IMPROVEMENT OF INFRASTRUCTURE DELIVERY THROUGH EFFECTIVE SUPPLY CHAIN MANAGEMENT AT NORTH WEST PROVINCIAL DEPARTMENT OF PUBLIC WORKS AND ROADS by

Abstract

The concept of supply chain management is of strategic importance in value creation, fiscal prudence, service delivery, and socioeconomic transformation. The aim of the study was to evaluate the supply chain management systems and procedures, benefits, challenges and critical success factors to efficient and effective infrastructure delivery in the department. A questionnaire was used to collect quantitative data on 110 random stratified samples. The study adopted a case study design within an explanatory paradigm to comprehend the impact of SCM systems on infrastructure delivery. The study found that committees, reporting gates, approval gates, framework agreement gates, established minimum requirements, and tracking and monitoring were used to control supply chain management systems and procedures. It is critical for successful adoption of SCM for infrastructure projects to have developed supply chain management skills and knowledge, stakeholder involvement, centralisation of high value transactions, compliance, transparency, and governance. Recommendations include the implementation of ICT innovations, centralisation of supply chain management processes, rationalisation of supply chain management regulations, and international training.

Full text

IMPROVEMENT OF INFRASTRUCTURE DELIVERY THROUGH EFFECTIVE
SUPPLY CHAIN MANAGEMENT AT NORTH WEST PROVINCIAL
DEPARTMENT OF PUBLIC WORKS AND ROADS
by
              

*Milpark Business School, Milpark Education, South Africa, ** NWU Business
School, Makeng, SA, ***Rembrandt Klopper, University of Zululand, SA
ABSTRACT
The concept of supply chain management is of strategic importance in value creation,
fiscal prudence, service delivery, and socio-economic transformation. The aim of the
study was to evaluate the supply chain management systems and procedures, benefits,
challenges and critical success factors to efficient and effective infrastructure delivery in
the department. A questionnaire was used to collect quantitative data on 110 random
stratified samples. The study adopted a case study design within an explanatory
paradigm to comprehend the impact of SCM systems on infrastructure delivery. The
study found that committees, reporting gates, approval gates, framework agreement
gates, established minimum requirements, and tracking and monitoring were used to
control supply chain management systems and procedures. It is critical for successful
adoption of SCM for infrastructure projects to have developed supply chain management
skills and knowledge, stakeholder involvement, centralisation of high value transactions,
compliance, transparency, and governance. Recommendations include the
implementation of ICT innovations, centralisation of supply chain management
processes, rationalisation of supply chain management regulations, and international
training.
Keywords: Information and communications technology, infrastructure projects, service
delivery, supply chain management.
INTRODUCTION

The organisation and management of public sector supply chain management (SCM)
systems are critical for delivery of services and goods to the citizens of South Africa.
This is important since public service departments have a mandate to supply services
and goods in a cost effective, equitable, transparent, fair manner. SCM systems are
tools that facilitate the delivery of quality services and goods at a fair price to the correct
place.
This paper offers a background to the study and addresses the problem statement,
research objectives, research questions, as well as outlining the methodology of the
study. It discusses the results and name some recommendations.
Problem Statement
The SCM system at NWPDPWR currently faces implementation challenges, resulting in
gross system inefficiencies, irregularities, fraud, corruption and incompetent SCM
officials (NWPDPWR, 2016). Despite substantial financial outlay, there is evidence of
inefficiency, within the public SCM systems in the country, which has led to squandering
of financial resources (Mhlongo, 2014). The aim of having these SCM systems is to
address procurement inefficiencies of items, contract management, asset management
including infrastructure (South Africa, 2004). Multifaceted problems in SCM emerged,
causing delivery challenges as projects are abandoned or prolonged due to overruns.
This situation prompted the researchers to conduct this study to investigate how SCM
implementation can be improved within the NWPDPWR.
Despite the reform processes in public procurement and the employment of SCM as a
strategic tool, there are problems in South African public procurement practices(e.g. non-
compliance with procurement and SCM-related legislation and policies, tender
irregularities, etc.) (Smart Procurement, 2011).
Objectives
The main objectives of this study were:
a) To establish the extent to which standard SCM procedures are observed at
NWPDPWR;

