iTHEMBA OUTSOURCING

BUSINESS CASE STUDY

Case Description

“Insanity How culture, quality, resilience and faith revived a dead business. 

They say that in times of crisis people show their true character. iThemba Outsourcing is an example of how strong bonds underpinned by a common vision can fuel resilience to achieve the near impossible and inspire greatness in average people. iThemba is a Xhosa name for hope.

iThemba started their journey with Siyakha as a dead company with no employees and zero economic activity. Despite having lost its contract and retrenched its staff, the owners displayed what is best articulated by a Japanese proverb: “Nana korobi ya oki”, meaning fall down seven times get up eight; they kept the faith and continued to search for work. One of their searches for work yielded a spark as Henkel shortlisted them for an embellishment contract.

Procuring a contract in this very competitive industry required that they comply with the ISO quality management system, they had a circa 80%-90% compliance gap. Siyakha intervened and filled a big portion of this gap resulting in them achieving a score of 80% from the first Henkel quality assessment and eventually securing the contract a couple of months later.

This helped the firm to restore a livelihood to over 40 families by re-employing 40 women whom it had retrenched just a year earlier. The contract resulted in other obstacles which were swiftly dealt with by the resilient and entrepreneurial approach of the owners.

iThemba management faced a moral challenge; do they concede defeat and close shop after losing the last contract and leave 40 women who have helped build the company from scratch unemployed in the process? Or do they give it another go, showcasing the spirit of entrepreneurship by being resilient, visionary and staying the course?

They chose the difficult path; in doing so, the universe conspired to assist them, triggering a series of events that culminated in the firm securing a five-year multimillion-rand contract with a multinational and true to the firm’s name, they restored hope in a country that cannot afford any more unemployment.

The Challenge 

They say that in times of crisis people show their true character. iThemba Outsourcing is an example of how strong bonds underpinned by a common vision can fuel resilience to achieve the near-impossible and inspire greatness in average people. iThemba is a Xhosa name for hope.

iThemba started their journey with Siyakha as a dead company with no employees and zero economic activity. Despite having lost its contract and retrenched its staff, the owners displayed what is best articulated by a Japanese proverb: “Nana korobi ya oki”, meaning fall down seven times get up eight; they kept the faith and continued to search for work. One of their searches for work yielded a spark as Henkel shortlisted them for an embellishment contract.

Procuring a contract in this very competitive industry required that they comply with the ISO quality management system, they had a circa 80%-90% compliance gap. Siyakha intervened and filled a big portion of this gap resulting in them achieving a score of 80% from the first Henkel quality assessment and eventually securing the contract a couple of months later.
This helped the firm to restore a livelihood to over 40 families by re-employing 40 women whom it had retrenched just a year earlier. The contract resulted in other obstacles which were swiftly dealt with by the resilient and entrepreneurial approach of the owners.

iThemba management faced a moral challenge; do they concede defeat and close shop after losing the last contract and leave 40 women who have helped build the company from scratch unemployed in the process? Or do they give it another go, showcasing the spirit of entrepreneurship by being resilient, visionary and staying the course?

They chose the difficult path; in doing so, the universe conspired to assist them, triggering a series of events that culminated in the firm securing a five-year multimillion-rand contract with a multinational and true to the firm’s name, they restored hope in a country that cannot afford any more unemployment.

The Business Background

iThemba is a contract packaging company based in Industria West, Johannesburg, the firm was founded in 2004 by Stephanie Moonsammy, and managed by Derek Moonsammy, Stephanie’s husband. The firm provides cost-effective labour intensive packaging solutions to the Retail and FMCG industry. It has managed to procure contracts with Adcock Ingram, BIC South Africa, Lever Ponds, Permark International, SC Johnson and Reckitt Benckiser in its 15-year history.

The last contract ended around the beginning of the second quarter of 2017 and the firm started retrenchment proceedings which were concluded by the end of the second quarter, all 45 employees joined the ranks of the unemployed. During this challenging period, Derek applied for several tenders, to qualify his hope for better days he also negotiated a payment holiday on the factory lease.
Around March 2018, the firm was shortlisted for an embellishment tender advertised by Henkel, a German multinational based in Alberton. To advance, the firm needed to be ISO aligned.

