Supply Chain Management

Supply Chain Management

What is Supply Chain Management?

Supply Chain Management is defined as “the interconnected process of planning, buying, storing, utilizing and disposing” which involves optimizing the economic return on the working capital invested in goods, stores and services.

Key elements include

  • proper planning during the budgeting phase (Occurs at a  strategic planning stage of the process)
  • Cautious service selection
  • Supplier selection and management
  • Bidding Process
  • Awarding Process
  • Requisitioning management

The core function of this Unit is to support all departments in their procurement needs and be responsible for demand, acquisition and logistics management.

Being the core component of the public financial management discipline, seeks to ensure the proper flow of goods and services between the supplier and the Municipality, in the right quality and quantity whilst advancing the Empowerment principles, supplier development, Local Economic Development (LED) and value for money, to ensure efficiency and appropriate service delivery.

Supply Chain Management has been developed in accordance and in conjunction with other pieces of legislation to develop and shape Supply Chain Management within the Municipality. These include Section 217 of the Constitution, which compels all organs of state to implement a Supply Chain Management system that is fair, transparent, equitable, competitive and cost-effective to the Municipality. Chapter 11 of the MFMA compels the municipalities to establish Supply Chain Management units and implement the Supply Chain Management Policy, which will be efficient and effective to all Supply Chain Management functional areas.The Preferential Procurement Policy Framework Act 5 of 2000 provides for the application of the points system when evaluating and adjudicating bids.

Treasury Regulations 868 of 2005 (Supply Chain Management Regulation) and Supply Chain Management: A Guide for Accounting Officers of municipalities and municipal entities, provides a step by step illustration for the implementation of the Supply Chain Management policies for the Accounting Officers.

The Supply Chain Management process contains various role players that influence the Supply Chain Management processes which are:

  1. The National Treasury: Develops policy and oversees the implementation of the policy in the municipality.
  2. The Provincial Treasury: Supports the municipalities in implementing the Supply Chain Management Policy and further provides assistance to the municipality in terms of capacity building and implementation.
  3. The Municipal Council: Approves the Supply Chain Management structure of the municipality and ensures that the Accounting Officer executes the council’s Supply Chain Management Policy in a effective manner.
  4. The Accounting Officer: Establishes the Supply Chain Management unit, which will be under the supervision of the Chief Financial Officer.

Each municipality in terms of section 165 of the MFMA, is required to establish an Internal Audit unit that must examine and report on the effectiveness, efficiency and economic use of the Supply Chain Management to achieve objectives of the municipality.

The Audit Committee renders an advisory service to the Municipal Council, Political Office bearers, Accounting Officers and Management of the municipality on matters relating to section 2 (a) I – ix of the MFMA.

Auditor General examines and reports the compliance of the municipality with the Supply Chain Management Policy to the Accounting Officer of the municipality.


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