business on a strategic level. If this does not happen, the function risks becoming redundant, as most transactional activities today are or at least can be executed in an automated manner. Such a transformation is, however, no easy task, and requires a considerable amount of time to be achieved. It further requires substantial investments, enduring commitment from senior management and specific skills to enable a function to operate at a strategic level. Commitment, investments and new skills on the other hand, do not automatically acquire a seat at the boardroom table for such a function and a place must be earned through accurate proof of the functions value-add in the organisation – the difficult task being expressing that value-add in terms of financial numbers. A function that was confronted with the same predicament was the procurement function of Sasol around 1999, during a time when the commodity prices were under severe pressure and the organisation was looking into alternative ways of improving its cost structure. At this point a decision, to shift the focus of the procurement department from a traditional transactional environment to a value-adding business partner, laid the foundation to re-engineer the function into becoming a value-adding strategic function. A decision was taken to implement strategic sourcing in Sasol as the basis for procurement. This decision required substantial investment and the help of consulting firm McKinsey and Company. The Sasol Board were very confident in its decision, and requested continuous feedback on the actual value that was released through implementation of this new process. This required of the procurement function to develop a model by which the value-add of the process could be measured in real terms. The purpose of this study is to investigate the transformation of the procurement function in Sasol from a traditional transactional function to a strategic value-adding business partner by specifically focusing on the function’s ability to prove its value-add to the organisation, and in so doing, gain respect for being a true strategic value-adding function.