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Understanding How the Municipal Supply Chain Management Works

Each municipality in terms of section 165 of the MFMA, is required to establish an Internal Audit unit that must examine and report on the effectiveness, efficiency and economic use of the Supply Chain Management to achieve objectives of the municipality.

What is Supply chain management?

Supply chain management, or SCM, is the process of overseeing how goods and services evolve from idea creation and raw materials into a finished consumer product. It includes the processes of moving and storing the materials used to produce goods, storing the finished products until they sell and tracking where sold products go so that you can use that information to drive future sales.

The process of SCM involves every aspect of business operations, including logistics, purchasing and information technology. It integrates materials, finances, suppliers, manufacturing facilities, wholesalers, retailers and consumers into a seamless system.

 Supply Change Management legal framework

Supply Chain Management has been developed in accordance and in conjunction with other pieces of legislation to develop and shape the SCM within the local government sphere. These include Section 217 of the Constitution, which compels all organs of state to implement a SCM system that is fair, transparent, equitable, competitive and cost-effective. Chapter 11 of the MFMA compels the municipalities to establish SCM units and implement the SCM Policy, which gives effect to all SCM functional areas.

The Preferential Procurement Policy Framework Act 5 of 2000 provides for the application of the points system when evaluating and adjudicating bids. Treasury Regulations 868 of 2005 (SCM Regulation) and SCM: A Guide for Accounting Officers of municipalities and municipal entities, provides a step by step illustration for the implementation of the SCM policies for the Accounting Officers.

The Supply Chain Management process contains various role players that influence the SCM processes which are:

  1. The National Treasury: Develops policy and oversees the implementation of the policy in all municipalities.
  2. The Provincial Treasury: Supports the municipalities in implementing the SCM Policy and further provides assistance to the municipalities in terms of capacity building.
  3. The Municipal Council: Approves the SCM structure of the municipality and ensures that the Accounting Officer executes the council’s SCM Policy.
  4. The Accounting Officer: Establishes the SCM unit, which will be under the supervision of the CFO.