An Analysis of Eskom S Strategic Sourcing As A Catalyst For Supplier Development

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AN ANALYSIS OF ESKOM’S STRATEGIC SOURCING AS A CATALYST FOR
SUPPLIER DEVELOPMENT
by
Mzoxolo Elliot Mbiko
MINOR DISSERTATION
Submitted in partial fulfilment of the requirements for the degree
MAGISTER COMMERCII
in
BUSINESS MANAGEMENT
FACULTY OF MANAGEMENT
UNIVERSITY OF JOHANNESBURG
Supervisor : MR TATENDA MBARA
Co-supervisor : PROF ELANA SWANEPOEL
2016
DECLARATION
I certify that the minor dissertation submitted by me for the degree Master’s of
Commerce (Business Management) at the University of Johannesburg is my
independent work and has not been submitted by me for a degree at another
university.
Mzoxolo Elliot Mbiko
ii
ACKNOWLEDGEMENTS
I am humbled and grateful to God for seeing me through this project. He provided me
with strength and opened my mind for new insights. I would like to convey my sincere
appreciation to all the amazing people and institutions who contributed in
accomplishing this study. In particular, a special acknowledgement to these people
and institutions for their role they played in my journey:
 My wonderful and loving wife, Adv. Phozisa Mbiko for handling unenviable
conditions and offering support throughout the project, and my three handsome
sons, Unakho Xwayi, Anda Mbiko and Lakhe Mbiko for understanding me.
 My parents, Amos and Nosandile for their sacrifices and support over the years.
 My sister, Nompumezo Mbiko for her supportive role in assisting with the
required material.
 My supervisor Mr Tatenda Mbara and co-supervisor Prof Elana Swanepoel for

their guidance and accessibility.
 Sakhele Gqabaza for his specialised assistance with statistical analysis.
 Ms Lita Spreeth for her professional language editing skills.
 My employer, Eskom for affording me an opportunity to realise my dream to

further my studies.
 Henk Langenhoven for his unwavering support and flexibility during tough
times.
 The management of Commodity Sourcing and Supplier Development and

Localisation departments for their time and valuable information imparted in this
study.
 Eskom library staff for their cooperation and to all colleagues and friends for
invaluable advice and inspiring engagements.
iii
ABSTRACT
Eskom Holdings SOC Ltd (a State-Owned Company), Registration Number
2002/015527/30, is South Africa’s primary electricity supplier which is wholly owned
by the South African government. Eskom’s mission is to provide sustainable
electricity solutions to grow the economy and improve the quality of life of the people
in South Africa and in the region. Owing to its strategic importance in the country,
Eskom is compelled to procure different commodities and services strategically to
ensure sustainable electricity provision to consumers while driving supplier
development for security of supply. As a result, strategic sourcing was introduced as
a way to procure commodities and supplier development as a mechanism to drive
industry growth in the energy sector. To maximise multiple benefits for the company,
integration and collaborative framework between strategic sourcing and supplier
development is a fundamental aspect that should be given attention.
The study analysed how strategic sourcing can be a catalyst for supplier
development in Eskom. An exploratory research design and a mixed research
methods (quantitative and qualitative) were employed. Non-probability purposive
sampling was applied to select respondents and participants. Survey instruments
(semi-structured questionnaires) were administered to commodity managers and
middle managers in Commodity Sourcing and Supplier Development and
Localisation departments respectively. Face-to-face interviews were conducted with
executive management at Eskom. Data were analysed through content analysis.
The results and findings of the study revealed that there is no unified and systematic
approach on the planning, implementation and monitoring tasks between the two
departments. It was found that procurement spend in Commodity Sourcing is used to
drive supplier development objectives but commodity managers are not contracted
on the objectives. Nevertheless, strategic sourcing is viewed as a great mechanism
to advance supplier development objectives provided a joint planning, execution and
monitoring and reporting is done appropriately.
It is important that an operating model between the two departments or entire Group
Commercial be reviewed and four recommendations and areas for future research
are articulated.
iv
TABLE OF CONTENTS
DECLARATION ...................................................................................................................................... ii
ACKNOWLEDGEMENTS ...................................................................................................................... iii
ABSTRACT ............................................................................................................................................ iv
LIST OF TABLES ................................................................................................................................ viii
LIST OF FIGURES ................................................................................................................................. ix
LIST OF ABBREVIATIONS AND ACRONYMS ..................................................................................... x
CHAPTER 1: BACKGROUND................................................................................................................ 1
1.1 Introduction ............................................................................................................................ 1
1.2 Conceptual Framework: Strategic Sourcing and Supplier Development ........................ 2
1.3 Context of Procurement ........................................................................................................ 7
1.4 Overview of Eskom ............................................................................................................... 8
1.4.1 Group Commercial Division ............................................................................................... 10
1.5 Strategic Supply Chain Integration ................................................................................... 15
1.6 Problem Statement .............................................................................................................. 16
1.7 Purpose of the Study .......................................................................................................... 17
1.7.1 Main and Investigative Questions...................................................................................... 17
1.7.2 Primary Objective .............................................................................................................. 17
1.7.3 Secondary Objectives ........................................................................................................ 18
1.7.4 Research Methodology ...................................................................................................... 18
1.8 Research Assumptions ....................................................................................................... 19
1.9 Relevance and Importance of Study ................................................................................. 20
1.10 Limitations of the Study ...................................................................................................... 20
1.11 Layout of the Study ............................................................................................................. 21
CHAPTER 2: LITERATURE REVIEW .................................................................................................. 23

2.1 Introduction .......................................................................................................................... 23
2.2 The South African Public Procurement Landscape ........................................................ 23
2.3 Composition of Group Commercial at Eskom .................................................................. 25
2.4 Literature Framework: Strategic Sourcing and Supplier Development at Eskom ........ 28
2.5 Strategic Sourcing ............................................................................................................... 32
2.5.1 Models of Strategic Sourcing ............................................................................................. 36
2.5.2 Shortcomings of the Models for Strategic Sourcing .......................................................... 54
2.6 Supplier Development ......................................................................................................... 54
2.6.1 Models of Supplier Development....................................................................................... 57
2.7 Integration Models ............................................................................................................... 64
2.8 Summary .............................................................................................................................. 67
v
CHAPTER 3: RESEARCH METHODOLOGY ...................................................................................... 68
3.1 Introduction .......................................................................................................................... 68
3.2 Research Design ................................................................................................................. 68
3.3 Research Philosophy .......................................................................................................... 69
3.3.1 Postpositivist Worldview .................................................................................................... 70
3.3.2 Constructivist Worldview ................................................................................................... 71
3.3.3 Transformative Worldview ................................................................................................. 71
3.3.4 Pragmatic Worldview ......................................................................................................... 72
3.4 Research Approach ............................................................................................................. 72
3.4.1 Inductive approach ............................................................................................................ 72
3.4.2 Deductive approach ........................................................................................................... 73
3.4.3 Abductive approach ........................................................................................................... 73
3.5 Research Strategy ............................................................................................................... 74
3.5.1 Case Study ........................................................................................................................ 74
3.6 Methodological Choice ....................................................................................................... 75
3.6.1 Qualitative and Quantitative Approaches .......................................................................... 75
3.7 Time Horizon ........................................................................................................................ 76
3.8 Population and Sampling ................................................................................................... 76
3.8.1 Study Population................................................................................................................ 77
3.8.2 Sampling ............................................................................................................................ 77
3.9 Data Collection Methods..................................................................................................... 78
3.9.1 Secondary Sources ........................................................................................................... 79
3.9.2 Primary Sources ................................................................................................................ 79
3.10 Pretesting ............................................................................................................................. 83
3.11 Data Analysis ....................................................................................................................... 83
3.12 Quality of the Research ...................................................................................................... 84
3.13 Ethical Considerations ........................................................................................................ 85
3.14 Conclusion ........................................................................................................................... 87
CHAPTER 4: DATA ANALYSIS AND INTERPRETATION ................................................................. 88

4.1 Introduction .......................................................................................................................... 88
4.2 Profiles of Survey Respondents and Interview Participants .......................................... 88
4.2.1 Profile of CS Respondents ................................................................................................ 89
4.2.2 Profile of SD&L Respondents ............................................................................................ 92
4.2.3 Profile of Executive Management Participants .................................................................. 95
4.2.4 Summary of Profiles .......................................................................................................... 98
4.3 Key Research Results and Findings ................................................................................. 99
4.3.1 Current Implementation of Strategic Sourcing and Supplier Development at Eskom ..... 100
4.3.2 Relationship between Strategic Sourcing and Supplier Development at Eskom ............ 115
4.3.3 Strategic Sourcing as a Catalyst for Supplier Development in the context of Eskom ..... 119
4.3.4 Strengthening of Integration between CS and SD&L ...................................................... 125
4.4 Conclusion ......................................................................................................................... 129
vi
CHAPTER 5: DISCUSSION, CONCLUSION AND RECOMMENDATIONS ..................................... 130
5.1 Introduction ........................................................................................................................ 130
5.2 Summary of Study ............................................................................................................. 130
5.3 Key Research Findings ..................................................................................................... 131
5.4 Conclusion ......................................................................................................................... 135
5.5 Recommendations ............................................................................................................ 136
5.6 Limitations of the Study .................................................................................................... 140
5.7 Areas for Future Research ............................................................................................... 140
REFERENCES .................................................................................................................................... 141

Appendix A: Eskom Supplier Development and Localisation 42 Focus Areas .......................... 157
Appendix B: Research Approval Letter .......................................................................................... 158
Appendix C: Cover Letter ................................................................................................................. 160
Appendix D: Questionnaire for Commodity Sourcing (CS) .......................................................... 161
Appendix E: Questionnaire for Supplier Development and Localisation (SD&L) ...................... 164
Appendix F: Interview Schedule ...................................................................................................... 167
vii
LIST OF TABLES
Table Description Page

Number Numbers
1.1 Advantages and Disadvantages of Centralisation and 8

Decentralisation of Procurement decision making
1.2 Supplier Development & Localisation Objectives 14
2.1 Eskom’s Group Commercial Changes 2
2.2 Models of Strategic Sourcing 37
2.3 Characteristics of Buyer-Centric or Seller/Supplier-Centric 45
Markets
2.4 Models of Supplier Development 58
3.1 Four Worldviews of Research 70
3.2 Pre-conditions Enabling the Researcher to Choose the Best 74
Strategy
3.3 A Comparison of Qualitative and Quantitative Approaches 75-76
3.4 Sample Size 78
3.5 Advantages and Disadvantages of Questionnaires 80
3.6 Section Two of Questionnaire 81
3.7 Advantages and Disadvantages of Interviews 81
3.8 Types of Interviews 82
4.1 Middle Management (CMs and MMs) Responses from CS and 88
SD&L
4.2 Responses from CMs in CS 89
4.3 Age Distribution of CMs 90
4.4 Responses from MMs in SD&L 92
4.5 Age Distribution MMs in SD&L 93
4.6 Interviews with Executive Management 95
4.7 Age Distribution of Executive Management 97
4.8 Summary Profiles of Respondents and Executive Participants 98
4.9 Responses about Eskom Strategic Sourcing Methodologies 101
4.10 Views of CS Respondents pertaining to SD&L 103
4.11 Views of SD&L Respondents pertaining to CS 107
4.12 Themes on Implementation of Strategic Sourcing and Supplier 114
Development
4.13 The Role of Strategic Souring 115
4.14 The Role of Supplier Development 117
4.15 Commodity Managers on Collaboration between CS and SD&L 120
4.16 Middle Managers on Collaboration between CS and SD&L 121
viii
LIST OF FIGURES
Figure Description Page
Number Number
1.1 Conceptual Framework of Strategic Sourcing and Supplier 3

Development
1.2 Eskom 7x7 Strategic Sourcing Methodology 12
1.3 Research Methodology 18
1.4 The Layout of the Study 22
2.1 Functions of Eskom 25
2.2 Supplier Development and Localisation Objectives 27
2.3 Literature Framework – Strategic Sourcing and Supplier 29
Development
2.4 Commodity Porfolio Matrix 33
2.5 Model 1: Eskom’s 7x7 Strategic Sourcing Methodology 37
2.6 Model 2: Strategic Sourcing Methodology 40
2.10 Model 6: Gillette Company - Strategic Sourcing Methodology 50
2.11 Options to Develop Sourcing Strategy 52
2.12 Model 1: Eskom’s Supplier Development Process 58
2.13 Model 2: Supplier Development Process 60
2.14 Model 3: Supplier Development Process 62
2.15 Integration Model 64
2.16 McKinsey 7S Model 65
3.1 Characteristics of the Research Approaches 73
3.2 Data Collection Methods 79
3.3 Conclusion of Methodological Framework 87
4.1 Gender Distribution of CM Respondents in CS 89
4.2 Years of Experience of CS Respondents 90
4.3 Levels of Education of CMs 91
4.4 Internal Training completed by CMs 92
4.5 Gender Distribution of MMs in SD&L 93
4.6 Years of Experience of MMs 94
4.7 Level of Education of MMs 94
4.8 Internal Training completed by MMs 95
4.9 Gender of Executive Participants 96
4.10 Years of Experience of Executive Participants 97
4.11 Effective Integration between Strategic Sourcing and Supplier 123
Development
4.12 Collaboration between CS and SD&L 126
ix
LIST OF ABBREVIATIONS AND ACRONYMS
BATNA Best Alternative to a Negotiated Agreement
B-BBEE Broad-Based Black Economic Empowerment
BSC Balanced Score Card
BWO Black Women Owned
CIPS Chartered Institute of Purchasing and Supply
CM Commodity Manager
CS Commodity Sourcing
CSCMP Council of Supply Chain Management Professionals
CSDP Competitive Supplier Development Programme
DPE Department of Public Enterprises
GC Group Commercial
GM General Manager
ISM Institute of Supply Management
KPI Key Performance Indicator
LBS Large Business Supplier
MM Middle Manager
MWBE Minor and Women Business Enterprise
MW Megawatt
NT National Treasury
O-CPO Office of the Chief Procurement Officer
PPPFA Preferential Procurement Policy Framework Act
PS Project Sourcing
RFI Request for Information
RFP Request for Proposals
RFQ Request for Qualifications
ROI Return on Investment
SADC Southern African Development Community
SBE Small Business Enterprise
SCM Supply Chain Management
SCOPS Supply Chain Operations
SD Supplier Development
SD&L Supplier Development and Localisation
SDI Supplier Diversity Initiative
SLA Service Level Agreements
SM Senior Manager
SMART Specific, Measurable, Achievable, Realistic, Time-bound
SMMEs Small, Micro and Medium Enterprises
SOC State-Owned Company
SRM Supplier Relationship Management
SS Strategic Sourcing
SSI Strategic Sourcing Initiative
TCO Total Cost of Ownership
TS Tactical Sourcing
TSC Total System Cost
UNISA University of South Africa
XFT Cross-Functional Team
x
CHAPTER 1: BACKGROUND
1.1 Introduction
The evolution of supply chain management has changed the procurement landscape
in both public and private sector organisations. Supply chain management (SCM)
has proven to be pertinent in improving quality of service delivery, business and
industrial competitiveness and facilitating economic development (Boateng,
2015:22). Effective procurement is one of the key supply chain best practices in
facilitating responsive supply chains in the global business environment (Swafford,
Ghosh & Murthy, 2006). As a result, procurement as an element of supply chain
management is continuously gaining momentum at executive level. For example,
senior executives in organisations have realised that cost savings, competitiveness
and supplier performance and relationship can improve through best procurement
practice. Procurement needs to improve from simple tactical sourcing and
unsystematic approach to strategic sourcing in order to realise entrenched multiple
benefits.
Strategic sourcing can be viewed as a catalyst for other supply chain practices owing
to its long-term prospects. These supply chain practices include supplier relationship
management, total cost of ownership, supplier development, demand management
and negotiations. The recognition and implementation of supply chain best practices
is often viewed as a source for competitive advantage and performance
improvement. Nevertheless, integration and collaboration of these practices in supply
chain management is complicated in operation.
Eskom Holdings Ltd, a state-owned company (SOC), (hereinafter referred to as

Eskom), Registration Number 2002/015527/30, is South Africa’s primary electricity
supplier, wholly owned by the South African government. Its business activities
include procuring different commodities and services to ensure sustainable electricity
provision to consumers. A decentralised procurement structure was in operation to
procure commodities and services until 2007. Subsequent to 2007, strategic sourcing
was introduced as a practice to procure commodities. A Group Commercial (GC)
division was established to implement a strategic sourcing methodology, among
other functions, to address fragmented and inefficient procurement.
1
The formation of the GC led to the creation of two departments, Commodity Sourcing
(CS) and Supplier Development and Localisation (SD&L), which drive strategic
sourcing and supplier development respectively. These departments mainly focus on
the centralisation of procurement, supplier development and transformation.
The integration and collaboration between CS and SD&L have presented some
challenges in trying to achieve their mandates. It has been found that their planning
and performance management execution are fragmented and adversely affect
operational excellence in driving supplier development across Eskom (Eskom
Evaluation of Procurement, 2013:09). The processes, systems and practices are not
properly aligned to improve performance. Smeltzer, Manship & Rossetti, (2003:24)
proclaim the minimum knowledge about strategic sourcing as an integrated business
process. Moses and Ahlstrom (2008) cited in Kotula, Ho, Dey & Lee (2015:244)
extend that a number of sourcing functions operate independently and internal
collaboration is inefficient. The researcher is of the view the extent of integration and
collaboration between strategic sourcing and supplier development, driven in Eskom
by CS and SD&L in respectively, needs to be analysed.
A collaborative relationship between CS and SD&L, responsible for strategic sourcing

and supplier development respectively, offers a potential opportunity for competitive
advantage for the buyer (Eskom). A similar study conducted about strategic sourcing
in conjunction with supplier development is unknown to the researcher. Sánchez-
Rodríguez (2009:161) affirms that there has been no direct effort to analyse the
relationship between strategic sourcing and supplier development practices.
However, the literature found that these two concepts: strategic sourcing and supplier
development have been researched independently of each other. The main aim of
this dissertation is to analyse how strategic sourcing can be a catalyst for supplier
development in Eskom.
1.2 Conceptual Framework: Strategic Sourcing and Supplier Development

It is important to show the relationship between strategic sourcing and supplier
development in supply chain management. The conceptual framework shows the
relationship between strategic sourcing and supplier development and is formed and
driven by the title and the research problem of the study.
2
The tree diagram in Figure 1.1 depicts the framework of the study in the supply chain
management field.
Figure 1.1: Conceptual Framework of Strategic Sourcing and Supplier Development

Source: Researcher’s Construct
In the conceptual framework, the supply chain management, procurement and

strategic sourcing at Eskom are linked. The three sourcing functions at Eskom are
tactical sourcing, strategic sourcing and project sourcing. For the purpose of this
study, strategic sourcing and supplier development are the focal points and tactical
sourcing and project sourcing are excluded from the analysis as they insignificant
direct influence on the study. The operating model of Eskom is that the supplier
development shall be implemented within the sourcing functions by using the
procurement spend. Therefore, the conceptual framework is built to show the
relationship between strategic sourcing and supplier development. The framework
shows the blurred and vague relationship between strategic sourcing and supplier
development through dotted lines. The red dotted lines represent an inefficient and
incoherent relationship between strategic sourcing and supplier development at
Eskom. The framework illustrates strategic sourcing, as a component of procurement
and in supply chain management, where supplier development is designed to be
executed. Both strategic sourcing and supplier development need recognition as
integrated strategic areas in supply chain management to maximise long-term
benefits.
The concepts of supply chain management, procurement, strategic sourcing, total

cost of ownership and supplier development in Figure 1.1 and other concepts used in
Chapter 2 are defined herein. The definitions of concepts are provided to facilitate
common understanding in this study.
3
I. Supply Chain Management (SCM) is defined by the Council of Supply Chain
Management Professionals (CSCMP) as the “planning and management of all
activities involved in sourcing and procurement, conversion and all logistics
management activities” (Wisner, Tan & Leong, 2012:7). The Institute for Supply
Management (ISM) refers to it as “the design and management of seamless,
value-added processes across organisational boundaries to meet the real
needs of the end customer” (Wisner et al., 2012:7). Both definitions underline
coordination and integration of activities to improve operating efficiencies,
quality and customer service but the definition by CSCMP is used in this study.
II. Procurement is one of the components of supply chain management and a

process of managing a broad range of processes that are associated with an
organisation’s need to procure goods and services that are required to
manufacture a product or to operate the organisation (Coyle, Langley, Novack &
Gibson, 2013:7-11). For the purpose of this study, procurement is defined as
one of the elements within supply chain management primarily focusing on the
sourcing and purchasing of goods and services within the supply value chain
(Boateng, 2016:438).
III. Strategic Sourcing is broader and more comprehensive than the procurement
process and focuses more on supply chain impacts of procurement and
sourcing decisions, and works in a cross-functional setting to assist to in
achieving the organisational overall business goals (Coyle et al., 2013:555).
Engel (2004:1) defines strategic sourcing as an “organised and collaborative

approach to leverage targeted spend across business functions with select
suppliers that are best suited to create knowledge and value in the customer-
supplier interface”. It involves overall spend analysis and categorisation of spend
in commodities. The NT Public Sector Supply Chain Management Review
(2015:6) defines it further as a collaborative and structured process of critically
analysing an organisation’s spending and using this information to make more
effective business decisions about acquiring commodities and services.
4
Hugo, Badenhorst-Weiss & Van Biljon (2011:71) pronounce the concept of
strategic sourcing from both a broad and narrow perspective. With regard to
broad perspective, there is no uniformity in the aspects to be included, while in
the narrow perspective, literature defines it in a variety of ways. However, Horne
(2007), a Corporate Sourcing Manager at AT&T South, identifies the following
common terminologies which are predominantly incorporated in definitions:
 organised;
 structured;
 comprehensive;
 collaborative;
 leverage; and
 creation of value.
IV. Total Cost of Ownership (TCO) is an element of strategic sourcing and is

defined as a philosophy to understand all relevant supply chain related costs of
doing business with a particular supplier for a particular good / service, or the
cost of a process or particular supply chain design (Fawcett, Ellram & Ogden
(2014:261). TCO focuses attention on the life cycle cost of the asset or sum of
all costs of owning an asset, as opposed to the initial or vendor cost (Boateng,
2016:556).
V. Supplier Development is a subject in SCM which has been researched

extensively in the past years. The concept was originated by Lender (1966) to
describe the willpower of manufacturers in enhancing the numbers of suppliers
for the purpose of improved performance. It is mechanism used by companies
to develop or assist existing or new suppliers to improve their processing
capabilities, quality, delivery and cost performance by providing the needed
technical and financial assistance (Wisner et al., 2012:43). It is an integral part
and subject of considerable research in supply chain management (Mohanty,
Gahan & Choudhury, 2014:201; Li, Humphreys, Yeung & Cheng, 2012:353).
According to Handfield, Krause,Scannell, & Monczka (2000:37-39) supplier

development is broadly defined as any activity that a buyer undertakes to
improve a supplier’s performance and capabilities to achieve the buyer’s short-
term and long-term supply needs.
5
Supplier development is considered as a critical factor to achieve, maintain and
improve the buying organisation’s competitive advantage (Rajput & Bakar,
2012:189). In the Eskom context, it is defined along the areas of industry
development, transformation and affording opportunities to the historical
disadvantages suppliers. In Chapter 2, Figure 2.3, a consolidation of multiple
benefits accrued from strategic sourcing and supplier development is
represented by performance and competitive advantage. The literature
indicates that organisations involved in supplier development improve supplier
performance and build competitive advantage (Modi & Mabel, 2007; Alaez-Aller
& Longas-Garcia, 2010).
Supplier development plays a critical role is driving performance improvement in

purchasing and contributing to overall organisational effectiveness. Krause,
Scannell & Calantone (2000), cited in Li et al., (2012:353) that supplier
development can lead to supplier performance improvement and it is a growing
trend among companies that practice supply chain management (Wisner et al.,
2012:43). Recently, supplier development activities are seen as the most
important effort that organisations undertake to gain competitive advantage and
develop suppliers for long-term partnership and relationship enhancement
(Shahzad, Sillanpää, Sillanpää, Imeri, 2016:56).
VI. Performance can mean a general set of performance indicators that can be
used to set objectives or judge the performance of any type of operation and
can include quality, speed, dependability, flexibility and cost. (Boateng,
2016:417). In this study, performance can mean cost savings, number of
developed suppliers, efficiency, improved supplier performance and adaptability
and the extent of achieving SD&L objectives. Sánchez-Rodríguez (2009:161-
162) concludes that strategic sourcing, supplier development and purchasing
performance are concomitant of each other.
VII. Competitive Advantage exists when an organisation is more profitable than its
competitors (Venter, 2015:128-129). The author further explained that there
are two ways to achieve that:
 an organisation can produce products and services that are superior in
value to those competitors (differentiation strategy) for it to charge
premium prices or retain customers for a longer period of time;
6
 it can produce products and services at a significantly lower cost than its
competitors (cost leadership strategy) to increase market share and
maximise profitability.
Generally, strategic sourcing leads to sustainable competitiveness, particularly

through reduction of costs from suppliers for goods or services to improve
baseline results. Competitive advantage is increasingly a function of supply
chain efficiency and effectiveness, and the greater collaboration at all levels
between suppliers and customers, the greater the likelihood to gain an
advantage (Williams, 2007:102). The concept of competitive advantage in the
study is used to indicate the end results derived from the integration of
strategic sourcing and supplier development at Eskom in dealing with external
stakeholders. Buyers who have closer relationships with suppliers may
strengthen their competitive advantage (Li et al., 2011:353). However, internal
collaboration in the organisation is a prerequisite. Ambe and Dlamini
(2012:277) argue that competitive advantage can be achieved and sustained
through the correct application of procurement best practices.
The highlighted disintegration, inefficient and incoherent challenges between

strategic sourcing and supplier development necessitates analysis in Eskom. The
challenges are investigated through the analysis of the current application and
relationship between strategic sourcing and supplier development, how strategic
sourcing can be a catalyst for supplier development and best practise to strengthen
relationship. This investigation will assist to identify process gaps and eventually
propose integrated framework between strategic sourcing and supplier development.
Since strategic sourcing is a component of procurement, the context of procurement
is underlined.
1.3 Context of Procurement
Organisations often choose centralisation or decentralisation, or a combination of

both as structures of procurement in the supply chain. However, procurement
decisions are largely based on various factors including market conditions, type of
materials, product characteristics which are largely aimed at serving the purpose of
the company.
7
Centralisation refers to the situation where procurement decisions are normally
centralised in one location, while in a decentralised environment procurement
decisions are fragmented in the company mostly at operational level (Wisner et al.,
2012:60). The advantages and disadvantages of centralisation and decentralisation
are included in Table 1.1
Table 1.1: Advantages and Disadvantages of Centralisation and Decentralisation of

