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MNP3703 - Summary for Exam (2019)
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MNP3703 - Supplier Relationship Management Summary for Exam 2019
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ADDENDUM A: CASE STUDYVilla Crop Protection shares insights of agribusiness in Africa
Crop protection is key to limit crop risks and increase harvest potential. Villa Crop Protection
is a company that sells crop protection products and solution packages to the South African,
as well as African agribusiness market. It is essential for farmers to protect their crop to
ensure its growing quality and a great harvest. Villa supplies several products and does so in
accordance with their product research and development philosophy. Villa is currently in
close cooperation with international, research-based manufacturers in the development of a
number of patented products. In an interview, conducted on the 2nd February 2017 with Elsa
Esterhuizen from the television program Grootplaas, the CEO and Managing Director, Dr
André Schreuder spoke about Villa’s involvement in crop protection. “In essence we focus on
crop protection products, in other words, insect repellents, herbicides, fungicides, and then we
try to develop products in the mature phase of the product life cycle, therefore after the patent
was released. The whole idea is to tailor this product for the South African agriculture.”
Another focus area is the development of unique formulated product mixtures to ensure that
customers have a strategic advantage in the market.
Villa aims to assist farmers with resolving the challenges they endure by providing them with
data-driven insights. Such insights include the “right product or programme” applied with the
“right equipment” at the “right time”. Villa agronomists started experimental locations across
South Africa where they wish to demonstrate their solutions to local weed, pests or disease
problems. These locations have been trademarked as “Answer Plots”. The goal of the Answer
PlotsTM is to convey up-to-date innovation, technology, training and education to the
farmers. In an interview conducted on the 19th January 2018, the national Marketing
Manager, Mr Marius Boshoff, expressed his excitement about the Answer PlotsTM that could
simplify the lives of crop producers significantly. He said: “At Villa we do about 900 field
trails per annum that provide us with approximately 80 000 points from where we can extract
data. It is always a challenge as to how you convey this type of data to farmers and the type of
format you create for it. Therefore, we received this concept of Answer PlotsTM from our
partner in America. They have roughly 200 areas where they do these trails.” Villa started to
conduct their trials in five places based on the seasons of South Africa. The trials are piloted
specifically in the northern regions in the summer rainfall area involving corn, soya and
sunflowers and the like. When descending to the Cape the trials involve small grains and
canola and in the future, it will involve fruits too. “But we find that every season is unique.
We had a nice wet season in the east and then cold, and now it is hot. The past two years have
been very dry. These opportunities give you the ability on every “ansible site” to experience
your area’s problems, to share them, and to ask questions and for advice.” Ansible is software
that automates equipment or processes. The ansible sites are set up to automatically collect
data. “We feel that it is immensely important to give farmers the opportunity to experience
these things in the fields, while you have an agriculturalist and experts in the area that can
share the information with them in a meaningful manner, rather to have them experience
‘death by PowerPoint’.” Death by PowerPoint is a term coined for a situation where a
presenter goes on and on, while he or she has lost the attention of the audience.
,Therefore, Boshoff implies that it is more important for a farmer to be involved in the field,
than to listen to a load of information that is ill presented.
The concept of Answer PlotsTM appears to be able to resolve questions that the growing need
in agriculture poses. However, it seems that there might be factors that are difficult to measure
that may also affect the productive growth of harvests. Dr Anthony Onoja, from the
University of Port Harcourt in Nigeria has recently visited South Africa and shared his
research on growth trends of cereal. He conducted research to determine which factors of
governance and the environment have impacts on the long-term productivity growth of staples
in the Southern African region. The university collected data from 15 Southern African
economies over 12 years on the total output of cereal, as well as inputs, comprising of labour,
land area, school enrolment, political stability index, government expenditure on research and
development (R&D), trade openness, temperature change, and water access. The results
revealed that cereal productivity was increasing between 2002 and 2013, albeit slowly, with
significant variations among the economies. South Africa ranked at the top on the subject of
productivity, while Mauritius ranked at the bottom. From 1961 to 2013, South Africa’s
average harvests exceeded the African average, but was still far below the international
average. The results also revealed that, ultimately, a change in temperature, governance
factors, especially quality of human capital, as well as government expenditure on agriculture
R&D, significantly influences the overall productivity growth of cereals.
Schreuder admitted that there are many challenges in the agribusiness market and echoed
some of Onoja’s results. “I think there are four problems that I want to highlight. Firstly,
technology. We have to make sure that our producers have the best technology in the world.
In many cases, we farm in a dessert. We do not have government subsidies and our producers
need to compete internationally. Therefore, technology is very important. Secondly, research.
I think we conduct too little research. If you compare us to countries that we need to compete
with, much more research should be conducted. The third challenge is the most difficult to
address and that is expertise. We need a new generation of agriculturalists and I believe that
we do not do enough to train the new generation of agriculturalists. Fourthly, which goes
hand in hand with that is investment in agriculture. We need to increase food production with
70% in the next 20 to 30 years. We cannot do it if we do not invest.”
The question arises, exactly how can these issues be addressed? “In 2015 we got an investor,
Land O’Lakes from the USA, a Fortune 500 Company”, Schreuder said. “We have access to
all their technology. That is an example of where Villa needs to acquire the technology and
develop it locally. Further, we try to determine what the need is at ground level from a crop
protection point of view. We then go to a network of 40 suppliers that we have all over the
world, get our hands on the technology, bring it to South Africa, and develop it to address the
need as best as possible. When we talk about research, something that I am very worried
about- at Villa we spend about R40 million on research concerning crop protection products
per annum. That entails that we do about 900 fully replicated trials throughout the country.