b) To identify the challenges in implementing effective SCM strategies to projects at
NWPDPWR;
c) To examine the benefits in implementing effective SCM strategies to projects at
NWPDPWR; and
d) To establish the critical success factors of implementation of SCM strategies in
infrastructure projects at NWPDPWR.
LITERATURE REVIEW
SCM is defined as a series of undertakings and associations that enable movement of
material in a trail from the producing supplier to the consuming end user client (Waters,
2013). Public sector SCM is the task of government departments to obtain products and
services from local and international suppliers subject to the values of cost effectiveness,
fairness, competitiveness, and transparency (Turley & Perera, 2014). In the government
sector, public SCM may be perceived as acquisition through purchasing of goods and
services by government (Chinomona & Pooe, 2013). Included in public SCM are
business activities that support service delivery, and social and political functions of
government (Wieland & Handfield, 2013).
The standard for Infrastructure Procurement and Delivery Management (SIPDM) covers
SCM for infrastructure delivery. It is framed around five areas proposed by the National
Planning Commission for the design of a procurement system and draws upon the work
of the 2015 Public Sector Supply Chain Management Review. It is issued as an
instruction in terms of Section 76(4)(c) of the Public Finance Management Act No. 1 of
1999 (South Africa, 1999).
Public sector supply chain management implementation model
The SCM model is set by government to ensure value addition in the process of
procuring (DTI, 2012). As stated in the Policy Strategy to Guide Uniformity in
Procurement Reform Processes in Government, SCM systems are linked to a budget
and thus have an impact on expenditure (South Africa, 2003a: 5). The SCM model
applied in South Africa is one with the elements of demand management, acquisition

management, logistics management and disposal management, risk management and
performance management.
The specific regulations guided by Constitutional principles in ensuring that SCM
systems are implemented are enforced through Regulations 16A4 and 16A5. These
regulations make provisions for a government entity to establish a SCM Unit within the
CFO’s office. They also ensure that SCM officials are trained in terms of National
Treasury’s Framework for Minimum Training and Deployment. This guideline must be
read together with the National Treasury Practice Note SCM 3 of 2004 to maintain
consistency since these provide a check-list that should be taken into consideration in
meeting the requirements.
According to Sheoraj (2013), skills and capacity shortages have been identified as an
impediment to the success of public procurement in South Africa. The transactions in
infrastructure are complex and government officials may lack specialist experience and
skills in dealing with issues (Parker & Figueira, 2010: 513). Capacity in the form of
appropriate structures with skilled and professional SCM personnel is a necessity for
SCM. In some government entities, the quality of SCM personnel’s skills are below
standard. McCarthy (2015) contends that there is a lack of capacity and knowledge by
SCM employees to handle procurement processes, which has led to bad governance.

Legal fragmentation in supply chain management legislation
There is the challenge of finding a balance between the two objectives of procurement.
Section 217(2) of the Constitution and the Preferential Procurement Policy Framework
Act (PPPFA) both provide for the use of public procurement as a means of development
and transformation. An effective SCM system must ensure that goods and services are
available at the best price, be of the right quality, at the right time and the right place. To
achieve this requires a cohort of SCM professionals with the right skills, experience,
social awareness, ethical standards and dedication, and a regulatory and organisational
environment that supports and monitors their work in the public interest.
Van Zyl (2015) asserts that there is a lack of appropriate bid committees, use of
unqualified suppliers, passing over of bids for invalid reasons, and utilisation of the
incorrect procurement process in respect of the thresholds, extensions of validity
periods, and incorrect utilisation of the limited bidding process. Furthermore, Ambe and
Badenhorst-Weiss (2011) note that there are inadequate controls for the handling of
bids, appointment of bid committee members not aligned to policy requirements, and
insufficient motivation for deviations from SCM procedures.
Effective policy making requires information on whether governments are doing things
right and whether they achieve the results intended (Acevedo, Rivera, Lima & Hwang,
2010). Rigorous monitoring and evaluation systems provide the means to compile and
integrate this information into the policy cycle, thus providing the basis for sound
governance (Acevedo et al., 2010). All governments and their entities have noted
irregular, unauthorised, fruitless and wasteful expenditures that contravene laws and
regulations. There is lack of proper monitoring and evaluation as required (Stemele,
2009).
It is critical to equip supply chain learners and practitioners with skills and knowledge of
the South African public sector SCM systems, its regulations, enterprise management,
sourcing strategies, supply tasks, integrated supply management, globalisation, and
technological advancement (Ambe & Badenhorst-Weiss, 2012). Public procurement
malpractices must be curtailed for delivery of SCM systems through the employment of
stakeholders that is part of the procurement process (Watermeyer, 2011). The status of
the procurement system requires the creation of three bid committees (the bid
specification committee, the evaluation committee, and the adjudication committee).