Procurement decision making
Centralisation Decentralisation
Advantages
 Leverage purchase volume.  Close knowledge of requirements.
 Reduces and avoid administrative  Better local relationships.
duplication.  Local sourcing.
 Enables specialisation and  Less bureaucratic.
standardisation.  Greater responsiveness.
 Lower transportation costs.
 No competition within units.
 Common supply base.
 Greater control over procurement.
 Commitments.
 Greater supplier cooperation and
 Coordination.
Disadvantages
 Increased bureaucracy.  Reduces leverage.
 Reduced flexibility.  Leads to duplication.
 Relatively inefficient.
Source: Wisner, Tan & Leong (2012:60-61); Fawcett, Ellram & Ogden (2014:312)
It is important for organisations to take a conscious decision about a procurement

system considering the advantages and disadvantages and operations. In practice,
the most effective procurement structure tends to be a mix of centralised and
decentralised systems or hybrid structure (Miszczak, 2014:46). An overview of
Eskom and analysis of CS and SD&L is provided next.
1.4 Overview of Eskom
As mentioned previously, Eskom Holdings SOC Ltd. is South Africa’s primary

electricity supplier which is wholly owned by the South African government. Eskom’s
mission is to provide sustainable electricity solutions to grow the economy and
improve the quality of life of the people in South Africa and in the region (Eskom
Corporate Plan, 2015/16 - 2019/20:53). It operates as a vertically integrated company
across a value chain that supplies electricity to both South Africa and the Southern
African Development Community (SADC) region (Eskom Corporate Plan, 2015/16 -
8
2019/20:70). It owns and operates 27 power stations in South Africa with a total
nominal capacity of 41 995 megawatt (MW). Its generation and distribution proportion
amounts to 95% of electricity used in South Africa and about 40% of electricity used
on the African continent. Eskom’s generating capacity comprises 35 726 MW from
coal-fired power stations, 1 860 MW from nuclear power, 2 409 MW from gas-fired
power fuelled by diesel, 2 000 MW from hydro and pumped storage stations, as well
as 3 MW from a wind farm at Klipheuwel (Eskom Integrated Report, 2014). Its wide
customer base ranges from industrial, mining, commercial, agricultural and
residential to redistributors (Eskom Corporate Plan, 2015/16 - 2019/20:46).
Eskom’s corporate plan covers the five-year period from 1 April 2015 to 31 March
2020. It focuses on stabilising the business and re-energising for longer-term
sustainability and growth. Its sustainability framework consists of eight sustainability
dimensions, which aim to stabilise and sustain the business (Eskom Corporate Plan,
2015/16 - 2019/20:7-8):
 financial sustainability;
 operational sustainability;
 sustainable asset creation;
 revenue and customer sustainability;
 environmental and climate change sustainability;
 sustainable human capital;
 transformation and social sustainability; and
 building a solid reputation.
In the corporate plan of Eskom, strategic sourcing and supplier development are not
explicitly covered as part of the eight sustainability dimensions. However, they could
play a critical role in achieving most of the sustainabilities such as financial
sustainability, operational sustainability, sustainable asset creation, revenue and
customer sustainability, environmental and climate change sustainability, and
transformation and social sustainability. Both strategic sourcing and supplier
development are intrinsically elements of supply management. Supply management
requires pursuing strategic responsibilities or roles that should be aligned with the
overall mission and strategies and have a major impact on the long-term
performance performance of the organisation (Monczka, Handfield, Giunipero &
9
Patterson, 2016:11). An overview of the group commercial division followed by
commodity sourcing and supplier development departments is discussed next.
1.4.1 Group Commercial Division
The GC division was established to centralise procurement and to stimulate growth

and development. The GC is the division at Eskom where strategic sourcing and
supplier development are administered and managed. Its mandate includes driving
transformation through supply chain management and procurement initiatives
(Eskom Corporate Plan, 2015/16 - 2019/20:156). The division was designed based
on certain principles (Eskom SD&L Plan, 2013 - 2015:6-7). These principles are as
follows:
 to establish a single procurement unit to manage cost savings;
 to provide efficient service with an impact on the business;
 to minimise the total risk through standardisation of procedures and processes
across the organisation;
 to enhance efforts in local development;
 to drive accountability within the commercial function; and
 to enhance skills within the procurement environment.
Contrary to principles of the division’s formation, the evaluation of the entire

procurement strategy indicates some inherent challenges (Eskom Procurement
Evaluation, 2013:9). These challenges are as follows:
 limited integration mainly between the sourcing function and supplier

development;
 a fragmented approach to supplier development;
 limited focus on cost savings;
 fragmented processes and practices;
 ineffective and inefficient planning and performance management; and
 inadequate skills and capabilities.
Considering the supply chain and procurement challenges found on the evaluation of
the procurement strategy, integration between strategic sourcing and supplier
development needs to be analysed.
10
Both the CS and SD&L departments are responsible for strategic sourcing and
supplier development respectively in GC. CS is concerned with procurement of
goods and services while SD&L’s objectives involve development of supplier to
improvement performance.
These two departments were formed to encourage cooperation and interdependence

in practice since supplier development is more reliant on procurement expenditure to
achieve its objectives.
I. Commodity Sourcing
Commodity Sourcing is the department responsible for the procurement of the

commodities; its mandate is two-fold (Group Commercial (GC) Business Plan, 2013-
2017:59-60):
 to establish and manage Eskom group contracts based on sound commodity
sourcing strategies that ensure business operations continue uninterrupted
and support Eskom and government initiatives; and
 to implement a world-class strategic sourcing methodology that sources
goods and services at cost effective, fair, competitive, efficient and in a
lawful manner while using its procurement spend to maximise local content,
create jobs and develop skills.
In Figure 1.2, a strategic sourcing methodology that is used by procurement

practitioners in Eskom to develop sourcing strategies and source goods, material, or
services is illustrated.
11
Figure 1.2: Eskom Seven-by-Seven (7x7) Strategic Sourcing Methodology
Source: Eskom Group Commercial Business Plan, (2013-2017:61)
The strategic methodology consists of seven steps hence the name, 7x7 (Eskom GC
Business Plan, 2013-2017:61). These steps are:
 kick-off and assess requirements;
 profile internally and externally;
 develop strategy;
 screen suppliers and selection factors;
 conduct auctions and request for proposals (RFPs);
 shape and negotiate value propositions; and
 implement agreements.
These steps are classified in two stages: Stage one entails the first three steps
referred to as strategy development, and the second stage, which involves the last
four steps, is called contracting. This methodology necessitates the sourcing
specialist to understand all internal business requirements, as well as the regulatory
framework and spend involved in the procurement field when engaging suppliers.
According to the methodology, the activities in each step are executed in a cross-
functional team led by the sourcing practitioner. A cross-functional team should
consist of representatives from different functions within the organisation such as
engineering, quality, project management, and supplier development. The main
12
objective of the supplier development practitioner in the cross-sectional team is to
encourage and promote local development and transformation in the process of
developing a sourcing strategy. Generally the scope of work is prescribed in a project
charter developed by the team.
The CS mandate states that procurement process should be applied through a

strategic sourcing methodology to advance socio-economic objectives, however the
7x7 strategic sourcing methodology in Figure 1.2 does not portray activities directed
at achieving these objectives. The socio-economic objectives are equivalent to
supplier development objectives, such as industrialisation, localisation, skills
development and job creation.
II. Supplier Development and Localisation (SD&L)
Governments and state-owned organisations are actively and creatively utilising

supply chain management to improve public sector governance, create sustainable
jobs, industrialise and stimulate small, micro and medium enterprises (SMMEs),
growth and development (Boateng, 2015). The government objectives are in line with
the supplier development at Eskom as it is based on the principle of developing the
industry and transformation through procurement expenditure. Nevertheless, the
existing literature focuses on improving supplier performance on elements related to
costs, quality, time and speed in the supply chain. It can be said that supplier
development practice in developing economy is unique compared to the developed
economy.
The SD&L mandate is to “achieve maximum and sustainable local development

impact by utilising Eskom’s procurement spend in a manner that allows flexibility
within the business in order to accommodate government local development initiative
and policies” (Eskom SD&L Presentation, 2013-2015:6). Its objectives consist of
industry transformation, skills development, industrialisation, and ensuring
localisation of the commodities. These strategic objectives are contained in the SD&L
Plan for 2013 – 2015 and there is no explicit operating model or structure in place to
integrate them into strategic sourcing. The lack of implementation guidelines and
structures can be attributed to the absence of the suitable operating model.
13
In Table 1.2, SD&L objectives are included. These objectives were designed in line
with key objectives of government’s national policies (Eskom SD&L, 2013 - 2015:23-
31).
Table 1.2: Supplier Development and Localisation Objectives

OBJECTIVES DEFINITION
Industrialisation Utilisation of Eskom’s and suppliers’ procurement spend to increase
establishment of new, or the expansion of existing, manufacturing
capacity and capability to create competitive industries.
Intended Outcomes:
 Develop new technology, skills sets, and innovation locally;
 transfer of technological capability and skills development through
the investment in local manufacturing capacity; and
 enable government to meet its industrialisation growth targets,
which also contribute towards localisation, job creation, and skills
development targets.
Localisation Include all aspects of local development, including skills development, job
creation (work opportunities), and industrialisation, local content (including
Broad-Based Black Economic Empowerment (B-BBEE) subsets, namely,
black women owned (BWO), small business enterprise (SBE), and Large
Business Supplier (LBS), and local content to site.
Intended Outcomes:
Develop South African-based suppliers;
 transfer of technology, skills, and innovation to the local industry
from foreign-based suppliers; and
 enable smaller local companies participate in the main stream
economy.
OBJECTIVES DEFINITION
Skills Skills included in the national scarce skills list and Eskom’s internal human
development resource requirements.
Intended Outcomes:
 Increase local skills base relevant to the energy sector where there
is a national scarcity of skills;
 implement a number of strategic skills development initiatives; and
 contribute towards industrialisation and localisation objectives.
Job creation Job creation (work opportunity) means the creation of jobs or work
opportunities by suppliers as a direct result of Eskom’s new build, capital,
and procurement spend, complemented by its focused industrialisation,
localisation, and supplier development objectives.
Source: Eskom Supplier Development and Localisation Plan (2013-2015:23-31)
The operating model requires that these objectives be encouraged and promoted in
the process of procurement. The Department of Public Enterprises (DPE) at the
Supplier Summit in 2014, acknowledged that the starting point for a supplier
development process is to integrate or link supplier development interests in the
strategic sourcing methodology. DPE declared a nonexistence of a perfect
methodology to do this; however, supplier development should not be viewed as a
separate activity from sourcing (DPE, 2014). The researcher is of the view that
14
achievement of these objectives can be accelerated provided there is integration
between strategic sourcing and supplier development.
With the creation of the two departments at Eskom, implementation processes and
achievement of intended benefits have been exposed to challenges coupled with silo
mentality. Nonalignment of objectives and different expectations from practitioners
hinder attainment of the strategic priorities such as cost savings, supplier
relationship, supplier development and transformation (Eskom Procurement
Evaluation, 2013:09). To maximise value in supply chain, companies are redirecting
their efforts towards integrating their process internally and externally. The supply
chain integration is elaborated in the following section.
1.5 Strategic Supply Chain Integration
Integration is defined as the process of incorporating or bringing together different

groups, functions, or organisations, either formally or informally, physically or by
information technology, to work jointly and often concurrently on a common business-
related assignment or purpose (Monczka et al., 2016:119). Chen, Daugherty & Roath
(2009), cited in Ralston, Blackhurst, Cantor & Crum (2015:47) define supply chain
integration as the management of various sets of activities that aim at seamlessly
linking relevant business processes both within and across organisations to build a
better supply chain. Linking supply chain processes across enterprises is seen as a
mechanism for efficiencies, customer value and gaining competitive advantage
(Devaraj, Krajewski & Wei, 2007). Ralston et al. (2015:57) state that strategic
integration needs a long-range goal or plan underlying integrative efforts. Efficiencies
can be derived through integration of processes both internally in departments and
functions and externally across firms. Effective integration not only assists in
functional silos and organisation boundaries, a unified value creation process that
generates and delivers value for the customer can be develop (Ralston et al.
(2015:47).
Strategic integration can impact on organisation conduct and performance and

improve integration success, which may lead to lasting and beneficial relationships.
Generally, integrated implementation of the strategic sourcing and supplier
development could have remarkable benefits for both the buyer and seller if there is
total commitment. Strategic sourcing can be a tool to stimulate supplier development
and forging of relationships. Integration between strategic sourcing and supplier
15
development is essential for operational excellence and accomplishment of multiple
benefits. The maturity level of strategic sourcing as a discipline in an organisation
can dictate the achievement of the intended outcomes (Yavas, Leong, Vardiabasis &
Christodoulidou, 2011:6). It is essential that different functions or groups in the
organisation must work together if the intention is to achieve a wide range of
common goals leading to competitive performance (Monczka et al., 2016:119). The
key aspect (research problem) which triggered why the study was undertaken is
discussed next.
1.6 Problem Statement
The research intends to analyse disintegration and nonalignment of strategic

sourcing and supplier development at Eskom. This study focuses exclusively on
strategic sourcing as a practice for procurement and how it could be a catalyst for
supplier development. The study is structured to add value to the new insights on
how best to integrate strategic sourcing and supplier development.
A study which was conducted in 2013 in Eskom revealed a list of operational

challenges emanating from procurement strategy (Eskom Procurement Strategy
Evaluation, 2013:9). These challenges are as follows:
 undefined interface priorities and processes;

 misaligned performance measures;
 inefficient and ineffective end-to-end processes; and
 fragmented and uncoordinated procedures.
The findings about the operational challenges have also stimulated the researcher to
investigate the causes and intensify the research process on strategic sourcing and
supplier development as procurement practices. The purpose, research questions
and objectives were formulated on the basis of the research problem and are
discussed in the next section.
16
1.7 Purpose of the Study
The purpose of this case study is to explore how supplier development could be
effectively integrated within the context of strategic sourcing at Eskom. The study
analyses the extent of integration / linkage between strategic sourcing and supplier
development to ensure unified planning, execution and improve performance
management of strategic sourcing and supplier development.
1.7.1 Main and Investigative Questions
The main question for this study is to establish how strategic sourcing could be a
catalyst for supplier development to improve performance and develop competitive
advantage at Eskom.
Investigative questions represent the information that the researcher needs to know
and must be answered satisfactory to resolve the issues encompassed in the main
research question (Cooper & Schindler, 2014:113). The investigative questions are:
 How are strategic sourcing and supplier development currently implemented

at Eskom?
 What is the existing relationship between strategic sourcing and supplier
development?
 What are the possibilities that could enable strategic sourcing to be a catalyst
for supplier development in the context of Eskom?
 What are the areas of improvement to strengthen integration between
Commodity Sourcing and Supplier Development and Localisation
departments?
1.7.2 Primary Objective
The primary objective of this study is to analyse integration of strategic sourcing with
supplier development at Eskom and determine how strategic sourcing can be a
catalyst for supplier development to realise long-term benefits.
17
1.7.3 Secondary Objectives
The four secondary research objectives of the study are as follows and are
numbered accordingly from RO1 to RO4:
RO1: To examine the current implementation of strategic sourcing and supplier
development at Eskom.
RO2: To assess the relationship between strategic sourcing and supplier
RO3: To establish possibilities for strategic sourcing to be a catalyst for supplier
development in the context of Eskom.
RO4: To discern pragmatic initiatives to strengthen integration between CS and
SD&L departments.
1.7.4 Research Methodology

The research questions and objectives are answered and attained through a two-
step process. The first step is the review of the literature and related concepts. The
second step involves collection of primary data through semi-structured
questionnaires and face-to-face interviews conducted with relevant participants
accountable for strategic sourcing and supplier development in the case company,
Eskom. In Figure 1.3, a concise schematic diagram of the research methodology is
depicted and a detail research methodology is provided in Chapter 3.
Research Methodology
Figure 1.3: Research Methodology

18
An exploratory research design based on the mixed methods research design
(qualitative and quantitative) is chosen as the best design to conduct this study. Yin
(2014:107) suggests the use of multiple sources for case study research to
corroborate and augment evidence. Data were collected through secondary and
primary sources. Secondary sources included Eskom corporate plan, annual reports,
GC business plan and SD&L plan. To complement the secondary data, data
collection instruments in a form of semi-structured questionnaires and face-to-face
interviews were employed to collect primary data.
Pragmatism was used as a suitable research worldview with inductive and deductive
research approaches. The inductive research approach provides the required
flexibility in the qualitative research process, while the deductive research assists in
understanding of the theory prior data collection. Content analysis has been used to
analyse qualitative data wherein main themes have been identified and coding has
been assigned to main themes for meaningful interpretation.
Non-probability purposive sampling design was used owing to its appropriateness.

The executive and middle management from CS and SD&L were purposely selected
to provide the required information. The executive management consists of general
managers, senior managers whereas middle management includes commodity
managers and middle managers as sources of primary data.
The respondents and participants are characterised to provide rich and in-depth
quantitative and qualitative data to achieve the research objectives.
The quality of the study was ensured during the research process and the ethical
aspects were addressed.
1.8 Research Assumptions
This study is based on certain assumptions, of which some are:
 The respondents and participants in the study are presumed to be well vested
in strategic sourcing and supplier development disciplines by virtue of their
employment.
 The selection of management levels is strongly motivated by the required in-
depth information and strategic insights.
19
 Accessibility to Eskom, the respondents and participants is feasible since the
researcher is employed by the same company. Ethical measures are applied
to fulfil required ethical standards as discussed in Chapter 3.
 High probability of the respondents and participants to respond to
questionnaires and be interviewed.
1.9 Relevance and Importance of Study
Since the introduction of both strategic sourcing and supplier development at Eskom
in 2011, a review of these two concepts has not been done. It is therefore
appropriate to undertake a study to explore the current status concerning strategic
sourcing and supplier development and to identify areas of improvement. The
findings of this study could address some of the operational challenges attributed to
planning and performance management deficiencies. Findings will be shared with
management and hopefully provide guidance for improvement in CS and SD&L
operating processes. This study is not only relevant to the GC division but can be
applied in multiple ways within Eskom, for example to:
 review relationships and processes which link strategic sourcing and supplier
development;
 identify implementation gaps between CS and SD&L;
 collaborate planning between strategic sourcing and supplier development;
 optimise the capacity of employees;
 identify skills and competency gaps to develop capacity development
interventions;
 improve communication and promote teamwork culture; and
 enable strategic decisions and performance management.
Finally, the results, findings and recommendations could contribute to the integration
of the supply chain processes at Eskom.
1.10 Limitations of the Study
The study focuses on Eskom as a case study company, particularly on functions

responsible for strategic sourcing and supplier development. Due to time limitations it
is regarded as impractical to cover all aspects that relate to strategic sourcing and
supplier development. The cross-sectional nature and a short duration of the study
20
do not warrant inclusion of other units or departments within the case company, nor
industries, government and suppliers.
More importantly, the study is limited to Eskom’s perspective as a buyer; but there is
an opportunity to include suppliers in future research. The motive for the inward-
looking strategy is based on the principle of continuous improvement in the company.
Relevant personnel in the two departments (CS and SD&L) are requested to provide
in-depth information, knowledge and insights about strategic sourcing and supplier
development. The results of this study are only limited to the case company and
cannot be generalised to other organisations.
1.11 Layout of the Study
The entire study consists of five chapters. In Chapter 1, the background and problem
statement of the study, the purpose, research questions and objectives and the
relevance along with importance of the study to Eskom are provided. An overview of
Eskom and relevant departments is explained. A concise literature review and
research methodology, as provided in depth in Chapter 2 and 3 respectively, are
covered.
The second chapter contains a theoretical framework of strategic sourcing and

supplier development in Eskom. Important concepts are defined, and prerequisites
and reasons for strategic sourcing and supplier development followed by the benefits
are covered. The chapter describes and analyses strategic sourcing and supplier
development models.
In the third chapter, an outline appears of the research methodology underlying this
empirical study of how the study is conducted. It includes the research philosophy,
research approach and research strategy followed by the methodological choice. The
time horizon, population, sampling design and data collection instruments are
described. The method used to test the data collecting instruments is described and
data analysis is explained. The quality and ethical aspects of the study are discussed
followed by the conclusion of the methodological framework undertaken.
21
The fourth chapter provides a detail analysis of data which have been collected and
presentation of the findings of the study. It includes the profile of the survey
respondents in CS and SD&L and profile of interview participants as well as key
research results and findings.
In Chapter 5, a summary of the study and a discussion of research findings in

accordance to research objectives are presented. Four recommendations and other
interventions, the limitations of the study and areas for future research are detailed.
A layout of the study is illustrated in Figure 1.4.
Figure 1.4: The layout of the study

22
CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
This chapter provides an overview of the South African public procurement system
and an outline of how Eskom, a state-owned company, fits into it. The theoretical
framework of the study covers strategic sourcing and supplier development at
Eskom. Therefore, the public procurement landscape is included as foundation, and
definitions, models and critical aspects of strategic sourcing and supplier
development are discussed.
2.2 The South African Public Procurement Landscape

Since Eskom is one of the Schedule 2 public institutions in South Africa the
landscape of public procurement is discussed. According to National Treasury
Schedule 2 public institutions are all major public entities in the country. The South
African government has recognised that public procurement can be a tool for
development and transformation. As a result, development and transformation
imperatives are often linked with public procurement expenditure to maximise value
add. Even though there is some recognition, some departments and state-owned
entities still do not view it a strategic function. The inadequacy of skilled supply chain
practitioners and lack of proper performance management and best practices
exacerbate the inefficient public procurement system. Some of the challenges
experienced in the public procurement system were included in a study by the
National Treasury (NT) that was published in April 2015 (NT Public Sector Supply
Chain Management Review, 2015:7). These are listed below:
 multiple policy objectives and sub-optimal public sector supply chain
management regulatory environment;
 inadequate planning and inefficient performance management;
 highly prescriptive and complex procedures and operational challenges which
are related to supply chain management;
 high cost of procurement and less focus on value for money;
 misaligned organisational structures;
 limited supply chain management capability and high turnover;
 fraud and corruption and unethical behaviour; and
 excessive decentralisation of the procurement system.
23
The establishment of the Office of the Chief Procurement Officer (O-CPO) at NT is
the indication of government’s commitment to improve public procurement and
address deficiencies. The mandate of the O-CPO is to modernise and oversee the
South African public sector SCM system and to ensure that the procurement of
goods and services is competitive and cost effective. NT’s review contains strategic
sourcing as one of the SCM reforms (NT Public Sector Supply Chain Management
Review, 2015:35). SCM reform emphasis is on the application of strategic sourcing
best practices by all national departments, provincial departments, local
municipalities and state-owned companies to realise cost savings and establish long-
term relationships with suppliers. Reforms are underway to ensure an environment in
which such a system can flourish. According to NT Public Sector Supply Chain
Management Review (2015:12), it is expected that the reforms will result in:
 good governance and accountability;

 cost-effectiveness, both financial and in terms of human capacity;
 reduced barriers to entry for SMMEs and emerging contractors;
 effective supplier participation; and
 improved contract management leading to increased savings and good-quality
on-time delivery.
According to the NT Public Sector Supply Chain Management Review (2015:35),

strategic sourcing could generate savings of up to 20% of the costs of goods and
services purchased, provided it is properly applied and continue to improve.
The Department of Public Enterprises, a shareholder to some SOCs, including

Eskom, requires SOCs to develop a plan to deal with socio-economic challenges
through its procurement. Consequently, Eskom initiated supplier development to
leverage and optimise its procurement spend to actively stimulate economic activity
and to achieve maximum sustainable local development (SD&L Plan, 2013/2015:
23).
Public procurement in South Africa still encounters immense challenges ranging from
lack of proper knowledge, skills, capacity, non-compliance with supply chain
processes and regulations, inadequate planning, monitoring and evaluation of supply
chain management to an excessive decentralised procurement system (NT Public
Sector Supply Chain Management Review, 2015:4-5).
24
Ambe and Badenhorst-Weiss (2012:255-256) suggest strategic sourcing as the
answer to these public procurement challenges. The authors recommended the
following to improve public procurement in South Africa:
 analysis of public procurement requirements at all levels of government;

 centralisation of high risk/low cost items and high risk/high cost items with
long-term contracts and high contract levels and supplier management;
 procure low risk/high cost items through one agency for different public
institutions and decentralise distribution; and
 procure low risk/low cost items on a decentralised basis by means of
quotations from local suppliers.
The recommendations by Ambe & Badenhorst-Weiss, 2011b & 2012 focuses on

processes, systems and practices. Following is the discussion of how the Group
Commercial at Eskom is constituted.
2.3 Composition of Group Commercial at Eskom

GC is one of the divisions at Eskom through which strategic sourcing and supplier
development are administered. The mandate of GC is to optimally manage external
spending, procurement processes, inventory management, warehousing and
logistics, contract negotiations and establishment, and supplier relationship
management. GC is responsible for driving transformation through supply chain
management, such as supplier development and localisation, and procurement
equity initiatives (Eskom Corporate Plan, 2015/16 - 2019/20:156). The division
consists of eight functions with unique and interconnected roles. In Figure 2.1, a
schematic representation of the functions is shown (Eskom GC Business Plan, 2012
– 2017:56-57).
Figure 2.1: Functions of Eskom Group Commercial Division

Source: Eskom Group Commercial Business Plan (2012/2013-2016/2017)
25
The GC division consists of the following eight functions:
1. Project Sourcing (PS) is solely responsible for all sourcing activities that
pertain to projects and as such, it services all capital projects. It advises
divisions on their respective capital project initiatives and the correct
methodology to use.
2. Tactical Sourcing (TS) undertakes all tactical purchasing of goods, services
(tangible and intangible) covering capital and operational expenditure and
fixed assets.
3. Supply Chain Operations (SCOPS) is a non-sourcing function and is critical in
the entire commercial value chain on inventory, warehousing and supply
planning management across the business.
4. Primary Energy procures all primary energy required for the running of all
power stations excluding nuclear. This includes coal, water, sorbent, including
all the logistics pertaining to the transportation of the relevant energy sources.
5. Business Enablement is a cross-cutting entity that provides support through
research and benchmarking with other state-owned entities as well as other
global utilities. It provides business support to the rest of GC which includes
strategy integration and business performance reporting.
6. Risk and Governance provides a cross-functional view and identifies
commercial risks, as well as treatment plans of such risks, including matters of
conflict of interest that include investigations of breaches of procedures. It
monitors and manages all the governance structures to ensure compliance.
7. Commodity Sourcing (CS) procures all commodities that effectively keep the
operations running in such a manner that all required commodities are
contracted at an optimal and strategic level ensuring continuity of supply. This
unit is responsible for supplier relationship management with suppliers
supplying commodities to Eskom. CS operates by using the Eskom’s 7x7
sourcing methodology illustrated in Figure 2.3. Its primary objectives include:
 to establish and manage Eskom group contracts based on sound
commodity sourcing strategies; and
 to implement a world–class strategic sourcing for the requirement of goods
and services in a cost effective, fair, competitive, efficient and lawful
manner, while using its procurement spend to maximise local content,
create jobs and develop skills.
26
8. Supplier Development and Localisation (SD&L) is uniquely structured to
ensure the delivery of socio-economic imperatives through the management of
Eskom expenditure. This includes elements of optimising B-BBEE, skills
development, job creation, localisation and industrialisation. The SD&L Plan
for the period 2013 to 2015 consists of the 42 focus areas identified for
localisation opportunities (Appendix A). The main objective of SD&L is to
achieve maximum and sustainable local development impact. It is carried out
through leveraging Eskom’s procurement spend in a manner that allows
flexibility within the business in order to accommodate government’s local
development initiatives and policies. The SD&L objectives shown in Figure 2.2
are developed to address some of the socio-economic challenges. Note that
SD&L and supplier development are used interchangeably in this study.
Figure 2.2: Supplier Development and Localisation Objectives

Source: Adapted from Supplier Development and Localisation Plan (2013-2015:24)
From the eight functions of GC, CS and SD&L are the underlying functions for this
study and that is where respondents and participants are located.
Following a detailed review of GC’s performance and processes with key

stakeholders across Eskom, a number of challenges have been identified (Eskom
Corporate Plan, 2015/16 - 2019/20:09). These challenges are mainly related to
procurement and SD&L, and they are presented in Table 2.1. Procurement refers to
all departments / sourcing functions responsible for sourcing of goods and services
such as CS, TS and PS.
27
Table 2.1: Eskom’s Group Commercial Challenges
Procurement: CS,TS and PS Supplier Development and Localisation
 Delays in renewal of expiring national contracts.  Limited integration within SD&L
 Ineffective cross-functional team. and between SD&L and CS.
 Government regulatory framework (PPPFA)  Delays and inconsistencies in the
stifling local development. SD&L assessment process.
 GC overall strategic misalignment with Eskom’s  Overall lack of support by SD&L.
Corporate Strategy.  Poor training and communication.
 Undefined priorities and processes and lack of  Overlapping focus and tasks
interface. across the SD&L functions.
 Ineffective implementation of performance  Limited supply chain visibility.
management and misaligned performance  Ineffective monitoring and
expectations. reporting.
 Inaccurate /incorrect/misaligned performance  Inefficient planning and
measures. implementation.
 Deficiencies in skills and capabilities impacting  Inadequate performance
behavioural factors. management.
 Inconsistent transition and ineffective training  Fragmented operational
processes excellence.
 System integration and functionality challenges.  Limited integration with sourcing
functions.
Source: Adapted from Eskom Evaluation of Procurement Strategy (2013:9)
These challenges point to a lack of integration, inadequate capacity, inefficient

planning and implementation and performance management as fundamental gaps. A
great part of these challenges are more associated with processes, practices,
planning, skills and training and efforts should have been directed to that for
intervention.
A literature framework which combines strategic sourcing and supplier development

at Eskom is developed and illustrated in Figure 2.3. It portrays strategic sourcing,
supplier development, the manner in which they are implemented at Eskom and how
their processes can be possible linked as well as possible outcomes.
2.4 Literature Framework: Strategic Sourcing and Supplier Development at

Eskom
Supply chains are increasingly recognised globally as a method to deal with issues of
risks, costs and relationships. Strategic sourcing in the supply chain is regarded as
an organised and collaborative approach which leads to long-term benefits. Sánchez-
Rodríguez (2009:161) affirms that strategic sourcing has a direct link on the
performance of an organisation.
28
The author further proposes that strategic sourcing needs to take a lead from other
areas such as supplier relationship management (SRM), negotiations and supplier
development, amongst others, in order to add value.
In Figure 2.3, a literature framework about strategic sourcing and supplier

development at Eskom is presented. It shows an integration of the strategic sourcing
and supplier development, the implementation methodology or model and how the
integration could lead to performance improvement and competitive advantage.
Rotich, Aburi & Kihara (2014:11) pronounce that there is a direct link between
supplier development and competitive advantage.
Figure 2.3: Literature Framework - Strategic Sourcing and Supplier Development

The literature framework illustrates the relationship between elements of this study:
strategic sourcing, supplier development, integration, models, performance and
competitive advantage. The 7x7 sourcing methodology described as Model 1 in
Figure 2.5 is used to implement strategic sourcing at Eskom. Supplier development
has its own unique operating model described as Model 1 in Figure 2.12, however
procurement spend is exploited to attain its objectives. The red dotted circle in the
framework represents a unique supplier development operating model in Eskom and
the model is not linked with the 7x7 methodology of the strategic sourcing. The inter-
relationship between strategic sourcing and supplier development has a potential to
lead to improved performance and competitive advantage at Eskom. As a result, the
processes can be easily intertwined to ensure operational excellence and efficiency.
29
Strategic sourcing and is supplier development can be a well-placed source to
improve performance and establish and maintain competitive advantage (Yavas et
al., 2011:04). This study establishes the inter-relationship between strategic sourcing
and supplier development and its associated potential outcomes to address some of
the integration challenges.
Moonen (2005:47) suggests that suppliers can be managed through strategic

sourcing. On the other hand, supplier development programmes or projects require
support of the sourcing and organisational strategies (CIPS, 2013:3). According to
Sánchez-Rodríguez et al. (2005:292), supplier development activities should not be
pursued independently, but should complement each other.
According to Sánchez-Rodríguez (2009:161) there is scant research in the field of

supply chain management to analyse the relationship between strategic sourcing and
supplier development. The author stresses the importance of strategic sourcing and
supplier development as methods to create customer value and superior
performance. Studies by Boateng (2015); Petje (2010); Ochieng (2014) and Modi
and Schoenherr (2011), underline long-term benefits and the importance of
integrating strategic sourcing and supplier development. However, they have not
delved into detail of how this integration should be done and they lack a case study
perspective on which to base their findings. This indicates that there is still a research
gap in researching the concepts of strategic sourcing and supplier development in
conjunction or combination. Unfortunately, the academic literature has not yet
explored, at least not with any depth, how the strategic sourcing can be a catalyst for
supplier development.
The role of sourcing has evolved and literature emphasises greater benefits from
shifting tactical purchasing to strategic sourcing (Amaya & Devatha, 2011:1). A
number of external forces driving this shift are globalisation, technology,
organisational consolidation, empowered consumer and cost efficiency (Coyle et al.,
2013:7-11). The procurement shift from tactical to strategic needs to be dynamic to
accommodate several aspects which are inherent and inseparable from strategic
sourcing, and supplier development is one of those aspects.
There is a growing trend by companies in strengthening competitive advantage by

reducing cost and improving quality and service through collaboration with suppliers
(Rotich et al., 2014:10).
30
As a result, some supplier development initiatives are prioritised by several
companies to improve supplier performance (Li et al., 2012:210).
Boateng (2015:20) asserts that South Africa’s industrialisation, economic

development and strategic sourcing are inextricably linked. The author emphasises
the need for South Africa to creatively adapt strategic sourcing for long-term socio-
economic developmental programmes. Furthermore, strategic sourcing enables
governments to industrialise, develop and create long-term jobs in certain deprived
localities and rural areas. Strategic sourcing is a concomitant of industry
development, and supplier development, as a channel for industrialisation and
economic development, requires a strategic relationship with strategic sourcing.
An independent supply chain consultant, Thapelo Petje advocated that supplier

development, being a strategic component in procurement, should form part of the
buying organisation’s strategic sourcing to ensure continuous improvement (Petje,
2010). This proposition has some inherent benefits such as process improvement
and cost savings. Although strategic sourcing methodology is mainly aimed at
optimising the TCO in the value chain, Dolan and Fedele (2004:3) maintain that it is
also the best vehicle to identify value creation opportunities. In implementation of the
methodology, procurement spend can be increased to support supplier development
programme to increase the pool of existing suppliers or new suppliers.
Several authors (Wagner, 2011; Talluri, Narasimhan & Chung, 2010;

Chandrasekaran, 2010; Sharma, 2010; Trent & Llewellyn, 2009; Williams & Moore,
2007) reveal that supplier development practices have a significant contribution in
improving efficiency for supply chain performance. Li et al. (2012:363) has
established that suppliers have recognised the value of supplier development and
shown significant interest to improve performance and achieve competitive
advantage.
For practitioners in strategic sourcing, the following principles, unique aspects,

golden rules of strategic sourcing accompanied by the benefits of strategic sourcing
should be understood.
31
2.5 Strategic Sourcing
Strategic sourcing is where many popular business strategies converge. It has been
applied successfully to companies and institutions of all types, sizes and ages
(Banfield, 1999:21-32. However, it has its principles, own unique aspects, and golden
rules which need to be considered in execution.
I. Principles of Strategic Sourcing
Certain issues need to be taken into consideration prior to introducing strategic

sourcing in an organisation. These relate to principles, unique principles and golden
rules for strategic sourcing.
Strategic sourcing is complex in nature and needs to be guided by certain principles.

