POST CONTRACT MANAGEMENT Unlocking the Potential

Mira Ristovich

Senior Consultant: Group ProcurementCIPS Sothern Africa Pan African Conference

24 - 26 May 2011

Agenda

• MTN Quick Overview

• Procurement Helix

• Sourcing Methodology & Relationship Life

Cycle

• L&D Vendor Rationalisation

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As MTN, we…

• Connect people with family, friends and jobs

• Create jobs, directly in the operations with

entrepreneurs who sell airtime, cleaning services,

advertising services, office rentals, security services –

which generates the economic multiplier

• Create a positive atmosphere for other investments

into the country

• Pay taxes which enable government to invest back

into the communities with infrastructure development

• Create infrastructure where non exists (in place of

rail, roads)

• Inspire the youth

• Invest in the communities in which we operate

© 2009 Accenture. All rights reserved. 3

Political risk map High growth is in high risk markets

4

2000 2005 2010

Operations 5 11 21

Population 68m 344m 552m

Market cap (ZAR bn) 58 (31 March 2000) 103 (31 Dec 2005) 253 (31 Dec 2010)

Revenue (ZAR bn) 6 29 115

EBITDA 2 12 50.5

Subs(m) 2,3 12 141,7

Business Growth

National Player African Player Emerging Market Player

Procurement Helix

6

Sourcing Methodology & Relationship Life Cycle

7

Identify

Opportunity

Post

Contract

Management

Contract

ManagementSolution

Definition

Seller’s

activities:

Develop offering

Advertise

Create needs

Condition

Sell

Buyer’s

activities:

Buyer has need

Specifies need

Search

Condition

Negotiate frame

agreements with

key suppliers to

ensure better

price and more

efficiency

Detailed

agreement

Implementation

Initial delivery

Refining

Ongoing delivery

Continuous improve.

Business dvlpmnt.

Extension

Completion

Termination

Sourcing

Methodology

Process

Relationship

Life Cycle

Model

Diagnostic

Phase

Business Case

Development

Approval by

Technical

Committee

Cross Functional

Team approval

CFT defines the

scope

RFx issued

Evaluation process

(desktop,

presentation,

additional

questions, price

review)

Short listed vendors

identified

High level plan

L&D Vendor Rationalisation - Background

MTN Group Learning and Development (L&D) aims

to rationalise its learning vendor base to:

• Improve the quality and consistency of learning

delivered

• Enable and sustain a rationalised learning vendor

base and

• Realise the potential savings opportunity

8

Pre-Contract:Planned Achievement Against Project Goals

Goal Planned Result

Rationalise the vendor base In the targeted competency clusters by 25 – 50%

Achieve cost savings Between 7% and 20% in net nominal savings opportunity. MTN’s strategic objective is to be a least cost operator

Achieve economies of scale Negotiate price, screen the quality and content

Standardisation of vendors per competency cluster

In line with critical skills required

Identify suppliers and rationalise supplier base

Assess suppliers on full set of criteria, including capabilities, offerings, price and quality

Incorporate leading practices of sourcing of Learning Vendors into MTN

Remaining four sourcing steps to be used to realise the savings opportunities

Reduce administrative efforts Standardise learning vendor management processes and improve integration between L&D, Procurement and Finance functions

The business case findings indicate that the rationalisation of L&D vendor management

will lead to costs savings, a reduced vendor base and consolidated programme catalogue

9

Sourcing: Vendor Filter Process

10

Shortlisted vendors from RFP process and

selected priority vendors will proceed to the

next sourcing event (auction/negotiation)

Final vendor selection will be made to align

with the project mandates of vendor

rationalisation and cost savings

Final

Proposal

Minimal

Requirements

Value Add

Supplier pool identified via

internal and external research

Screen 3

Screen 2

RFI information provides input to

this processScreen 1

Final

Agreement

MTN

Vendor

External

VendorsTotal

No. of

vendors

invited

160 33 193

No. of

vendors

responded

60 17 77

No. of

vendors

shortlisted

26 7 33

No. of

vendors to

be

contracted

15 4 20

• Combination of RFP and RFI issued

• MTN incumbents and external vendors were sent the RFP’s based on their capabilities

11

TCO

Programme

Costs

Ancillary

Costs

(delegate and

facilitator)

Programme

Initiation

Training

Environment

Build Learning

Solution

Travel

Accommodation

Per Diem

Setup & Run Charges

Administrative

Venue hiring (Internal/External)

Catering

Tech. Equipment

Cancellation

Course Materials

© 2010 Accenture. All rights reserved.

