Managing Sourcing Relationships

Evidence based vendor management is a hot topic.  Many vendor relationships and overall vendor management strategies are still characterised by a reliance on personal opinion and intuition.  The difference in process maturity around initial procurement and ongoing vendor management still appears great in many cases.

In vendor management there tends to be a lack of consistency in the way organisations capture information, evidence and reports that are used to analyse the performance of individual vendors and / or overall organisational sourcing performance.  In particular you may notice that it is difficult to get consistent information on performance levels on SLAs, risk profiles and issues profiles across individual and multiple vendors.  Check: Have you multiple different spreadsheets with different sets of information?

Clear visibility of SLA Performance, Risks and Issues are the ‘bread and butter’ for all organisations who take vendor management seriously.  These mature organisations seek to do two things

• Manage individual vendor relationships effectively - they do this to ensure that the service being provided by the vendor is delivered effectively and that the client organisation is getting value for money.
• Assess organisational sourcing performance - this refers to the process of understanding how well vendors are managed right across the organisation.  This type of activity seeks to ensure that there is consistent process in place to manage vendor relationships.

Both individual vendor management and group sourcing management require a consistent approach in order to drive value from vendors.  This type of analysis should address a few areas;

• At Individual Vendor Management Level
  • What is the traffic light status on each KPI in the SLA and why?
  • What is the relationship between traffic lights status and volumetrics?  is there one?
  • How does the issue profile on the relationship align to the SLA performance?  Does it?
  • What is the risk profile on the relationship?  Remember these are not just vendor risks but any risks that may impact the potential for the relationship to deliver value to the client.
  • What is the relationship score?  Do you having a scoring mechanism which allows you to factor in SLA performance and risk profile?  Sometime RAG status is not meaningful – especially where you intend to aggregate performance across vendors.
• Organisational Sourcing Performance
  • Compare the level of service delivered by different vendors?  Where you have a multivendor strategy you should be able to compare services e.g. helpdesk etc.
  • Aggregate vendor scores in certain ‘catergories’ to understand how well you are managing these relationships in general
  • Compare risk and issue profiles across all relationships to understand where there are areas of common concern – this may point to process, skills or technology gaps in your own organisation.
  • Identify vendor relationships with lowest score and prioritise actions.

Your ability to drive an effective vendor management strategy is directly influenced by the quality of data you use – do not fool yourself into thinking that intuitive or opinion based reports on vendors can compare to objective fact based reporting.  The key to sucess is driving a consistent approach to capturing the appropriate level of information, at the appropriate time on all relationships.

Traoloch Collins is CEO of ServiceFrame.  ServiceFrame is a web based innovative vendor governance tool. Visit www.serviceframe.com for more details.