Coyle et al. (2013:559) advise that the strategic sourcing process should be guided
by five core principles as drivers to achieve the desired level of value. These
principles include the following:
 Assess the total value
Value of supplier relationship and TCO ownership model are essential to ensure
better efficiency in the supply chain.
 Develop individual sourcing strategies
Strategic commodities or categories need to have individual sourcing strategies.
 Evaluate internal requirements
Customer requirements and commodity specification must be analysed and
understood.
 Focus on supplier economics
Industries must be assessed appropriately to acquaint with market conditions.
 Drive continuous improvement
Establish continuous improvement with the supplier.
II. Unique Aspects of Strategic Sourcing
Strategic sourcing is regarded as a comprehensive process and has unique aspects

which differentiate it from other SCM practices (Coyle et al., 2013:555). These
aspects consist of:
 Consolidation and leveraging of purchasing power
This refers to concentration of larger volumes of purchases into fewer
suppliers or fewer purchasing transactions for significant savings.
32
 Emphasis on value
The focus needs to be on achieving greater value such as reduced costs
over the product life cycle.
 More meaningful supplier relationships
Development of collaborative relationships which are sustainable can be
effective depending on the concerned type of purchase.
 Attention to be directed to process improvement
Reformulation and streamlining of purchasing processes are key elements
of strategic sourcing and looks beyond the need for effective purchasing
practices and focuses attention on the business processes that are related
to the purchase considered.
 Enhanced teamwork and professionalism
This involves supplier and customer participation in a cross-functional
team to enable implementation and realisation of strategic benefits.
Strategic sourcing requires that commodities be categorised in terms of strategic

importance and the complexity of the supply market. The manner in which
categorised commodities are procured determines the different sourcing approaches.
The commodity categories are illustrated in Figure 2.4 and include noncritical,
bottleneck supplies, leverage supplies and critical strategic supplies.
Figure 2.4: Commodity Portfolio Matrix

Source: Adapted from Handfield, Krause, Scannell & Monczka (2000:39); Coyle, Langley,
Novack & Gibson (2013:557)
33
The commodity portfolio matrix in Figure 2.4 shows that not all items and services
purchased are of equal importance. It suggests that supply chain management
practitioners must employ varying procurement strategies based on the risk and
value of the item in each quadrant. Therefore, each quadrant needs to have a
different procurement strategy. For example, commodities in the critical strategic
quadrant, supplier development is warranted as commodities in the category are
strategically important, high spend value and therefore requires supplier relationship
management. Commodities in this quadrant often have significant impact on both
operations and the commercial /mission critical goals of the organisation. They
(commodities) require extensive management attention, with the highest levels of
organisational resource input in the sourcing process in terms of the expenditure,
time and involvement (IIAPS, 2015:5).
In addition to the unique aspects, there are golden rules which need to be given
attention by organisations contemplating to introduce or improve strategic sourcing.
III. Golden Rules for Strategic Sourcing
Kocabasoglu and Suresh (2006:4) establish certain factors that must be examined
for strategic sourcing to work. These factors are referred to as building blocks of
strategic sourcing:
 Status of the purchasing function within the organisation;
 Level of internal coordination of purchasing with other functions;
 Information sharing with key suppliers; and
 Development of key suppliers.
Adoption of strategic sourcing requires clarification of roles both within the

organisation and in buyer-supplier relationships. A buying organisation needs to be
on top of strategic sourcing and ensure internal processes and systems are in place
prior engaging with suppliers (Handfied et al., 2000:40). Planning and communication
are key integral aspects for integration. Boateng (2015:37) identifies some conditions
which he referred to as golden rules for effective strategic sourcing. These golden
rules could assist organisations considering introducing or improving strategic
sourcing.
34
They are as follows:
 Vision for strategic sourcing initiative and quantifiable goals;

 Critical assess the current procurement and sourcing process;
 Avoid the piecemeal approach. Use sourcing as an integral component of all
business strategies and take a holistic and enterprise-wide approach;
 Be realistic and deliver value fast to improve;
 Be strategic in driving forward the ambitions of the enterprise;
 Align the total requirement specifications to the organisation and value chain;
 Create a platform to share knowledge within the value chain;
 Make strategic sourcing beneficial for all those embarking on the journey and
have the right people from the outset;
 View strategically selected suppliers as partners;
 Mindful of the politics and C-suite support;
 Ensure buy-in across the organisation as sourcing is not an isolated decision
due to the need to incorporate other relevant functions.
The principles, uniqueness and golden rules are the pillars in the strategic sourcing
process and should guide implementation and continuous improvement process. If
they are taken into consideration, the following benefits can be accrued.
IV. Benefits of Strategic Sourcing
This section contains strategic sourcing benefits by which organisations could impact
the profit. Both the private and public sectors can gain from the adoption and
implementation of strategic sourcing. There are various benefits for strategic sourcing
(NT Supply Chain Management, 2015; ISM, 2015) and these include:
 Organisations can use their purchasing power to negotiate good deals through
leveraging purchasing or buying power.
 Strategic sourcing reduces fragmented procurement and duplication of effort
that take place across departments or divisions.
 Strategic sourcing eliminates price differentiation and reduces inconsistency in
prices between the private and public sectors and between government
departments.
35
 Strategic sourcing encourages uniformity in government policy positions on
certain commodities and services and standardisation, the development and
use of standardised specifications of common commodities.
 Strategic sourcing can increase government efficiency by providing
information on government’s spending patterns. Strategic sourcing provides
for a greater understanding of the supplier market and how to involve them in
the procurement process.
 Strategic sourcing can enable organisations to develop targeted skills set or
expertise about commodities among purchasing officials and reduce
complexity for end users.
 Strategic has a potential to improve vendor performance owing to increase in
clarity of requirements and improvement in suppliers’ relationships to identify
new and innovative solutions.
Six different models of strategic sourcing are discussed in the following section.
These models are about sourcing commodities through strategic sourcing
methodology from suppliers but there is no indication how these suppliers are
developed to reach the required performance.
2.5.1 Models of Strategic Sourcing
The models of strategic sourcing provide insights into how different organisations
conduct strategic sourcing and what steps are incorporated in each model. These
models are shown in Table 2.2 and each model in discussed.
36
Table 2.2: Models of Strategic Sourcing
Source: Eskom Group Commercial Business Plan (2012/2013-2016/2017); Coyle, Langley,

Novack & Gibson (2013:559) as adapted from Adjoined Consulting, LLC, Kanbay, Inc.;
National Treasury (2015); Smeltzer, Manship & Rossetti (2003); Engel (2004); Dolan and
Fedele (2004)
Model 1
In the case of Eskom, the sourcing of strategic commodities involves a strategic
sourcing methodology referred to as the 7x7 sourcing methodology. The
methodology consists of seven steps as depicted in Figure 2.5.
Figure 2.5 Model 1: Eskom’s 7x7 Strategic Sourcing Methodology

Source: Eskom Group Commercial Business Plan (2012/2013-2016/2017:61)
37
Several steps or tasks in most sourcing methodologies are contingent upon previous
steps/tasks. Each step includes tasks activities to be executed to lead to a specific
milestone. The 7x7 strategic sourcing methodology (GC Business Plan, 2013-
2017:61) consists of the following sequential steps:
Step 1: Project Planning Kick-off

This step involves putting together a cross-functional team (XFT) from different functions
or departments and the signing-off of the project charter by all members. Each member
has roles and responsibilities in the XFT and the commodity manager is responsible to
lead the team.
Step 2: Profile Internally and Externally

When the first step is complete, supply and spend are analysed pertaining to the category
or commodity. The supply market in terms of the number of suppliers, TCO model, raw
materials and industry structure form part of the supply analysis.
Step 3: Develop Sourcing Strategy

The sourcing strategy is developed by the XFT using spend, supply market analysis and
TCO information. The inputs from previous steps drive formulation of the strategy.
Step 4: Screen Suppliers and Selection Criteria

The objective of Step 4 is to identify all possible suppliers in the market relevant for the
category and then narrow the list of suppliers, using an objective scoring process, to
those that meet Eskom’s key requirements for the supply of the category. The following
are key deliverables of this step:
 initial list of suppliers in the market;
 completed request for information (RFI);
 RFI Selection factors and weightings;
 RFI evaluation summary; and
 short list of suppliers to send an in-depth Request for Proposals (RFPs).
38
Step 5: Conduct Auctions and RFPs
The objective of Step 5 is to solicit bids / proposals from suppliers in a standard
comparable format to determine those suppliers suitable for further negotiation or
contracting. The key deliverables for this step are as follows:
 list of Request For Qualifications / Request For Proposal (RFQ / RFP) key
elements;
 completed RFQ / RFP;
 completed bidder pack for an eAuction event and for training conducted;
 eAuction event delivered or RFQ / RFP responses received;
 RFQ / RFP or an eAuction evaluation matrix; and
 suppliers selected for contracting or further negotiation.
Step 6: Shape and Negotiate Value Propositions

The objective of Step 6 is to have a formal agreement in a “win-win” situation that allows
both parties to envisage prospects of doing business. Step 6 consists of these
deliverables:
 fact-based negotiation templates;

 negotiation strategy and preparation pack; and
 completed negotiation with agreed outcomes / minutes.
Step 7: Implement Agreements

This step involves the implementation of the agreements and to ensure relevant
individuals understand the changes and the implications thereof. This step is expected to
achieve these deliverables:
 implementation plan;
 transition / switching plan;
 final executive summary presentation and sign-off;
 handover pack for contracts department;
 implemented agreements; and
 framework and data summary for tracking contract compliance and performance.
39
From Figure 2.5, Model 1, it follows that Eskom’s strategic sourcing methodology is silent
on supplier development implementation. The Eskom 7x7 strategic sourcing
methodology depicted in Figure 1.2 from the Group Commercial business plan indicates
a four-step supplier management and development and it is ambiguous whether this was
planned as a supplier development process in the methodology. Even so, supplier
development objectives are not stated as key deliverables in steps of the strategic
sourcing methodology.
Model 2
Coyle et al,. (2013:559) describe another strategic sourcing methodology similar to
Figure 2.5 but slightly different towards the last two steps. Therefore, similar steps
are not discussed in this model. A second model of strategic sourcing consists of
seven steps as illustrated in Figure 2.6.
Figure 2.6: Model 2: Strategic Sourcing Methodology

Source: Coyle, Langley, Novack & Gibson (2013:559) as adapted from Adjoined Consulting,
LLC, Kanbay, Inc.
There are only two different steps in this model:

 Transition and integration: It involves cultivating of relationship, new processes
and project management.
 Performance management: It concerns monitoring and reporting of the
sourcing progress, costs savings and continuous improvements.
One of the important features of the strategic sourcing is the application of the Total
Cost of Ownership (TCO) in order to deal with cost savings. This model includes
important key deliverables and outcomes such as TCO, monitoring and reporting,
40
training on new processes to ensure continuous improvement. It ensures that the
objectives or desired outcomes are realised or the actual performance ties in which
predetermined outcomes for corrective measurement.
Model 3
Owing to public procurement challenges and inefficiencies in the supply chain
management, the South African government view strategic sourcing as a robust and
sustainable solution to efficient management procurement spend. In Figure 2.7, a
strategic sourcing methodology developed by NT to eliminate and reduce public
procurement challenges is depicted (NT Supply Chain Management Review, 2015:7-
8).

Source: Adapted from National Treasury Strategic Procurement Framework (2015:17-20)
Step 1: Opportunity Analysis

This involves identifying spend areas where there are opportunities to reduce costs
or improve processes. Critical to this step is to prioritise spend areas based on
importance, supply market complexity and the extent to which spend areas are
common across the organisation. This is being done to align with the department’s
service delivery objectives.
41
Step 2: Prepare and Engage
During this phase the project is scoped, stakeholders are identified and a cross-
functional team is established. The project team must put in place a governance
structure, develop a communication plan, establish timelines, set milestones and
create a project charter.
Step 3: Gather Information

This step requires the project team to gather information under three headings:
I. Needs assessment and impact of the purchase category
The team must obtain information on existing sourcing practices, plans and
contracts, and find out from stakeholders what they need in terms of
functionality, quality, volumes and other issues. At this stage, the team must
identify opportunities to reduce costs, and carry out an initial risk analysis.
II. Analyse Internal Information.
In this phase, the team collects and analyses information about past purchase
trends, price history, performance of current suppliers and analyse the
department’s risks and overall spend. This is usually collected from internal
customers or end-users.
III. Analyse External Information
The team carries out supplier analysis to determine who the major suppliers
are, how they are organised in the market and what the item’s main cost
drivers are. This information is usually collected from suppliers or industry
bodies.
Step 4: Evaluate and Develop a Sourcing Approach

In this phase, the project team analyses and interprets all of the information
gathered. This is usually grouped under the following headings:
 Supplier characteristics.
 Commodity characteristics.
 Spend information.
 Supply market characteristics.
The team uses this information to determine the baseline for calculating savings. It
will also be able to identify sourcing options, decide on the best sourcing strategy,
develop evaluation criteria, and draft the business case and implementation plan. At
this point, they should also get approval to implement the strategy.
42
Step 5: The Bidding Process
If the sourcing strategy suggests that the strategy should be a competitive bidding
process, Step 5 will be followed. This involves the normal process of bid
advertisement, bid evaluation, supplier short-listing and recommendation, bid
adjudication and bid award. Other activities in this step are price benchmarking,
supplier vetting, implementing a negotiation strategy and calculating potential
savings.
Step 6: Contracting and Service Level Agreements (SLAs)

This step formalises the award by putting in place a contract between the department
and the chosen supplier(s). Before signing the contract, the parties should agree to
performance metrics for both sides; for example on-time payment and on-time
delivery. All performance measures, expectations, prices and other important
contract obligations should be documented in a SLA and agreed by both parties.
Step 7: Manage and Review Performance

This step tends to be the most neglected part of the sourcing process. Sourcing is
often detailed and laborious because the sourcing team is disbanded or because the
relationship between purchaser and supplier is not properly cultivated.
There appears to be a lack of supplier relationship and continuous improvement

aspects to adjust to ever-changing environment as opposed to previous one (Model
2). It can be viewed as a contract-oriented model which seemed to have overlooked
soft issues.
Model 4
This model consists of seven steps and have different stages or steps compared to
Models 1 and 2 as illustrated in Figure 2.8.
43
Source: Smeltzer, Manship & Rossetti (2003:19-21)
Model 4 analysed the integration of strategic sourcing and negotiation planning in 29

cases (Smeltzer et al., 2003:18-24). About fifty-one percent (51%) of the 29 cases
failed to meet the price range and Best Alternative to a Negotiated Agreement
(BATNA) conditions compared to forty-nine percent (49%) which have managed to
develop negotiation tactics. Smeltzer et al., (2003:20) found that the negotiation plan
was not well-integrated with strategic sourcing steps. The crucial components of
strategic sourcing such as performance management and supplier relationship were
overlooked in Model 3.
Step 1: Categorise the Purchase

The purchase of goods and services are categorised in value / profit potential and
risk / uniqueness through a segmentation quadrant. This is done to ensure alignment
with the organisation’s strategic goals so that the supply strategy matches the correct
criteria. Three companies out of the 29 cases over-emphasised the importance of the
purchase to the organisation.
Step 2: Market Analysis

The second step entails conducting market analysis to determine the location of
power within the buyer-supplier negotiations. The study indicates that markets can be
either buyer-centric or seller-centric / supplier-centric and Table 2.3 provides
characteristics of these markets.
44
Table 2.3: Characteristics of Buyer-Centric or Seller/Supplier-Centric Markets
Buyer-Centric Market Seller/Supplier Centric Market
 Abundance of sellers.  Abundance of buyers.
 Excess capacity.  Shortage of capacity.
 Large spend by one buyer  Small average buyer-spend
relative to the average supplier’s relative to average supplier’s
revenues. revenues.
 One supplier possessed
specialised, proprietary
technology.
Source: Adapted from Smeltzer, Manship & Rosseti (2003:19-20)
The nature of the market whether buyer-centric or supplier-centric has a direct

influence on the category or commodity strategy to be sourced. The study reveals
that certain sourcing teams did not comprehensively evaluate all possible power
imbalances between the buyer and the supplier.
Step 3: Supply Strategy

The deliverables of this step involve determining whether the item should be single-
sourced or multiple-sourced, if spend consolidation is a viable tactic, and the nature
of relationship that needs to be built. According to the study, seven teams out of 29
cases failed to comprehensively complete supply strategy in the strategic sourcing
process.
Step 4: Total Cost or Price Analysis

The fourth step in strategic sourcing process compares a cost or price of the
supplier’s goods and services based on the supply strategy’s requirements
developed in Step 3. The analysis of the nature of the buy determines the extent of
strategic value, uniqueness, complexity of the item, and whether price comparison or
total cost of ownership is viable to be considered. The study found that 11 sourcing
teams out of the 29 cases failed to conduct comprehensive cost or price analyses.
Furthermore, few of the teams developed complex and impressive total cost models;
instead price is used as a differentiator.
Step 5: Bid Development

The XFT should request bids from suppliers that equalled the requirements of the
previous steps. Documentation such as RFQ and RFP are key tools in bid
development in strategic sourcing.
45
Step 6: Supplier Selection
The sourcing team should conduct supply base rationalisation or additional cost/price
analysis based on the responses to the RFQs and RFPs. Individual negotiating plans
for each supplier from the supply base should be developed.
Step 7: Development of a Negotiation Plan

A negotiation plan should follow these negotiation tactics or criteria:
 Price range resulted from market analysis and cost analysis; and
 best alternative to a negotiated agreement (BATNA) from supplier selection
stage
Strategic sourcing and negotiation are important business processes. Smeltzer et al.
(2003:22-24) provided a succinct version of findings as follows:
 Lack of appreciation of strategic sourcing as an integrated process.

 Disintegrated process between strategic sourcing and negotiation.
Underdeveloped negotiation plan.
 Lack of knowledge to effectively integrate strategic sourcing and negotiation
plan to create an integrated process.
 Poor planning and lack of process integration demonstrated by the selection of
negotiation styles.
 Behavioural factors such as the culture of the organisation have a major
influence on the decision and actions of the organisations.
 Misunderstanding of the strategic sourcing.
 Sourcing practitioners did not see a connection between strategic sourcing
and negotiation planning.
 Strategic sourcing existed in name only. Existence of strategic sourcing
process but not being practised needs emphasis of process integration by
managers.
 Training needs to be provided to understand the importance of linkage
between strategic sourcing and negotiation plan.
The strategic sourcing methodology in Figure 2.8 (Model 4) has ignored the agreement,
supplier relationship and performance management and review areas.
46
Model 5
The Vice President of Project Services at the Procurement Centre, Robert Engel,
presented a step-by-step strategic sourcing practical model at the 89th Annual
International Supply Management Conference 2004. Engel (2004:1-5) acknowledges
strategic sourcing as one of the most powerful tools to be used to produce significant
results in an organisation. The eight strategic sourcing steps are shown in Figure 2.9.

Source: Adapted from Engel (2004:1-5)
Step 1: Identify the Target Spend Area

This step involves the identification of spend areas that are common across the business.
After identification and the selection of spend areas, prioritisation of the spend areas is
required to match the goals and objectives of the organisation. It is suggested that an
executive sponsor should be allocated to initiate and drive it along in ensuring success.
This could have the potential of eliminating and reducing resistance at operational levels.
Step 2: Create the Sourcing Team

Since strategic sourcing is a collaborative approach, the involvement of members from
functions other than procurement, is crucial. The sourcing team needs to be selected
from a cross-functional perspective ranging from, amongst others, engineering, research
and development, finance, maintenance and health / environmental / safety. Buy-in from
the onset by the cross-functional team cannot be over-emphasised in the sourcing.
47
Step 3: Develop a Team Strategy and Communication Plan
This step encompasses strategy development on the identified spend areas. In this step,
the cross-functional team will develop a project charter with specific goals and objectives,
timelines and milestones as a road map to attain the team objectives. It is imperative for
the team to develop a communication plan that outlines how team progress and updates
will be communicated as this set to strengthen credibility of the project and keep an
organisation informed. An understanding of the existing supplier capabilities and future
requirements of the commodity or service is one of the most important actions in this
step.
Step 4: Gather Market Information

As the strategy development and the existing supplier capabilities have been completed,
analysis of the supplier capabilities in the market needs to be done. The information
about suppliers can be obtained through request for information (RFI).
Step 5: Develop a Supplier Portfolio

A criterion for evaluation can possibly be developed by the team based on the information
received from the RFIs. Potential suppliers can be put on supplier development and RFP
can be requested from suppliers who offer total value to the sourcing process in terms of
their pricing and commercial propositions.
Step 6: Develop a Future State

This step is regarded as one of the most important steps in the entire sourcing process. It
includes an evaluation process whereby a business case is developed, gap analysis
performed, and establishing of the critical criteria to select supplier(s). The main criteria
are TCO, recognise the total system cost (TSC) and develop performance metrics:
 TCS
This refers to the understanding of the true cost of the product or service and
includes, amongst others, acquisition cost, operating cost, maintenance cost,
training cost, warehouse cost and transport cost. The TCO should be understood,
so that an informed decision is taken on the basis of best value rather than lowest
unit price.
48
 TSC
It acknowledges the cost of doing business with the supplier base after TCO. It
also includes interaction costs between the buyer and suppliers, as well as buyer’s
costs incurred to build and maintain the relationship with the select supplier base.
 Performance Metrics
For sustainable and collaborative relationship with suppliers, performance metrics
need to be developed for both the buyer and suppliers. These could include
reliability, responsiveness, agility, cost, and asset management. Considering the
unique commodity or service characteristics, each commodity or service should
have different metrics applicable to it and established performance review
approach.
A sub-element of this step is the three-phase process concerning the awarding of

contracts:
Phase 1- Selection of supplier base on best value;
Phase 2 - Establishment of continuous improvement objectives with the suppliers; and
Phase 3- Innovation from selected suppliers as key to significant savings.
Step 7: Negotiate, Evaluate, Commitment and Agreement

The sourcing needs to take into consideration the following important points during
negotiation and selection stage:
 The likelihood of significant savings comes from supplier innovation; therefore
longer-term agreements are more appropriate than the short-term ones. If
longer-term agreements are preferable, then there is the likelihood of
developing a trust and working relationship to fully realise savings in
continuous improvement processes or innovation in Phase 2 or 3 of Step 6.
 Ensure higher levels of trust during the negotiations by being firm and fair for
long-run rewards.
 Finalise performance metrics during the negotiation stage instead of post-
award of contract.
 Develop a sense of commitment to succeed and display a “win-win” attitude.
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Step 8: Supplier Relationship Management (SRM)
The last step involves building relationship with suppliers. It includes the following steps:
 focusing on contract execution;
 the establishment of field effectiveness teams to implement new ideas or
processes;
 developing continuous improvement cost drivers with the selected suppliers;
and
 refining the score cards and metrics originally developed to measure
performance.
Strategic sourcing can take any number of steps but there are essential elements which
cannot be compromised. Recently supplier relationship, performance management and
continuous improvement determine success of strategic sourcing.
Model 6
The Gillette Company launched a strategic sourcing initiative to create savings to
investment and positively impact on the company’s results. A formal 7x7 step strategic
sourcing methodology was implemented to competitively source and evaluate suppliers
on cost, quality and services provided (Dolan & Fedele, 2004:1-3). The strategic sourcing
methodology employed by The Gillette Company is illustrated in Figure 2.10.
Figure 2.10: Model 6: The Gillette Company-Strategic Sourcing Methodology

Source: Dolan & Fedele (2004:2)
Although it is also a 7x7 step methodology, strategic sourcing by The Gillette Company
combines certain steps from Models 1 and 2. The focus in Model 6 is in the first three
steps of strategic sourcing methodology since they present a great opportunity to
incorporate supplier diversity goals (Dolan & Fedele, 2004:3-6). Supplier diversity in the
US can be equated to some of the supplier development objectives such as
50
transformation in South Africa where marginalised suppliers are given opportunities to
partake in economic activities. These steps are viewed as important for the purpose of
this study where supplier development can be incorporated and are discussed
hereunder:
Step 1: Develop the Category Profile

This step involves an understanding of the category profile by the cross-functional team
through supplier analysis, spend analysis, supplier market analysis and commodity
characteristics. Category profile can include various aspects such as:
 what is being bought and from which suppliers;
 product / service characteristic / specifications;
 current product / service cost;
 internal management of spend;
 market trends and economics; and
 available negotiation leverage with suppliers.
This step is critical to supplier diversity as it provides an understanding of the Minor and
Women Business Enterprise (MWBE) spend levels which can assist in setting realistic
and future targets. It identifies internal stakeholders, gathers data, assesses and selects
vendors. It enables the team to break down spend into subcategories, components,
services, transportation costs and administrative costs to either consolidate with one
supplier or spread among several suppliers. Dolan and Fedele (2004:3) maintained that
the step facilitates procurement practitioners in setting realistic supplier diversity targets
and strategies.
Step 2: Generate the Supplier Portfolio

This step involves inclusion of minority and women-owned suppliers and non-traditional
suppliers and a list of manageable suppliers for negotiation process. The process of
generating the supplier portfolio involves a team which often sets diversity goals on the
procurement spend or subcategory sourced with MWBEs. Other activities may include
partnerships with Tier 1 suppliers to create Tier 2 opportunities for supplier diversity
purposes and the creation of an internal supplier diversity database.
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Step 3: Develop the Sourcing Strategy
In this step, the category needs to be assessed through the category position matrix or
commodity portfolio matrix shown in Figure 2.4, to develop a comprehensive sourcing
strategy. It can be a leverage, strategic, non-critical or bottleneck category. Once the
category is positioned in the portfolio matrix, the cross-functional team can determine the
most appropriate sourcing strategy. The graphical representation of sourcing strategy
options in different categories through the usage of the category positioning matrix is
shown in Figure 2.11.
Figure 2.11: Options to Develop Sourcing Strategy

Source: Dolan and Fedele (2004:04) & NT: SPF (2015:12-15)
The left side of the sourcing in Figure 2.11 represents leverage or non-critical categories
while the right side represents strategic and bottleneck categories. The leverage or non-
critical categories are more suitable for volume concentration, best-price evaluation and
the supplier base expansion approach, and can be used to exploit buying power.
Categories in the complex markets involving factors such as market barriers, supply
scarcity and technological changes are aligned to product specification improvements,
joint process improvements and relationship restructuring approaches, and can be used
to create a competitive advantage.
In assessing and implementing of the strategy options, for example, in Volume

Concentration Strategy, the following options are available for the cross-functional team
to consider:
52
 reduce cost by consolidating volumes from different facilities, regions or business
units;
 suppliers can lower costs in anticipation of the greater volumes;
 contract a MWBE supplier to increase overall organisational spend;
 negotiate Tier 2 requirements into a sole source non-MWBE; and
 set aside a portion of spend to be allocated with an MWBE.
Best Price Evaluation Strategy involves selecting of various suppliers which have the best
offering for each segment of the spend. This cross-functional team divide and optimise
spend and also provide opportunities for MWBEs to compete and earn business.
Supplier Base Expansion Strategy looks beyond the region, country to find more
competitive and qualified suppliers who can provide required products and services.
Finding an MWBE with global capabilities can increase MWBE spend or setting up a
required Tier 2 programme / partitioning off of an MWBE segment if required suppliers
are not available.
When the market is characterised by complexities, three strategies can be applied:

Product Specification Improvements, Joint Process Improvement or Relationship
Restructuring. Collaborative relationship with suppliers is created and maintained to
reduce costs and improve quality of the products and services provided. Capabilities of
the MWBE can be developed and enhanced through supplier development for further
business. Elimination of the middlemen and direct contract with MWBE can be an
advantage for supplier diversity agenda. An MWBE distributor or value-adding supplier
can be used to reduce administrative costs on behalf of the organisation through its
purchasing power and negotiates best prices. Set aside programmes can be used if the
distributor is not MWBE.
The Gillette Company strategic sourcing yielded significant cost savings and improved
quality of goods / services. Strategic sourcing created the suitable structure, processes
and cross-functional teams to track progress weekly and constant assessment of market
conditions and opportunities to review and source categories. Strategic sourcing models
generally focus on reducing cost, develop relationships with suppliers to improve
performance. The discussion about shortcomings of these models is presented in the
next section.
53
Form the six models of strategic sourcing, it goes without saying that there is no best
model. The models assumed that there are competent suppliers in the market to
source quality commodities. Even though they might be suppliers, but those that are
currently supplying commodities should be developed for consistency and high
performance taking account of the demanding turbulent business environment.
Depending on the needs of the organisation, a model should be aligned to the intended
outcomes taking account of the internal and external environments.
2.5.2 Shortcomings of the Models for Strategic Sourcing

The six models have overlooked the importance of capturing the intellectual capital
that the cross-functional team developed during sourcing methodology. According to
Ball (2005:12), sourcing methodology should reflect feedback loops such as:
 Measure and Report – These involve assessment of the benefits from the
sourcing undertaken through the life of the new arrangement and report
results to relevant departments and executive groups. This could be a great
marketing tool for strategic sourcing.
 Capture Learning – Lessons learned need to be captured appropriately for
continuous improvement and to avoid repeating similar mistakes. Information
and changes such as supply dynamics, supplier contracts should be captured
accordingly.
 Ensure Compliance – Suppliers must be measured against performance
metrics that were agreed upon in the sourcing process. Performance terms
must not be altered and relationship must be maintained with the supplier
continuously.
The second key concept of supplier development, overview of supplier development

in Eskom and its reasons and benefits are discussed herein.
2.6 Supplier Development
The term “supplier development” was introduced in the academic community by

Leenders (1966). Although it has evolved, its inception was mainly to increase the
number of qualified suppliers and to improve supplier performance. Gordon (2014:1)
describes supplier development as “working collaboratively with critical, strategic and
high-potential suppliers to improve capabilities and competitiveness in the areas of
cost, quality, time and technology”. There is no universal approach to supplier
54
development (CIPS, 2013:2) but any approach should support the organisation
strategy.
In the Eskom context, supplier development is mainly concentrated on the

development of local suppliers by providing sustainable opportunities to establish and
develop existing industries. Eskom defines its supplier development based on
achievement of the SD&L objectives such as industrialisation, localisation, creation of
employment opportunities and skills development (Eskom SD&L Plan, 2013 –
2015:24). This is often done through the use of procurement spend. The SD&L plan
involves the 42 focus areas (Appendix A) which constitute approximately 89% of
procurement spend. These objectives are similar to supplier diversity goals
undertaken in developed economies.
Organisations need to be clear of their rationale prior to instigating a supplier

development programme. An overview of supplier development in Eskom, the
reasons, benefits and models of supplier development are covered from section 2.8.1
to 2.9 followed by an integration model in section 2.10.
I. Overview of Supplier Development at Eskom
In 2007, DPE developed the Competitive Supplier Development Programme (CSDP).

