AASM05K Assignement 3 Unique number 602755

Subject code: AASM05K
Student number: 77923529
Assignment 03 – Second semester
Unique No. 602755
Topic 1
Title
Issues regarding purchase &
supply turnaround times for fast
pace high value projects in the
engineering & construction private
sector
.

Unique No. 602755
Table of contents
Page 1 Introduction
Page 2 Discussion about the
background of the company
& the procurement and
materials management
system (PAMMS) used to
facilitate part of the Supply
Chain Management Process
Page 3 Section 1 Issues slowing down the
process of orders
Figure 1.1
Increasing the efficiency of
processing orders
Page 4 Section 1 1.1.1 – Classification of
products material and
services
1.1.2 – The Supply Risk
1.1.3 – The Profit Impact
1.2.1 – Strategic items
1.2.2 – Leverage items
1.2.3 – Non critical items
Pages 5 Section 1 1.2.4 – Bottleneck items
Figure 1.2 & Figure 1.3
Page 6 Section 1 1.3.1 Lower total cost
1.3.2 Higher quality
1.3.3 Access to advance
technology
1.3.4 Access to unique
sources of supply
1.3.5 Alternative suppliers
1.3.6 Access to
diverse/broader sources of
supply
1.3.7 Access to more reliable
sources of supply
Page 7 Section 2 Poor expediting is causing
delays in the delivery of
material and equipment
Providing and expediting
management & process
solution
Page 7 Section 2 2.1 Planning for expediting
2.1.1 The main goals
2.1.2 Other goals

Unique No. 602755
2.1.2.1 – Entire Product
2.1.2.2 – Correct Product
delivered
Page 8 Section 2 2.1.2.3 – Prices must match
2.1.2.4 – Damaged and poor
quality identified
2.1.2.5 –Integrate expediting
process
2.1.2.6 – Follow up with
vendors on orders
2.1.2.7 – Follow up on
milestone payments
2.1.2.8 –Visit Factories
2.1.2.9 – Ensure relevant
documents and components
are delivered
2.1.2.10 – Reporting
2.1.3 Specific, Measurable
attainable, relevant & time
bound
2.1.4 Plans must be
discussed with management
Page 9 Section 2 2.2 Organising the expediting
function
2.2.1 - Design the job
2.2.2 – Identify the interfaces
2.2.3 – Reports required
2.2.4 – Discuss chain of
command
2.2.5 - Coordination
2.3 – Leading
2.3.1 – Leading the expeditor
2.4 – Controlling the
expediting function
2.4.1 - Control
2.4.2 – Deviation
2..5 – Characteristics of an
effective control system
Page 10 Section 2 2.6 Quality Standards
Figure 2.1
Page 11 Section 3 Receipting not being
complete in time, causing
delays in payment
Restructuring of the
receipting process
Figure 1.3
Page 12 Section 3 3.2 – Seamless planning
process
3.3 – Steps in the warehouse
process
Page 12 Section 3 3.3.1 – Step 1
3.3.2 – Step 2
3.3.3 – Step 3

Unique No. 602755
3.3.4 – Step 4
Page 13 Figure 1.4
Page 14 Conclusion
Page 15 Bibliography

Unique No. 602755
Introduction
 In this study we look at issues in slow order processing, poor expediting and the
issue of receipting not being done in time. These issues are slowing down the
process of the supply chain causing the organization time and money and affecting
the value of the end customer. In this study we will be looking at possible solutions to
create more efficiency in processing orders, expediting management and processes
& warehouse receipting processes in order to increase the flow of goods, services
and information through the supply chain in order to optimize shareholder and
customer value
Page 1