Use of technology to streamline transactions and improve oversight is one way to
effective delivery of SCM systems in the public sector (Mafini, 2016). Properly
implemented, these ensure that public sector SCM system is accountable, provides
value for money, and ensures quality service delivery (Mhlongo, 2014).
According to Bolton (2015), organisational capacity refers to the ability to carry out
defined functions in an accountable and responsible manner, and includes a macro
organisational structure as well as individual skills and capacities. Ineffectively managed,
these can raise the risk on compliance and increase the cost of doing business (Kashap,
2014). This affects the infrastructure supply chain as costs are passed on to the State.
METHODOLOGY
According to Raddon (2010), researchers formulate ontological assertions on what
knowledge is and in what manner individuals acquire knowledge. The positivist approach
provides a platform for a quantitative approach to analyse the central phenomena of this
study. The research method adopted by the research is therefore a quantitative
paradigm. For the purposes of this research a 95% confidence interval and a 5% margin
of error was sought.
Sample/population
In this study the population was the full managerial complement at NWPDPWR, totalling
300 managerial employees in four districts (NWPDPWR, 2017). The researchers,
however, sent questionnaires to 150 managerial staff at NWPDPWR. Employees were
chosen randomly from a stratum until 150 managerial employees were selected as
shown below.
Table 1: Target population breakdown for NWPDPWR managerial staff
MANAGERIAL
LEVEL
DISTRICT 1 DISTRICT 2 DISTRICT 3 DISTRICT 4 TOTAL
LOW 35 48 50 52 185
MIDDLE 31 15 13 17 76
TOP 15 8 8 8 39
TOTAL 81 71 71 77 300
Table 2: Sample size for NWPDPWR managerial staff
MANAGERIAL DISTRICT 1 DISTRICT 2 DISTRICT 3 DISTRICT 4 TOTAL

LEVEL
LOW 17 24 25 26 92
MIDDLE 16 8 7 8 39
TOP 7 4 4 4 19
TOTAL 40 36 36 38 150
Questionnaires were emailed to participants and once completed, the questionnaires
were returned. To change the participants’ subjective opinions into quantifiable format,
the researchers utilised a Likert scale.
DATA PRESENTATION, DISCUSSION AND ANALYSIS
Of the 150 distributed questionnaires, 110 completed questionnaires were received.
Thus, a response rate of 73.3% was achieved but it was not representative and if people
want to use these results, it would be advisable to run the test again. The number of
male participants was 65%. This could indicate a reflection of lack of interest by women
in participating in surveys. This gender disparity was considered by the researchers as
not affecting the outcome of the study, as both classes of gender showed ability to
handle the topic under study.
A collective 48% of respondents were between the ages of 25–45, corresponding to the
Generation X and Generation Y employees. However, 49% of respondents were in the
age groups 46–55 and 55+, corresponding to the Boomers II Generation. This reflects a
near even distribution of Generation Z, Generation Y and Boomers II, who are a more
mature, flexible and technologically advanced age group (Yukl, 2012).
Of the 110 participants, 35% had attained a diploma, 47% a degree, and 18% were in
possession of a postgraduate qualification. A total of 35% of the respondents had
worked for NWPDPWR between 5 to 10 years, 54% have worked for 11 years and
more. This reveals that the majority of the participants had served for a considerable
length of time at NWPDPWR and grew to understand issues pertaining to SCM within
the department. The functions of the participants were spread across the departments,
with 60% in operations, 20% in procurement, and 20% in finance and administration.
Cronbach test