The CSDP was developed primarily to leverage SOC’s procurement for development
and transformation (DPE, 2014). It was developed with three key objectives:
 to reduce costs;
 to reduce the dependency on imports and foreign exchange exposure; and
 to develop niche export areas.
Following the introduction of CSDP, Eskom revised its CSDP Plan into a
comprehensive SD&L Plan (Eskom SD&L Plan, 2013-2015:3). The Eskom SD&L
Plan covers a time frame of six years, starting in the financial year 2011/12, and
renewed every two years until its expiry date in 2016/17. The SD&L department
consists of three core functions (Eskom SD&L plan, 2013-2015:14-15), and include:
 Strategy and Planning
The function is responsible for the analysis of local industries, and the skills base
(capacity and capability) to develop an Eskom-wide supplier development strategy. It
also involves in guiding target setting through the development of weightings,
55
segmentation of suppliers and ensures cognisance of Government and external
policy.
 Execution Support
It provides tactical and negotiation support to Eskom buyers through the
development of contractual targets and provides local development policy advice to
the function suppliers.
 Monitoring and Reporting
The activities of this function involve the collection, verification, managing and
analysis of contract data and measure key performance indicators (KPIs) for internal
and external reporting.
II. Reasons for Supplier Development
The reasons for supplier development involve addressing suppliers’ operations and
increase of suppliers’ capability for continuous improvements (Chavhan, Mahajan &
Sarang, 2012:38). Supplier development is a mechanism to reduce risk in the supply
chain.
There are also external factors which force organisations to undertake supplier
development programmes (Gordon, 2014:1-2), and these include:
 Globalisation
Globalisation has put pressures on supply chains and as a result suppliers are
optimising supply chains to drive down costs.
 Supply chain risks
Owing to the turbulent business environment and supply chain complexity,
suppliers face enormous challenges.
 Sustainability
Global warming has increased requirements for suppliers to adopt green and
sustainable practices.
The factors that stimulate success of supplier development range from long-term
commitment to strategic goals, information sharing, trust, effective communication,
supplier evaluation and supplier strategic objectives (Li, et al., 2012:363; Mohanty et
al,. 2014:209). Hales and Arumugam (2012:60) conclude that supplier development
requires participation and cooperation from both internal and external stakeholders.
56
More importantly effective supplier development is entirely dependent on top
management support apart from other factors.
III. Benefits of Supplier Development
The benefits for supplier development should be understood from the onset by both
the buyer and suppliers prior any project initiation activities. This enables all parties
to focus on the end results of the supplier development programme. Gordon (2014:2-
3) highlights the following supplier development benefits:
 cost reduction;
 quality and cycle time improvement;
 increased business alignment;
 reduced dependence on a dominant supplier by the development of the
capabilities of another supplier; and
 new product development.
Supplier development is mutually beneficial for buyer and supplier (Rajput & Bakar,
2012:189). According to Mohanty et al. (2014:209) effective supplier development
essentially depends upon the type of supplier relationship management in existence
in the buying organisation. However, internal integration is the basis for creating
relationship with external stakeholders.
2.6.1 Models of Supplier Development

Gordon (2014) cited in Avery (2015:1) proclaims that supplier development can be
either targeted or strategic. He referred to targeted supplier development as being
short-term orientated that consists of results-oriented projects initiated by
procurement. In contrast, the long-term orientated strategic supplier development
teaches the supplier of how to develop itself. The author pointed out that targeted
supplier development projects can be a method for procurement to test the waters for
strategic possibilities. In Table 2.4, three models of supplier development are
detailed.
57
Table 2.4: Models of Supplier Development
Source: Eskom SD&L Plan (2013/2015:32); Gordon (2014:3); Handfield, Krause, Scannell &
Monczka (2000:39-41)
Model 1
In order to successfully achieve the SD&L objectives, Eskom has designed an
approach to assist in the identification of local development opportunities. The Eskom
business model prescribes that supplier development should be executed within
procurement processes to address SD&L objectives. In Figure 2.12, the six steps in
Eskom’s approach to supplier development are depicted (Eskom SD&L Plan,
2013/2015:32-37).
Figure 2.12: Model 1: Eskom- Supplier Development Process

Source: Adapted from Supplier Development and Localisation plan (2013/2015:32-37)
58
Step 1: Demand Analysis
This step involves analysis of the internal demand. Opportunities are identified to
enable leveraging of the associated spend for supplier development.
Step 2: Supply Analysis

A high-level analysis of the supply environment is conducted for each project or
commodity grouping. This is done to obtain a broad understanding of the market and
to develop a strategy.
Step 3: Classification
Classification of projects and commodity groupings are usually linked to supplier
development objectives, such as:
 industrialisation;
 localisation;
 skills development;
 job creation; and
 exempted micro-enterprises development.
Step 4: Strategy Development

The development of the supplier development strategy is driven by the nature of the
project as well as commodity grouping. The output of these processes is the
development of long-term strategy. Strategies involve medium-to-short-term
strategies, and the development of standard guidelines outlining the weightings
dependent on the different local development focus areas.
Step 5: Execution and Support

Once a strategy is developed, a support team will execute it by providing support in
the creation of tender and contractual documents.
Step 6: Monitoring and Reporting

Monitoring and reporting involves collection and verification of local development
performance information, and B-BBEE spend through the consolidation of SD&L
performance feedback.
The Eskom supplier development process in Figure 2.12 has no clear indication of
how supplier development is often planned and should be implemented. The process
lacked transformation element and time lines since Eskom’s supplier development is
59
oriented on industry transformation and provision of opportunities to small and
medium suppliers. The implementation guidelines and supplier integration are lacking
in the process and this can lead to confusion in the business. However monitoring
and reporting is mentioned as the most important step to gauge performance.
Model 2
Model 2 of the supplier development process consists of seven steps (Gordon,
2014:3-8), illustrated in Figure 2.13.
Figure 2.13: Model 2: Supplier Development Process

Source: Gordon, (2014:3)
Step 1: Determine the Potential Need and Executive Appetite for Supplier
Development
Not all organisations have a need for supplier development and a need accompanied
with well-defined and cost-out business case should be identified and assessed.
When the need is established, support from the organisation is a necessity.
Step 2: Identify Target Suppliers

Step two involves identification of target suppliers for development or segmentation
of the supply base for supplier development for a comprehensive business case.
There are certain tasks that need to be performed in this step, namely:
 the identification of critical commodities – high-priority or strategically
important categories of products and services;
 the identification of high spend and high component or service costs in those
categories and strategically important low-spend suppliers;
 the evaluation of the performance of suppliers in these categories; and
60
 the identification of suppliers who would add more value if their performance
improved.
Step 3: Choose Supplier Development Approach

There are two approaches for supplier development which organisations can chose
from:
 Targeted approach – it is a result-oriented approach which often initiated by
the buyer for short-term projects. As much as it is effective in short-term, it is
not sustainable to deal with future challenges.
 Strategic approach – This involves collaboration between the buyer and
suppliers on continuous improvement of initiatives and processes.
Step 4: Form an Internal Supplier Development Team

The success of the supplier development can be enhanced through the
establishment of the internal cross-functional supplier development team. The
business case needs to be developed by the team and secure commitment from the
top management.
Step 5: Identify Specific Opportunities at Individual Suppliers to determine Supplier

Development Readiness
After suppliers have been identified and warranted commitment from the executive
has been obtained, specific opportunities for improvement can be identified with the
supplier.
Step 6: Secure Commitment from the Supplier’s Senior Management

Forging of an external relationship between buyers’ management and suppliers’
management is one of the most important aspects of supplier development.
Expectations, commitment required and resource constraints need thorough
assessment and mutual agreement.
Step 7: Project Plan, Agreement, Launch and Monitoring

The last step involves the creation of the detailed proposed project plan with clear
objectives, scope of work, work plan, performance measurement methodology,
resources required and benefits.
61
The Model 2 of the supplier development process appears to be unambiguous as to
how supplier development is set to be done. The need for supplier development is
determined, suppliers for supplier development are targeted and well-defined
approach and opportunity identification, involvement of the key members and senior
management for support and leadership, project plan and monitoring are all key
aspects in supplier development.
Model 3
Handfield et al. (2000:39-41) further proposes a process map for supplier
development. Model 3, illustrated in Figure 2.14, consist of seven steps.
Figure 2.14: Model 3: Supplier Development Process

Source: Handfield, Krause, Scannell, & Monczka (2000:39-41)
Step 1: Identity Critical Commodities

This step involves analysis of commodities to determine whether supplier
development is warranted, and if so, which purchased commodities and services
require the most attention. Certain commodities may not require pursuing supplier
development. Commodities can be classified as either “noncritical supplies,”
“bottleneck supplies,” “leverage supplies” or “strategic supplies”, using the commodity
portfolio matrix demonstrated in Figure 2.4 in Chapter 2.
Step 2: Identify Critical Suppliers

Top suppliers of the identified strategic commodities must be selected to prepare
engagement. The selected suppliers could be those that are strategically aligned with
supplier development priorities to establish strategic relationships depending on the
strategy. Sharma and Yu (2013:48) suggest the following supplier selection criteria:
 overall cost of the product;
 quality of the product;
 service performance of supplier; and
 supplier’s profile.
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Step 3: Form a Cross-Functional Team
A cross-functional team should consist of relevant people or stakeholders who will
add value in the process. An organisation must organise itself before expecting
commitment and cooperation from suppliers. The strategies and objectives for
supplier development must be clear, well-defined and articulated to optimise
suppliers’ contribution to the course.
Step 4: Meet with Supplier’s Top Management

A cross-functional team needs to engage the supplier’s top management team. In the
absence of strong top management support, supplier development could be
ineffective (Li et al., 2011:363).
Step 5: Identify Key Projects

It is only when consensus is reached between the buyer and suppliers that a project
plan can be identified. Step 5 and the subsequent steps largely determine the
success or failure of the projects, so it must be implemented in a proper manner. The
identified opportunities need to be based on practical aspects through collaborative
relationship.
Step 6: Define Details of Agreement

The details of the agreement consist of processes, roles and responsibilities,
activities, time frames, costs and qualities to specify the milestones and timelines.
The project can only commence once the fundamentals of the agreement are
finalised.
Step 7: Monitor Status and Modify Strategies

Supplier development monitoring and reporting plays a vital role in the impact
analysis of the projects. The monitoring of the status of a project is imperative for
continuous improvements and enabling remedial actions in order to achieve the
goals thereof. It is important for role players to be aware that objectives or plans need
to be dynamic because of influence of the prevailing project conditions.
Model 2 and 3 have a number of identical steps which are incomparable with Model 1
steps in application at Eskom. The identification of commodities is the key step in
Model 3 because it simplifies the process of choosing suppliers for development as
commodities are produced by suppliers. Therefore, identification of critical
commodities should precede the identification of critical suppliers. The commodity
63
portfolio matrix demonstrated in Figure 2.4 in Chapter 2 emerges as the appropriate
model to use in choosing the commodity.
Sánchez-Rodríguez (2009:163) is of the view that supplier development

implementation has a direct impact on the supplier performance and therefore on the
sourcing performance as well. This author opined that competitive advantage can be
strengthened through the combination of strategic sourcing and supplier
development processes or practices. Based on this study it is justifiable to infer that
supplier development could yield some benefits both for the buyer and supplier if it is
implemented appropriately within the strategic sourcing context.
2.7 Integration Models

Supply chain activities need to be internally integrated prior to engaging with external
stakeholders. Integrating processes, especially in complex and vertical integrated
organisations, are seen as a valuable tool to reduce and eliminate functional silos
between functions. Wisner et al. (2012:471) propose a model, illustrated in Figure
2.15, which can be used to integrate processes in an organisation.
Figure 2.15: Integration Model

Source: Adapted from Wisner, Tan & Leong (2012:471)
The integration model depicts how processes can be integrated in an organisation.

The model incorporates corporate or divisional strategies, aligns strategies and key
processes and also assesses performance for continuous improvement. The model
involves internal and external partners, and includes performance which should be
monitored jointly on a quarterly and annual basis. It can be applied in integrating
strategic processes in Eskom for efficiency reasons. McKinsey 7S model in Figure
2.16 is another model which can be used to connect key internal elements and to
64
determine whether these elements are aligned to allow organisations to achieve
strategic objectives.
Figure 2.16: McKinsey 7S Model

Source: Jurevicius (2003)
This model is a tool that analyses how the organisation is designed by focusing at
seven key internal elements: strategy, structure, systems, shared values, style, staff
and skills. It identifies whether alignment and integration is effective within the
organisation and allow organisation to achieve its objectives. The seven elements
are categorised into the ‘soft’ and ‘hard’ elements. Strategy, structure and systems
are hard elements while shared values, style, staff and skills are classified as soft
elements. One of the characteristics of this model is that all the seven elements
should be interconnected and a change in one element requires change in the entire
organisation for it to function effectively.
The meaning of these seven elements are underlined next (Bartone & Wells II.,
2009:2-12; Jurevicius, 2003).
I. Strategy
Strategy refers to what the organisation does that provides unique value or
competitive advantage. It is a direction provided by the actions and decisions of
strategists in pursuit of organisational goals (Venter, 2015: 10).
II. Structure
Structure is about how the organisation is arranged or configured and it represents
the way business divisions and units are organised and also includes the information
of who is accountable to whom.
65
III. Systems
Systems refer to the rules and regulations / procedures, standards, and processes
for getting things done and managing the activities of the organisation, both formal
and informal. They reveal business’ daily activities and how decisions are made.
IV. Staffing
Staffing refers to people in the organisation and how they are recruited, trained,
motivated and rewarded to perform their jobs. Leadership is included in this category,
whether leaders are selected from the outside or developed from within. Staffing
addresses the question of how the organisation assures whether it has the right
people to do the work.
V. Skills
Skills are the special, distinctive capabilities and competencies of the organisation,
both in the people and the organisation itself.
VI. Style
Style deals mainly with the leadership approach of the top managers in the
organisation. Style also incorporates the climate, culture of the organisation and the
dominant leadership style.
VII. Shared Values

Shared values are the norms and standards that guide employee behaviour and
company actions and are also the foundation of every organisation. They are at the
core of McKinsey 7s model.
All these elements should be treated equally to achieve intended results. The
McKinsey 7S model can be applied in several situations whether to facilitate
organisational change, strategy implementation and to identify the change effect of
the element.
Nevertheless, there are inherent challenges associated with the integration models of
processes or functions (Wisner et al., 2012:482). These include:
 Silo mentality – Failure to appreciate the end-results and exploding of

individualism practice.
66
 Lack of process visibility and information – Inability to understand processes
and information in real time.
 Lack of trust – Unwillingness to work in a team and share experience and
lessons.
 Lack of knowledge – Lack of process, information system skills and
knowledge regarding the benefits of SCM among management and
employees within the firm.
2.8 Summary
This chapter reviewed the existing literature on strategic sourcing and supplier
development. Since Eskom forms part of the Schedule 2 of public institutions, an
overview of the South African public procurement landscape and its reforms is
provided. A theoretical framework of strategic sourcing and supplier development in
the context of Eskom which forms the basis of this chapter was depicted followed by
definitions of keys concepts. Strategic sourcing is not an ordinary practice, some the
unique aspects are highlighted and benefits of supplier development. Integration
models which could be applied by organisations are underlined.
In the analysis of strategic sourcing, six models were identified and discussed and
Model 1 is associated on how strategic sourcing is implemented at Eskom. Models of
supplier development were discussed. The maturity level of strategic sourcing as a
discipline in an organisation plays a key role in achieving strategic outcomes (Yavas
et al,. 2011:6). Therefore, it important to assess the status of the strategic sourcing in
an organisation and this is referred to as golden rule by Kocabasoglu & Suresh
(2006:4) and linked to research objective.
A second golden rule, level of internal coordination of purchasing with other

functions will be analysed. This can be linked to the second objective where the
existing relationship between strategic sourcing and supplier development is
assessed. The foundation for the formation of the GC division has commonalities
with the benefits of the strategic sourcing. The next chapter deals with how the
research was conducted.
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CHAPTER 3: RESEARCH METHODOLOGY
3.1 Introduction
The previous two chapters presented a conceptual framework and the literature
framework for the study. Both these chapters outlined and explained the research
problem and objectives and reviewed a literature about procurement and the
concepts of strategic sourcing and supplier development. In Chapter 3, a blueprint to
accomplish the research objectives is presented. It encompasses the research
philosophy, research approach, the research design and the methodological choice.
It provides an explanation and rationale for the research strategy, sampling, data
collection and analysis instruments, reliability and validity, as well as ethical
considerations related to the research. This chapter also includes the advantages
and disadvantages of the data collection methods and the reasons for the choice of
methods that have been employed.
3.2 Research Design

A research design is a plan which commences from the philosophical assumptions to
thoughtful selection of participants, data collection techniques to be used and the
approach to data analysis. It is a blueprint for fulfilling objectives and answering
questions (Cooper & Schindler, 2014:82). Research design is comparable to an
architectural blueprint that is followed by a builder in the construction of a house
(Wagner, Kawulich & Garner, 2012:21). It is a plan, structure and strategy of
investigation that is adopted by the researcher to answer questions validly,
objectively, accurately and economically (Kumar, 2011:94). The research design
definitions highlight the identification and development of procedures and logistical
arrangements necessary to undertake a study. They also emphasise the importance
of quality in these procedures in ensuring validity, objectivity and accuracy. The
worldviews, the strategies, and the methods entirely shape the research design,
whether it is quantitative, qualitative or mixed (Creswell, 2008:17). Cooper and
Schindler (2014:125) argued that there is no single definition that imparts the full
range of important aspects of research design as there are multiple definitions of
research design.
Research design can be divided into three categories such as explanatory,

descriptive and exploratory (Wagner et al., 2012:10). Explanatory research focuses
on the studying of the problem to explain the casual relationships between variables.
68
Descriptive research outlines the characteristics of the phenomenon being studied.
Exploratory research primarily emphasises the discovering of and gaining insight into
a problem (Saunders, Lewis & Thornhill, 2012:171-172).
The study is based on the exploratory research design to gain insight into the
functioning of the strategic sourcing and supplier development. Exploratory research
allows for the asking of open-ended questions and it is flexible and adaptable to
change (Saunders et al., 2012:171).
3.3 Research Philosophy

Research philosophy is viewed as assumptions about how researchers perceive the
world, and it underpins the research strategy and methods (Saunders et al., 2012:
127-130). It relates to the development of knowledge, the nature of that knowledge,
and is influenced by practical considerations.
Different terminologies are often used in the research discipline. For example,
Creswell (2014:6) referred to philosophical assumptions as philosophical worldviews,
while Mertens (2010:7) referred to them as paradigms. Philosophical worldviews are
viewed as general philosophical orientations about the world and the nature of
research that a researcher brings to a study (Creswell, 2014:5). A paradigm is a way
of looking at the world and consists of certain philosophical assumptions which guide
and direct thinking and action (Mertens, 2010:7). Paradigms and worldviews have
identical meanings in research.
Saunders et al. (2012:130-140); Wagner et al. (2012:51-59); Nieuwenhuis (2007:47-

62) mentioned three different ways of thinking about research philosophy: ontology,
epistemology and axiology. Guba and Lincoln (1994, 2005); Morgan (2007), cited by
Mertens (2010:11) introduced four basic belief systems which help to define a
paradigm: ontology, epistemology, axiology and methodology. A brief explanation of
each belief system is provided herein (Mertens, 2010:11):
 Ontology - It is concerned with the nature of reality and consists of aspects
such as objectivism and subjectivism.
 Epistemology - It is concerned with what constitutes acceptable knowledge in
a field of study and consists of positivism, realism and interpretivism
philosophies.
 Axiology - It is concerned with the researcher’s view of the role of values in
research and nature of ethical behaviour.
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 Methodology - This belief system is concerned with an approach to systematic
enquiry.
The four worldviews that are widely discussed in the research are: postpositivism,
constructivism, transformativism and pragmatism (Creswell, 2014:6-11). The latter
(pragmatism) is relevant to this study because its emphasis is on solving problems in
the real environment or in real life context. This is suitable for this study as it attempts
to find solutions in the case company, Eskom. The key elements of each of the four
worldviews are presented in Table 3.1.
Table 3.1: Four Worldviews of Research

Postpositivism Constructivism
 Determination  Understanding
 Reductionism  Multiple participant meanings
 Empirical observation and  Social and historical construction
measurement  Theory generation
 Theory verification
Transformative Pragmatism
 Political  Consequences of actions
 Power and justice oriented  Problem-centred
 Collaborative  Pluralistic
 Change-oriented  Real-world practice oriented
Source: Creswell (2014:6)
3.3.1 Postpositivist Worldview

The problems studied by postpositivism involve finding and interrogating factors that
influence outcomes. This worldview’s assumptions are more aligned with quantitative
research. Postpositivism involves certain features that should be taken into
consideration in the research process (Bertram & Christiansen, 2014:25) and these
include:
 Findings must be generalised and based on the available data. Researchers
generally work on large-scale studies to ensure generalisation.
 Researchers apply random selection when sampling with large sample sizes
to draw statistical conclusions.
 Researchers must maintain objective views and limit the impact of personal
experience.
This worldview is irrelevant for the purpose of the study because there is no theory
being verified neither empirical observation to be used. Postpositivists have
elementary differences with constructivists due to behavioural aspects of humans
that are ignored.
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3.3.2 Constructivist Worldview
This worldview evolved as a response to a critique of positivism and postpositivism

and believes that individuals seek an understanding of the world in which they live
and work (Bertram & Christiansen, 2014:26). The constructivist researcher engages
in the situation from the viewpoints of the participants and subjectivity cannot be
entirely ruled out. The key features of constructivist research are (Bertram &
Christiansen, 2014:25):
 It is underpinned by the idea that the behaviour of humans is context
dependent.
 It recognises the researcher’s subjectivity.
 It requires interaction between researchers and respondents.
 It requires data authenticity which reflects the experiences of the respondents.
 It includes explicit explanation regarding data analysis and conclusions.
 The findings cannot be generalised to other contexts, but may be transferred
to a different context.
It is not the appropriate worldview since this study is not based on the theory
generation. Both postpositivist and constructivist worldviews are criticised and
challenged by the transformative worldview.
3.3.3 Transformative Worldview

The transformative worldview opposes postpositivist assumptions by underlining that
it imposes structural laws and theories. The transformative worldview is more
concerned with the groups and individuals that are marginalised in the society and
the reality is shaped by social, political, cultural, economic and other dynamics
(Bertram & Christiansen, 2014:27). The societal imbalances which are perpetrated by
the external environment are not the focus of this study, therefore transformative
worldview is inappropriate to be used. The relevance of other worldviews is not
considered in the transformative worldview. On that note, it is opposed by the
pragmatic worldview in that different worldviews are appropriate for different types of
research and can supplement each other (Bertram & Christiansen, 2014:30).
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3.3.4 Pragmatic Worldview
In a pragmatic worldview, the focus is on the research problem and approaches to
understand the phenomenon. Morgan (2007) and Creswell (2014:11) outlined some
fundamentals for pragmatism as follows:
 Pragmatism is not committed to any one system of philosophy and reality.
 Individual researchers have freedom of choice regarding methods, techniques
and procedures to achieve the research purpose.
 Pragmatists do not see the world as an absolute unity.
 Truth is what works at the time.
 Pragmatist researchers focus on the what and the how to research, based on
the intended outcomes.
 Pragmatists concur that research always occurs in social, historical, political
and other contexts.
 Pragmatists believe in an external world that is independent of the mind as
well as lodged in the mind.
 Pragmatism opens the door to multiple methods, different worldviews, different
assumptions, as well as different forms of data collection and analysis.
The study focuses on finding possible solutions to the existing pragmatic and real-life
challenges in the two departments, and therefore, the philosophical paradigm is
rooted in the pragmatic worldview. In these two departments, multiple realities
require multiple ways for demystification (Saunders et al., 2012:130). The advantage
of pragmatism is that it is flexible and accommodative of different worldviews. It is not
prescriptive on data collection and analysis, and acknowledges the changes in the
world which require different solutions to different problems.
3.4 Research Approach

A research approach needs to fit with the purpose of the study. According to
Dudovskiy (2013:32) and Saunders et al. (2012:143-148), there are fundamentally
three research approaches and these are discussed.
3.4.1 Inductive approach

This approach moves from data to theory. It is more appropriate if the research starts
with research purpose and collect data to explore a phenomenon and later develop
or build theory in the form of a conceptual framework.
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3.4.2 Deductive approach
The deductive approach moves from theory to data. Theory is developed from the
reading of the academic literature and concludes with the design of a research
strategy to test a theory. It is commonly applicable in the natural sciences.
3.4.3 Abductive approach

This approach moves back and forth, therefore it combines induction and deduction.
It involves collecting data to explore a phenomenon, identifying themes and
explaining patterns, to generate a new or modify an existing theory, which is
subsequently tested through additional data collection.
Characteristics of the three approaches to research are presented in Figure 3.1.
(Saunders et al., 2012:143-148).
 Meaning of human perspective to events are aimed to be explored

 Research context is understood in a deeper manner
 Qualitative type of data is collected
Inductive  More flexible approach to research structure to ensure provisions
for changes during the research
 Researcher is perceived to be a part of the research process
 Principles based on science

 Movement is done from theory to data
 Casual relationships between concepts and variables need to be
explained
Deductive  Quantitative type of data is mainly collected
 Measures of control are applied in order to ensure the validity of
data
 The approach is highly structured
 Researcher is independent from the research process
 Require selection of sufficient sample size for generalisation
 Premises are used to generate testable conclusions

 Generalising from the interactions between the specific and the
general
Abductive  Data collection is used to explore a phenomenon, identify themes
and patterns located in a conceptual framework and test this with
subsequent data collection.
 Theory generation or modification, incorporating existing theory
where appropriate, to build new theory or modify existing theory
Figure 3.1: Characteristics of the Research Approaches

Source: Adapted from Saunders et al. (2012:143-148)
A combination of inductive and deductive research approaches were chosen to base

empirical findings on literature and also draw conclusions from the collected data.
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3.5 Research Strategy
A research strategy is a plan to answer a research question (Saunders et al., 2012:
173). According to Bertram and Christiansen (2014:41), case studies, action
research, surveys, experimental research, ethnographic research or participatory
research are strategies that are frequently used in research. Yin (2014:9) introduced
relevant factors that assist in making decisions on when to use each research
strategy as presented in Table 3.2.
Table 3.2 Pre-conditions Enabling the Researcher to Choose the Best Strategy
Strategy Design Type of Question Requires control over Focus on
behavioural events contemporary
events
Experiments How, why Yes Yes
Survey Who, what, where, how No Yes
many, how much
Archival Who, what, where, how No Yes/No
Analysis many, how much
Case study How, why No Yes
History How, why No No
Source: Yin (2014:9)
Pre-conditions are shown across the five research strategies: experiment, survey,
archival analysis, case study and history in Table 3.2. These pre-conditions
combined with the following factors, enable the researcher to choose the best
research strategy to use (Yin, 2014:9):
 type of research question posed;
 extent of control a researcher has over actual behavioural events; and
 degree of focus on contemporary as opposed to entirely historical events.
3.5.1 Case Study

Case studies frequently involve the extraction of information from company
brochures or annual reports, which can be linked with primary data from respondents
and participants (Cooper & Schindler, 2014:165). A case study as a research
strategy was chosen as a suitable research strategy owing to it being “fit for
purpose”. According to Bertram and Christiansen (2014:41), a “fit for purpose” is an
approach whereby data collection methods match the kind of data that the
researcher wants to collect. Yin (2014:4) mentioned the following reasons why the
case study research strategy is relevant:
 A case study often uses “how” or “why” to develop research questions.
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 It helps to understand the complex social phenomena due to the possibility to
probe questions.
 It creates opportunity for sufficient access to data. The research topic is
explored within the Eskom context and access to data was found to be less
complicated.
 It supports the necessity of extensive and in-depth information about a
phenomenon.
Vos, Strydom, Fouche, and Delport (2011:321) indicated that exploration and
description of a case should involve detailed, in-depth data collection methods and
multiple sources of information. This case study has used multiple sources of data
collection, namely semi-structured questionnaires, face-to-face interviews, corporate
plan and reports in Eskom.
3.6 Methodological Choice

