This document proposes establishing a Mongolian Supplier Development Center (MSDC) to help build local supply chains in Mongolia. The MSDC would work with buyers to identify their procurement needs and then help local suppliers meet those needs through a revolving Technical Assistance Fund. The fund would provide cost-sharing grants to suppliers to improve their technical skills, processes, and ability to meet buyers' quality, quantity, price, and delivery requirements. Establishing the MSDC would help diversify Mongolia's economy by increasing local content in supply chains and creating new business and jobs. Next steps proposed include identifying potential supplier-buyer matches, developing the MSDC concept further, and legally incorporating the organization by mid-December
1. Opportunities for building
supply chains in Mongolia
Dr. Fernando Bertoli
September 21, 2012
Ulaanbaatar, Mongolia
2. The Mongolian challenge
How to transparently procure
services and products that:
• meet buyers’ specifications
(quality, quantity, delivery
schedules, etc.)
• on a commercially sustainable
basis; and
• can be competitively sourced in
Mongolia
• in a political environment
pressing for local content, and Workers sew leather goods at a factory in Darkhan
• within a relatively undiversified Photo: Uurtsaikh Sangi
economy.
3. Successful supplier development programs are:
1. Transaction focused
2. Private-sector driven
3. Built on commercial principles
4. Highly proactive in the identification and recruitment of potential
suppliers
5. Innovative and “think out of the box” in looking for and
structuring partnerships and ventures that expand or create new
businesses as suppliers
6. Built on procurement of “lower end” basic goods and services
and move to higher value-added goods and services
4. A solution: the Mongolian Supplier
Development Center
Purpose of MSDC: Improve the ability of Mongolian private sector firms
to sell products and services that meet buyers’ demand.
Residents ride past idle mining equipment, Omnogobi aimag.
5. Mongolia Supplier Development Center
(Illustrative)
Board of Directors Internal Audit
Executive Director
Supply Chain & Market Technical Assistance Accounting &
Analyst Revolving Fund (TAF) Administration
Business Development Business Development Finance & Costing
Specialist Specialist Specialist
Technical expert(s) hired as needed through short-term fixed price contracts between Mongolian potential supplier(s)
and TAF to help meet supply requirements and close transactions between buyer and supplier(s)
6. MSDC objectives
1. Assist Mongolian suppliers to meet buyers’ specifications on quality,
quantity, price, and delivery schedules for products and services
2. Use a transaction-focused approach to improve performance of
Mongolian suppliers by supporting best practices in technical know-
how, core business processes, and management
3. Increase sales of Mongolian suppliers and create jobs
4. Help diversify the Mongolian economy by fostering local supply of
products and services—increased local content of supply chain
5. Create a sustainable revolving fund (“Technical Assistance Fund,” TAF)
operated through an independent, transparent, and commercially-
oriented umbrella institution to provide technical assistance in
continued supply chain development and improvement.
7. Potential “deals” for MSDC’s Technical Assistance Fund
• Develop local sourcing or subcontracting in
lieu of vertical integration: re-conditioning
equipment, dairy and meat production,
catering operations, construction, ICT
services, etc.
• Facilitation of joint ventures between
Mongolian and foreign strategic
technological partners to serve as suppliers
• Facilitation of Mongolian equity transactions
to serve suppliers.
• Fleet owner-operators programs as in South
African Breweries world-class delivery and
distribution systems Auto and machine refurbishing in Mongolian can
often be a challenge. Photo: Tsolmon Naidandorj
8. MSDC operational approach
1. Buyer’s needs identified: specifications for products or services, quantities and
delivery schedules, etc.
2. Feasibility of supply conducted: current sources used by buyer, pricing,
specifications, quantities desired, etc.
3. Potential local suppliers identified and assessed (due diligence of potential
supplier)
4. Buyer intent negotiated
5. Supplier assisted through the Technical Assistance Fund on a cost-sharing
basis
6. Purchase order negotiated between buyer and supplier
7. Supplier makes sale.
9. Proposed next steps to establish MSDC:
1. Quick “deal pipeline:” Rapid scan and prioritization of short-term and
medium-term potential buyer-supplier transactions by product, service,
buyer, and region
2. MSDC concept: Development and negotiation of what MSDC could or
should do, how, structure, governance and operations, resources
(TAF), legal registration, etc.
3. Incorporation: Capital contributions, legal registration, staff
recruitment, TAF procedures and forms, marketing and information,
etc.
4. Public launching: By mid December and with at least two “trail-
blazing” deals in progress.