The research instrument consisted of 25 items, with a level of measurement at a nominal
and ordinal level. Cronbach’s Alpha equalled 0.904, which indicates good reliability (α =
0,904 N = 25). Scale is reliable.
Findings and discussion
Of the respondents, 64% agreed that NWPDPWR has SCM tracking and monitoring
systems. The views of NWPDPWR employees regarding SCM mandate and priorities
were as follows: A total of 75% agreed that NWPDPWR has SCM mandates and
priorities. Seventy one percent agreed that NWPDPWR observes the minimum
requirements of SCM as prescribed for public service procurement. These minimum
requirements also brought efficiencies in procurement and solved inequality issues
through BBBEE initiatives (McCrudden, 2004:245).
The data reveals that 70% of respondents agreed that NWPDPWR observes the SCM
framework as prescribed for public service procurement. The data shows that 79% of the
participating employees agreed that NWPDPWR observes the SCM reporting gates. The
data indicates that 77% of participants agreed that NWPDPWR observes the SCM
approval gates. About 72% of the participating employees agreed that NWPDPWR
observes the SCM committees as prescribed.
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/Tracking and
monitoring
2.975 0.914
0Mandate and priority 2.614 0.877
Framework
agreements
2.235 0.869
Reporting gate 1.875 0.947
1Approval gate 1.641 0.932
2Existence of
committees
1.314 0.784
3Minimum agreements 0.946 0.857

It is concluded that tracking and monitoring, Mandate and priority, and framework
agreements are important SCM challenges facing NWPDPR as highligted by the
respondents. The p-value for all the variables was more than 0.05 showing statistical
significance in the results.
Challenges in supply chain management
A total of 52% disagreed that regulatory ambiguity is not a challenge to NWPDPWR in
executing SCM. There is an overlap and duplication among different regulatory
instruments relating to infrastructure, construction, and SCM policy (Ambe &
Badenhorst-Weiss, 2012). This splintered legal framework creates uncertainty about
which of these diverse instruments takes legal precedence in regulatory interpretation
when public procurement cases are disputed in court (Watermeyer, 2011).
Of the participating employees, 51% disagreed that lack of regulation is a challenge in
effective execution of infrastructure SCM. The data also shows that 78% of the
participating employees agreed that procurement skills shortage is a challenge in
delivery of SCM. According to Sheoraj (2013), skills and capacity shortages have been
identified as an impediment to the success of public procurement in South Africa. The
lack of global experience in dealing with infrastructural projects may expose the public
sector during negotiations with private sector partners (KPMG, 2014). The respondents
were indifferent with 38% choosing to be neutral. Without transparent and accountable
systems, the vast resources channelled through public procurement systems run the
danger of being entangled with increased corruption (Jeppesen, 2010).
The data shows that 68% of the employees disagreed that lack of monitoring and
evaluation is hampering effective SCM systems for infrastructure delivery. This
contradicts the view of Matthee (2015) that some of the practices relating to non-
compliance with the rules and procedures relate to the tendency not to utilise a
competitive process, and incorrect utilisation of the preference points system. Van Zyl
(2015) asserts that there is incorrect utilisation of the limited bidding process.
More than 40% (43%) remained neutral on the notion that ineffectiveness of BBBEE is a
challenge to SCM. According to Irwin (2010), a SCM system should be fair, equitable,
transparent, competitive and cost effective; consistent with the Preferential Procurement
Policy Framework Act, 2000, and consistent with the Broad-Based Black Economic
Empowerment Act, 2003. These reforms brought efficiencies in procurement and solved

inequality issues through BBBEE initiatives (McCrudden, 2004: 245). The South African
government adopted the provision of BEE to empower all historically disadvantaged
people rather than only a small group (Kruger, 2011). The preferential procurement
regulations aggravate this situation by privileging ownership over local production, hence
penalising public entities as suppliers.
Seventy nine percent of the participating employees agreed that lack of adequate ICT
innovation in SCM is hampering infrastructure delivery. Connectivity between
government departments, local authorities and state owned entities (SOEs) is essential
for a well-functioning SCM system (Bolton, 2015).
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#
*
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/Lack of SCM Skills
and Knowledge
3.874 0.869
0Lack of ICT innovation 3.216 0.758
Regulation Ambiguity 1.213 0.847
Lack of Regulation 0.645 0.674
1Ineffectiveness of
BBBEE
0.514 0.598
2Fraud and corruption 0.387 0.514
3Lack of monitoring
and evaluation
0.314 0.643
It is concluded that lack of SCM skills and knowledge, lack of ICT innovation and
regulatory ambiguity are important SCM challenges facing NWPDPR as noted by
respondents. All the variables had a p-value of more than 0.05 showing that there is
statistical significance in the results.
Benefits of supply chain management
The respondents were indifferent on this notion with 35% choosing to be neutral.
Innovation of automation of the SCM systems bring a cost reduction for suppliers,

