Tag Archives: Supplier Managemnt

The dangers of multi-sourcing

This article by Jonathan Cooper-Bagnall, head of sourcing consulting at PA Consulting appeared in the Independent on 10th November 2009.  it illustrates very well the challenge of making performance meaningful!

“Outsourcing is back on the agenda, with a multiple-supplier model. But as Jonathan Cooper-Bagnall says, a holistic approach is vital

The last recession, in the early years of the last decade, fuelled considerable debate on the value of outsourcing. Many organisations saw it as an opportunity to secure cost reductions by awarding large and often complex outsourcing contracts to the world’s leading service providers. Although outsourcing was not a new phenomenon, the scale of deals signed, the number of jobs moved to offshore locations, and the speed of the change, provoked concern as to whether this was sustainable and appropriate.

Today, the outsourcing debate is raging again. Public and private sector organisations are looking to strip more costs from their operations by further outsourcing and offshoring. Many already have experience of outsourcing, but that experience has been mixed. The scale of the earlier outsourcing and offshoring has proved sustainable. However, some contracts have not delivered as a result of rushed contract execution and underinvestment in the transition to new suppliers, and the management of those suppliers. Those mistakes need to be avoided this time round.

Any organisation considering outsourcing needs to answer the question of how the delivery of operations can be restructured so that it takes advantage of the outsourcing provider’s skills. According to PA’s 2009 International Outsourcing Survey, organisations are planning to break up the large, complex contracts and move to a set of smaller contracts with multiple suppliers. The perception is that this will deliver much-needed cost reduction, and that this multi-sourcing approach enhances competition and offers a more flexible and agile delivery of operations…..”

More at this link


Making Performance Meaningful with KPIs

Key Performance Indicators (KPIs) help an organization define and measure progress toward organizational goals.

Do you have good KPIs defined?  Are they ones that reflect your organization’s goals, ones that you can measure and that you can use as a performance management tool?  If so, you can use them as a stick to improve performance but much more positively you can use them as a carrot.

KPIs give everyone in the organization a clear picture of what is important and what they need to make happen.  You can use them to make sure that everything the people in your organization do is focused on meeting or exceeding your KPIs.   Publicize them and post them everywhere: in the lift lobbies, on the walls of every conference room, on the company intranet and certainly on the company web site!    Show what the target for each KPI is and the progress toward that target for each of them. Use them to get real engagement within the organization and across your supply chain.

But what are KPIs?  Once an organization has analyzed its mission, identified all its stakeholders, defined its goals and agreed a set of ‘critical success factors, it needs a way to measure progress toward those goals. KPIs are those measurements.  They should be quantifiable measurements, agreed to beforehand, that reflect the ‘critical success factors’ of the organization. They will differ depending on the organization. Some may be financial e.g. the percentage of  turnover coming from a particular region, some may be transactional e. g. number of helpdesk calls answered in a fixed time.  What matters is that they reflect the organization’s goals, they must be key to its success, and they must be SMART (Specific, Measurable, Achievable, Relevant and Time Bound) .

If a KPI is going to be of any value, there must be a way to accurately define and measure it.  For example to be the lead organization in a particular sector sounds good but how do you really know when you get there.  Not only must they be measurable but you must have systems in place to do the measuring – for example, if you are not prepared to invest in software to measure how quickly the phones are answered, don’t set that as a KPI!

Real value comes from staying with the same definition from year to year so that you can compare results over time and look at trends.   You can use KPIs to set challenging targets e.g. year on year improvements.     For example a 5% increase  in sales is something employees can understand and take specific action to accomplish.

In selecting KPIs   it is important to limit them to those factors that are essential to the organization reaching its goals. It is also important to keep the number of KPI’s small just to keep everyone’s attention focused on achieving the same KPIs.  That is not to say, for instance, that a company will have only three or four KPIs in total. Rather there will be three or four Key Performance Indicators for the organization at corporate level and the business units within it may have three, four, or five KPIs that support the overall company goals and can be “rolled up” into them.

Selecting the  right KPIs can be a key to ensuring your organization achieves real performance success.  If you would like advice on selecting KPIs for your organization or if you would like assurance that your performance measures are working effectively, G&W Consulting can provide you with support

For more information you can contact us at this link

Successful Management of Service Contracts – the UK National Audit Office Value for Money Report – December 2008

In 2007-08, UK central government spent over £12 billion on service contracts primarily in the areas of information and communications technology, facilities management and business process outsourcing. The organizations surveyed estimated that they spent on average the equivalent of two per cent of annual contract expenditure on managing their service contracts.

The delivery of public services, protection against service failure and achievement of value for money are all dependent on effective contract management. The consequences of service failure can be serious – recent delays in the marking of SATS tests have highlighted the important role contractors play and the impact service failure can have. At the same time, this report identifies examples of good practice contract management, such as the Department for Work and Pensions’ contract with BT to provide telecommunications services where there was good senior management engagement with the supplier.

The report examined how well central government organizations were managing their service contracts, assessed against the good practice framework for contract management which the NAO developed at the outset of their work. Contract management is especially important where suppliers are engaged to provide services over a long period of time and clients need to ensure that service levels and value for money are maintained over the duration of the contract.

The key findings from the survey are given below and you can learn more about the report at the NAO Website at this link!

But if you would like to know how well your organization is delivering its services contract – G&W Consulting can provide you with an MPM Review which can tell you how well your organization is dealing with the issues identified blow. You can contract us at this link

NAO Report – Key findings

  • Organizations were not always giving contract management the priority it deserves.
  • Organizations do not always allocate appropriate skills and resources to the management of their service contracts.
  • There were weaknesses in key performance indicators and limited use of financial incentives to drive supplier performance.
  • Despite the critical nature of the contracts in seen in the survey, many did not have in place some or all elements of good practice risk management processes.
  • Value for money testing can result in significant savings but the extent to which organizations test the value for money of ongoing services and contract changes is variable.
  • In general both organizations and their suppliers were positive about working relationships, though less than half of organizations had implemented a supplier relationship management programme despite what appear to be clear benefits
  • The Office of Government Commerce can do more to support central government organizations to improve contract management.

Don’t forget to see our controversial paper on Benchmarking at our White Papers and Other Resources page – we would very much welcome your views and comments.