Unique No. 602755
Discussion about the background of the company & the procurement and materials
management system (PAMMS) used to facilitate part of the Supply Chain Management
Process
Kentz, a Member of the SNC-Lavalin Group, is a global engineering specialist solutions
provider, with 15,500 employees operating in 36 countries worldwide. We have provided
Engineering, Construction and Technical Support Services (TSS) to clients in the energy and
resources sectors for more than 90 years http://www.kentz.com/# (accessed on the
27/10/2015).
Research will be conducted in the organization on various issues relating to Supply Chain
Management as outlined below.
This report outlines issues slowing down the order processing and supply of commodities to the
various projects and the tools & techniques to be used to resolve these issues and allow an
efficient & effective flow of commodities from suppliers to projects.
Kentz uses an MRP II system called “Procurement and materials management system”
(PAMMS). The system has six process phases namely:
1. Portal – This is where authorizations take place as per lines and limits of authority set
by the management executive committee (MEC)
2. Material Catalogue (MatCat) – This is where the projects Bill of Materials (BOM) are
loaded (Per commodity type i.e. Piping, Instrument, Electrical Civil & Structural etc.)
Standard construction material can be found here for the purpose of raising a requisition
in the next process phase
3. Document drawing management system (DMS) – This is where all drawings and related
documents are loaded and controlled. Commodities are pulled through from MatCat to
the next phase based on the BOM and the drawings and documents in this phase
4. Materials Management System (MMS) – This is where project material controller’s load
material requisitions for the various commodities they require to complete the project &
is based on the BOM and supportive commodities i.e. Stationary & office furniture,
Assets, power tools & related consumables i.e. grinding discs and drill bits est.
5. Procurement Management System (PMS) – This is where the order processing begins
i.e. request for quotations (RFQ’s), Bid analysis sheets (BAS) are created for
adjudication purposes and purchase order documents (PO’s) are created and sent to
vendors.
6. Warehouse Management system (WMS) – This is where invoices get receipted for
payment and the inventory is managed
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Unique No. 602755
Section 1
Issues slowing down the process of orders
 Low value fast moving items i.e. stationary, grinding discs, cutting discs, drill bits,
power tools, hand tools & service kits (Filters) etc. is being processed through
PAMMS and this is delaying procurement from processing orders for high value, high
risk, slow moving items i.e. High voltage cable, specialized electrical components i.e.
Power distribution panels & control panels, Spare parts for heavy machinery i.e.
Cranes & Cherry pickers. These high value high risk items are of high importance to
the successful completion of the project.
 The low value fast moving items are important to the support function of the project
and also require attention and without these processed in the time available, the
project will come to a standstill & could face penalties for not meeting deadlines. The
time it takes to process a material requisition & purchase order on PAMMS can take
between 1 to 3 hours or more depending on the amount of line items and system
approvals by management.
Increasing the efficiency of processing orders
 For this specific issue the Product Classification Matrix can be used to identify the
different product groups, their supply risk and profit impact.
See bellow Figure 1.1
Profit
Impact High
Leverage Items
1. Grinding discs
2. cutting discs
3. drill bits
4. service kits
5. Power tools
6. Hand tools
7. Cleaning Services
8. Gardening Services
9. Guarding Services
Strategic Items
1. High Voltage Cable
2. Cranes & crane
Spares
3. Cherry Picker &
cherry picker
Spares
4. Power Distribution
panels & control
panels
Non-Critical Items
1. Stationary
2. Office consumables
i.e. printer cartridges
Bottleneck Items
1. Spare parts for
vehicles
2. Nuts and bolts
3. High voltage lugs
4. Cable Glands
Low Supply Risk High
Product classification Matrix. Source: Adapted from Kraljic (1983: 109-117) Page 3

