There is great importance for empowering suppliers as empowering suppliers can help in overcoming many problems and achieve a huge number of benefits, and empowering suppliers improves efficiency significantly. This is due to their great understanding of the business processes and the needs of the buyer, thus helping to improve the integration of financial operations in the company, and this will lead to the continuous improvement of the company, and in this article, we will show you all the details about empowering suppliers.
Empowering Suppliers definition
Empowering suppliers is to make a B-BBEE compliant entity that is required to meet three key criteria including recognition of B-BBEE’s purchases as a percentage of total purchases.
Therefore, we can say that empowering suppliers are BBBEE compliant entities or institutions that must meet all the regulatory requirements of the country which we will present next.
How to improve empowering suppliers in your organization?
As we mentioned in the introduction, empowering suppliers achieves many advantages and benefits.
Here are a number of tips that will help you empower your suppliers and reap a lot of benefits:
1. Extend Payments
One tip that will help you empower your suppliers is to be responsible when extending digital payments, as this will help you avoid putting pressure on the supplier’s working capital.
Thus, not forcing them to obtain loans with high interest rates and avoiding the problem of the cash flow gap, and this will help the supplier to connect to cash faster with the payment of a percentage of the transaction.
And thus reduce the daily sales of the supplier while extending the payment days due to the buyer; this is convenient for all parties.
2. Take advantage of discount opportunities
It is one of the most important tips in empowering suppliers, as buyers who have sufficient working capital can make great returns on their money by taking advantage of early payment discounts.
This will increase the liquidity of the supplier, thus strengthening the supply chain resilience, and there are two common models of discount opportunities, namely:
- Early payment discounts.
- Dynamic discounting.
3. Take advantage of supplier portal
Empowering suppliers in your organization can be improved through the supplier portal, which helps create more efficient flows of communication between the supplier and the buyer.
The supplier portal also allows access to real-time data and thus greater visibility into billing and payment processes, and thus greater management of their cash.
What Qualifies an Entity as an “Empowering Supplier”?
There are a number of matters that indicate that an entity or a particular institution is considered as empowering suppliers.
The following are the most important requirements that indicate that the entity fulfills the empowering suppliers:
- Availability of 1, 4, 8 or more on the BEE scorecard.
- That the entity be a valid corporate citizen, i.e. in compliance with all South African laws and related regulatory requirements, which include taxation, occupational health and safety, employment equity and skills development.
- The entity fulfills one or 3 of the following criteria, and this requirement is one of the most difficult demand management of empowering suppliers, and the following are those requirements:
- Entity expenditure of at least 25% of cost of sales, excluding labor and depreciation costs, in South Africa.
- Create at least 50% of jobs for blacks.
- There is at least 25% local transfer of raw materials.
- Allocate at least 12 days annually to help improve the operational and financial capabilities of beneficiaries from black and emerging markets.
- Pay 85% of South African labor costs, and this is for the service industry only.