A methodological approach can be quantitative, qualitative or be based on mixed
methods. A mixed methods research approach encompasses both quantitative and
qualitative approaches. Mixed methods are used to answer research questions.
3.6.1 Qualitative and Quantitative Approaches

Kumar (2011:104) pointed out that qualitative research is more appropriate when
studying values, beliefs and perceptions due to its flexibility. Quantitative approach
involves extensive calculation of numbers. Factors which distinguish between
qualitative and quantitative approaches for suitability and relevancy are briefly shown
in Table 3.3.
Table 3.3: A Comparison of Qualitative and Quantitative Approaches

Qualitative Approach Quantitative Approach
 Non-numerical data.  Numerical data.
 Epistemological roots in phenomenology  Epistemological roots in positivism.
and interpretive philosophy.
 Purpose is constructing detailed  Purpose is testing predictive and cause-
descriptions of social reality. effect hypotheses about social reality.
 Methods utilise inductive logic.  Methods utilise deductive logic.
 Suitable for a study of a relatively  Suitable for study of phenomenon which
unknown terrain, seeks to understand are conceptually and theoretically well
phenomena. developed; seeks to control phenomena.
 Participants’ natural language is used in  Concepts are converted into operational
order to come to a genuine understanding definitions; results appear in numeric form
of their world. and are eventually reported in statistical
language.
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 The research design is flexible and  The research design is standardised
unique and evolves throughout the according to a fixed procedure and can be
research process. replicated.
 Data sources are determined by  Data are obtained systematically and in a
information richness of settings, types of standardised manner.
observation are modified to enrich
understanding.
 The unit of analysis is holistic,  The unit of analysis is variables which are
concentrating on the relationships atomistic (elements that form part of the
between elements and context to develop whole).
a conceptual framework. The whole is
always more than the sum.
 May be used in realist and pragmatist  Uses probability sampling techniques to
philosophies. ensure generalizability.
 Researcher is dependent on gaining  Researcher is seen as independent from
physical access to participants and builds the respondents.
rapport to access data.
 Researcher strategies include action  Associated with experimental and survey
research, case study research, research strategies.
ethnography, grounded theory and
narrative research.
Source: Fouche and Delport (2011) in Vos, Strydom, Fouche & Delport (2011: 66)
Both non-numerical and numerical data were collected from respondents and
participants.
3.7 Time Horizon

An exploratory study can be either a cross-sectional design or longitudinal design. A
cross-sectional study is implemented once and represents a snapshot at one point in
time (Cooper & Schindler, 2014:128) and is commonly applied in social sciences.
Contrary to the cross-sectional study, the longitudinal study takes a long period to
complete. However, its advantage is being able to measure or observe changes in
patterns and development over the variables being studied (Saunders et al.,
2012:190). Since this study is a mini-dissertation for a post graduate programme
within a short span of time, the best fitting time horizon is cross-sectional as opposed
to longitudinal.
3.8 Population and Sampling

Yin (2014:51) mentioned five grounds for a single case study, namely critical,
unusual, common, revelatory and longitudinal. A single case study is analogous to a
single experiment and selection of the case needs to relate to theoretical propositions
of interest. The topic of the study is about Eskom and the analysis of the strategic
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sourcing and supplier development in the CS and SD&L departments respectively.
These departments are embedded cases in a single case study, Eskom, and data
are collected and analysed as such.
3.8.1 Study Population

According to Bertram and Christiansen (2014:59), a population is the total number of
people, groups or organisations that could possibly be included in a study. The
population is the personnel in the CS and SD&L departments responsible for
management of strategic sourcing and supplier development in Eskom in the course
of their daily duties. CS consists of 123 employees while SD&L has 62 employees
and a sample was drawn from these employees.
3.8.2 Sampling
Kumar (2011:193) defined sampling as the process of selecting a few (a sample)
from a bigger group (sampling population) to become the basis for estimating or
predicting the prevalence of an unknown piece of information, situation or outcome
regarding the bigger group. It is simply a subgroup of the population that the
researcher is interested in and includes the determination of how many individuals,
groups or objects will be observed.
There are three categories of sampling design: random/probability and non-

random/non-probability, and mixed sampling designs (Dudovskiy, 2013:46; Kumar,
2011:199-208). In probability sampling, every member of population has an equal
and independent known chance of participating in the sample. Probability sampling
design includes simple, stratified, systematic, and cluster sampling methods (Cooper
& Schindler, 2014:361). In non-probability sampling, members are selected in a non-
random manner and have a chance to participate in the sample. The participation of
the members in a population is dependent upon other considerations. Non-probability
includes judgement/purposive, quota, snowball, accidental, and expert sampling
designs (Kumar, 2011:199-206). Executive participants and respondents at middle
management level were selected based on purposive sampling.
I. Sampling Frame
The sampling frame can be explained as a list of people within the study population
who can contribute to the research (Dudovskiy, 2013:46). As stated earlier, non-
probability purposive sampling is employed in this study. Purposive sampling occurs
when a researcher uses judgement about who can provide the best information to
77
achieve the objectives of the study (Kumar, 2011:207) and eventually select a
sample which conforms to criteria (Cooper & Schindler, 2014:324). Purposive
sampling was used to select respondents and participants with management
experience, knowledge of strategic sourcing and supplier development and ability to
provide strategic insights. Executive management comprised of general managers
and senior managers of both departments while middle management level included
all commodity managers in CS and middle managers in SD&L.
It is justified to target management levels due to the strategic nature of their roles and
responsibilities in both departments. It is advantageous to collect data from different
management levels as it can lead to substantial information and understanding of the
entire scenario. Furthermore, the researcher is employed in the SD&L department as
a middle manager and this became convenient when interacting with the selected
respondents and participants.
II. Sampling Size
Sample size refers to number of individuals from the sampling frame that plays a key
role in the primary data collection process. In Table 3.4 the sample of the population
is presented.
Table 3.4: Sample Size

CS Number SD&L Number
Total Staff 123 Total Staff 62
General Manager 1 General Manager 1
Senior Managers 4 Senior Managers 4
Commodity Managers 24 Middle Managers 19
Source: Eskom: Commodity Sourcing and Supplier Development and Localisation (2015)
The sample size consisted of the 24 commodity managers and 19 middle managers
to whom questionnaires were distributed and eight senior managers and two general
managers which were interviewed from both departments.
3.9 Data Collection Methods

There are two main approaches to gather information about a situation, person,
problem or phenomenon, namely through secondary and primary sources. (Kumar,
2011:138). Secondary and primary sources that were used are depicted in Figure
3.2.
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Figure 3.2: Data Collection Methods
Source: Adapted from Kumar (2011:139)
3.9.1 Secondary Sources

Secondary data were collected mainly from Eskom, namely Eskom’s corporate plan,
annual reports, GC reports, Eskom’s strategic sourcing and supplier development
documentation, National Treasury publications, articles and books.
3.9.2 Primary Sources

Data collection consists of questionnaires, interviews, observation, testing and
artefact analysis (Bertram & Christiansen, 2014:72). The literature review indicates
that both questionnaires and interviews were largely used by the researchers
reported on in Chapter 2. As a result semi-structured questionnaires and face-to-face
interviews with key informants were used. The questions contained in the
questionnaire (Appendices D and E) and interview schedule (Appendix F) were
systematically organised to achieve and respond to the research objectives and
questions of Chapter 1.
I. Questionnaire
Questionnaires can comprise of either closed-ended or open-ended questions
(Kumar, 2011:151) or a combination of the two. Close-ended questions refer to
questions which dictate to respondents how to answer the questions from a set of
options or categories. To the contrary, open-ended questions provide a broad choice
to answer questions and require analytical and critical thinking from the respondents,
as possible responses are not prescribed.
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The classification of questions in the questionnaire, whether closed or open-ended, is
directly linked to the type of questionnaire whether structured, semi-structured or
unstructured. Semi-structured questionnaires were sent to commodity managers and
middle managers through their email addresses accompanied by a cover letter
(Appendix C). The anonymity of respondents was partly compromised since there is
often interaction with them and email addresses are known to the researcher.
However, the respondents were encouraged not to disclose their names on the
questionnaire. In Table 3.5, advantages and disadvantages of questionnaires
(Kumar, 2011:148-149) are highlighted.
Table 3.5: Advantages and Disadvantages of Questionnaires

Advantages Disadvantages
 It is less expensive in respect to time,  Application is limited as it cannot be
human and financial resources. used with the illiterate, very old and
 It offers greater anonymity particularly handicapped.
where sensitive questions are posed  Absence of the researcher during the
which ultimately enhances the likelihood filling out of questionnaire for clarity by
of obtaining accurate information. the respondent.
 Ability to administer to a large number of  Low return rate of completed
people. questionnaires.
 Information can be captured into a  There is a self-selecting bias attributed
computer programme and responses to attitudes and motivations that are
counted in each category. different to those who return
 Standardised questions control the questionnaires.
amount of information from  Opportunity to clarify issues is lacking if
respondents. there is misunderstanding of questions
 Access to a large group of by the respondents.
geographically scattered respondents  The response to a question may be
within a short period of time. influenced by the response to other
questions.
 Possibility to consult others which may
dilute expression of respondents’
opinions.
Source: Adapted from Kumar (2011:148-149).
A questionnaire was designed not to take more than 30 minutes to complete to

maximise response rate. The questionnaire was split into two sections. The first
section had questions about the respondent’s gender, age group, work experience in
Eskom and strategic sourcing, work experience prior to them joining Eskom, highest
qualifications and internal training programmes.
The second section of the questionnaire covered open-ended questions that were
divided into four sub-sections (A, B, C, and D) with its headings, as presented in
Table 3.6.
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Table 3.6: Section Two of Questionnaire
Sub-section Heading of Subsection
A Current state of strategic sourcing (SS) and supplier development (SD) at
Eskom.
B Role of SS and SD in Eskom.
C Collaboration between CS and SD&L.
D Processes, systems and practices in Eskom.
II. Interviews
Nieuwenhuis (2007:87) defined an interview as a data collection tool in which the
interviewer and the participant engage in a two-way and purposeful conversation. It is
a structured and focused conversation between the researcher and the participant
with an agenda and schedule of questions to be answered (Bertram & Christiansen,
2014:80). The advantages and disadvantages of an interview are underlined in Table
3.7.
Table 3.7: Advantages and Disadvantages of Interviews

Advantages Disadvantages
 More appropriate for complex and  Time consuming and expensive.
sensitive situations.  Quality of data depends upon the quality of
 Useful for collecting in-depth information the interaction.
by probing from a small number of  Quality of data depends upon the quality of
people. the interviewer.
 Information can be supplemented  Quality of data may vary when many
through non-verbal communication interviewers are used.
observed and interpretation of the tone  Power relations can influence the interview
of the respondent. process.
 Presence of the researcher during the  Generate large amount of textual data which
interview process. lead to difficulties in analysis stage.
 Possible wider application with any  Subjective elements such as own behaviour /
population: children, the handicapped, beliefs which needs verification.
illiterate or very old.  The researcher may introduce bias in
 Moreover, in interviews researcher has framing of questions and interpretation of
direct control over the flow of primary responses.
data collection process and has a  The respondent may be too close to the
chance to clarify certain issues during project being researched and tends to be
the process as need arises. more subjective and defensive. This would
 Generally provide vast amounts of rich affect the quality of data.
and useful data for further analysis.  The respondent may also be evasive in
 Respondents often see interviews as answering the questions.
opportunities to voice opinions.  It might also be difficult to restrain the
 Interaction of the respondents with the respondent who might take a different angle
interviewer rather than writing long in answering the questions thereby providing
responses in a questionnaire. information not useful to the interviewer.
Source: Kumar (2011:149-150)
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There are three different formats of interviews, namely structured, semi-structured
and unstructured (Saunders et al., 2012:374; Kumar, 2011:145), as shown in Table
3.8 together with some characteristics of each.
Table 3.8: Types of Interviews

 Use predetermined and standard or identical set of questions in the
interview schedule.
Structured  Used to collect quantifiable data.
 Requires fewer interviewing skills.
 Provides uniform information which assures comparability of data.
Semi-  Non-standardised and frequently used in qualitative research.

structured  Contain a list of themes and key questions.
 Prevalent in both quantitative and qualitative research.

 Complete freedom provided in terms of content and structure.
Unstructured  Commonly informal.
 No predetermined question.
 Prevalent in both quantitative and qualitative research.
 Dominantly used in qualitative research.
Source: Adapted from Saunders, Lewis & Thornhill (2012:374) & Kumar (2011:145)
Semi-structured interviews were chosen as the most appropriate data collection

instruments with executive management as it allowed participants to engage, share
opinions and beliefs with the interviewer during face-to-face interaction. An interview
schedule was designed to collect primary data. The interviews were audio recorded
after permission was granted by participants and transcribed afterwards. Handwritten
notes were made during face-to-face interviews to record main points and nonverbal
communication. The fact that the executive management was selected and probing
occurred in the interview process, ensured that the richest data was obtained from
participants. Demographic information such as job title and experience in the case
company, amongst others, was collected per interviewee. The demographic
information was consistent with the questionnaires administered with commodity
managers and middle managers which enabled meaningful data analysis.
The interviews followed a top-down approach where general managers were

interviewed before the senior managers. The interview process was convenient and
saved travelling costs as all participants were based in one geographical workplace.
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Interviews were scheduled to take a maximum of an hour at the case company’s
head office, Megawatt Park in Sunninghill, where all the interviewees are located.
3.10 Pretesting
There are a number of reasons why a questionnaire and interview schedule should
be pretested (Cooper & Schindler, 2014:324), such as:
 It assists to discover ways to increase participant interest;
 it increases the likelihood for participants to remain engaged in the completion
of the questionnaires and interviews;
 it assists participants in discovering question content, wording and sequencing
problems; and
 it explores ways to improve the overall quality of data to be collected.
The questionnaires (Appendices D and E) and interview schedule (Appendix F) were

given to two colleagues for pretesting to establish errors and to improve the design.
These two colleagues were separated from the sample and their selection was based
on their extensive experience in the case company.
3.11 Data Analysis

Data analysis involves segmenting and separating the data as well as consolidating it
in a systematic manner (Creswell, 2014:195). In qualitative research, data analysis
involves identifying common patterns within the responses and critically analysing
them in order to achieve research aims and objectives (Dudovskiy, 2013:48).
Data obtained from questionnaires and interviews were analysed using a four–step
process (Kumar, 2011:278), as follows:
Step 1: Identify the main themes

It involves understanding of the meaning of responses from respondents and
participants and develops broad themes which reflect the meanings.
Step 2: Assign codes to the main themes

A code needs to be assigned to each theme using keywords or numbers if a
researcher decides to count the occurrence rate of themes in an interview.
83
Step 3: Classify responses under the main themes
Review the transcripts of interviews and classify the responses or contents of the
notes under the different themes.
Step 4: Integrate themes and responses into the report

The final step involves integrating themes and responses into the report. The themes
and responses were integrated into the final report.
A Microsoft Excel programme was used to code, store and analyse data. The data
obtained from the respondents and participants were organised and analysed to
establish the extent of integration between the variables (strategic sourcing and
supplier development). After each interview, data was analysed and a mini report
compiled to include in the final report. The process of data analysis was finalised by
interpretation of the findings to develop a complete research report.
3.12 Quality of the Research

Research quality can be determined using validity, trustworthiness and reliability.
Validity refers to the checking of the appropriateness and accuracy as applied to a
research process while reliability refers to consistency in its findings when used
repeatedly (Kumar, 2011:177-184; Saunders et al., 2012:192). Reliability is a key
characteristic to demonstrate the quality of the research. Validity, trustworthiness and
reliability are regarded as continuous concepts (Bertram & Christiansen, 2014:194)
which constantly improve during the research process.
A standard semi-structured questionnaire and interview pack were developed and

applied consistently during data collection. Both the questionnaire and interview
schedule were informed by the literature review and approved by the supervisor prior
to the data collection process. Each question asked was logically and linked to the
objectives of the study. For validity purposes, data collection methods were not
altered in the research process and all interviews were completed and recorded. To
ensure preparedness of participants, interview themes were forwarded, prior to the
interviews, to the participants along with the interview request. Interviews were
arranged individually to allow participants to attend at their convenient times.
Data were collected from the executive and middle management levels, therefore
trustworthiness is guaranteed from the respondents and participants.
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Since the researcher is employed in the same case company, his beliefs and
perceptions were carefully excluded in the findings.
It is unreasonable to make any generalisations to a population beyond cases similar

to the one studied (Kumar, 2011:127). For that reason, the research findings are
applicable to the case in question and generalisation to other cases could provoke
challenges because of different case study circumstances.
3.13 Ethical Considerations

The main aim of ethics in research is to safeguard the research process so that no
one is harmed or endures unpleasant consequences from it. Cooper and Schindler
(2014:28) defined ethics as norms or standards of behaviour that guide moral
choices about a researcher’s behaviour in relationship with others. Ethical issues
emerge from interaction with people, other beings and the environment, particularly if
potential conflict of interests exist (Mouton, 2013:15). For purposes of this study, an
email correspondence was sent to all respondents and participants to request them
to participate in the forthcoming research and they expressed willingness to
participate in the research process, and thereafter a formal invitation letter was also
sent with the questionnaire and informed consent was obtained. The findings were
reported correctly without bias in order to uphold the ethical research practice. The
fact that the researcher is employed at Eskom has not compromised and prejudiced
the authenticity of the results of this study because the ethical principles articulated
hereunder were upheld during the research process.
Bertram and Christiansen (2014:66) proposed that certain ethical principles need to
be considered in the research process. Despite these ethical principles, Cooper and
Schindler (2014:28) stated that there is no single approach to ethics. The ethical
principles are as follows:
 Autonomy
All the respondents and participants need to be free to exercise their freedom of
choice to partake in the research. A consent agreeing to participate voluntarily
and withdraw from the study at any time was secured from all the respondents
and participants. All participants were treated with respect and dignity given their
positions at Eskom. An explanation was provided to interviewees in the first ten
minutes regarding the purpose of the interview, stressing of confidentiality issues,
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and permission to record interview proceedings. In view of that all participants
confirmed their participation in the study. Permission was granted to conduct the
study in Eskom through a signed letter (Appendix B) by both general managers in
CS and SD&L.
 Non-maleficence
Non-maleficence simply refers to the “do no harm” principle, either physical,
emotional, social or any other harm to any person in conducting the study.
Respondents and participants were informed and assured their private and
confidential information are to be used for academic research.
 Beneficence
Beneficence means that the study must be of value. The study should be of
benefit to and useful for, either directly the participants or broadly the organisation
or society. The study is of benefit to Eskom management to make informed
decisions, as it suggests improvements particularly for CS and SD&L
departments.
 Consequences
This principle involves possible outcomes when the study is completed. The
entire report findings are set to be presented to all that have participated in the
study and Eskom management.
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3.14 Conclusion
The conclusion for this chapter is in the form of a diagram in Figure 3.3 which clearly
demonstrates how the research process was undertaken. The diagram shows that
the study has taken a vertical or top-to-bottom approach.
Figure 3.3: Conclusion of Methodological Framework

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CHAPTER 4: DATA ANALYSIS AND INTERPRETATION
4.1 Introduction
The preceding chapter dealt with the research methodology and how information was
obtained in addressing the research questions and research objectives. In this
chapter the primary focus is on analysing, presenting and interpreting the collected
data to determine the extent to which strategic sourcing can be a catalyst for supplier
development in Eskom. This chapter is organised based on the research questions
and objectives which were reflected in the survey instruments (semi-structured
questionnaires in Appendices D and E, and the interview schedule in Appendix F).
The profiles of the respondents from Commodity Sourcing (CS), Supplier
Development and Localisation (SD&L) managers and executive management are
presented. The key research results for the survey and findings for the in-depth
interviews are organised according to the research objectives.
4.2 Profiles of Survey Respondents and Interview Participants

Data were collected through questionnaires completed by middle management in the
CS and SD&L departments. Middle management constituted of commodity managers
(CMs) and middle managers (MMs) in accordance with the existing Eskom’s
organisational structure. Subsequent to the collection of the survey data, face-to-face
interviews were conducted with executive management. The profiles of the survey
respondents and interview participants are discussed. The number of responses
received from CMs and MMs is provided in Table 4.1.
Table 4.1: Middle Management (CMs and MMs) Responses from CS and SD&L
Questionnaires Number %
Total Responses 26 60%
Total Non-responses 17 40%
Total Circulated 43 100%
In Table 4.1, a total of 43 questionnaires were distributed to CMs in CS and MMs in

SD&L through email addresses. Out of the 43 questionnaires, 60% (26) were
completed and 40% (17) were not returned. All CM and MM respondents were at the
middle management level and were well-versed in strategic sourcing and supplier
development to provide rich and in-depth information. Attempts were made to
increase the response rate by reminding respondents of the due date for
questionnaires through follow-up email correspondence and telephone calls. The
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value of the research, to their respective departments and the entire organisation,
was also explained to stimulate the respondents to respond.
In the next sections, the profile of the CS respondents is presented firstly, followed by
the profile of the SD&L respondents.
4.2.1 Profile of CS Respondents

From Table 4.2, it follows that 42% (10) of the responses were received from CMs in
CS out of the 24 which were distributed, as depicted in Table 4.2.
Table 4.2: Responses from CMs in CS

CS: Commodity Managers Number %
Responses 10 42%
Non-responses 14 58%
Total 24 100%
The profiles of the respondents in the survey and the participants in the in-depth
interviews include gender, age group and years of experience, the highest level of
education attained and completed internal training by middle management in each
department. These are presented in the next sections.
I. Gender Distribution of Respondents in CS

The purpose of this section is to establish the gender distribution of respondents in
CS which practises and manages strategic sourcing in Eskom, as illustrated in Figure
4.1.
Figure 4.1: Gender Distribution of CM Respondents in CS
Out of the 10 CMs that responded in CS, 70% were males while 30% were females
(Figure 4.1). Of the 24 commodity managers that received the questionnaire, 54 %
(13) were males and 46% (11) were females. From the analysis, the probability is
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that the responses would have been skewed, but not by such a large percentage
considering the composition of the 24 commodity managers.
II. Age Group Distribution of Respondents from CS

The respondents were requested to indicate their age group in categories namely:
20-29, 30-49, 50-59 and 60 or older. Although the survey instrument was pre-tested,
it was discovered during data analysis that the age interval size between 30-49 years
was not the same size as the other age intervals. However, the results of age group
analysis are displayed in Table 4.3 in the format in which they were asked.
Table 4.3: Age Distribution of CMs

Age Group Number %
20 – 29 0 0%
30 – 49 7 70%
50 - 59 2 20%
60 or older 1 10%
Total 10 100%
From Table 4.3, most respondents that oversee implementation of strategic sourcing
in CS are between the ages of 30 to 49 years. There were two CS respondents in
age group 50-59 and only one manager in 60 or more years’ range. There are no
CMs aged between 20 and 29 years. It may be that the lower management levels
occupied by this age group.
III. Years of Work Experience of Respondents from CS

The purpose of this section is to demonstrate the extent of experience of the CMs. To
comprehend the respondents’ diverse working experience, CMs were requested to
indicate their years of experience in Eskom, practising strategic sourcing in the
company and experience prior to joining the company (Figure 4.2).
Figure 4.2: Years of Experience of CS Respondents
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As illustrated in Figure 4.2, CS respondents jointly had 153 years of experience with
each ranging between 6 to 25 years of Eskom experience and 64 years of
experience practising strategic sourcing out of the 153 years. They had eight years of
procurement or strategic sourcing experience amassed before joining Eskom. On
average, each CM has 15 years of experience in Eskom, 6 years in managing
strategic sourcing in Eskom and less than a year of experience in strategic sourcing
before joining Eskom. It can be concluded that strategic sourcing is largely
understood and experienced in the context of Eskom.
IV. Highest Level of Education of Respondents from CS

CMs were asked to state their highest levels of education to get a sense of their
procurement or strategic sourcing knowledge and exposure. The results show that
the respondents have obtained bachelors, honours and master’s qualifications in
different disciplines. The fields of qualification range from economics, informatics,
engineering, logistics and accounting. The fields of qualification seem to be relevant
to undertake research, economic analysis, understanding the commodity
manufacturing process and calculations in procurement and strategic sourcing.
Figure 4.3: Level of Education of CMs
As per Figure 4.3, out of the 10 CMs that contributed to the study, each level of
education (bachelors, honours and masters) has three respondents. There was one
respondent who did not mention a qualification; hence the numbers did not add up
to 10. Some CMs have indicated that they have completed additional short
programmes in supply chain management.
V. Completed Internal Training by Respondents in CS

Internal training programmes generally enable employees to keep abreast of the
demanding and turbulent environment and to be efficient in their daily duties. A
question was asked to commodity managers of whether they have attended internal
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training courses related to procurement and strategic sourcing. The question was
posed to determine whether CMs are continuously broadening their knowledge in the
discipline (Figure 4.4).
Figure 4.4: Internal Training completed by CMs
Of the 10 respondents, 90% (9) indicated that they completed internal training linked
to procurement and strategic sourcing. There was only one respondent (10%) who
had not participated in internal training. The training programmes which were
indicated are as follows (listed in no order of importance):
 strategic sourcing (7x7 sourcing methodology);
 procurement in Eskom (PIE);
 contract management;
 negotiation; and
 foreign exchange.
The list of training programmes reflects some relevance to common duties and
responsibilities of the practitioners in procurement and strategic sourcing.
4.2.2 Profile of SD&L Respondents

A total of 19 questionnaires were distributed to middle managers in SD&L, of which
84% (16) were returned (Table 4.4).
Table 4.4: Responses from MMs in SD&L

SD&L: Middle Managers Number %
Responses 16 84%
Non-responses 3 16%
Total 19 100%
The profile of the respondents includes gender, age group, years of experience, the
highest level of education attained and completed internal training by middle
managers in SD&L department. These are presented in the next sections.
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I. Gender Distribution of Respondents in SD&L
The purpose of this section is to present the gender distribution of middle managers
in SD&L (Figure 4.5).
Figure 4.5: Gender Distribution of MMs in SD&L
Of the 16 middle managers that responded in SD&L, 81% (13) were males while
19% (3) were females (Figure 4.5). The gender composition of the 19 middle
managers referred in Table 4.4 constitutes of 74% (14) males and 26% (5) females.
The evidence suggests an imbalance of gender at middle management level in
SD&L.
II. Age Group of Respondents from SD&L

Similar age group categories which were used in CS are employed in SD&L. The
result in relation to the age group of middle managers is depicted in Table 4.5.
Table 4.5: Age Distribution MMs in SD&L

Age Group Number %
20 – 29 0 0%
30 – 49 12 75%
50 - 59 3 19%
60 or older 1 6%
Total 16 100%
From Table 4.5, twelve of the respondents in SD&L (75%) are between the ages of
30 and 49 years. Three are between the ages of 50 to 59 years with one person
older than 60 years. Similar to CS, there were no respondents in the 20 to 29 age
bracket.
III. Years of Experience of Respondents from SD&L

The years of experience of middle managers are illustrated in Figure 4.6 according to
three aspects, namely years at Eskom, years in Eskom supplier development and
years of supplier development experience before joining Eskom.
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Figure 4.6: Years of Experience of MMs
According to Figure 4.6, the accumulative Eskom experience of the 16 middle

managers collectively amounted to 203 years varying between 3 and 22 years. The
supplier development experience in Eskom jointly amounted to 90 years while prior
to joining Eskom, it summed up to 41 years. The average experience of the
respondents in Eskom is 13 years, followed by six years of internal supplier
development experience and three years of supplier development experience before
joining Eskom.
IV. Highest Level of Education of Respondents from SD&L

The highest levels of education of middle managers are illustrated in Figure 4.7. All
the middle managers who responded had at least a degree.
Figure 4.7: Levels of Education of MMs
From Figure 4.7, 50% (8) of the 16 middle managers who responded have acquired
master’s degree, 12% (2) had honours degrees and 38% (6) had bachelor’s degrees.
It was established that the middle managers earned their qualifications in a range of
disciplines such as statistics, engineering, law, business administration, counselling
psychology, business leadership, economics and accounting. Most of these
disciplines are relevant to SD&L with an exception of counselling psychology and law
which comes across as unrelated to the function.
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V. Completed Internal Training by Respondents in SD&L
The question was asked to middle managers of whether they have attended internal
training courses related to supplier development in Eskom. The responses about
internal training are demonstrated in Figure 4.8.
Figure 4.8: Internal Training completed by MMs
Of the 16 respondents, 56% (9) have completed internal training in supplier

development related areas while the remaining 44% (7) stated that they have not
participated in training for reasons which were not enquired or mentioned. The
respondents indicated the following training programmes which had been completed,
in no particular order:
 enterprise development;
 strategic sourcing;
 B-BBEE;
 supplier development;
 local content;
 New Engineering Contract (NEC).
4.2.3 Profile of Executive Management Participants

Face-to-face interviews were conducted with participants at executive management
level that comprised of the group executive in group commercial, a general manager
and senior managers (Table 4.6).
Table 4.6: Interviews with Executive Management

Interviews Number %
Actual Interviews 9 82%
No interviews 2 18%
Targeted Interviews 11 100%
Nine interviews (82%) were conducted out of the 11 targeted with executive
management. Only two interviewees (18%) were unable to honour the request for
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interview and these included the general manager and a senior manager of one
department. The CS and SD&L departments are headed by the general managers
and the group executive oversees these departments. Since all the participants were
at executive level, it can be deduced that credible information was provided during
interviews.
Kumar (2011:245) maintained that certain types of information can be regarded as

sensitive or confidential by some people and thus an invasion of privacy particularly
in the face-to-face interview. Owing to the sensitivity, culture of the organisation and
power relationship between the researcher and the executive management
(interviewees), a decision was taken to avoid asking questions that may be deemed
sensitive and confidential. These are questions that relate to a level of education and
completed internal training.
The profile of the nine executive management interviewees in relation to gender, age
group and years of experience is discussed in the following sections.
I. Gender Distribution of Executive Participants