Unique No. 602755
1.1.1 Kraljic (1983: 109-117) mentions that all products materials & services can be
classified on the basis of the supply risk and on profit impact for the firm. By
classifying the supply situations using these variables, the supply department
can develop different action plans (Strategies) to best manage all purchase
transactions
1.1.2 WMJ Hugo & JA Badenhorst-Weiss (2011 : 15-16) State that The Supply Risk
refers to the risk of supply in the market i.e. long lead times due to scarcity
factor, government embargoes, limited supply markets or natural disasters
1.1.3 WMJ Hugo & JA Badenhorst-Weiss (2011 : 15-16) State that The Profit
Impact refers to the contribution to the profit of the firm that can be
Attributed to a specific product i.e. quality of the product or if it is a substantial
component of the final product or an event that is an essential part of a
production machine, which can cause a major cost escalation if unavailable
Figure 1.1 illustrates the following categories:
1.2.1 Strategic items are items that are of high profit impact, high supply risk & there is
a limited amount of suppliers in the market. These strategic items are of high
importance to the organization and need to be well managed. Long term, collaborative
& cohesive relationships need to be maintained with suppliers that supply these items in
order for the organization to maintain a competitive advantage in the market. It is also
advisable to source additional suppliers from other countries to better equip the
organization for delays in supply.
1.2.2 Leverage items are items that have a high profit impact and low supply risk and
there are large number of suppliers in the market supplying these items. For this group
of items the purchasing department can look into developing a catalogue of standard
items for their construction sites and submit this catalogue for pricing to the market and
create a vendor alliance with one or two Supplier that will agree to supply these items at
a fixed price for a set duration of time i.e. 6 to 12 months. Once agreed, this catalogue
can be uploaded on PAMMS in the MATCAT and the projects can select items from the
Vendor Alliance Catalogues (VAC) this will speed up the procurement process as the
items will have prices attached to them that have been preapproved by management.
The organization can befit from economies of scale and continua’s supply if a stock
holding level is agreed upon with the supplier
1.2.3 Non-critical items have a low profit impact, low supply risk and there are many
suppliers in the market. For this group of items the purchasing department can look into
developing a catalogue of standard items for their construction sites and submit this
catalogue for pricing to the market and create a vendor alliance with one or two supplier
that will agree to supply these items at a fixed price for a set duration of time i.e. 6 to 12
months. Once agreed, this catalogue can be uploaded on PAMMS in the MATCAT and
the projects can select items from the Vendor Alliance Catalogues (VAC) this will speed
up the procurement process as the items will have prices attached to them that have
been preapproved by management. This type of agreement is also known as a blanket
agreement.
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Unique No. 602755
1.2.4 Bottleneck items have a low profit impact, high supply risk and few suppliers in the
market. It is important to maintain long term, collaborative and cohesive relationships with these
suppliers In order to keep track of stock holdings and potential stock outs. In this case it may be
good to source a few more suppliers in or out of the country as an alternative source of supply.
A term agreement can be set to ensure continues supply i.e. 6 to 12 Months Term
Figure 1.2 identifies the implementation process of strategic supplier alliances or
partnerships
Preparation Align Sourcing Strategy with
organization overall strategy
Step 1
Create infrastructure for
managing, planning and
implementing of alliances
Step 2
Identification and evaluation Identify products services
and materials for alliances
Step 3
Identify candidates for
alliances of partnerships
Step 4
Evaluate alliances or
partnership candidates
Step 5
Initiate executive level
contact with candidates
Step 6
Conclusion and Management Negotiate with candidates Step 7
Nurture and growth of the
relationship
Step 8
Performance assessment of
alliance or partnership
Step 9
The implementation process of strategic supplier alliances or partnerships Source: Adapted from WMJ Hugo, JA
Badenhorst-Weiss & EHB Van Biljon (2004: 43-44)
In figure 1.3 WMJ Hugo & JA Badenhorst-Weiss (2011: 82-86) suggest the following
seven step supplier selection process. This process ensures that the supplier will meet
all the organizations requirements and will rule out any supplier that could possibly
delay supply
Figure 1.3
Establish criteria for supplier
selection
Exploratory Stage Identify possible suppliers Pre-Assessment Phase
Prescreen to reject
unsuitable suppliers
Selection Stage Conduct research on suitable
suppliers
Assessment Phase
Choose the assessment
method and Annalize the
suppliers
Select supplier
Supplier management or
maintenance Stage
Ongoing measurement of
supplier performance
Post- Assessment Phase
Supplier accreditation
Page 5

