Telkom SA’s Group Executive for Procurement and Contract Management, Ben Van Zyl faced a vast and complex task to modernise the company’s procurement function when entering the role in 2019. A concerted period of automation, streamlining, supplier management improvements and risk management prioritisation have left no stone unturned since then, with the department now setting the tone for broader Group goals.
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Hi Ben. I know you’ve been with Telkom for quite a while, so perhaps we can pick up your story since you started in 2014. What was the situation from a procurement perspective at that time?
My journey at Telkom has been nothing short of transformative, marked by challenges, innovation, and a steadfast commitment to driving value creation as a procurement professional. Since joining in December 2014, I’ve embraced the evolving dynamics of the business landscape, consistently prioritising key areas such as cost reduction, working capital improvement, Environmental, Social, and Governance (ESG) initiatives, Supplier Relationship Management (SRM), and risk management.
Each shift in focus has not only been a response to organisational needs but also an opportunity to harness the unique potential of procurement to help the business thrive.
Could you elaborate on the stages of your journey a little more?
In December 2014, I joined Telkom to drive strategic cost transformation through outsourcing. After completing this initiative in 2016, I became the Chief Procurement Officer for Openserve, overseeing sourcing, contract management, and supply chain functions. My focus shifted to scaling the supply chain to meet Openserve’s goal of connecting one million homes with fibre-to-the-home (FTTH). We built a control tower for our supply chain to use data-driven insights to improve supply chain co-ordination and drive inventory optimisation. The other key initiative was implementing a Supplier Relationship Management (SRM) framework that notably enhanced supplier performance and quality management, and minimised cost leakage across the supply chain.
In 2019, I accepted the role of overseeing the Procurement function for Telkom Group. We developed a complete and credible spend cube to gain insights that act as a compass, helping us to identify trends and anomalies, optimise spending, and make informed choices ultimately improving the bottom line while reducing risk. We implemented supply chain finance (SCF) solutions to unlock working capital, to allow us to invest in growth. Then, when COVID-19 struck, the SCF solution was a great enabler to assist our suppliers facing cash flow challenges. We had to prioritise supplier risk management and collaborated with our strategic partnerships for critical products and services. However, we also benefitted from previously created panels of suppliers in different locations and alternative trade routes to ensure supply.
Bringing us closer to present day…
Indeed… In 2022, the focus remained on risk management and this prompted us to conduct a comprehensive control review of the entire procure-to-pay value chain. That same year, Telkom renewed its sustainability strategy and I was asked to lead on the Social stream of Telkom Group’s Environmental, Social, and Governance (ESG) strategy development, emphasising the crucial role procurement plays in advancing sustainability.
Our current focus is on digitalisation and automation to unlock capacity, to be more agile and enable my team to concentrate on more value-added activities.
Throughout this journey, I’ve learned that while all value levers in procurement are important, the emphasis and procurement strategy need to continuously shift to align with the evolving risks, challenges and priorities of the business.
You’ve alluded to certain inefficiencies that you’ve tried to remedy over the past 10 years. Can you be more specific with what they were and the impact SCF solutions have made?
Telkom continuously invests in infrastructure to stay relevant and keep up with data demands. One of the key initiatives implemented, about six months before the COVID-19 pandemic, is our supply chain finance initiative. We transitioned all suppliers from 30-day payment terms to 90 days offering them the option to receive payment within two days by seamlessly trading their invoices on our platform. This approach enables suppliers to benefit from the lower interest rates Telkom secures with the bank. This initiative significantly improved cash f low during a critical period of the pandemic, unlocking approximately 1.9 billion rand in liquidity for Telkom.
Our GCEO and GCFO championed the initiative as the project sponsors, and was well-received by our suppliers as it also enhanced their cash flow.
For instance, we initially engaged a supply chain platform supplier but the solution presented two significant shortcoming. Firstly, the platform could not facilitate transactions in USD for one of our largest suppliers. Second, it lacked full integration with our ERP system, necessitating manual interventions for reconciliation.
We then selected an alternative supplier who was able to seamlessly integrate their platform with our ERP system. This fully integrated solution enhanced efficiency, allowing us to improve cash f low and also keep our suppliers happy.
You touched upon the supplier feedback for the supply chain finance initiative. What has been the response in terms of this speedier, automated function?
They loved it! Once an invoice is approved, the supplier has the flexibility to choose when to receive payment. Internally, the process is automated and efficient.
Another area we’re now focusing on is to implement an OCR solution with additional workflow capability on the invoicing side. Many other organisations have done that of course, and we have the commerce automation module within Ariba for a certain number of our suppliers. We want to make sure that absolutely every supplier has that OCR capability, so that, when an invoice comes in, we can process these invoices much faster with no errors.
This will also help us to identify where the bottlenecks are, because in many instances suppliers claim they were not paid timeously, it is because their invoice was never received into our Ecosystem.
Now, if suppliers submit those invoices electronically to a central location, it immediately goes into a workflow we can channel to the right individual. Even if that person is on leave it won’t escalate. It will simply divert to an alternative person to approve the invoice.
More broadly, I can now identify where challenges frequently arise and pinpoint areas of concern more clearly. With this data, we can drive efficiencies, accelerate processes, reduce manual errors, and gather insights that will help us improve our operations moving forward.
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Speaking of automation, I understand this is just one part of a broader automation plan in recent years?
If we look at the broader ecosystem in procurement, the big focus for me was to introduce automation in areas where we have rules-based transactions such as the purchase requisition to purchase order process.
Then there’s the speed aspect too. It took our SLA for purchase requisitions to purchase orders from a two-day turnaround to 80 percent of them being flipped within 12 hours and over 90 percent within 24 hours.