The gender distribution of participants at the executive management level is shown in
Figure 4.9.
Figure 4.9: Gender of Executive Participants
The executive managers who participated were predominantly male (67% = 6), and
all three females participated. The two participants who did not participate were both
males.
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II. Age Distribution of Executive Participants
The age group of executive management is concentrated between 50 and 59 years
(Table 4.7).
Table 4.7: Age Distribution of Executive Management
Age Group Number %

20 – 29 0 0%
30 – 49 2 22%
50 - 59 7 78%
60 or older 0 0%
Total 9 100%
The executive management participants are older and in the region of 50 to 59 years
(78% =7) followed by 22% (2) in the age group between 30 and 49 years. From
Table 4.7, most of the executive participants are at the later economically active
years and this can suggest that they have 5 to 15 years to reach the retirement age
of 65 at Eskom.
III. Years of Experience of Executive Participants

The executive managers were asked about their current years of experience in
Eskom and before joining Eskom. The intention was to assess their leadership tenure
in the organisation and their understanding of the culture of the organisation. An
analysis of the years of experience of executive management is shown in Figure
4.10.
Figure 4.10: Years of Experience of Executive Participants
The executive participants collectively had 174 years of Eskom experience amongst
themselves ranging from 9 to 32 years. It means that the minimum experience that
each executive participant had was nine years. Before they joined Eskom they had a
total of 15 years of experience varying between zero and six years.
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From these figures it is possible to conclude that some of the executive managers
have grown through Eskom’s ranks. This could have both positive and negative
effects to their departments. On the positive front, years of experience could be an
indication of progressive recognition by the organisation and awareness of the
culture of the organisation. It might also yield benefits in the form of stability and
maintenance of culture particularly if it is productive. On the unfavourable side, the
general view is that they may encounter difficulties adjusting to new challenges and
therefore not be amenable to change.
4.2.4 Summary of Profiles

The summary of profiles of the respondents and participants is presented based on
the gender, age group and the years of experience in Table 4.8.
Table 4.8: Summary Profiles of Respondents and Executive Participants
Profile of CS Respondents Profile of SD&L Respondents Profile of Executive Participants

Gender Number % Gender Number % Gender Number %
Male 7 70% Male 13 81% Male 6 67%
Female 3 30% Female 3 19% Female 3 33%
Total 10 100% Total 16 100% Total 9 100%
Age
Number % Age Group Number % Age Group Number %
Group
20 – 29 0 0% 20 – 29 0 0% 20 – 29 0 0%
30 – 49 7 70% 30 – 49 12 75% 30 – 49 2 22%
50 - 59 2 20% 50 - 59 3 19% 50 - 59 7 78%
60 or older 1 10% 60 or older 1 6% 60 or older 0 0%
Total 10 100% Total 16 100% Total 9 100%
CS: Years of Experience of Commodity Managers

Range Experience in Eskom Experience in Eskom Strategic Sourcing Experience in Strategic Sourcing /
Procurement prior joining Eskom
Minimum 6 2 0
Maximum 25 10 5
SD&L: Years of Experience of Middle Managers
Range Experience in Eskom Experience in Eskom Supplier Development Experience in Supplier
Development prior joining Eskom
Minimum 3 2 0
Maximum 22 13 8
Years of Experience of Executive Management
Range Experience in Eskom Experience in Strategic Sourcing / Procurement prior joining Eskom
Minimum 90
Maximum 32 6
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From Table 4.8, CS and SD&L respondents in both departments reveal that the
number of male respondents (77%) was greater than the females (23%). The outlook
of the dominancy of male respondents is reflected at the executive management
level where 67% males responded compared to 33% females. In summary, out of the
35 respondents, males constituted of 74% whereas females had only 26%. It
appeared that there was an identical trend at middle and executive management
levels in both CS and SD&L departments in terms of one gender dominance on
respondents.
In the age group, Table 4.8 portrays a higher number of managers (73%) between 30
to 49 years at middle management whereas executive managers (78%) are more in
the age of 50 to 59 years. From the analysis, it is evident that some of the executive
managers may be due for retirement in the next 5 to 15 years, if retirement age is 65
years. This may necessitate strategic action related to succession planning within the
range of 5 to 15 years. Overall, 60% of the respondents and participants fall between
30 to 49 age bracket followed by 34% in 50 to 59 years. There is a small number (2)
in 60 and above category and none in the 20 to 29 age group.
In comparing the average years of experience in Eskom of the commodity and

middle managers, they had 15 and 13 years respectively. Both commodity and
middle managers have an average of six years of experience practising strategic
sourcing and supplier development.
4.3 Key Research Results and Findings

The aim of this section is to ensure that the research objectives are achieved. The
primary objective of the study was to analyse integration of strategic sourcing with
supplier development at Eskom in order for strategic sourcing to be a catalyst for
supplier development to realise long-term benefits. To achieve this, the key results
and findings of the study are presented in accordance with four secondary research
objectives mentioned in Chapter 1, section 1.8.3, namely:
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RO3: To establish possibilities of how strategic sourcing could be a catalyst for
supplier development in the context of Eskom.
SD&L departments.
The research objectives were discussed and accomplished in section 4.3.1 to 4.3.4.
The first objective which relates to current implementation of strategic sourcing and
supplier development in Eskom is discussed in the following section.
4.3.1 Current Implementation of Strategic Sourcing and Supplier

Development at Eskom
The respondents were requested to describe how strategic sourcing and supplier
development were implemented in CS and SD&L respectively. The aim of this
section was to assess the methodologies utilised by the two departments against the
models in the literature reviewed in Chapter 2 (Tables 2.2 and 2.4). The results from
the two departments are presented in the following sections.
I. Application of Strategic Sourcing in CS

This section provides answers to questions and statements from A1 to A11 in
subsection 2.A in the CS questionnaire (Appendix D). Question A1 was an open-
ended question which asked how strategic sourcing is done in CS. The question was
posed to compare the responses with the literature on models of strategic sourcing
(Eskom Group Commercial Business Plan, 2012/2013-2016/2017; Coyle et al.,
2013:559; National Treasury 2015; Smeltzer et al., 2003; Engel, 2004; Dolan and
Fedele, 2004) as shown in Chapter 2, Table 2.2. Nine of the 10 commodity managers
cited that CS employs 7x7 strategic sourcing as a process to source goods and
services through the development of the sourcing strategy. The remaining
respondent mentioned an approved strategy as a mechanism that is used in CS. Two
of the respondents provided similar responses, as shown in Table 4.9 below, about
strategic sourcing methodology that is applied in Eskom. These two responses are
similar to Model 1 depicted in Chapter 2, Table 2.2.
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Table 4.9: Responses about Eskom Strategic Sourcing Methodologies
Respondent 1 Respondent 2
1.Access Opportunities 1.Kick off
2.Profile external and Internal Market 2.Internal and external analysis
3.Develop Strategy 3.Strategy development
4.Screen Suppliers 4.Supplier selection
5.Prepare (Request for Proposal) 5.Commercial event( RFQ/RFP/e-auction)
6.Shape Negotiations, and 6.Negotiations
7.Implement Agreements 7.Implement Agreements
Some of the responses which were highlighted by the CS respondents include

(verbatim):
 Seven-by-seven steps (7x7) are perpetually implemented in CS when
establishing national contracts. The objectives are to understand the
commodity, its internal usage / requirements, to understand the industry or
external environment and incorporate the research findings when compiling
the strategy as well as looking for opportunities to achieve savings and
advance shareholders’ socio-economic objectives.
 CS uses the 7x7 sourcing methodology, where end user requirements are
consolidated and a sourcing strategy is developed as to how the commodity
will be sourced.
The 7x7 sourcing methodology mentioned by the CS respondents is similar to the

one stated in Chapter 2, Table 2.2 as Model 1.
Further clarity was sought by asking question A8: ‘At what stage of the strategic
sourcing methodology do you consult SD&L? If not, why?’ Seven of the CS
respondents indicated that SD&L is consulted from the first step (kick-off) of the
strategic sourcing where opportunities are explored until the sourcing strategy is
approved and implemented. Respondents underlined that consultation happens in
the cross-functional team. However, three different responses were provided,
namely:
 SD&L is consulted when the need arise from the end-users for a commodity
which would lead to strategy development and appointment of cross-functional
team;
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 Consultation is done during market research, approval and implementation of
sourcing strategies; and
 The approximate value is the determining factor to consult with SD&L.
CS respondents mentioned that SD&L are involved in the setting of targets for the
local content on items being procured.
The commodity managers were asked (question A2) about how much time they are
allowed to develop a sourcing strategy. Different periods were mentioned by seven
respondents and these were in 170 days (approximately six months) and months
ranging from two, four, six, six to twelve, twelve, and twelve to eighteen months. The
other three respondents stated that the period allowed to develop a sourcing strategy
varies and depends on certain aspects such as:
 complexity of the commodity and industry structure;
 commodity value; and
 availability of information to develop a sourcing strategy.
Question A3: What is your understanding of an SD&L mandate?

From the CS respondents it emerged that SD&L’s mandate is mainly to advance
socio-economic development objectives such as supplier development, skills
development, localisation and transformation by using the procurement spend.
Following are the CS responses:
 The SD&L department is responsible for establishing and monitoring socio-
economic objectives that can be attained through procurement spend within
Eskom.
 The SD&L mandate outlines the objectives of SD&L and how the sourcing
departments should support the mandate taking into account the different
levers supported/driven by SD&L.
 The SD&L mandate is to enhance local development by means of leveraging
Eskom procurement spend.
 SD&L supports the group commercial division in supplier development, skills
development, localisation, transformation.
 SD&L supports the development of previously disadvantaged suppliers
through sub-contracting to improve the local content and local skills
development.
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 SD&L ensures that sourcing strategies incorporate transformation objectives
and developmental agenda.
 The SD&L mandate is to develop local suppliers (market) to be able to
compete globally.
 SD&L assists in making sure that black companies are empowered and cater
for them in sourcing strategies.
Presentation of the current status of strategic sourcing in CS according to the CS

respondents.
To ascertain the current status of strategic sourcing as perceived by the respondents
from CS, five questions were addressed to the commodity managers, namely
questions A4 to A7 and A9. The results appear in Table 4.10.
Table 4.10: Views of CS Respondents pertaining to SD&L

CS:Current Status of Strategic Sourcing in Eskom YES NO
No Question/Statement # % # %
A4 Is strategic sourcing process aligned to SD&L programme? If not, what are the gaps or misalignment? 7 70% 3 30%
A5 Sourcing strategy incorporates SD&L objectives 10 100% 0 0%
A6 Is your performance compact linked with SD&L performance? 9 90% 1 10%
A7 Do you always consult with SD&L when developing a sourcing strategy? 10 100% 0 0%
A9 Is there a policy that governs the consultation of other functions in the strategic sourcing process? 8 80% 2 20%
Seventy percent (70%) of the CS respondents to question A4 indicated the strategic

sourcing process is aligned to the SD&L programme. If such alignment did not exist,
a supplementary question was asked to the respondents to identify the gaps or
misalignment. Gaps mentioned included inefficient cross-functional team, need to
improve monitoring process to meet SD&L targets, explore interventions for suppliers
that do not meet the targets, mechanism to deal with trade-off between cost
effectiveness and localisation drive. One CS respondent summarised it as follows:
“SD&L programs can be achieved through strategic sourcing, tactical sourcing

and project sourcing within Eskom. Whether strategic sourcing is aligned to
SD&L program or not, it depends on initiatives and ambitions of cross-functional
team which is led by the commodity manager to advance localisation, skills
development, job creation, industrialisation and support business owned by
previously disadvantaged groups. The short-term (annual objectives) goals of
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SD&L must be emphasised and monitored from the beginning of each financial
year. Its long-term objectives must as well be made clear to all departments
within the organisation and be supported by all Group Executives”.
All CS respondents are in agreement that the sourcing strategy incorporates SD&L
objectives (question A5) and that consultation with SD&L is always done when
developing a sourcing strategy (question A7). According to eight of the respondents a
policy that governs the consultation of other functions in the strategic sourcing
process does exist and two respondents have disagreed (question A9). The existing
documents referred to by these two CS respondents could be the approved Eskom
Procurement and Supply Management Procedure and Procurement and Supply
Chain Management. However, these documents are not consultation policies but
contain procurement and supply chain procedures.
Question A6: “Is your performance compact linked with SD&L performance?”
The results show that 90% of the CS respondents indicated that their performance
compacts are linked with SD&L performance.
Role of SD&L as perceived by the commodity managers in CS.

Question A10: What do you think should be the role of SD&L in the cross-functional
team? (open-ended question)
Similar views about the role of SD&L in the cross-functional team from commodity
managers were combined and these are:
 SD&L should identify opportunities to develop industries, suppliers and to build
capacity in terms of scarce skills;
 Sourcing specialists should be trained and fully equipped on SD&L and its role
within the organisation to help grow the economy of the country. SD&L’s role
in cross-functional team is to look for possibilities of advancing elements of
SD&L through each commodity and ensure the attainment of identified
opportunities;
 SD&L needs to fulfil their mandate objectives and making sure that they are
incorporated in sourcing strategies;
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 CS respondents emphasised SD&L’s role in the cross-functional team:
“SD&L’s role is to ensure that the cross-functional team understands the
SD&L mandate and how CS can contribute to the achievement of SD&L
objectives. SD&L is part of the cross functional team which means that they
need to be involved from the initial stages of the process to obtain an
understanding of the commodity and the markets / industry of the commodity
in order to influence the strategy for the various commodities”;
 SD&L should guide the cross-functional team in terms of SD&L requirements
and advise on suppliers to source from to ensure its mandate is accomplished;
 SD&L should align the strategy to the overall company strategy;
 SD&L representatives need to understand the commodities they are giving
advice on and the market in general. They should advise the sourcing
specialist of government requirements regarding transformation. Suppliers’
requirements need to be realistic and achievable. Focus needs to be on
monitoring post-contract awards.
The views from the CS respondents are diverse as some indicated that sourcing
specialists should be trained to carry out the SD&L mandate, while others emphasise
the need to involve SD&L in the cross-functional team. However, common intuitions
from the respondents suggest that SD&L should be present and play an advisory role
in the cross-functional team in so far as the socio-economic objectives is concerned.
Question A11: How do you feel about the role of SD&L in the cross-functional team?
(open-ended question)
The question was posed to determine effectiveness of the SD&L in the cross-
functional environment. The manner in which the CS respondents felt about SD&L in
the cross-functional team is as follows:
 SD&L should not only involve themselves on setting targets but in detailed
market research of each commodity, raw material and key component
required to manufacture a specific commodity;
 Three CS respondents mentioned that SD&L’s role is limited and
dissatisfactory, and requires improvement particularly on the monitoring and
reporting element;
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 SD&L is one of the key functionaries and should be involved in the cross
functional team at the start of the process and throughout the sourcing
process;
 One of the CS respondents revealed that its role is positive in the business;
 The importance of the SD&L role was stated by two CS respondents: It plays
an important and integral part of the cross-functional team and without it the
strategic objective of commodity sourcing in particular and that of Eskom in
general would never be realised. It is necessary and important as part of the
cross-functional team;
 SD&L’s role is very important to ensure localisation, industrialisation and skills
development is properly understood by all the cross-functional team members
as well as its importance in improving the lives of the local communities;
 The SD&L role is great, however, the monitoring and reporting needs
improvement to ensure that the supplier delivers on their obligations.
It was stated by commodity managers that SD&L is involved in the cross-functional

team; however, it was underlined that SD&L should be involved from the beginning to
the end of the strategic sourcing methodology.
II. Application of Supplier Development in SD&L

The questions and statements for SD&L in subsection 2.A range from A1 to A9 in the
SD&L questionnaire (Appendix E).
Question A1: How SD&L is done in Eskom?

The SD&L responses from question A1 as cited by middle managers revealed SD&L
objectives are normally achieved through leveraging procurement and spend on
commodities. This is done by setting targets in view of the complexity, value and the
duration of the contract. SD&L is seen as a support function to buyers in the CS.
Despite the agreement by most participants on the implementation aspect, it was

revealed that the approach is fragmented and had inefficiencies. A specific process
of how SD&L is implemented, apart from mentioning procurement spend as a lever to
advance its objectives, did not emerge. One respondent pointed out that SD&L is at
infancy stage within Eskom and has not been embraced in the entire business.
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Since SD&L is implemented within CS procurement processes, it was necessary to
assess the understanding of CS by middle managers.
Question A2: What is your understanding of Commodity Sourcing?

Some respondents cited the centralisation and consolidation of procurement of
commodities in Eskom to maximise savings and improve efficiencies. One
respondent alleged that the strategic sourcing methodology is not thoroughly
implemented because there are critical steps that are omitted hence it has not
integrated SD&L effectively.
The perceptions of SD&L respondents pertaining to alignment, sourcing strategy,

performance, consultation and existence of policy (question or statements A3 – A7)
are presented in Table 4.11.
Table 4.11: Views of SD&L Respondents pertaining to CS

SD&L:Current Status of SD in Eskom YES NO
No Question/Statement # % # %
A3 Is SD&L aligned to Commodity Sourcing processes? If not, what are the gaps or misalignment? 8 50% 8 50%
A4 SD&L objectives are incorporated in the strategic sourcing methodology in Commodity Sourcing. 11 69% 5 31%
A5 Is your performance compact linked with Commodity Sourcing performance? 5 31% 11 69%
A6 Do you always consult with Commodity Sourcing in driving SD&L objectives? If yes, at what stage? 10 63% 6 38%
A7 Is there a policy that governs the consultation of other functions in pursuing SD&L? 10 63% 6 38%
There seems to be no consensus in question A3 on whether SD&L is aligned to CS

or not since half of the respondents agreed (50%) while the other half disagreed
(50%).
Some alignment gaps were mentioned by the SD&L respondents, namely:

 It was cited by one respondent that most of the SD&L opportunities are at the
early stages of the procurement process and are not completely optimised.
 It was further stated that SD&L as a department lacks the capacity to engage
and maximise its imperatives.
 Lack of alignment of SD&L with procurement plans.
 It was also mentioned that even if there is an alignment it has to improve. Lack
of integration between strategy formulation and execution.
 Another gap was in relation to lack of communication.
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In question A4, 69% of SD&L respondents have indicated that SD&L objectives are
incorporated in the strategic sourcing methodology in CS. According to the literature
review, Eskom’s 7x7 strategic methodology had not shown SD&L objectives on its
steps.
The results on the question A5 indicate that 69% of the SD&L respondents’
performance compacts are not linked with CS performance. A question emerged as
to how SD&L influences strategic sourcing when the performance compacts are
delinked with CS strategic objectives.
In question A6, there are 63% of the SD&L respondents who said that they always
consult with CS in driving SD&L objectives. The existence of the policy that governs
consultation of other functions in pursuing objectives of SD&L was backed by 63% of
SD&L respondents (question A7).
The existing policy referred to by the respondents could be the authorised Eskom
Procurement and Supply Management Procedures which can be easily confused
with the policy. As a result, procedures and policy may have been interpreted
differently by the respondents; hence some are not aware of such a policy.
Two similar questions (A8 and A9) were posed to gather the perceptions of middle
managers about CS.
Question A8: What do you think should be the role of CS in the cross-functional
team?
SD&L respondents outlined perceptions about how CS should play its role in the
cross-functional context. Responses are grouped into the following themes: Cross-
functional environment, coordination and consultation.
To promote the cross-functional values, SD&L respondents perceived the following

about CS:
 CS should lead the cross-functional team and ensure proper alignment of all
business objectives including those of SD&L;
 CS should drive the process of the cross-functional team with a supplier
development and localisation agenda;
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 It was mentioned by three SD&L respondents that CS should drive the
sourcing process and coordinate the cross-functional team of all inputs of the
cross-functional team members and ensure integration into a sourcing
contract;
 CS initiates and drives the cross-functional team, facilitates and provide
updates;
 CS needs to consult with other business functions to understand their needs
for effective and efficient sourcing of commodities;
 CS should adhere to all the steps of the strategic sourcing process and all
members of the cross functional team should be involved in the entire process
and not just someone from commodity sourcing.
With regards to the collaboration and consultation, the respondents outlined their
views as follows:
 CS should collaborate with SD&L;
 CS should chair the team, coordinate inputs and decisions and present a
consolidated view of the commodity about demand and supply parameters of
the commodity;
 CS needs to develop procurement plans and also incorporate SD&L
requirements;
 CS discussions on the cost-effective, qualitative, timely and sustainable way of
sourcing a product / service should take into consideration SD&L’s objectives;
 CS should proactively inform SD&L about all procurement transactions that
are being planned; CS works together with SD&L in order to incorporate
developmental objectives in all formal commodity sourcing transactions;
 CS should support SD&L by ensuring that the final negotiated commitments
are incorporated in the signed charter.
Some of the views were not related to the themes and these are:
 CS should ensure that the organisation adheres to commercial principles for
the business to get the best pricing and value for its money;
 CS uses the procurement spend to achieve transformational targets and
economic participation by historically marginalized groups; and
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Most of the SD&L respondents emphasised the importance of the cross-functional
team which CS should lead and also stressed the significant role that SD&L can play
in undertaking CS processes. It can be said that the interdependency between CS
and SD&L needs to be enhanced and clearly define roles in the cross-functional
team.
Question A9: How do you feel about the role of CS in the cross-functional team?
The SD&L respondents expressed their views about the manner in which they felt
about CS in the cross-functional team. Some of the responses indicated some
pessimism on how CS performs its role in the cross-functional team:
 In the cross-functional team certain tasks and responsibilities of other
functions are excluded;
 There is an attitude of individualism by CS;
 The position of CS is not optimally place in the business;
 CS is too comfortable and not reactive in conducting their business;
 CS is not effective in planning and organising and lack time management;
 CS does not play an effective and coordinating role in the cross-functional
team;
 CS does not integrate the broad developmental mandate of Eskom and tends
to focus more on cost efficiencies, quality and time;
 CS is not actively playing the leading role and tends to abdicate its
responsibility;
 CS has not effectively collaborated with SD&L;
Other SD&L respondents show some level of optimism about CS:

 CS has ensured that SD&L is involved in the cross-functional team.
 Most of the CS sourcing teams embrace SD&L objectives.
 CS has a clearly defined role.
It appears that there are more negative comments than positive. Most of the
highlighted concerns by SD&L respondents about CS pointed to the lack of role
clarity and collaboration. It emerged that CS is disjointed with other functions
particularly with SD&L. The responses reveal a lack of planning and organising on
the part of CS which resulted in a reactive mode in performing leadership duties.
The possible despondence that might exist within the SD&L department manifests
itself in the negative comments made by the respondents.
110
III. Executive Management
According to the questions which were posed to the executive management, the
following findings are reported.
Question 1: In your view, is Commodity Sourcing / strategic sourcing process aligned

to SD&L programme? If not, what are the gaps or misalignment?
The interviewed executives provided the following responses to the question:
 Seven participants/executives conveyed that the 7x7 strategic sourcing
methodology did not include SD&L when it was developed. One participant
further stated that strategic sourcing and supplier development were designed
independent of each other. Some participants affirmed that SD&L was created
as a supporting area rather than a strategic activity at Eskom. It was
mentioned by participants that SD&L is being treated as a retrofit to the 7x7
strategic sourcing methodology.
 One participant underlined that CS and SD&L processes are probably aligned
on paper as opposed to actual execution which can lead to some
misalignment. Another participant ascribed misalignment to disjointed
coordination and limited resource capabilities in the organisation.
 One participant revealed that the misalignment between CS and SD&L is a
grave concern and is triggered by the structural and fragmented approach to
strategic decision making. The participant further stated that the CS and SD&L
work against each other and are not complementary. This has led to sub-
optimal treatment of the 42 focus areas in CS and non-strategically positioning
of SD&L as a target-setting function.
 It was mentioned by one participant that the disjuncture and lack of
coordination between strategic sourcing and supplier development is
emanating from the lack of role clarity and ownership.
Some suggestions were put forward by six participants, namely:

 Review of the 7x7 sourcing methodology to reflect inclusivity of SD&L or
combine the two departments.
 Capacitate commodity managers to carry out the SD&L mandate and be
measure on that through performance contracts.
 Review organisational structure to locate SD&L appropriately or merge these
two departments.
111
Question 4: Is your performance compact linked with Commodity Sourcing / Supplier
Development & Localisation performance?
The following reasoning was given by the interviewed executives:
 Procurement spend is considered as a key measurement regardless of where

the money is used. As a result, some participants mentioned that their
performance compacts include either CS or SD&L objectives but not both
depending on the department where they are located.
 As participants highlighted that performance management was not effective in
the entire organisation, a suggestion was made regarding performance
management improvement to link both CS and SD&L objectives.
Question 5: Is there a policy/practice that governs the consultation of other functions

in the CS and SD&L?
The executives interviewed commented as follows:
 The comments given by the participants were similar. Most of the participants
were not aware of such policy, it was established that Eskom Procurement
and Supply Management Procedures are the only documents which address
procedures and processes, but are not necessarily policies.
Question 6: What do you think should be the role of Commodity Sourcing / Supplier
Development and Localisation in the cross-functional team?
The following propositions were given by the interviewed executives:

 The majority of the participants reiterated the need for integration of the
processes between the two departments. One participant proposed that
ownership or allocation of the specific commodities should go to individual
managers to execute them in the cross-functional team.
 Three participants repeatedly raised the issue that SD&L knowledge should be
passed on to commodity managers to lead both strategic sourcing and
supplier development. The motive which was provided is directed at
encouraging commodity managers to be multidimensional in executing their
duties.
112
IV. Discussion of the Strategic Sourcing and Supplier Development Implementation at
Eskom
The intention of this section is to provide a summary of how strategic sourcing and
supplier development are currently implemented in Eskom. The results from survey
and face-to-face interviews revealed that procurement spend is often used as a
mechanism to enable implementation of supplier development. There are relatively
conflicting responses of how supplier development is achieved in CS with the use of
the procurement spend. Supplier development in Eskom has its own process, as
shown in Model 1, Table 2.4 in Chapter 2, which is not directly linked to Eskom’s 7X7
strategic sourcing methodology (model 1 of strategic sourcing). It appears that there
is a lack of appreciation of interdependency between the two departments as
processes are misaligned with limited collaboration.
Six models of strategic sourcing were presented in the literature review in Chapter 2,
Table 2.2. CS respondents have confirmed that Model 1 in Table 2.2 is used to
develop sourcing strategies to procure goods and services. The question on whether
the seven steps are strictly followed was not posed. The negative responses from the
SD&L respondents can be linked to the invisible SD&L objectives in the
methodology, whilst supplier development is meant to be driven through strategic
sourcing methodology. Various periods, in days and months, were mentioned which
commodity managers are allowed to develop a sourcing strategy, and as a result the
duration to develop a sourcing strategy is not clear.
On the supplier development front, the literature review (Eskom SD&L Plan,
2013/2015:32; Gordon, 2014:3; Handfield et al., 2000:39-41) revealed three models
of how supplier development is applied (Chapter 2, Table 2.4). Although there is a
supplier development process in Eskom as stated in Chapter 2, Model 1, there is no
evidence that it was applied because respondents did not reveal it when asked about
how SD&L is implemented in Eskom. The conclusion indicates that the 7x7
methodology and SD&L process are misaligned and the mechanism in which they
are integrated is unclear. Model 2 and 3 have similar steps and this provoke reasons
for consolidation to build a new model.
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From the responses gathered from CS and SD&L, five themes emerged, namely
alignment, interdependency, linkage of performance compact, consultation and
existence of consultation policy. The consolidation of the results in Tables 4.10 and
4.11 led to the summary of each theme in Table 4.12.
Table 4.12: Themes on Implementation of Strategic Sourcing and Supplier
Development
Departments CS SD&L CS SD&L
Yes Or No and Average YES YES Average NO NO Average Total
THEMES: 1 to 5 # % # % # % # % # % # %
Alignment 7 70% 8 50% 8 60% 3 30% 8 50% 6 40% 100%
Interdepency 10 100% 11 69% 11 84% 0 0% 5 31% 3 16% 100%
Linkage of Performance Compact 9 90% 5 31% 7 61% 1 10% 11 69% 6 39% 100%
Consultation 10 100% 10 63% 10 81% 0 0% 6 38% 3 19% 100%
Existence of Consultation Policy 8 80% 10 63% 9 71% 2 20% 6 38% 4 29% 100%
On average, 60% of the respondents were positive about the alignment between
strategic sourcing and supplier development while 40% were on the pessimistic side
(Table 4.12). The alignment is supported by 84% of respondents who confirmed
existence of interdependency and 81% stating that consultation does happen. The
respondents (71%) confirmed the existence of a consultation policy with other
departments. Although the respondents claimed the existence of the consultation
policy between CS and SD&L, the policy is not known apart from the procedures and
processes. Performance compacts of the practitioners are seen to be linked (61%) to
the other department. Despite the linkage, it is concerning that 39% of the
respondents denied that they are appraised both on strategic sourcing and supplier
development objectives. It can be said that there are some inconsistencies in
responses on the questions and statements about alignment, performance compacts
and existence of consultation policy between CS and SD&L respondents and
participants.
The research objective was achieved through understanding of the current

implementation process of strategic sourcing and supplier development and
associated challenges. The second research objective namely: To assess the
relationship between strategic sourcing and supplier development at Eskom, is
addressed in the next section.
114
4.3.2 Relationship between Strategic Sourcing and Supplier Development at
Eskom
The relationship between strategic sourcing and supplier development at Eskom was
investigated using the five-point Likert scale, ranging from ‘strongly disagree’ to
‘strongly agree’. The aim of this objective was to establish the role of the two
concepts and how they are integrated in practise.
I. Role of Strategic Sourcing in Eskom

In order to establish the nature of relationship between strategic sourcing and
supplier development, the role of strategic sourcing in the entire organisation needs
to be examined. Statements B1-B16 in subsection 2.B of the questionnaire
(Appendix D) on a five-point Likert-scale addressed the role of strategic sourcing in
Eskom. The responses from CS respondents in Table 4.13 are presented and
discussed.
Table 4.13: The Role of Strategic Sourcing