Visa

Physical

VirtualNetwork / Connectivity

E-Learning user license

Stationery

Research and Development

Out of scope are:

• Needs analysis costs

• CAPEX vendors

• Investment in L&D

Facilitator (internal/external)

Other

Operational

Costs Marketing &

Commun.

Personnel

Opportunity Cost

Content Customisation

Branding

Promotional Items

Communication Tools

OLM

Course Materials

TCO Model Components

The TCO model

Operating Guidelines - MTN

Procurement Programme

• Comparisons will be made based on total

cost of ownership, including cost of

switching and qualitative aspects• Strategies will optimize group scale and

align approaches to match individual

business needs• No group company will be worse off in

the current environment than they were

pre-strategy• “The Contract” -Once potential suppliers,

evaluation and risk criteria and

implementation plans are defined by the

operating companies, all sourcing

decisions are to be honored.

Contract

Prioritisation and

Assessment

Contract Strategy

Development

Contract Plan

Implementation

Results Tracking and

Reporting

Supplier Relationship

Management

The earlier Procurement is involved in the sourcing process, the greater the

savings achieved

Procurement Ambassador : Mira Ristovich – ristov_m@mtn.co.za

Contract: From “Purchasing” … To “Procurement”

Savings Realisation Model

© 2010 Accenture. All rights reserved. 13

Savings report to be compiled in LADDS and calculated in USD, Rands and Local Currency

Approved Vendors

Approved Courses

Prices per Vendor

% of Savings

Data Input

LADDS monthly reporting

Savings Report:

• Total Savings in USD

• Total Savings in Local

Currency

• Total Savings in Rands

• Spend in vendors/courses not

approved

LADDS

Data Output

Post Contract Management Relationships

14

Initial Delivery

Refining

Ongoing Delivery

Continuous ImprovementBusiness Development

Extension

Completion

Latent Termination

Final Termination

Supplier & Customer Positioning

CUSTOMER POSITIONING

15

Critical

KEY

Security

Transactional Profit

DEVELOP

EXPLOITNUISANCE

KEY ACCOUNTA

t

t

r

a

c

t

i

v

e

n

e

s

s

High

Low Relative value of account High

Managing Supplier Relationships Model

16

Supplier Performance Management

Organisational benefits achieved

Governance model design and development

Scope redefined and no. of vendors further reduced

Benefits tracking (TCO model)

Cross-functional teaming

Change management and communication through out the project

GFA standardisation and SLA design

© 2009 Accenture. All rights reserved. 17

Organisational benefits achieved (Cont)

1st vendor conference as a great success

• Purpose of the conference:

– Sharing of strategy and the operating model & Knowledge sharing and integration

– Discussing Administrative issues

– Intellectual property clarification

– Progress management and meetings

– Country protocols

– SLA workshop and development

– Performance management

– Communication channels & Collaboration

– Introduction of the Academy's Operational Manuel - Project Charter standardisation

– Tax and Withholding Tax

• Twenty vendors invited

• Awards given to the five best Academy partners

• Procurement manager awarded "The Best Internal Support 2010".

© 2009 Accenture. All rights reserved. 18

Organisational benefits achieved (Cont)

Business case targets achievements:

• Well-exceeded the business case targets, 26.82% vs. 20% savings

• 92% vs. 50% vendors reduction for the in scope competency clusters

• The estimated number of attendees for the in-scope courses showed

that MTN expected to train 49% more people than in the previous year

• The total training costs would actually reduce in real terms.

• The quality and consistency of courses being delivered has increased

and stabilised respectively

© 2009 Accenture. All rights reserved. 19