The Business, Before The Program

iThemba was out of business around March 2018 when they started in the Siyakha development program. They had all infrastructure they needed to start production, however, maintenance work was essential. The first few engagements were held with only Derek, Greg, the former logistics manager and Wellington, the former production manager in an empty factory.

They had procured an unsystematic quality management documents from the internet and were trying to develop a decent quality management file in preparation for the next selection round from Henkel.

iThemba Packaging and outsourcing

Goal Focused Interventions

Siyakha interventions were single-mindedly focused on assisting the firm to become ISO aligned to secure the Henkel contract. We first did an as-is analysis of the firm, this was facilitated by a professional quality practitioner. The findings revealed significant gaps which would have otherwise hamstrung the firm’s ambitions. A detailed action plan was then drawn from the findings.

The firm implemented the action plan supported by a business coach. The work included repairs and maintenance work; updating and developing quality management policies and procedures, and, cleaning the factory. Around six additional ex-employees took part in this prep work; their commitment was palpable and the energy was free-flowing, at times they worked through public holidays shoulder-to-shoulder with their Siyakha business coach.

Obstacles

The biggest obstacle was working capital, it was partly overcome by negotiating favourable (longer) credit terms with suppliers and shorter payment terms with the customer. The unresolved part of the obstacle proved to be a worthy opponent; not all suppliers agreed to the requests for extended credit terms and Henkel only agreed to shorter payment terms (60 days from 90 days) about six months into production.

This harmed operations, albeit minimal. When dealing with a blue-chip company there’s a small margin for error. Some materials were delivered late as a result of the working capital issue, this caused unnecessary downtime and wastage at worst. To fix the problem, contingency plans that allowed swift shuffling of production teams were developed and monitored daily. This aided in minimising the impact of the obstacle. Customer expectations were also managed by constant feedback. Lastly, Derek and Stephanie loaned the firm circa R3million of their nest egg.

Response to Program

“I was able to develop respect very soon in the program because the business coach’s general business knowledge was very helpful. A trust relationship also developed. There was no part of the coaching program that did not add value. The QMS training session was very helpful because it was directed at our pain point at the time of need. A social media marketing training would have been ideal. The coaching and participating at the Smart Procurement Expo provided considerable value for me and the business.”

Learning & Retention

The top skills that were mastered by the owner during the program are:

  1. Understanding quality management and
  2. Monthly financial reporting

Having access to some of the training facilitators after the training session, the business coach’s approach to reawakening accounting principles and highlighting the significance of timeous monthly reporting aided the owner to master the skills learned in the training interventions.

 

Changed Behaviours

Timeous updating of financial records has become a standard; previously this activity was not given priority. The firm is determined to gradually and firmly establish a culture of quality within the firm; this proved to be the most challenging, however, all stakeholders have realised the significance of this objective.

Impact On The Business

iThemba accessed the right assistance at the right time; the quality management system intervention and a hands-on approach by the quality practitioner and the business coach helped the firm to achieve with weeks what it would have taken it over two months on their own. The solution needed to be delivered within certain timelines because of the tender process, otherwise, it would not have made an impact. The intervention helped secure the contract for iThemba.

The following growth metrics are a testimony to the statement above; the company grew profits by 161%, their economic participation increased by 191% and created 45 new jobs in the process.

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Growth In Profit

Growth In Jobs

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Growth in economic participation

The Road Ahead

Now that the Henkel has been procured, the firm is working on consolidating operations as it prepares to take on additional work from Henkel. Marketing and sales efforts are also being increased to create additional revenue streams. The firm was sponsored with a website; this will bolster its marketing initiatives. Derek will be focusing on new business development as he enters his twilight years; he is gradually offloading some of his management responsibilities to Marc Moonsammy, his son.

The owners have created a suitable business plan for the firm and they will be able to revise or create a completely new one on their own in the future, Marc was instrumental in developing the business plan.

“Based on the value we derived, we would recommend Siyakha to other SMMEs” 

Derek Moonsammy

iThemba Outsourcing

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