Section 2.B: The Role of Strategic Sourcing in Eskom
Disagree
Disagree
Strongly
Strongly
Neutral
Agree
Agree
No. Statement Total
B1 Commodity Sourcing is involved in the development of Eskom Corporate Strategy. 10% 30% 40% 20% 0 100%
B2 Leadership in Eskom generally view strategic sourcing as a platform to create value. 0 30% 20% 40% 10% 100%
B3 Role of strategic sourcing is recognised in the entire organisation to improve performance. 0 20% 10% 60% 10% 100%
B4 Strategic sourcing plays an integrative role for other functions (SD&L and engineering etc.). 0 0 20% 50% 30% 100%
B5 Strategic sourcing is primarily aimed at reducing costs and creates long-term relationships. 0 0 0 30% 70% 100%
B6 My role and responsibilities are only related with signing of the contract or procuring commodities. 30% 40% 10% 20% 0 100%
B7 Strategic sourcing has reduced costs significantly in the past. 0 0 0 50% 50% 100%
B8 Commodity Sourcing often use strategic sourcing methodology in developing sourcing strategies. 0 0 0 20% 80% 100%
B9 Commodity Sourcing objectives are always linked with SD&L. 0 20% 10% 40% 30% 100%
B10 Strategic sourcing can enable and advance SD&L objectives. 0 0 10% 30% 60% 100%
B11 SD&L objectives are incorporated and enhanced in the sourcing strategy. 0 20% 10% 30% 40% 100%
B12 SD&L representative is always part of the cross-functional team from the onset to the end. 10% 30% 0 50% 10% 100%
SD&L representative continue to be part of the cross-functional team when the sourcing strategy has
B13 0 10% 20% 50% 20% 100%
been developed.
Commodity Sourcing performance metrics on the sourcing contract are often reviewed quarterly with
B14 0 40% 0 50% 10% 100%
suppliers.
B15 I monitor SD&L requirements with suppliers. 0 40% 10% 50% 0 100%
B16 Implementation of SD&L had a positive effect on my work. 0 10% 30% 60% 0 100%
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Statements B1-B4
In Table 4.13, 40% of the CS respondents disagreed that CS participated in the
development of Eskom corporate strategy while 40% were neutral (B1). This could
be a signal of limited involvement of CS in Eskom’s strategic agenda. Fifty percent
(50%) of the CS respondents in statement B2 perceived that leadership in Eskom
generally view strategic sourcing as a platform to create value while 30% disagreed
and 20% were neutral to the statement. Most of the CS respondents (70%) assented
that the role of strategic sourcing is recognised in the entire organisation to improve
performance (B3). The statement in B3 is augmented with 80% of CS respondents
advocating that strategic sourcing plays an integrative role for other functions (B4).
Statements B5-B7
All the CS respondents agreed that strategic sourcing is primarily aimed at reducing
costs and create long-term relationships (B5) and that strategic sourcing has
significantly reduced costs in the past (B7). Seventy percent (70%) of the CS
respondents opposed that their roles and responsibilities are only related to signing
of contracts or procuring commodities (B6).
Statements B8
All CS respondents confirmed that the CS often used strategic sourcing methodology
in developing sourcing strategies. It can be assumed that Model 1 from Eskom in
Chapter 2, Table 2.2 is the one referred to by the respondents.
Statements B9-B13
CS respondents (70%) pointed out in statement B9 that CS objectives are always
linked with SD&L, while 20% disapproved of the statement. In statement B10, the
majority of respondents (90%) were positive in that strategic sourcing can enable and
advance SD&L objectives. Seventy percent (70%) of the CS respondents stated that
SD&L objectives are incorporated and enhanced in the sourcing strategy (B11),
whereas 20% have had dissimilar views. According to the Table 4.13, 60% of the
respondents confirmed that the SD&L representative is always part of the cross-
functional team from the onset to the end, whilst 40% differed with the statement
(B12). In statement B13, seventy percent (70%) of the respondents maintained that
the SD&L representative continues to be part of the cross-functional team when the
sourcing strategy has been developed. This statement is directly linked with B12,
116
which indicates involvement of SD&L representation in the cross-functional team
from the onset to the end.
Statements B14-B15
Here 60% of the CS respondents in statement B14 confirmed that CS performance
metrics on the sourcing contracts are often reviewed quarterly with suppliers.
However, 40% of CS respondents objected the statement. It means that performance
metrics on certain sourcing contracts are not reviewed with suppliers quarterly. In
addition to that, 40% of the respondents revealed that they do not monitor SD&L
requirements with suppliers (B15).
Statements B16
A total of 60% of the CS respondents admitted that the implementation of SD&L had
a positive effect on their work, while 30% reserved their views. Ten percent (10%)
disagreed with the statement.
II. Role of Supplier Development in Eskom

This section contains the analysis and discussion of the role of supplier development
in Eskom from the perspective of the SD&L respondents. The results of statements
B1 to B12 are indicated on a five-point Likert-scale in terms of scales from “strongly
disagree” to “strongly agree” in Table 4.14.
Table 4.14: The Role of Supplier Development

Section 2.B: The Role of SD&L in Eskom
Strongly
Disagree
Disagree
Strongly
Neutral
Agree
Agree
No. Statem ent Total
B1 SD&L is involved in the development of Eskom Corporate Strategy. 19% 19% 19% 31% 13% 100%
B2 Leadership in Eskom generally view s SD&L as a platform to create value for money. 19% 31% 25% 25% 0% 100%
B3 Role of SD&L is recognised in the entire organisation . 13% 38% 13% 38% 0% 100%
B4 SD&L plays an integrative role for other functions. 0% 38% 6% 44% 13% 100%
B5 SD&L relies on strategic sourcing methodology in Commodity Sourcing for implementation. 0% 31% 19% 44% 6% 100%
B6 SD&L objectives are linked w ith Commodity Sourcing. 19% 13% 63% 6% 100%
B7 Commodity Sourcing can enable and advance SD&L objectives. 6% 0% 0% 31% 63% 100%
B8 SD&L representative is alw ays part of the cross-functional team from the onset to the end. 13% 25% 6% 38% 19% 100%
SD&L representative continues to be part of the cross-functional team w hen the sourcing
B9 13% 6% 19% 44% 19% 100%
strategy has been developed.
SD&L performance metrics on the sourcing contract are often review ed quarterly w ith
B10 0% 31% 44% 25% 0% 100%
suppliers.
B11 SD&L requirements are monitored w ith suppliers. 13% 0% 44% 44% 0% 100%
B12 Commodity Sourcing had a positive effect on my w ork. 0% 13% 63% 13% 6% 94%
Note: Responses on Question B12 do not add up to 100% because one respondent did not provide an answer
117
Statements B1-B4
When SD&L respondents asked whether SD&L is involved in the development of
Eskom’s corporate strategy B1), 44% either agree or strongly agree to that whereas
38% either disagree or strongly disagreed with 19% being neutral to the statement.
Fifty percent (50%) of SD&L respondents disagreed that leadership in Eskom
generally views SD&L as a platform to create value for money, with 25% being
neutral about the statement (B2). Fifty-one percent (51%) of the respondents did not
believe that the role of SD&L is recognised in the entire organisation (B3) and 57% of
the respondents pointed out in statement B4 that SD&L plays an integrative role for
other functions. Some of the negative results could have been influenced by the fact
that SD&L is seen as a support function in Eskom.
Statements B5-B9
Statement B5 revealed that 50% of SD&L respondents generally agreed that SD&L
relies on strategic sourcing methodology in CS for implementation, followed by 31%
disagreeing and 19% neutral. If the responses are considered, it seems that there is
some uncertainty as to how SD&L is implemented. Sixty-nine percent (69%) of the
respondents perceived that SD&L objectives are linked with CS (B6). The majority
(94%) of the SD&L respondents were of the view that CS can enable and advance
SD&L objectives (B7). The results in statement B7 are in line with 90% of the CS
respondents who shared similar sentiments. The respondents were split in their
views on whether SD&L representative is always part of the cross-functional team
from the onset to the end. In statement B8, fifty-seven percent (57%) agreed while
38% disagreed and 6% neutral that SD&L representative is always part of the cross-
functional team from the onset to the end. In statement B9, 63% of the respondents
agreed while 19% equally disagreed and neutral that SD&L representative continues
to be part of the cross-functional team when the sourcing strategy is being
developed.
Statements B10-B11
Forty-four percent (44%) of the SD&L respondents are undecided whether SD&L
performance metrics on the sourcing contracts are often reviewed quarterly with
suppliers followed by 31% deviating from the statement B10. In addition to
performance metrics, 44% are unsure whether SD&L requirements are monitored
with suppliers and 13% of the respondents strongly disagreed (B11).
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Statement B12
Only 19% of the SD&L respondents indicated that CS had a positive effect on their
work while 63% of SD&L respondents were neutral or indecisive to respond to the
statement.

Question 7: What is your general view of the CS / SD&L to create value in the
business?
 SD&L is seen as ineffective in the business and a lack of commitment and
accountability was mentioned by one participant.
 The majority of the participants proclaimed that CS and SD&L work against
each other and its processes are not interdependent.
 Government legislation such as Preferential Procurement Policy Framework
Act (PPPFA) is seen as a hindrance to advance supplier development through
strategic sourcing.
 It was mentioned by most of the participants that there is a lack of a holistic
approach in which supplier development is carried out in the business. It can
be said that processes and systems need to improve.
IV. Discussion on the Effective Relationship between Strategic Sourcing and Supplier
Development
A conducive environment between strategic sourcing and supplier development
should ensure effective relationship and result to sustainability. Since the literature on
the relationship between strategic sourcing and supplier development is inadequate
due to limited research in the area, the discussion is equally restricted. In the
literature review, Rodriguez (2009:161) found that these two concepts of strategic
sourcing and supplier development have been researched independently of each
other and effort needs to be intensified to analyse the relationship between strategic
sourcing and supplier development practices.
4.3.3 Strategic Sourcing as a Catalyst for Supplier Development in the

context of Eskom
This section determines whether strategic sourcing can be a catalyst for effective
supplier development in Eskom. The questions to ascertain that are included in
subsection 2.C (Appendices D and E). The responses are divided into CS, SD&L and
executive management, followed by a discussion on strategic sourcing as a catalyst
for supplier development in the Eskom’s context.
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I. Responses from CS Respondents
Ten statements from C1 to C10 in subsection 2C were given to CS respondents to
indicate their agreement on a five-point Likert scale. The responses on the
statements are displayed in Table 4.15.
Table 4.15: Commodity Managers on Collaboration between CS and SD&L
Section 2.C: Collaboration between Commodity Sourcing and SD&L
Disagree
Disagree
Strongly
Strongly
Neutral
Agree
Agree
No. Statement Total
C1 Commodity Sourcing is thoroughly integrated with SD&L. 10% 20% 10% 50% 10% 100%
Integration between Commodity Sourcing and SD&L is managed in a proactive and
C2 10% 40% 40% 0 10% 100%
coherent manner.
C3 A collaborative framework exist between Commodity Sourcing and SD&L. 0 30% 0 60% 10% 100%
The existing organisational culture promote collaboration between Commodity
C4 0 30% 10% 50% 10% 100%
Sourcing and SD&L.
C5 Leadership is supportive in both departments. 0 10% 20% 50% 20% 100%
Commodity sourcing and SD&L jointly develop strategic objectives for the financial
C6 10% 30% 40% 20% 0 100%
year.
C7 Monitoring and evaluation of objectives is done jointly with SD&L. 10% 40% 30% 10% 10% 100%
C8 SD&L objectives are always incorporated in the strategic sourcing methodology. 0 0 10% 50% 40% 100%
C9 SD&L is viewed as a critical member of a cross-functional team. 0 0 0 60% 40% 100%
C10 SD&L processes are well understood in Commodity Sourcing. 10% 20% 30% 30% 10% 100%
Statements C1-C3
The results in statement C1 indicated that 60% of CS respondents perceived that CS
is thoroughly integrated with SD&L. On the other hand, in statement C2, 50% of CS
respondents pointed out that integration between CS and SD&L is not managed in a
proactive and coherent manner, while 40% were neutral and 10% were on the
positive side. Seventy percent (70%) of the respondents in C3 noticed the existence
of a collaborative framework between CS and SD&L. The evidence suggests that
there is integration that is not properly managed and that it is incoherent.
Statements C4-C5
Sixty percent (60%) of the respondents pointed out that the existing organisational
culture promotes collaboration between CS and SD&L (C4). In statement C5, the
evidence from the CS respondents (70%) shows that leadership is supportive in both
departments.
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Statements C6-C10
Respondents in statement (C6) disagreed (40%) that CS and SD&L jointly develop
strategic objectives for the financial year with 40% being neutral and only 20%
agreeing. With regard to monitor and evaluate objectives being done jointly with
SD&L (C7), half of the respondents (50%) either disagreed or strongly disagreed,
30% neutral and 20% either agreed or strongly disagreed. Most of the respondents
(90%) agreed that the objectives of SD&L are always incorporated in strategic
sourcing methodology (C8). With regard to statement C9, SD&L is viewed by CS
respondents as a critical member of the cross-functional team (100%). The
responses whether SD&L processes are well understood in CS (C10) indicates some
discrepancies as responses are apportioned across all the options on the five-point
Likert scale.
II. Responses from Supplier Development Respondents

Supplier development respondents provided responses on statements C1 to C10
about collaboration in Table 4.16.
Table 4.16: Middle Managers on Collaboration between CS and SD&L

Strongly
Disagree
Disagree
Strongly
Neutral
Agree
Agree
No. Statement Total
C1 SD&L is thoroughly integrated w ith Commodity Sourcing. 0% 44% 31% 19% 6% 100%
Integration betw een SD&L and Commodity Sourcing is managed in a proactive and coherent
C2 0% 56% 13% 25% 0% 94%
manner.
C3 A collaborative framew ork exists betw een SD&L and Commodity Sourcing. 6% 13% 50% 31% 0% 100%
The existing organisational culture promotes collaboration betw een SD&L and Commodity
C4 0% 50% 31% 19% 0% 100%
Sourcing.
C5 Leadership is supportive in both departments. 0% 38% 19% 38% 6% 100%
C6 SD&L and Commodity Sourcing jointly develop strategic objectives for the financial year. 0% 50% 44% 6% 0% 100%
C7 Monitoring and evaluation of objectives is done jointly w ith Commodity Sourcing. 13% 44% 38% 6% 0% 100%
SD&L objectives are alw ays incorporated in the Commodity Sourcing strategic sourcing
C8 13% 19% 25% 44% 0% 100%
methodology.
C9 Commodity Sourcing is view ed as a critical member of a cross-functional team. 6% 6% 6% 56% 25% 100%
C10 Commodity Sourcing strategic sourcing methodology is w ell understood in SD&L. 13% 31% 31% 25% 0% 100%
Note: Responses on Question C2 do not add up to 100% because one participant did not provide an answer
Statements C1-C3
In statement C1, 44% of SD&L respondents pointed out that SD&L is not thoroughly
integrated with CS, whereas 31% were neutral about the statement. In addition to
that, 56% of respondents indicated that integration is not managed proactively and
coherently (C2). The responses on C1 and C2 are comparable with CS responses in
Table 4.15.
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In statement C3, only 31% of the SD&L respondents stated that a collaborative
framework exists between SD&L and CS while 50% were neutral and 19%
disagreed. This shows inconsistency in the responses coming from different
departments.
Statements C4-C5
In statement C4, respondents (50%) disagreed that the existing organisational
culture promotes collaboration between SD&L and CS while 31% were neutral. With
regards to statement C5, 44% of the respondents confirmed that leadership is
supportive in both departments while 38% strongly disagreed to the statement and
19% neutral to it.
Statements C6-C10
A total of 50% disapproved the statement that SD&L and CS jointly develop strategic
objectives for the financial year while 44% were neutral (C6). It appears that joint
planning between these two departments is non-existent. In terms of the monitoring
and evaluation of objectives whether is done jointly with CS (C7), 57% of SD&L
respondents disagreed while 38% chose to be neutral. The respondents are divided
whether SD&L objectives are always incorporated in the CS strategic sourcing
methodology while 25% were neutral (C8). Due to the fact that commodity managers
are required to lead the cross-functional team, the majority (81%) of the SD&L
respondents view CS as a critical member of the cross-functional team (C9). The
SD&L respondents (44%) disagreed that CS strategic sourcing methodology is well
understood in SD&L with 31% chose no side.
CS and SD&L respondents were required in both CS and SD&L questionnaires in

subsection 2.D to signify their concurrence on the statements D1 to D2 with either a
Yes or No.:
D1: Strategic sourcing methodology in CS is a platform that can be used to
advance SD&L objectives in Eskom.
D2: SD&L processes are appropriately incorporated in strategic sourcing
methodology.
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The results from questionnaires are consolidated and illustrated in Figure 4.11.
Figure 4.11: Effective Integration between Strategic Sourcing and Supplier

Development
The responses in statement D1 showed that all CS and SD&L (100%) respondents
are aligned to strategic sourcing 7x7 methodology being a mechanism to be used to
advance SD&L objectives. The undivided responses suggest that a 7x7 methodology
needs to be streamlined to include SD&L objectives followed by the implementation
guideline. The pie chart on the right-hand side (D2) shows the respondents are
indifferent on whether SD&L processes are appropriately incorporated in strategic
sourcing methodology. The results show that 52% of the respondents agreed that the
processes are fused in strategic sourcing methodology, while 48% dismissed the
statement. The combination of responses in D2 implied that CS and SD&L
respondents had encountered different experiences in execution of their duties.

Question 3: Do you think the existing organisational culture promotes collaboration
between Commodity Sourcing and Supplier Development and Localisation, if not
why?
 Although in CS it was indicated that leadership is supportive, it emerged that

participants were extremely concerned about leadership in the organisation.
It was mentioned that most executives joined Eskom when the GC structure
was developed and they did not influence its formation. It was mentioned
that leadership and accountability are some of the drawbacks in the
organisation.
 Some of the responses about the culture in the organisation were:
 existing culture does not promote SD&L;
 there is a hostile culture between the departments and is seen as a
stumbling block;
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 the existing culture between CS and SD&L is not conducive and there
is a finger-pointing attitude; and
 there is an imperfect teamwork culture.
Question 10: Do you think CS/Strategic sourcing methodology can be a platform that
can be used to advance SD&L objectives in Eskom
 Strategic sourcing is generally seen as a powerful instrument to be used to

address multiple objectives. However, participants cited that the entire GC,
including CS and SD&L departments, needs to be restructured due to
structural challenges.
 Consolidation of sourcing functions was emphasised to streamline
processes.
 Participants made mention of the required support from the chief executive
office to champion strategic sourcing and supplier development and address
regulatory constraints.
 Change of perception that SD&L is obligatory, is required. The mindsets and
attitudes of people in the entire supply chain need to be in support of
development.
 CMs need to understand all areas which affect sourcing and be capacitated
to drive SD&L objectives in the sourcing methodology.
 Review 7x7 sourcing methodology to integrate SD&L in an early stage.
 Involve the executive management (Board; EXCO) to strategically shift the
workings of CS and SD&L and provide continuous support.
 Improve communication and accountability across the business functions.
IV. Discussion on Strategic Sourcing as a Catalyst for Supplier Development

The intention of the third objective was to determine whether strategic sourcing can
be a catalyst for effective supplier development in Eskom. There is a mutual
understanding that strategic sourcing is a great mechanism which could be used to
advance supplier development in Eskom. Strategic sourcing has a potential to
achieve multiple objectives rather than just sourcing a product or service. It can drive
industrialisation, economic development, cost savings, innovation and supplier
relationships. In the literature review, Yavas et al. (2011:04) and (Rajput & Bakar,
2012:189) supported that strategic sourcing can be a well-placed source of
competitive advantage and can achieve, maintain and improve the buying
organisation’s competitive advantage.
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On the other front, the strength of strategic sourcing as a catalyst for supplier
development can be linked with the literature review which indicates that supplier
development programmes or projects require support of the sourcing and
organisational / corporate strategies (CIPS, 2013: 3). From the responses, it can be
inferred that strategic sourcing is still at operational level and require elevation to
strategic level to integrate other functions.
4.3.4 Strengthening of Integration between CS and SD&L

A number of challenges which inhibit integration were mentioned by respondents and
participants and include:
 Unplanned integration which lack strategic consideration.
 Presence of structural misalignment and fragmented approach.
 Ineffective cross-functional teams.
 Exclusion of SD&L objectives in the 7x7 sourcing methodology.
 Undefined roles and incompatibility between CS and SD&L.
 Disregard of SD&L as a strategic function for Eskom and industries.
 Lack of interdependent processes between the two departments. There
seems to be a lack of a clear framework of how supplier development is
designed to effectively leverage procurement for the achievement of
objectives.
Open communication and sharing of goals, strategies and information are

preconditions to integration. Integration and collaboration whether in processes or
systems tend to yield competitive advantage.
Responses from Statements C11-C14 from CS and SD&L Respondents

Statements about integration and collaboration were developed to enquire the
respondents to indicate their agreement by indicating a Yes or No. Four sub-themes
subsequently emerged from C11-C14 responses, namely:
 open and effective communication between CS and SD&L;
 joint performance measurement;
 close collaboration between SD&L and CS; and
 joint strategic planning committee.
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The consolidated results for statements C11 to C14 from CS and SD&L respondents
about collaboration between CS and SD&L are illustrated in Figure 4.12.
Figure 4.12: Collaboration between CS and SD&L
Open and effective communication is an integral part of any collaborative initiative in

business. Although 54% of the respondents asserted that there is open and effective
communication between SD&L and CS, 46% disagreed with statement C11.
According to Figure 4.12, the majority of the respondents (85%) disagreed that there
is a joint performance management between SD&L and CS (C12). The joint strategic
planning committee between SD&L and CS was advocated by 85% of the
respondents (C14).
Respondents were undecided (50%/50%) on whether close collaboration existed

between CS and SD&L (C13). According to respondents, certain factors related to
the committee need to be considered:
 it is required for easy communication;
 it should be formed for three years to design processes and phase it out
afterwards;
 it will ensure goal congruency and joint planning; and
 responsibilities need to be carefully addressed without merely delegating them
to the committee.
They also indicated the non-existence of a joint performance measurement between
the two departments.
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Lastly, participants were requested to provide possible improvements which could
ensure effective integration and responses on statements D3 to D4 were recorded.
Question D3:
In your opinion, what processes, systems, practices should be put in place to ensure
effective integration of CS and SD&L in the near future?
The following diverse propositions were put forward:
 proper implementation of the business plan and measurement is required;
 every business function should have SD&L performance metrics and report on
them;
 develop a well-coordinated and integrated procurement strategy;
 SD&L practitioners need to be placed with the CS department; and
 CS must be compacted on SD&L performance.
Question D4: What are the critical success factors in working between SD&L and
Commodity Sourcing?
Critical success factors were mentioned and consolidated responses are as follows:
 collaboration appears to be a challenge between the two departments;
 improved working relationship between the two departments is a requirement;
 agreement on strategic objectives, joint participation in implementation and
joint monitoring and reporting;
 performance monitoring takes place separately between CS and SD&L;
 improved senior management support; and
 awareness of both departments’ objectives.
From the responses, it was discovered that CS respondents are generally

comfortable with the strategic sourcing processes which include limited integration of
SD&L. On the contrary, SD&L respondents appeared to be discontent with the lack of
integration while CS respondents are frustrated with the invisibility of the SD&L
representation in cross-functional teams. As a result of that, a finger-pointing attitude
cannot be entirely ruled out.
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I. Executive Management
Question 8: Is there a need for a joint strategic planning committee between
Commodity Sourcing / Supplier Development and Localisation?
 The establishment of the joint strategic planning committee was supported by
the participants and further suggested inclusion of other technical functions.
Question 11: In your opinion, what processes, systems, practices should be put in
place to ensure effective integration of Commodity Sourcing/ Supplier Development
and Localisation in the near future?
 Visibility of strategic contracts that are expiring and ensure that the
development of the sourcing strategy is done on time.
 Development of a change management programme to address behavioural
factors.
 Create a disciplined organisation not in theory but in practice as well.
 Creativity and passion are required from all practitioners.
 Strategic sourcing practitioners need to be skilled appropriately.
 Technical support is required to develop technical specifications of
commodities.
II. Discussion on Strengthening of Integration
The last research objective was to formulate initiatives to strengthen integration

between CS and SD&L departments and respond to the main question. Although
there were challenges mentioned by the respondents and participants, a number of
interventions related to processes, systems and practices where identified to counter
these challenges. These interventions were supplemented by the critical success
factors which should be considered between CS and SD&L. However, four themes
emerged from the responses to the questionnaires and face-to-face interviews: open
and effective communication between CS and SD&L; joint performance
measurement; close collaboration between SD&L and CS; and a joint strategic
planning committee. These themes can be linked with the golden rules for strategic
sourcing, referred by Kocabasoglu and Suresh (2006:4), prior implementation:
 Determine the status of the purchasing function within the organisation;
 Improve the level of internal coordination of purchasing with other functions;
 Promote information sharing with key suppliers; and
 Integrate the development of key suppliers.
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The establishment of the joint planning committee and ensuring joint performance
measurement between SD&L and CS to strengthen integration should be prioritised.
An integration model proposed by Wisner et al. (2012:471), illustrated in Figure 2.15,
can also be used to integrate processes in the organisation and establish external
relationships.
4.4 Conclusion
The profiles of the respondents and participants were presented and analysed. It
follows that males enjoy gender dominance at middle and executive management
levels in both departments.
In achieving the first objective, the current implementation of strategic sourcing and
supplier development at Eskom is still at strategy or commodity level rather than
strategic level. Themes were identified through a four-step process as mentioned in
Chapter 1.
On the second objective it was identified there was an effective relationship between
strategic sourcing and supplier development and a lack of commitment and
accountability in leadership. Processes are not intertwined and a holistic approach is
lacking.
The strategic sourcing methodology is regarded as a powerful instrument to be used

to attain multiple objectives. Four sub-themes were identified namely: open and
effective communication between CS and SD&L; joint performance measurement;
close collaboration between SD&L and CS; and joint strategic planning committee.
The conclusion and recommendations in Chapter 5 are based on the analysis of the
results in Chapter 4.
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CHAPTER 5: DISCUSSION, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
The primary and secondary objectives of the study were reflected in Chapter 1,
sections 1.7.2 and 1.7.3. The primary objective was to analyse integration of strategic
sourcing with supplier development at Eskom and determine how strategic sourcing
can be a catalyst for supplier development to realise long-term benefits. The aim of
this chapter is to attain four secondary objectives, namely:
RO3: To establish possibilities of how strategic sourcing could be a catalyst for
supplier development in the context of Eskom.
SD&L departments.
This chapter summarises and links the findings with other preceding chapters. Based
on the findings, recommendations and a conclusion are presented followed by
limitations and future research areas of the study.
5.2 Summary of Study
The study found that there is disintegration and misalignment between strategic
sourcing and supplier development at Eskom. The study was undertaken in two
departments, namely CS and SD&L which are responsible for strategic sourcing and
supplier development respectively. A primary objective and secondary objectives
were highlighted and the importance of the study to the entire Eskom was
determined.
It was highlighted that strategic sourcing and supplier development was researched
independently of each other and there was a scant research which was done in
combination of the two concepts. The literature review examined different models of
strategic sourcing and supplier development. Model 1, as illustrated in Figure 2.5,
Chapter 2, was confirmed as the strategic sourcing methodology that is being used in
Eskom and there was no evidence on the integration of Eskom supplier development
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process referred to as Model 1 in Figure 2.12. As a result of that, a clear process of
strategy implementation is undermined between strategic sourcing and supplier
development.
It was found that effective integration does not only address functional silos and
organisation boundaries instead it promotes unified value creation process that
generates and delivers value for customers.
The methodology in which the study was conducted was explained. An exploratory
research and mixed research methods were chosen as research design. Data were
collected through semi-structured questionnaires and face-to-face interviews with
middle management and executive management respectively. Profiles of the
respondents and participants were presented and key research results and findings.
Content analysis was used to interpret and analyse data.
The findings revealed an unproductive relationship between strategic sourcing and

supplier development at Eskom which are aggravated by the nonexistence of the
well-defined collaborative framework. There is a lack of clear collaborative framework
for implementation and this may be due to the underestimated value of the
implementation process. Some of the findings of this study can be linked to the
challenges in the literature review which was uncovered by the study on the
evaluation of the procurement strategy in Eskom (Eskom Procurement Evaluation,
2013:9), section 1.4.1.
The study found that a competitive advantage can be created and enhanced in the
organisation if the processes are integrated and an integration model was discussed.
It follows that strategic sourcing is a great mechanism which can drive supplier
development to drive strategic objectives.
In this chapter, key research findings in accordance with research objectives are
discussed. A conclusion and recommendations are detailed in the section followed
by limitation and areas for further research.
5.3 Key Research Findings

The responses from the respondents and participants were analysed based on the
research objectives from RO1 to RO4, the following key findings were gathered from
the questionnaires and face-to-interviews.
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RO1 To examine the current implementation of strategic sourcing and
supplier development at Eskom
The aim of this section was to assess the methodologies utilised and processes
applied by the two departments in attaining their mandate as mentioned in Chapter 2.
 The manner in which strategic sourcing is implemented is based on the
development of sourcing strategy to source products and services. The
methodology that is used by Eskom is indicated in the literature review in
Chapter 2 as Model 1, as presented in Figure 2.5. It was ascertained that a
supplier development process exist in Eskom, however there is no evidence of
its application in the business. It was established that the 7x7 strategic
sourcing methodology and the disconnected supplier development process
(Model 1, Figure 2.12) are misaligned and the mechanism of integrating them
is unclear.
 Strategic sourcing and supplier development were designed independent of
each other hence the disjuncture. The strategic sourcing methodology being
used in CS emerged as a practice that is not well-understood in SD&L. There
is also a lack of understanding of processes and practises that are used in
SD&L. This implies that ineffective communication between these
departments which are meant to be working in unity could be one of the
stumbling blocks.
 Supplier department appeared to be a retrofit in the strategic sourcing and not
thoroughly integrated in planning and implementation. Interaction and
consultation by CS with the SD&L is on the basis of urgent need and not on a
continuous basis and this makes information sharing difficult.
 Performance contracts of respondents are based on the speed to develop
sourcing strategies to source commodities and services. Cost savings, SRM,
visibility of procurement and innovations are not considered as main focus
areas.
 SD&L is at infancy stage within Eskom and has not yet been embraced in the
entire business
 It was found that procurement spend is leveraged to implement supplier
development.
 Most of the models of supplier development detailed in Table 2.4, Chapter 2
involve top management on the supplier and buyer’s side. In contrast,
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Eskom’s supplier development does not indicate top management
involvement.
 Strategic sourcing and supplier development are still at the operation level in
Eskom. It was discovered that strategic sourcing and supplier development
are generally not viewed as strategic functions in the company.
 It appears that there is a lack of common understanding or appreciation
between the departments of how each department operates. For example, the
supplier development process was not mentioned when it was asked how
SD&L is currently implemented.
It can be deduced that there is no unified and systematic approach on the planning,
implementation and monitoring tasks between the two departments.
RO2 To assess the relationship between strategic sourcing and supplier

development at Eskom
 The existing relationship between strategic and supplier development is not

well organised. The culture and leadership appeared to have an impact on the
situation.
 It was found that the Eskom supplier development process was developed
through an independent approach which did not incorporate a fundamental
strategic sourcing methodology. This is evident in Chapter 2 where both
models of strategic sourcing and supplier development which are applied at
Eskom appeared to be disjointed and misaligned.
 An impression was given that there is a divergence by leadership on whether
supplier development is a platform to create value for money. Strategic
sourcing seems to be misapplied as it is only used as an instrument to
develop sourcing strategies and source commodities and service. The fact
that involvement of CS in Eskom’s corporate planning is limited is a signal that
strategic sourcing is at operational level.
 An assessment of strategic sourcing in relation to supplier development shows
that strategic sourcing could be a catalyst for supplier development in Eskom.
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RO3 To establish possibilities of how strategic sourcing could be a catalyst
for supplier development in the context of Eskom
 There is enormous support for the formation of a joint strategic planning

committee responsible for planning and performance measurement. This
support signals shortcomings which are inherent in the system.
 Integration and collaboration appear to be challenges as they are not properly
managed. Findings revealed that collaboration is incidental, that there is a
presence of structural misalignment, a fragmented approach is followed,
ineffective XFT exists, supplier development objectives in the 7x7 sourcing
methodology are excluded, and undefined roles and incompatibility between
CS and SD&L exist. SD&L related challenges were exposed, namely supplier
development being an add-on in sourcing function. These challenges do not
support collaboration as they thwart the business.
 Visible and supportive leadership is required particularly from the chief
executive’s office to champion strategic sourcing and supplier development.
 Consolidation of sourcing functions was emphasised to streamline processes.
 Implementing a robust change management programme to change
perceptions that SD&L is obligatory. The mindsets and attitudes of people in
the entire supply chain need to be in support of supplier development.
 Procurement practitioners need to be developed and trained on supplier
development processes in order to be responsible and account on supplier
development deliverables.
 Improve communication and accountability across the business functions.
 The respondents and participants advocated the formation of a joint strategic
planning committee between CS and SD&L.
RO4 To discern pragmatic initiatives to strengthen integration between CS

and SD&L
Some initiatives on strengthening integration between CS and SD&L were identified.