Unique No. 602755
Prof JW Strydom, C Bothma and P Prinsloo (2011:45-49) have provided reasons for and
benefits of international purchasing and global sourcing:
1.3.1 Lower total cost as a result of bulk purchases and economies of scale
1.3.2 Higher quality provided by countries that are ISO9000 certified and better price benefits
of such quality can be gained due to other countries quality standards being greater than South
African Standards
1.3.3 Access to advance technology in the form of products and machinery and easy to
assemble items which can result in faster production thereby giving the organization a
competitive advantage and speeding up supply chain procurement
1.3.4 Access to unique sources of supply can be sourced to ensure that there will be no
delays in delivery i.e. Spare parts for a machine that was bought in the UK might not have a
division in South Africa with a large stock holding and stock outages are most likely to be
experienced. By sourcing suppliers in other countries with larger stock holdings the organization
can deal direct and fly in the parts if no stock is available locally. There are also cost befits
involved in purchasing direct
1.3.5 Alternative suppliers can be sourced globally to ensure that there are back up suppliers
should the local suppliers not have the stock required or if there is a delay due to stock outs or
natural disasters. This is important for strategic items and bottleneck items and will alleviate
some of the pressures involved in these categories.
1.3.6 Access to diverse/broader sources of supply can be achieved through global sourcing
i.e. suppliers that provide specialized products that the organization will require and that cannot
be found in South Africa
1.3.7 Access to more reliable sources of supply i.e. local suppliers shut downs due to strikes
can delay production and prove to be unreliable. Sourcing alternative suppliers that are more
reliable can improve the organizations competitive advantage in the market.
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Unique No. 602755
Section 2
Poor expediting is causing delays in the delivery of material and equipment
1. Expediting of orders is a problem as there is currently no set process or training and
development for expeditors in the organization. Due to this issue, orders are not
expedited accordingly i.e. the manufacturing of a bus for the organization – There is
various production processes the bus needs to go through before it can be
manufactured and dispatched to site
2. The expeditor is not familiar with these production processes due to lack of
knowledge, training & experience. This lack of knowledge in turn causes a delay in
the order turnaround time as the expediting is not efficient & effective and reporting
is not comprehensive and there is no real time information available on hand.
3. This lack of knowledge in expediting results in penalties and losses i.e. the need to
get a rental bus of higher due to exorbitant costs incurred by the project & put in
place a new purchased bus (Manufactured to required spec). By the expeditor not
providing the project with accurate feedback regarding the production of the new
bus and expediting the production process effectively there is a delay in the
manufacturing process and delivery of the bus in turn causing the project more
money
Providing and expediting management & process solution
GS Du Toit, BJ Erasmus & JW Strydom (2012:174-242) suggests that a management
approach to business be used i.e. Planning, organizing, leading and controlling
Planning for expediting
2.1 Planning provides direction, reduces the impact of change, promotes co-ordination,
ensures cohesion and facilitates control. The cost of planning in this case is minimum
and will include resources such as time, expertise, development cost for the expeditor in
the field of supply chain management & administration costs i.e. paper, ink, e-mail data
costs for researching
2.1.1 The main goal is to ensure that the product purchased reaches the project in time
for the project to utilize the product and satisfy the end customers’ needs and provide
value to shareholders. The goals of the expeditor must be in line with the overall goals
of the organization which in this case has been aligned.
2.1.2 Other goals include:
2.1.2.1 Ensuring the entire quantity of the order is delivered
2.1.2.2 Ensuring the correct product is delivered and that incorrect products are
returned and exchange timeously to prevent any delays to the project
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Unique No. 602755
2.1.2.3 Ensuring the price on the order matches the price of the goods and that any
discrepancies is brought to the purchasers attention in order to resolve the
problem at an early stage to prevent any delays at a later stage
2.1.2.4 To ensure that any damaged or poor quality products are identified at an early
stage and returned and exchanged timeously in order to prevent any delays
2.1.2.5 To integrate expediting processes and information with the supplier, purchaser
& project to ensure that all are kept informed of the progress of production and
the status of the delivery and to report any changes to production schedules or
delivery issues in order for the project to plan accordingly, Such reporting can
be regarded as real-time information
2.1.2.6 To follow up with vendors on receipt and acknowledgement of orders and
confirm delivery dates to ensure that deliveries are on schedule from inception
stage and to notify the purchaser and project of any changes
2.1.2.7 To follow up on milestone payments to ensure that production starts and that
the order is delivered on time
2.1.2.8 To visit factories to check up on the status of production in order to ensure
schedules provided by the supplier are accurate
2.1.2.9 To ensure that all relevant certificates, factory acceptance testing documents,
drawings and related requirements are delivered in time as per the projects
requirement’s
2.1.2.10 To report back to procurement on poor performing vendors in order for
corrective action to be taken
2.1.3 The above mentioned goals are specific, measurable, attainable, and relevant and
are time bound. The goals must be discussed with the expeditor and must form the
structure of the expeditor’s job description. Key performance indicators must be
discussed and agreed upon with the expeditor, procurement manager and project
manager. Check points are set by the procurement manager to ensure that
predetermined goals are being reached
2.1.4 Plans must be discussed with management to obtain additional value and
approval and reactive planning must be done when changes occur. This plan is at
operational level and will be approved by middle management level.
Page 8

