Most organisations have several ‘tiers’ of vendors. Vendors may be ‘tiered’ based on a variety of criteria such as deal size, criticality of service delivered, regulatory impact etc. In all cases client organisations will apply varying levels of risk, issue and performance management depending upon the Tier the supplier fits into. It is a very sensible approach but most organisations struggle to ensure that vendors in the same tier are managed to the same level and consistently. Tiering creates the illusion of consistent vendor management. Why does this problem arise?
Typically the issue is that organisations enforce rigorous management at ‘engagement level’ or ‘vendor level’ for important and strategic deals. They will have good visibility of performance and risk at the deal level but in most cases each deal will be managed differently. These differences might be different spreadsheet formats, different meeting times and agendas, different roles in engagement meetings, different escalation procedures. Does it matter you might ask – so long as each contract is managed?
It does matter because each bit of variability between the way different contracts are managed makes it more and more difficult to assess how well you managing vendors at an overall level. Specifically it makes it very difficult to aggregate information to compare performance across vendors or to get an overall picture of performance levels. High performance organisations are interested in not just assessing how well a ‘deal’ is performing but also assessing the overall performance of the organisation to manage sourcing.
Driving a standardised approach to managing performance, risk and issues is absolutely critical to managing sourcing at organisational level. To achieve this using spreadsheets and e-mails is impossible – people like to change and ‘tweak’ files etc. and the result is immediately obvious. To drive world class consistent vendor management then consider a portal where all information on sourcing performance is collected and where all issues and risks can be captured in a consistent way. Information can then be presented and reported in a format that allows meaningful analyses and comparisons.