Then we spend about R1,5 million at universities through bursaries in order for them to assist
us in conducting relevant research. Expertise, again a great challenge. At Villa we have the
Villa Foundation where we will spend R10 million this year, which covers several aids, from
Christian contributions where it is needed, to education, from school level to university and
training.
,We also have an internship program. Typically what we want to do is after we have identified
needs, we will go to universities, to their top students, we provide them with bursaries and
they do research on the topics that was identified from those needs and then those students
come and work for us.” Furthermore, Villa works with other supply partners in close
collaboration with high levels of trust between the organisations. Villa has identified several
needs of suppliers of crop protection compounds and aims to match these needs with their
capabilities. Most importantly, suppliers need easy access to the South African market. Villa
is able to provide them with one account that provides access to the whole of South Africa, of
which they currently command approximately 20 percent of the market share. Similarly,
suppliers need complete market coverage. Villa is structured in such a way that products can
be channelled to all dealerships to supply the whole market. Suppliers also need a distributor
with excellent knowledge of the local market, which Villa fulfils by their years of experience
and intimate knowledge of the market. Furthermore, suppliers need financial security and
Villa has proved themselves with an impeccable record over the years. In addition, suppliers
aspire to develop products for particular local circumstances. Villa makes every effort with a
team of highly skilled scientists that can develop trial protocols and coordinate field trials
through a contracted team of experienced field trialists. Suppliers want a proper logistical
infrastructure that Villa is able to offer, because of their vast knowledge of the importation
and clearing requirements for products and active ingredients. Finally, the need of product
formulation is met by Villa’s ability to process raw materials or semi-finished goods for the
supplier at their specialised facilities (also termed toll formulation facilities). The range of
final products include herbicides, insecticides, fungicides and adjuvants. A future project
includes the formulation of foliar feeds, which is a method of fertilising plants with liquid. In
addition, Villa continuously investigates the possibilities to secure more patented products to
develop in South Africa.
Onoja recommended that Southern African countries should prioritise investment in human
capital and technological innovation by increasing budgetary allocations to education and
agricultural R&D. It is of utmost importance that regional and individual governments should
increase efforts to fund projects that will reduce the negative impacts of climate change and
build the resilience of farmers for sustainable food production. But in the interim, Villa
continues their trials on the Answer PlotsTM to award farmers the opportunity to observe
what is happening in their area. “However” Boshoff said, “it expands beyond that to anyone
who is involved in the agricultural input area, also our student clients, our distributors, our
agents, and of course, it is for anyone who is interested to attend. In fact, we have a group of
rural farmers who attend. Even other states in Africa sends visitors.”
References:
Esterhuizen, E. (presenter). 2018. Villa Crop kuier op Grootplaas. (2018-01-19). Centurion:
Plaas Media. [Television broadcast]. [Online] Available from: https://agriorbit.com/villa-
crop-kuier-op-grootplaas/ [Accessed: 2018-07-23].
Esterhuizen, E. (presenter). 2017. Villa Crop Protection op Grootplaas. (2017-02-02).
Centurion: Plaas Media. [Television broadcast]. [Online] Available from:
https://agriorbit.com/villa-crop-protection-op-grootplaas/ [Accessed: 2018-07-23]
, STUDY UNIT 1
WHAT IS SUPPLIER RELATIONSHIP MANAGEMENT
1.1 Suppliers: the focus of purchasing management and strategic sourcing
Suppliers and the relationships with them is the focus of purchasing management and strategic sourcing
Purchasing management
Purchasing management refers to the systematic process of deciding what, when and how much to
purchase, the act of purchasing it and the process ensuring that what is required is received on
time in the quantity and quality specified
Purchasing management steps:
Identify the need
Finding and choosing the right supplier
Negotiating matters such as price, quality, and quantity with the supplier
Ensuring that the goods or services fulfilling the need are delivered according to the agreed
conditions
Maintaining files and records to document the transaction
Strategic purchasing is the process of planning, implementing, evaluating and controlling
strategic operating decisions to achieve long-term goals
Strategic sourcing
Strategic sourcing can be regarded as a process whereby spending is analysed and categorised
according to the importance and cost of the purchases, and the complexity of the supplier base.
In the narrow sense, strategic sourcing can be regarded as a strategic management process
whereby commodities (materials and services) and suppliers are analysed, and relationships are
formed and managed in support of long-term organisational goals
1.2 The nature of supplier relationships and the management thereof
1.2.1 Introduction
A relationship can be defined as a connection or association
Relationships apply when individuals, organisations and groups within and external to an enterprise
interact
Relationships between suppliers and buyers differ a great deal – they may range from low-value,
transaction-based interactions to partnerships that are of strategic and financial importance for the
business
Buying organisations do not always dictate the direction of a relationship. Suppliers’ perception of the
importance of their clients sometimes dictate the nature of the relationship, depending on the position of
the power of a supplier
1.2.2 The supplier’s influence on the relationship
Fig 1.1: The supplier perception model – how suppliers see a buying organisation by focusing on two
aspects:
The value of the business offered by the buying organisation in terms of the supplier turnover
levels
The level of attractiveness that the buying organisation’s business has for the supplier
Fig1.1: The supplier perception model
High Develop relationship with Core relationship with buying
Level of buying organisation organisation
attractiveness Marginal relationship with Exploit relationship with
Low buying organisation buying organisations
Low Value of business High
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