Print   |   Bookmark   |   Enlarge text    |   Reduce text

Partners

Arrow  Maintaining key agency/principal relationships Arrow  Maintaining product quality from outsourced suppliers Arrow  Foreign direct imports and dumping

The Altron group’s partners are integral to its ability to conduct business, providing the raw materials, services, technology and product components that help the group to deliver on customer requirements. How the group companies select and interact with partners influences the quality of product and service delivery as well as the continuity of supply. In the sections that follow we show how Altron group companies manage their relationships with partners, depending on the nature of the material issue they are addressing.

Apart from the B-BBEE issues of preferential procurement and enterprise development, which are reported on in the transformation section of this report, the most material sustainability issues regarding partners are:
Arrow   securing continuity of supply by maintaining key agency/principal relationships
Arrow   maintaining product quality from outsourced suppliers
Arrow   foreign direct imports and dumping.

Arrow  Maintaining key agency/principal relationships

The predictable and continuous supply of the relevant raw materials, services or product components is central to Altron’s ability to deliver consistently and reliably to its own customers. Our partnerships with suppliers are of critical importance. The Altron group seeks to nurture long-term relationships with established suppliers with whom it can have close, ongoing interaction to ensure that its supply needs and expectations are met. Partnerships are built on trust and performance, both of which are continuously tested in our business relationships, with a view to making sure all parties are contributing and gaining benefits.

 

Altech

Component and product supply has become a less significant issue for Altech as its manufacturing operations are relatively small. Altech Autopage Cellular’s (AAC) ability to continue to service its customers relies on agreements with major network operators, and five-year renewals are in place.

In its East Africa operations, the telecommunications network roll-out will necessitate a need to bring in large multi-national suppliers. During the year under review, the chief strategic officer was involved in building strategic supply relationships with a few, strong suppliers in this region.

Altech UEC has a high risk exposure in the securing of components as a large portion of these are sourced directly from China. The language barrier, business culture and physical distance of current sourcing operations from China, complicate the supply chain and contribute to a high cost of supply. To manage the issue, Altech UEC has placed resources in China through partnerships with its existing service providers  in logistics, design and sourcing. It has established formal agreements in place with service level agreements that provide tangible measures for improvement. Suppliers are benchmarked against Bill of Material (BOM) costs.

Altech engages on an ongoing basis with suppliers and partners. One of its biggest challenges involves staying ahead of rapid technological changes in certain of its business areas and selecting the most appropriate suppliers to help it adapt to such changes. In this regard, Altech has agreements that provide its subsidiary companies with access to suppliers’ future plans and ‘roadmaps’.

The company favours suppliers who are financially stable, sustainable and who are either first or second-order players in their industry. They should also have a good research and development track record and the ability to anticipate and respond to changes in technology and customer demand. Their ability to delivery consistently and to certain standards of quality should be well established. Ensuring continuity of supply is the responsibility of the managing director of each Altech operation, each of whom report into the chief operating officer.

Bytes

A number of companies within the Bytes stable have active partner programmes:
  • Bytes Communication Systems (BCS)
    BCS is a premium partner of Alcatel Lucent, for voice, data, contact centres and communication applications. The most important issues in the contract with Lucent require BCS to meet specific technical resource targets and revenue targets. BCS ensures that it meets these targets each year in order to maintain its preferred partner status.
  • Bytes Document Solutions (BDS)
    BDS has a partnership relationship with Xerox, a multinational company specialising in desktop printers and multifunction office systems to high-speed colour presses, outsourcing and digital imaging. Through this partnership BDS is one of the largest suppliers of technology, hardware and services specialising in document management and distribution in South Africa as well as 24 sub-Sahara African countries. BDS is the exclusive and largest distributor of Xerox products, services and supplies and has operated in South Africa since 1964.
  • Bytes Specialised Solutions (BSS)
    BSS is the exclusive distributor of NCR and Teradata products and solutions in South Africa and selected neighbouring countries. The business crafts the majority of its solutions and services offerings by adding value to core NCR and Teradata solutions and services. BSS’s partnership with NCR is for the supply of ATMs, while it offers business analytics and data warehousing through its partnership with Teradata. BSS offers the full extent of Teradata’s enterprise intelligence and analytical solutions with the ability to create a single view of the business.
  • Bytes Systems Integration (BSI)
    BSI also has partnership agreements with Microsoft, Cisco, Network Appliance, HP, SAP, Kronos, Metastorm and others.

    Bytes UK has a significant partnership with Microsoft and is currently the largest distributor of Microsoft products in the UK

Powertech

Worldwide demand for transformer boards has been overwhelming, and although suppliers have increased their production capacity, ensuring reliable supply remains
a challenge for Powertech Calidus. The operation continuously sources and audits international suppliers to ensure that is has an alternative supply pipeline. It also strives to reduce its dependency on traditional principals by expanding its product range within the insulation product offering to include, for instance, furnace and generation markets.
  • Powertech Batteries
    Powertech Batteries has established local strategic partnerships for key commodities such as lead, acid, cases and covers. However, the lack of local manufacturing technology means that it imports separators from France and gauntlets from Italy and Luxembourg. Safety stock exists for between 10 and 20 days of battery production for these imported commodities.
  • Powertech Transformers
    Powertech Transformers relies on imported resources such as copper, core steel, transformer oil and insulation for 60% to 80% of products. It mitigates the risk of being dependant on a single supplier by continually investigating alternative sources of these raw materials and negotiating new supply contracts. During 2008 it concluded a long term supply agreement with a Chinese supplier of enamelled copper strip. During the year ahead, it has two major international suppliers for insulation material, is a very scarce resource, and will audit various additional local and international suppliers.

    A contracts manager negotiates and manages contracts to ensure continuity of supply of key raw materials and continues to evaluate alternative suppliers, especially in lower cost countries. The contracts manager reports to the logistics manager and the CEO on this issue.

    Powertech Transformers has a technology agreement with ABB, allowing the company to maintain its leadership position through access to ABB’s leading technology for power transformers.

Arrow  Maintaining product quality from outsourced suppliers

Quality standards from outsourced suppliers is mainly an issue within the Altech stable, which has service level agreements with suppliers in India and China. To ensure the quality of incoming products, our operations make use of statistical process control methodologies, involving the sampling of a percentage of products and testing them against an agreed threshold of error or defect. While established world-standards are used as the benchmark in this process, the diverse nature of the different business operations makes it difficult to establish a generalised ‘norm’ for quality. Quality standards are dealt with upfront when defining service level agreements.

During the year, some products manufactured in China for Altech UEC were deficient and had to be recalled. The company has product warranty clauses in place, and has agreed levels of quality and conformity with its Chinese suppliers to prevent repeat incidents. It manages document control and conducts regular audits on product quality.

Arrow  Foreign direct imports and dumping

Foreign direct imports and dumping practices mean Desta Power Matla’s (DPM) competitors can offer price discounts to customers, threatening the operation’s market share. The sales and marketing manager is responsible for keeping the company abreast of imports and possible dumping, but management’s first priority is always to thoroughly investigate and establish the causes for any loss in market share. The company will continue to use local supply partners in line with its B-BBEE commitment, but will also investigate new relationships to ensure that it sources at the lowest possible price. During the year, management visited trade shows in BRIC countries, where unit manufacturing costs are lower, to gather market intelligence on best practices and to share the knowledge and experience gained, with other Altron group purchasing managers.

Strong competition from cheap imports was experienced by Crabtree Electrical Accessories SA in the Powertech Industrial Group. However, the company maintained its leading position in its core market and remains a brand respected for its quality and reliability.