These include:
 It became clear that the restructuring and reviewing of 7x7 sourcing
methodology to integrate SD&L objectives is required in GC.
 It follows that a proper implementation of the business plan and measurement
is required and ensure that every business function has SD&L performance
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metrics and reports on them; agreement on strategic objectives, joint
participation in implementation and joint monitoring and reporting;
 The role of both strategic sourcing and supplier development practitioners
needs to be clearly defined and ensure that the performance contracts of
practitioners include strategic objectives of both departments.
 It was established that there are cultural challenges which need to be
addressed in the organisation.
 Some of the employees are qualified in diverse fields, some of which are not
related to the occupied positions, therefore training and development
programme is necessary to enhance core competencies in the functional
areas.
5.4 Conclusion
In Eskom, the lack of synchronisation within Group Commercial (GC) tends to reduce
the positive impact in the business. Integration between strategic sourcing and
supplier development can achieve significant benefits for Eskom if it is linked with the
company’s eight dimensions of sustainability. The eight sustainability dimensions aim
to stabilise and sustain the company in the short and medium to long term and they
are the foundation for operations (Eskom Corporate Plan, 2015-2020:27-29). It is
imperative that sourcing and supplier development decisions are considered in light
of the sustainability dimensions. Both strategic sourcing and supplier development
need to be central to Eskom’s efficiency and value for money.
The results are consistent with the literature review on the strategic importance of the
strategic sourcing in the business. The challenges which were uncovered on the
evaluation of the procurement strategy (Eskom Procurement Evaluation, 2013:9)
compliment with the challenges which have been found in this study.
Strategic sourcing can be maximised if it is well-integrated with other internal

business functions. An integration model for processes in Chapter 2, section 2.11
can be employed in this scenario. It should incorporate activities ranging from
corporate planning through to contract management to ensure value for money in
sourcing of goods and services. The study revealed that, due to a lack of
standardised integration between strategic sourcing and supplier development
methodology at Eskom, performance improvement and competitive advantage can
135
be at risk. Model six of the strategic sourcing methodology suggests a great
opportunity to incorporate supplier diversity goals in the first three steps (Dolan & Fedele,
2004:3-6). Supplier diversity in Chapter 2 can be equated to supplier development in
Eskom because they both focus on industrial development and transformation.
Even though there is positivity to some extent on the part of the commodity
managers in CS with regard to integration, middle managers in SD&L have had
opposite views. Executive management must start to recognise the significant
benefits that strategic sourcing and supplier development can bring to the company.
5.5 Recommendations
According to Quinlan (2011:453), as well as Polonsky and Waller (2011:200-201),
recommendations should adhere to certain prerequisites, and these are:
 It should be succinct, clear and meaningful in relation to the aim and
objectives and findings of the study.
 It should respond to the main research question or investigative questions and
be achievable.
 The rationale per recommendation must be linked to results and literature.
 It is important to identify the positive and negative implications of undertaking
change.
 It should be specific and realistic in relation to the specific question, resources,
time constraints and action oriented.
To address disintegration and misalignment between strategic and supplier
development in order for strategic sourcing to be a catalyst for supplier development,
four recommendations are made to attain the research objectives. These
recommendations are linked with findings and organised in a chronological order for
impeccable execution in addressing strategic challenges and ensuring sustainability
of strategic sourcing and supplier development in Eskom.
I. Recommendation #1: Develop a vision and strategy for strategic

sourcing and supplier development
Executive management should play an active role in formulating a common vision
and a robust, integrated strategy for both strategic sourcing and supplier
development. For maximum impact and value add, the vision and strategy should
informed by the sustainability framework in the corporate plan as mentioned in
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Chapter 1, section 1.4. The strategy should be developed such that it can measure
strategic imperatives such as productivity, shareholder value and cost savings,
among others. The vision and strategy need to be measured for continuous
improvement to sustain a productive culture. Quantification of the benefits and costs
for both strategic sourcing and supplier development either on a quarterly or bi-
annual basis should be seen as a form of performance management. Some of the
benefits for strategic sourcing and supplier development are discussed in Chapter 2,
sections 2.7.2 and 2.10 (NT Supply Chain Management, 2015; ISM, 2015; Gordon,
2014:2-3). This recommendation has a potential to inform the decision-making
process and enable implementation of the relevant decisions which could lead to the
creation of projects with strategic suppliers. Elevation of strategic sourcing and
supplier development to a strategic level can automatically be accomplished.
II. Recommendation #2: Review the entire Group Commercial operating

model and re-engineer business processes in CS and SD&L
The operating model in GC is not without its own challenges. These challenges have
been highlighted in Chapter 1, section 1.4.1. A new operating model should be
developed with clear integrated strategic objectives and efficient and standardised
processes in the entire division to streamline the eight functions of GC, illustrated in
Figure 2.2, Chapter 2. It should integrate key business performance measures that
are interrelated and manage them within a structured and well-defined framework.
The operating model should promote setting of milestones and deliverables, and
monitor effectiveness and efficiency to reinforce accountability. This recommendation
aims for a unified and systematic approach within GC and clear accountability as it
sets out a new collaborative framework and clear work processes. Furthermore, to
pursue excellence, the operating model needs to be supported with the following
drivers for effective implementation:
 visible leadership;
 productive organisational culture;
 conducive organisational structure;
 stimulating reward systems; and
 overhaul of organisational systems, policies and procedures.
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III. Recommendation #3: Develop appropriate processes, systems and
practices to support strategic objectives
The disconnection between processes, systems and practices in supply chain can be
a threat in achieving results as some constraints in one area could potentially impact
the other. The literature review revealed that linking supply chain processes across
enterprises is seen as a mechanism for efficiency, customer value and gaining
competitive advantage. This last recommendation involves development of
appropriate processes, systems and practices to ensure proper internal controls. To
increase cooperation and realise cost savings and innovation, a robust supplier
relationship management (SRM) should be explored to strengthen relationships with
suppliers. The literature review presented in Chapter 2 has proven that there is a
growing trend by companies in strengthening competitive advantage through
collaboration with suppliers.
Furthermore, the cross-functional team should capture intellectual capital which

emerged during the strategic sourcing methodology to overcome some of the
shortcomings of strategic sourcing as stated in Chapter 2, section 2.5.2. The
following three aspects can be considered:
 Capture Learning – support the knowledge management function to capture
lessons learned for continuous improvement purposes.
 Measure and Report – Ensure measurement of objectives and constant
reporting and it can include assessment of the benefits for strategic sourcing
and supplier development and report results to relevant departments and
executive groups. This can guarantee the strategic importance of both
strategic sourcing and supplier development at executive management.
 Ensure Compliance – Continuous measure of suppliers’ performance metrics
in the sourcing process and maintenance of the strategic relationship in the
context of SRM.
The framework of capturing intellectual capital is supported by Ball (2005:12) in the
literature review to ensure reflection of feedback loops.
138
IV. Recommendation #4: Undertake an assessment of the capabilities
and skills prior to integrating strategic sourcing and supplier
development
Aforementioned recommendations need competent personnel and productive culture
for effectiveness. An enhancement of employees’ capabilities and capacity is
indispensable to support vision, strategy, new operating model, processes, systems
and practices. It follows that attention should be paid to information capital, human
capital and organisational capital and these include visible leadership, organisational
culture accountability, information sharing and performance management. A
comprehensive plan aimed at exploiting existing knowledge and skills should be
developed and supported by the practical change management programme and
incentive programme to stimulate positive behaviour. This recommendation could
benefit the organisation in terms of placing right skills in the right positions and
identify training and development gaps. The human resource department needs to be
involved in the execution of this recommendation.
It is advisable that these four recommendations be implemented within the McKinsey

7S model or framework as discussed in Chapter 2 to ensure effective alignment and
allow achievement of goals. The following key steps should be followed for better
application of the model:
I. Identify the areas that are not effectively aligned;
II. Determine the optimal organisation design;
III. Decide where and what changes should be made;
IV. Make the necessary changes; and
V. Continuously review the 7s.
For immediate outcomes, the recommendations are supplemented with some

interventions which need to be undertaken for quick positive impact.
 Elevate strategic sourcing from operational or sourcing strategy level to a
strategic level in Eskom. This could strengthen the sourcing function and
increase the overall maturity level.
 Establish a strategic planning committee with relevant functions within group
commercial division to develop a strategic plan for the next three to five
years. These initiatives can benefit integration across the division. The
committee should report progress quarterly to the Chief Procurement Officer
139
or Group Executive. The strategic planning committee should look at ways
to break down silos in systems and processes.
 An extensive and practical change management programme should be
implemented to support employees to realise a common vision.
 Develop sourcing excellence initiatives to enhance the capabilities of the
organisation particularly on the sourcing and supplier development side.
 Develop a performance management tool and review of performance
contract of buyers to include supplier development deliverables.
 Train and develop buyers on supplier development implementation.
 Review the 7x7 strategic sourcing methodology to include supplier
development.
5.6 Limitations of the Study

Inadequate Research Studies
In the literature review, it was discovered that strategic sourcing and supplier
development have been researched independently of each other. As a result, there
was limited literature on the two concepts particularly in the South African context.
Respondents / Participant Bias

It is likely that respondents and participants may have been influenced by their
personal views and beliefs in responding to questions in questionnaires and
interviews. This may be due to protection of authority attached to their positions
which they occupied.
5.7 Areas for Future Research

Three areas for further research surfaced in the study and are described as follows:
 Linking strategic sourcing with supplier relationship management. A
collaborative and transparent relationship in strategic sourcing needs to be
investigated in Eskom and beyond.
 Future studies on the same topic could be conducted in different organisations
along with extended consultation with relevant suppliers and government.
 The maturity level of the strategic sourcing needs to be explored.
140
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156
Appendix A: Eskom Supplier Development and Localisation 42 Focus Areas
157
Appendix B: Research Approval Letter
Date: 05 October 2015

Enquiries:
Mzoxolo Mbiko
Telephone:
+27 11 800-3988
General Managers:
Supplier Development &Localisation
Commodity Sourcing
APPROVAL OF THE RESEARCH TOPIC FOR MASTERS PROGRAMME – MR

MZOXOLO MBIKO
Mr Mzoxolo Elliot Mbiko is employed within the Supplier Development and Localisation
department undertaking his MCom in Supply Chain Management at The University of
Johannesburg. The Masters programme is funded by Eskom and one of the requirements to
complete the qualification is to conducting a study in the field.
Mr Mbiko has compiled a research proposal which has recently been approved by the relevant
university committee to continue with his dissertation. The research study aims to analyse and
improve business processes specifically within Strategic Procurement / Commodity Sourcing
and Supplier Development. The title of the topic concerns the “Analysis of Eskom strategic
sourcing methodology as a catalyst for supplier development”. The findings of the research will
be shared with Eskom business and management to provoke strategic thinking and contribute
to continuous improvement between these two departments.
It is in this background that his topic should be approved as the findings of the study will be
used within the business where possible.
Supported:
Mr Henk Langenhoven
Corporate Specialist: Supplier Development and Localisation
Date:
Approved:
158
Mr Mandla Gobingca
General Manager: Supplier Development and Localisation
Date:
Approved:
Mr Charles Kalima
General Manager: Commodity Sourcing
Date:
159
Appendix C: Cover Letter
Dear Participant,
This is an invitation to participate in an academic research that is part of my postgraduate

studies. The research is undertaken to fulfil requirements for the MCom (Supply Chain
Management) at the University of Johannesburg. The topic for the research is the “Analysis
of Eskom strategic sourcing as a catalyst for supplier development”.
The data collected through this questionnaire will be used solely to compile a research report
for academic purpose. Kindly be assured that your input will be treated strictly confidential
and research findings will be presented as aggregates.
It would be greatly appreciated if you can kindly return the completed questionnaire on or
before 14th September 2015. Your feedback is important for the success of this study.
Any enquiries or questions pertaining to the questionnaire can be referred to Mzoxolo Mbiko
on 076 2555 341 or 011 800 3899, email: MbikoME@eskom.co.za.
Thanking you in advance for your participation.
Mzoxolo (Mzo) Mbiko Mr Tatenda Mbara
Researcher Research Supervisor
160
Appendix D: Questionnaire for Commodity Sourcing (CS)
Dear Respondent,
You are kindly requested to complete this questionnaire for the purpose of fulfilling my post graduate
requirements. Please note that your responses will be treated as private and confidential and research
findings will be presented as aggregates without mention of respondents’ names. This questionnaire
will take you approximately 30 minutes and it is divided into two sections. First section one requires
personal information of the respondent and second section contains open-ended questions.
Section 1: Demographics of Respondent
Name (optional)
Gender Male Female
(mark with “X”)
Age Group 20 – 29 30 – 49 50 – 59 60 +
(mark with “X”)
Years of experience in Eskom
Years of experience in Commodity Sourcing
Formal Qualifications in Supply Chain Management /
Procurement / Strategic Sourcing
Other formal Qualifications you possess
Have you attended internal training courses on Yes No
strategic sourcing in Eskom? (mark with “X”)
If so, list the courses:
Years of experience in strategic sourcing/procurement
before joining Eskom?
Section 2.A: Current status of Strategic Sourcing and SD&L in Eskom.
No. Test the Application of the Strategic Please provide your answer in this column
Sourcing Methodology
A1 How strategic sourcing is done in
Commodity Sourcing?
A2 How much time are you allowed to

develop a sourcing strategy?
A3 What is your understanding of an SD&L
mandate?
A4 Is strategic sourcing process aligned to
SD&L programme? If not, what are the
gaps or misalignment?
A5 Sourcing strategy incorporates SD&L Yes No
objectives?
A6 Is your performance compact linked with Yes No
SD&L performance?
A7 Do you always consult with SD&L when Yes No
developing a sourcing strategy?
A8 At what stage of the strategic sourcing
methodology do you consult SD&L? If not,
why?
A9 Is there a policy that governs the No
Yes
consultation of other functions in the
strategic sourcing process?
A10 What do you think should be the role of
SD&L in the cross-functional team?
A11 How do you feel about the role of SD&L in
the cross-functional team?
Section 2.B: The role of Strategic Sourcing in Eskom.
Kindly choose an option which in your view matches with the statement by putting an X in the
161
appropriate box
Disagree
Disagree
Strongly
Strongly
Indicate the role of Strategic Sourcing within the
Neutral
No.
Agree
Agree
business
B1 Commodity Sourcing is involved in the

development of Eskom Corporate Strategy.
B2 Leadership in Eskom generally view strategic
sourcing as a platform to create value.
B3 Role of strategic sourcing is recognised in the
entire organisation to improve performance.
B4 Strategic sourcing plays an integrative role for
other functions (SD&L and engineering etc.).
B5 Strategic sourcing is primarily aimed at reducing
costs and creates long-term relationships.
B6 My role and responsibilities are only related with
signing of the contract or procuring commodities.
B7 Strategic sourcing has reduced costs significantly
in the past.
B8 Commodity Sourcing often use strategic sourcing
methodology in developing sourcing strategies.
B9 Commodity Sourcing objectives are always
linked with SD&L.
B10 Strategic sourcing can enable and advance
SD&L objectives.
B11 SD&L objectives are incorporated and enhanced
in the sourcing strategy.
B12 SD&L representative is always part of the cross-
functional team from the onset to the end.
B13 SD&L representative continue to be part of the
cross-functional team when the sourcing strategy
has been developed.
B14 Commodity Sourcing performance metrics on the
sourcing contract are often reviewed quarterly
with suppliers.
B15 I monitor SD&L requirements with suppliers.
B16 Implementation of SD&L had a positive effect on
my work.
Disagree
Disagree
Strongly
Strongly
Indicate Relationship between Commodity Sourcing

Neutral
No.
Agree
Agree
and SD&L
C1 Commodity Sourcing is thoroughly integrated with

SD&L.
C2 Integration between Commodity Sourcing and SD&L is
managed in a proactive and coherent manner.
C3 A collaborative framework exist between Commodity
Sourcing and SD&L.
C4 The existing organisational culture promote
collaboration between Commodity Sourcing and SD&L.
C5 Leadership is supportive in both departments.
C6 Commodity sourcing and SD&L jointly develop
strategic objectives for the financial year.
C7 Monitoring and evaluation of objectives is done jointly
with SD&L.
C8 SD&L objectives are always incorporated in the
strategic sourcing methodology.
C9 SD&L is viewed as a critical member of a cross-
functional team.
C10 SD&L processes are well understood in Commodity
162
Sourcing.
No. Answer the following questions by choosing Yes or No Yes No
C11 There is open and effective communication between the two departments.
C12 Performance management of Commodity Sourcing and SD&L is done jointly.
C13 There is a close collaboration between Commodity Sourcing and SD&L.
C14 Is there a need for a joint strategic planning committee between Commodity
Sourcing and SD&L.
Section 2.D: Internal Processes, Systems and Practices in Eskom

D1 Strategic sourcing methodology is a platform that can be used to advance SD&L
objectives in Eskom
D2 SD&L processes are appropriately incorporated in Strategic sourcing
methodology
In your opinion, what processes, systems,

D3 practices should be put in place to ensure
effective integration of Commodity Sourcing and
SD&L in the near future?
What are the three critical success factors in
D4 working with SD&L?
Kindly provide any additional comments you might
D5 have.
Thank you for your participation!
163
Appendix E: Questionnaire for Supplier Development and Localisation (SD&L)
Dear Respondent
You are kindly requested to complete this questionnaire for the purpose of fulfilling my post graduate
requirements. Please note that your responses will be treated as private and confidential and research
findings will be presented as aggregates without mention of respondents’ names. This questionnaire
will take you approximately 30 minutes and it is divided into two sections. First section one requires
personal information of the respondent and second section contains open-ended questions.
Section 1: Demographics of Respondent

Name (optional)
Gender Male Female
(mark with “X”)
Age Group 20 – 29 30 – 49 50 – 59 60 +
(mark with “X”)
Formal Qualifications in Business Management /
Economics / Supply Chain Management / Procurement
/ Strategic Sourcing
Other formal Qualifications you possess
Years of experience in Eskom
Years of experience in SD&L
Years of experience in suppler development or
localisation related areas before joining Eskom?
Have you attended internal training courses related to Yes No
supplier development or localisation areas (mark with
“X”)
If so, list the courses:
Section 2.A: Current status of Strategic Sourcing and SD&L in Eskom.

No. Test the Application of the SD&L Please provide your answer in this column
A1 How SD&L is done in Eskom?
A2 What is your understanding of Commodity
Sourcing?
A3 Is SD&L aligned to Commodity Sourcing
processes? If not, what are the gaps or
misalignment?
A4 SD&L objectives are incorporated in the Yes No
strategic sourcing methodology in
Commodity Sourcing.
A5 Is your performance compact linked with Yes No
Commodity Sourcing performance?
A6 Do you always consult with Commodity Yes No
Sourcing in driving SD&L objectives? If
yes, at what stage?
164
A7 Is there a policy that governs the Yes No
consultation of other functions in pursuing
SD&L?
A8 What do you think should be the role of
Commodity Sourcing in the cross-
functional team?
A9 How do you feel about the role of
Commodity Sourcing in the cross-
functional team?
Section 2.B: The role of SD&L in Eskom.

Kindly choose an option which in your view matches with the statement by putting an X in the
appropriate box
Strongly
Strongly
Disagre
Disagre
Neutral
Agree
Agree
No. Indicate the role of SD&L within the business
e
B1 SD&L is involved in the development of Eskom Corporate
Strategy.
B2 Leadership in Eskom generally views SD&L as a platform to
create value for money.
B3 Role of SD&L is recognised in the entire organisation .
B4 SD&L plays an integrative role for other functions.
B5 SD&L relies on strategic sourcing methodology in Commodity
Sourcing for implementation.
B6 SD&L objectives are linked with Commodity Sourcing.
B7 Commodity Sourcing can enable and advance SD&L objectives.
B8 SD&L representative is always part of the cross-functional team
from the onset to the end.
B9 SD&L representative continues to be part of the cross-functional
team when the sourcing strategy has been developed.
B10 SD&L performance metrics on the sourcing contract are often
reviewed quarterly with suppliers.
B11 SD&L requirements are monitored with suppliers.
B12 Commodity Sourcing had a positive effect on my work.

Disagree
Disagree
Strongly
Strongly
Neutral
Agree
Agree
Indicate Relationship between Commodity Sourcing and

No.
SD&L
C1 SD&L is thoroughly integrated with Commodity Sourcing.

C2 Integration between SD&L and Commodity Sourcing is managed in
a proactive and coherent manner.
C3 A collaborative framework exists between SD&L and Commodity
Sourcing.
C4 The existing organisational culture promotes collaboration between
165
SD&L and Commodity Sourcing.
C5 Leadership is supportive in both departments.
C6 SD&L and Commodity Sourcing jointly develop strategic objectives
for the financial year.
C7 Monitoring and evaluation of objectives is done jointly with
Commodity Sourcing.
C8 SD&L objectives are always incorporated in the Commodity
Sourcing strategic sourcing methodology.
C9 Commodity Sourcing is viewed as a critical member of a cross-
functional team.
C10 Commodity Sourcing strategic sourcing methodology is well
understood in SD&L.

C11 There is open and effective communication between SD&L and Commodity
Sourcing.
C12 Performance measurement of SD&L and Commodity Sourcing is done jointly.
C13 There is a close collaboration between SD&L and Commodity Sourcing.
C14 Is there a need for a joint strategic planning committee between SD&L and
Commodity Sourcing?
Section 2.D: Internal Processes, Systems and Practices in Eskom

D1 Strategic sourcing methodology in Commodity Sourcing is a platform that can be
used to advance SD&L objectives in Eskom.
D2 SD&L processes are appropriately incorporated in strategic sourcing
methodology.
D3 In your opinion, what processes, systems,

practices should be put in place to ensure
effective integration of SD&L and Commodity
Sourcing in the near future?
D4 What are the three critical success factors in
working with Commodity Sourcing?
D5 Kindly provide any additional comments you
might have.
Thank you for your participation!
166
Appendix F: Interview Schedule
September 2015
Dear Participant,
You are kindly requested to participate in the interview for an academic research that is part of my
postgraduate studies. The research is undertaken to fulfil requirements for the MCom (Supply Chain
Management) at the University of Johannesburg. The topic for the research is the “Analysis of Eskom
strategic sourcing as a catalyst for supplier development”. Please note that your responses will be
treated as private and confidential and research findings will be presented as aggregates without
mention of respondents’ names. The interview will take you approximately 45 minutes and it is divided
into two sections. First section requires personal information of the respondent and second section
contains open-ended questions. Interview proceedings will be audio-recorded for proper analysis by
the researcher.
Location: Time:
Section One: Closed-Ended Questions
Male Female
20 – 29 30 – 49
50 – 59 60 or above
Years of experience in Eskom:
Year of experience in strategic sourcing / SD&L related areas in Eskom:
Years of experience in strategic sourcing/procurement /SD&L areas
before joining Eskom:
Section Two: Open – ended Questions
The interview schedule consists of four themes:
I. Current status of Commodity Sourcing /Strategic Sourcing and SD&L in Eskom
II. The role of Strategic Sourcing/SD&L in Eskom
III. Collaboration between Commodity Sourcing and SD&L
IV. Internal Processes, Systems and Practices
Questions:
1. In your view, is Commodity Sourcing/Strategic Sourcing process aligned to SD&L
programme? If not, what are the gaps or misalignment?
2. Why there is no collaborative framework between Commodity Sourcing and SD&L?
3. Do you think the existing organisational culture promotes collaboration between Commodity
Sourcing and SD&L, if not why?
4. Is your performance compact linked with Commodity Sourcing/ SD&L performance?
5. Is there a policy/practice that governs the consultation of other functions in the Commodity
Sourcing/Strategic Sourcing/SD&L?
Section Two: Open – ended Questions
Questions: (continue)
6. What do you think should be the role of Commodity Sourcing/SD&L in the cross-functional
team?
7. What is your general view of the SD&L/Commodity Sourcing in the business?
8. Is there a need for a joint strategic planning committee between Commodity Sourcing and
SD&L?
9. Leadership in Eskom is generally view strategic sourcing/SD&L as a platform to create value.
Do you agree/not? Motivate your answer.
10. Do you think CS/Strategic sourcing methodology can be a platform that can be used to
advance SD&L objectives in Eskom?
11. In your opinion, what processes, systems, practices should be put in place to ensure effective
integration of Commodity Sourcing and SD&L in the near future
12. Kindly provide any comments you might about this interview.
167

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Mzoxolo Elliot Mbiko

Submitted in partial fulfilment of the requirements for the degree

Supervisor : MR TATENDA MBARA

Co-supervisor : PROF ELANA SWANEPOEL

Mzoxolo Elliot Mbiko

 My supervisor Mr Tatenda Mbara and co-supervisor Prof Elana Swanepoel for

 Sakhele Gqabaza for his specialised assistance with statistical analysis.

 Ms Lita Spreeth for her professional language editing skills.

 My employer, Eskom for affording me an opportunity to realise my dream to

 The management of Commodity Sourcing and Supplier Development and

CHAPTER 2: LITERATURE REVIEW .................................................................................................. 23

CHAPTER 4: DATA ANALYSIS AND INTERPRETATION ................................................................. 88

REFERENCES .................................................................................................................................... 141

Table Description Page

1.1 Advantages and Disadvantages of Centralisation and 8

1.1 Conceptual Framework of Strategic Sourcing and Supplier 3

Eskom Holdings Ltd, a state-owned company (SOC), (hereinafter referred to as

A collaborative relationship between CS and SD&L, responsible for strategic sourcing

1.2 Conceptual Framework: Strategic Sourcing and Supplier Development

Figure 1.1: Conceptual Framework of Strategic Sourcing and Supplier Development

In the conceptual framework, the supply chain management, procurement and

The concepts of supply chain management, procurement, strategic sourcing, total

II. Procurement is one of the components of supply chain management and a

Engel (2004:1) defines strategic sourcing as an “organised and collaborative

IV. Total Cost of Ownership (TCO) is an element of strategic sourcing and is

V. Supplier Development is a subject in SCM which has been researched

According to Handfield, Krause,Scannell, & Monczka (2000:37-39) supplier

Supplier development plays a critical role is driving performance improvement in

Generally, strategic sourcing leads to sustainable competitiveness, particularly

The highlighted disintegration, inefficient and incoherent challenges between

1.3 Context of Procurement

Organisations often choose centralisation or decentralisation, or a combination of

Table 1.1: Advantages and Disadvantages of Centralisation and Decentralisation of

It is important for organisations to take a conscious decision about a procurement

1.4 Overview of Eskom

As mentioned previously, Eskom Holdings SOC Ltd. is South Africa’s primary

1.4.1 Group Commercial Division

The GC division was established to centralise procurement and to stimulate growth

Contrary to principles of the division’s formation, the evaluation of the entire

 limited integration mainly between the sourcing function and supplier

These two departments were formed to encourage cooperation and interdependence

Commodity Sourcing is the department responsible for the procurement of the

In Figure 1.2, a strategic sourcing methodology that is used by procurement

The CS mandate states that procurement process should be applied through a

II. Supplier Development and Localisation (SD&L)

Governments and state-owned organisations are actively and creatively utilising

The SD&L mandate is to “achieve maximum and sustainable local development

Table 1.2: Supplier Development and Localisation Objectives

Source: Eskom Supplier Development and Localisation Plan (2013-2015:23-31)

1.5 Strategic Supply Chain Integration

Integration is defined as the process of incorporating or bringing together different

Strategic integration can impact on organisation conduct and performance and

1.6 Problem Statement

The research intends to analyse disintegration and nonalignment of strategic

A study which was conducted in 2013 in Eskom revealed a list of operational

 undefined interface priorities and processes;

1.7.1 Main and Investigative Questions

 How are strategic sourcing and supplier development currently implemented

1.7.2 Primary Objective

1.7.4 Research Methodology

Figure 1.3: Research Methodology