Unique No. 602755
2.2 Organizing the expediting function
2.2.1 The first step in organizing the expediting process is to design the job which can be
developed from the above mentioned list of goals that has been discussed
2.2.2 The second step is to identify the interfaces that the expeditor will be involved in i.e.
Procurement, Finance & Operations/ Project and discuss the expediting process with all the
interfaces to ensure that buy in and acceptance is obtained from all involved.
2.2.3 The third step is to advise the expeditor of the reports that need to be submitted and the
formats in which these reports must be submitted, when the reports must be submitted and to
who the reports must be submitted. This will ensure continues feedback from the expeditor
regarding progress of the orders and any issues can be identified at an early stage and
measures can be taken to prevent delays.
2.2.4 The third step will be to discuss chain of command & authority must be explained to the
expeditor to prevent any confusion. The expeditor will have authority over suppliers and must
ensure that there is a professional but cohesive and collaborative relationship maintained. The
expeditor will take instructions from the procurement manager for the specific project and
reports will be sent to the procurement manager first for review prior to sending reports to the
project
2.2.5 The fourth and final step is co-ordination. The expeditor will be responsible for all the tasks
mentioned in the job description and will co-ordinate deliveries with suppliers, procurement and
projects to ensure that accurate information regarding production status and deliveries is
provide via the reporting system.
2.3.1 The expeditor must be lead into completing his/her tasks in accordance with the
predetermined standards of the organization. The procurement manager will be responsible for
motivating and ensuring that the expeditor follows the correct process and achieves his/her
objectives and goals. The expeditor will be required to maintain constant communication with
suppliers, procurement and the project and must ensure that communication is clear, precise
and accurate
2.4.1 The expediting function must be controlled and this can be done by setting standards for
achievements of goals i.e. are reports sent on time, is stock being delivered on time, are all the
necessary documents being delivered with the commodity in the time required, is the process of
returns with in a reasonable time est. These time frames are set as standards and actual
performance is measured against these standards in order to identify deviations and
outstanding performance.
2.4.2 If deviation occurs, deviation is evaluated to identify the seriousness of the deviation.
Corrective action is then taken to improve performance, strategies can be revised to accomplish
the standards & performance standards can be lowered to make them more realistic and
achievable. Other areas of control can be financial resources, information resources & physical
resources.
2.5 GS Du Toit, BJ Erasmus & JW Strydom (2012:239-240) States that characteristics of an
effective control system are: integration, flexibility, accuracy, timeliness & simplicity
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Unique No. 602755
2.6 The expeditor should also be familiar with the various quality standards and quality control
process in order to ensure that the right quality standard of product is supplied prior to the
product being delivered to site.
WMJ Hugo & JA Badenhorst-Weiss (2011: 127) Suggests the following synoptic presentation of
the quality control process (See figure 2.1) be followed to reduce the issue of the incorrect
quality of products being delivered to site
Figure 2.1
Set standards
Recording
Explained deviation
Page 10
Quality
specifications
Supplier
Determine
Sample
Delivery
Inspection
Determine Inspection Size
No
Inspection
Sample
Inspection
Total
Inspection
Further
Inspection
Look for reason for
deviation
Decide
Return entire
consignment
Return defective
products
Negotiate
adjustment
Effect measures for preventing deviation