improved transparency and oversight with an enhanced user-friendly public procurement
environment. This accommodates a culture of cooperation between suppliers and the
public sector (Watermeyer, 2011). Of the participating employees, 73% agreed that
effective SCM systems for infrastructure delivery lead to economic development.
The respondents were indifferent on value for money with 44% neutral. It may be
regarded as the optimal use of resources to achieve intended outcomes (Ambe, 2016).
About a third of the respondents (34% being neutral) were indifferent on this notion that
public sector SCM is the task of government departments (Turley & Perera, 2014).
Services and goods are purchased based on the guidelines to cost effectiveness,
transparency, competitiveness and fairness (South Africa, 1996).
The majority of the respondents agreed (79%) that SCM systems for infrastructure bring
improved efficiency. Burger (2014) argues that an effective SCM system brings technical
efficiency premised on the notion of minimum inputs but maximum outputs and x-
efficiency based on the principle of prevention of wasteful use of inputs. The data reveals
that 59% of the participating employees agreed that effective SCM leads to quality
infrastructure. EU (2013: 15) argues that payment based on attainment of performance
standards; competitiveness and better supporting assets and novelty stimulate provision
of improved services and infrastructure.
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/Value for Money 4.751 0.784
0Improved Efficiency 4.653 0.795
Innovation
Enhancement
4.687 0.613
Economic
Development
4.568 0.587
1Better Quality 4.457 0.544

It is concluded that value of money, improved efficiency and cost saving are the
important SCM benefits as considered by the respondents. All the variables had a p-
value of more than 0.05 therefore there is no statistical difference in the results.
Critical success factors
Of the participating employees 92% agreed that SCM skills and knowledge are critical
for effective infrastructure delivery. To fully achieve SCM objectives, the National
Treasury provides support by facilitating the development of training materials (South
Africa, 2015). McCarthy (2015) contends that there is a lack of capacity and knowledge
by SCM employees to handle procurement processes that led to bad governance. Sixty
eight percent agreed that stakeholder involvement is critical for effective SCM. Other
supply chain experts such as Ambe (2009:429) indicates that SCM is an approach of
doing business where one expects to share risks, rewards, collaboration, benefits, trust,
and information exchange throughout the supply chain phases.
Nearly 72% of respondents agreed that a legal framework streamlining is critical for
effective SCM systems. A single SCM legal framework rationalises the legal environment
(Bolton, 2015). The more than 80 different legal instruments, guidelines and instruction
notes makes it cumbersome to effective SCM systems in projects. Standard operating
procedures for all SCM processes and procedures are essential for effective
management of supply chains of infrastructure projects (Ambe, 2016). In lieu of the need
for centralisation for successful SCM execution, 73% of the participating employees
agreed that centralisation is critical for effective SCM.
A reporting framework has been developed to standardise SCM reporting across the
public sector (Ambe, 2016). Accounting officers and authorities ought to report on a
range of information, including procurement plans, tenders to be advertised, tenders
awarded, supplier company information, the value of each award, and progress in
implementing tenders (Turley & Perera, 2014). Governance controls refer to the
measures put in place to ensure that the outputs and outcomes of procurement are of
the right quality, and within acceptable levels of risk exposure and performance (Bolton,
2015).
Relevance of the SCM Critical Success Factors
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8!4  ,-
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5
7(9:%(*
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4.794 0.643 0.665 0.672
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5%+(##"
4.541 0.641 0.924 0.951
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4.533 0.587 0.614 0.653
The table showed that for each of the SCM critical success factors, the p-value was
more than 0.05 (p>0.05). Since some of the variables showed that there was no
homoscedasticity of variances, Welsh test was also computed which reflected a p-value
of more than 0.05. Therefore it is concluded that there is no significant difference
between the variables. Studies by Turley and Perera (2014) found standardisation and
streamlining of SCM processes, and transparency as the most critical factor.
Observation of supply chain management systems and procedures
The SCM model differs from the one for other goods and services, with inclusion of
portfolio processes, contract planning processes, detailed design processes, site
processes and close-out processes (Ambe, 2016).
According to Irwin (2010), a SCM system should be fair, equitable, transparent,
competitive and cost effective; be consistent with the Preferential Procurement Policy
Framework Act, 2000; be consistent with the Broad-Based Black Economic
Empowerment Act, 2003. The Procurement Act’s contribution towards giving equal
opportunities to economically disadvantaged individuals, and giving preference by
means of specific scoring measurement tools has helped change the legislative
landscape regarding SCM (Ambe, 2016).