When you’re looking to automate and to actively reduce head counts in relation to some tasks, there could be workforce friction. Has that been the case for you?
It has been a bit of a challenge as these transformations always have an impact. But that’s why the culture is so important, so people understand why you’re proposing a transformational change. There will always be some resistance to change in any company, but if it’s the right decision then very quickly people will start to see how things are working better and even how their own work lives have improved. It takes some effort and understanding from both sides to make a transformation work.
What’s key, is ensuring that your people are trained and given the opportunity to gain the right skills that are required in the organisation. For our part, we’ve had to prove that what we’re proposing is beneficial to the business and our employees. Now that we’ve done that with a couple of examples, I’m already seeing now that there is far more excitement with newer process changes where they’re buying into the idea much more quickly. They’re diving into new skills and the potential opportunities that these initiatives open.
Change can often elevate the sense of achievement among the team once they’ve got the hang of a new solution or new way of working, and then they crave more of that.
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Speaking of change and new ways of thinking and operating, I was wondering how critical the theme of sustainability has been during this rethink around the procurement function?
Sustainability is a crucial aspect of the long-term success and resilience within Telkom, and really within any organisation in South Africa.
As one of the key contributors to the Telkom ESG strategy, I wanted to establish and define a very strong supply code of conduct for the business. Part of my focus on ESG has also been on helping the business to monitor Scope 3 carbon emissions as part of the environmental pillar of the ESG strategy.
We therefore onboarded a company to help us keep on top of this data and to drive operational excellence in this area. However, we’re in a strange position in that the demands we’re placing on ourselves don’t quite match the level of legislation currently in place in South Africa – we’re outpacing the expectations that other industrial operators in the country have to adhere to.
As with everything, it’s a journey we’re on with our suppliers to improve this area, but we’re happy to take on the responsibility of driving change and improvements. We know it’s only a matter of time until companies will be seeking organisations like Telkom to help guide them, as soon as regulations demand they do change and do improve the way they monitor and report emissions.
Ultimately, I know it is essential us as a company, for the country, and for the planet. South Africa has unique challenges, but we want to help overcome them. We want to be deliberate with the decisions we make in terms of our social and environmental impact. We want to ensure we benefit the economy, society, the environment and build a sustainable future.
As you said before, it’s all about setting that positive culture?
Exactly. We need to be deliberate in setting the right culture and drive the right behaviours. We want to collaborate, to be customer-centric, and to use the procurement function as a vehicle for doing good.
We have the opportunity to drive excellence. We’re seeing it through our approach to talent management on the people side; through our automation efforts on the technology side; and through new engagement models that bring our clients and suppliers along with us on this journey.
That journey is now five years old. What would you say have been the key milestones or eureka moments that epitomise what you’ve achieved so far?
I really would go back to the supply chain finance initiative, I think. It created so much value for the Group in terms of its reinvestment needs.
More broadly though, I can visibly see proof that we’re moving in the right direction, and I can see that because I was asked to provide evidence to that effect.
So, my team and I did a very comprehensive procure to pay control assessment, covering process, governance, systems, people, etc, reviewing and demonstrating that we are able to manage the risks in Telkom. Those reviews and audits also led to recommendations to the board around how we can strengthen, and one of those recommendations was looking at contract management capability and the framework we had within the group. I proposed moving to a complete end-to-end model, we’re already entering phase two and final assessments, and I’m excited to roll that out as the next ‘milestone’.
You mentioned right at the start that there were numerous audit findings within the procurement environment that needed addressing when you entered the role. Were you able to address those risk & control issues?
Yes, there were over 30 issues in total and we managed to address all of them within the first two years. We also implemented the source to contract system and the expanded use of automation within that, as well as the focus on that end-to-end digital view where possible.
I’d cite the notion of control within that, too. For example, having the capability to flag any anomalies or exceptions or issues, automatically, so we can immediately connect dots, identify any wrongdoings – internally and externally, purposeful or inadvertent – and keep our ecosystem running smoothly.
It was critical to not to over-correct but find the right balance between sufficient level of control and agility in transacting with our suppliers. The procurement value chain will always be vulnerable and will never be 100 percent bullet proof. It therefore requires continuous focus, investment and improvement to prevent procurement related fraud and corruption.
While strong preventative and detective controls integrated into our processes and systems, and governance to deter certain fraudulent activities, we are fostering an ethical culture that remains central to our defence against fraud. Issues such as bid rigging, collusion, bribery and tender schemes are not easily detectable, which is why having a well-trained and vigilant procurement team is our best line of defence.
With those audit findings addressed then, what are the big goals moving forward?
I think the key focus for me is still to continue on our digital transformation journey. There are opportunities for automation, getting information more quickly and more accurately between the business and our suppliers for optimal decision making; while also managing risk effectively, and cutting costs in the process.
We also want to do a lot more around analytics. Deep dives into analytics to assess specific categories, contracts, business cases and cost of ownership models are already taking place. Becoming more predictive would be the next phase for us.
Finding the balance between control and agility will be key as these things come to fruition, but the benefits from a supplier relationship management, risk management and control perspective are huge.
Then there’s the ESG aspect, too. This continues to be a huge focus over the next five years and as the environment around us catches up, we have to make sure the decisions we make are the right ones.
As a final question, then, based on your experiences over the past five years, what advice would you give other organisations facing a seemingly complex and multi-faceted procurement transformation? After all, you have turned 30 issues into zero in a relatively short space of time…
I would say, embrace the evolving dynamics of the business landscape and drive value creation beyond cost reduction. There are so many ways in which procurement can enable or even amplify business strategy, but it’s crucial to keep our approach simple and aligned with key business priorities.