Unique No. 602755
Section 3
Receipting not being complete in time, causing delays in payment
1. Receipting in the central warehouse is unorganized and is not done timeously and there
is no plan or structure in place for receipting deliveries / invoicing. Due to this process
being unorganized, there is a jam in the supply chain i.e. receipting is not done in time
to meet the organizations financial departments deadlines for processing invoices and
loading payments.
2. This in turn means no payment processed for the suppliers with in the mutually agreed
30 day payment terms. This causes cash flow problems for suppliers and in turn the
organizations account with the supplier is place on hold and causes penalties in the
form of interest on the outstanding amounts & production loss for the project as a result
of no commodities supplied.
Restructuring of the receipting process
3.1 Kentz has a central warehouse situated in Alrode South. This warehouse is
responsible for receiving, checking, packaging, labeling, loading and receipting (Briefly
explained) there are multiple projects in and out of the country which the warehouse is
responsible for in terms of consolidating loads and loading trucks for delivery. There
are a limited amount of staff members and all are responsible for warehouse
operations. The issue as mentioned above is causing a jam in the supply chain and
from an investigation into the situation it has been discovered that there is no
accountability for processing receipts on specific projects, all delivery notes are
receipted by random members in the team and there is no specific time or deadline for
completing receipting.
The supply chain process flow for the warehouse is as follows:
Figure 1.3
Step 1 Step 2 Step 3 Step 4
Step 5 Step 6 Step 7 Step 8
Page 11
Requisition
loaded onto
PAMMS
Purchase order
processed &
sent to supplier
Order
Expedited
Order delivered by
supplier to warehouse
Warehouse
Offloads and
checks order
If all is in order,
warehouse
receives the order
Warehouse then
receipts the order
against the delivery
note / Invoice
Ware house then
consolidates the
commodities for
various projects
and loads the
truck

Unique No. 602755
3.2 WMJ Hugo, JA Badenhorst-Weiss & EHB Van Biljon (2004: 34) suggests a
seamless planning process that will ensure that there is a constant flow of goods
services and information to the customer.
3.3 From Figure 1.3 it can been seen that there are steps from source to the point the
goods are loaded onto the truck. The issue occurs in step 7 the following steps are
recommended to ensure the smooth flow of receipting in the warehouse:
3.3.1 Step 1 – Each member in the warehouse must be responsible for the receipting of
a specific projects delivery notes / invoices there by enforcing accountability
3.3.2 Step 2 – Each member in the warehouse must provide a report on receipts done
in the week and highlight any issues causing delays i.e. price differences, quantity
differences, quality issues est.
3.3.3 Step 3 – All queries must be resolved within a period of 3 days maximum
3.3.4 Step 4 – A predetermined time of 3 days is set for receipts to be completed, any
deviation from this set date will have to be analyzed and a decision on corrective action
determined by the procurement manager
 The above mentioned steps have been selected based on an intuitive method which
has been taken from “selecting the most appropriate technique” by WMJ Hugo, JA
Badenhorst-Weiss & EHB van Biljon (2004 : 88)
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Unique No. 602755
Figure 1.4 selecting the most appropriate technique
Yes
Intuitive method
(Judgment and
Or experience)
No
Yes
Statistical
Analysis
No
Yes Optimization
Or heuristics
Model
No
Yes Develop Model
No
Yes Develop AI or
Simulation model
No
Page 13
Analyse the scope and
complexity
“Can you use your intuition,
judgement or experience to
solve the problem?”
“Will basic statistical analysis be
sufficient?”
“Is an optimisation or heuristics
model available?”
“Can such a model be
developed?”
“Is AI or simulation available?”

Unique No. 602755
Conclusion
We have identified the issues of slow order processing and have identified the product
classification matrix and the different types of methods used such as blanket cover, fixed term
contract and vendor alliances to relieve the procurement officer from processing an order for
every request, and we have identified the supplier selection and relationship requirements for
the various commodities. We have identified the issues in expediting and have provided a
management approach and process to resolving the issue. Finally we have highlighted the
issues in receipting and have identified a method from “selecting the most appropriate
technique”.
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Unique No. 602755
Bibliography
1. http://www.kentz.com/# (accessed on the 27/10/2015).
2. WMJ Hugo & JA Badenhorst-Weiss. 2011. Purchasing and Supply Chain Management.
Sixth Edition. Pretoria: Van Schaik
3. WMJ Hugo, JA Badenhorst-Weiss & EHB Van Biljon. 2013. Ninth impression. Pretoria:
Van Schaik
4. GS Du Toit, BJ Erasmus & JW Strydom. 2012. Eighth impression. Cape Town: Oxford
University Press Southern Africa (Pty) Ltd
5. Prof JW Strydom, C Bothma and P Prinsloo 2011. Global Sourcing Management
(Focusing on international purchasing). MuckleneukTshwane: University of South Africa
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AASM05K Assignement 3 Unique number 602755

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