Challenges in implementation of supply chain management strategies
It is noted that effective implementation of SCM systems for infrastructure delivery is
hindered by a shortage of procurement expertise, as viewed by participants in this study.
According to Sheoraj (2013), skills and capacity shortages have been identified as the
greatest impediment to the success of public procurement in South Africa.
Benefits of effective implementation of supply chain management strategies
Value for money may be regarded as the optimal use of resources to achieve the
intended outcomes. Cost-saving, quality infrastructure, and efficiency is underlined as
some of the benefits of effective SCM systems (Skelcher, 2013). The respondents were
in support of improved efficiency and better quality that emanates from the effective
delivery of SCM for infrastructure projects. In terms of section 217 of the Constitution,
the benefits will be that quality service delivery will become possible, with improvements
in the welfare of South Africa’s citizens. However, the BBBEEA regulation does not
adequately incentivise employment creation, support for small enterprises and local
procurement (Kruger, 2011).
The respondents were in agreement that for the successful implementation of effective
SCM strategies of infrastructure projects it is critical to develop skills and knowledge,
involve stakeholders, streamline legal framework, centralise, and enforcement of
compliance and good governance (Ambe & Badenhorst-Weiss, 2012). Streamlining and
standardisation of business processes removes unnecessary steps in the SCM process
(Turley & Perera, 2014).
Centralisation offers advantages such as leverage due to volumes, reduction of
duplication of purchasing effort, better control and development of specialised expertise
of purchasing personnel. However, if the advantages of centralisation are to be realised,
efficient contract management and supplier relationship management is a pre-condition.
Recommendations
International training for supply chain management personnel
It is critical to equip all supply chain practitioners with appropriate international skills and
knowledge of the South African public sector SCM systems, its regulations, enterprise
management, sourcing strategies, purchasing and supply tasks, integrated supply
management, globalisation, and technological advancement. According to Ambe and

Badenhorst-Weiss (2012), it is vital to educate SCM personnel with knowledge and skills
that permit effective purchasing and supply performance in the public sector.
Rationalisation of supply chain management regulations
A single SCM legal framework significantly rationalises the legal environment. Standard
operating procedures for all SCM processes and procedures are essential for effective
management of supply chains of infrastructure projects (Ambe, 2016).
Centralisation of supply chain management processes
Formation of a centralised database significantly reduces the administrative burden
within SCM systems, as the mandatory administrative documents are submitted once in
a pre-determined period. According to Handfield, Monczka, Guinipero and Patterson
(2011:160), centralisation offers advantages such as leverage due to volumes, reduction
of duplication of purchasing effort, better control and development of specialised
expertise of purchasing personnel.
ICT innovation in supply chain management systems
ICT innovations in SCM allows effective and efficient delivery of SCM systems in the
public sector by streamlining of transactions and improvement of oversight. With new
technology, SCM can achieve a critical user-friendly public procurement environment
that results in good governance and accountability, and cost-effectiveness. Streamlining
and standardisation of business processes removes unnecessary steps in the SCM
process. According to Kruger (2011), connectivity between national and provincial
departments, and at local government level, is less than optimal and this delays
transaction capturing and processing and negatively affects the ability to make well
informed SCM decisions.
Conclusion
To improve the delivery of effective SCM systems for infrastructure projects, standard
systems and procedures within the public sector would need to be observed. The
challenges of SCM skills and knowledge, inadequate ICT innovation, fraud and
corruption, and SCM regulation overlap and duplication would need to be overcome.
Effective SCM systems for infrastructure give value for money through improved
efficiency, better quality, cost savings, and economic development. It is critical to ensure

ICT innovations, centralisation of SCM processes, rationalisation of SCM regulations
and international training for successful delivery of SCM for infrastructure projects.
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