Four Keys to Successful Outsourcing and Vendor Management
Whether outsourcing customer care, technical support, field service, or IT resources, there is more to consider than selecting the vendor, establishing the scope of work, pricing and signing the agreement. Much more. Many organizations do a good job in establishing the Master Services Agreement (MSA) and Statement of Work (SOW), readying the vendor and conducting periodic operational and check point review meetings. However, companies may be missing the four keys to successful outsourcing and vendor management.
Where many organizations miss the mark is understanding and managing the full outsourcing and vendor management process which includes these four fundamentals; Contract Management, Financial Management, Performance Management and Relationship Management. Each has specific areas of focus:
Contract Management not only includes the creation of an MSA, SOW, terms and conditions, scope, warranties, pricing, deliverables, etc., but also have governance and monitoring rigor to insure the contract is being executed as agreed upon. Thus, Contract Management is a continuous process and not an event. Some areas of focus are:
- Risk Management – (Privacy and Security, Limitations, Liabilities and Business Continuity)
- Tracking Deliverables and Obligations within the MSA and SOW (reports, training, current certificate of insurance, business continuity test plans and periodic tests, etc.)
- Contract Change Management Process (new work, volume changes, new locations, changes to SOW, pricing, term date, renewal dates, etc.)
- Penalties and Incentives (monitoring process, timing, triggers, approval process)
- Issue Resolution Process (monitoring and tracking)
- Triggering Events (Data breech, storms, outages, inspections, “tabletop” exercises, etc.)
- Termination process (announcement, timing, transfer of work, etc.)
- Invoicing review, approval and audit (owners, timing, approvers, invoice discrepancy and remedy process)
- Monitor, Audit and Prevent Cost Leakage (volume, hours, number of contractors, etc.)
- Pricing Strategy and Model (per person, per hour, per productive minute or hour, per job, etc.,)
- Reporting for clear visibility of spend vs. anticipated savings
- Monitoring and tracking pricing tier/volume discounts
Performance Management is not just tracking the operational performance; it also captures how your vendor is performing against the entire agreement. Tracking and monitoring such items as:
- Timeliness of all contract obligations and deliverables
- Vendor commitments from operational, quarterly and annual reviews
- Timeliness of invoices and credits
- Ramping up or ramping down appropriately based on volume of work
- Key Performance Indicators (Service Level Agreements, Operational Performance Metrics, etc.)
Relationship Management includes more than a weekly operational review of the KPIs or quarterly reviews with the vendor. The client should set the agenda and run the meetings, not the vendor. Focus areas includes:
- Assign a dedicated relationship or vendor manager. This can be a full- or part-time responsibility depending upon: contract amount, volume of work, number of locations, etc.
- Semi-annual leadership meetings should be held to review vendor performance, strategic initiatives and industry trends for both the vendor and the client, alternating meeting places. Strengthen the partnership
- Operational Quarterly Business Reviews (quarterly performance, issues resolved, new issues, next quarter commitment and following quarter forecast)
- Monthly deep dive operational review meetings (KPIs, workforce planning, reports, key projects, quality, customer satisfaction, systems and technology, etc.
- Weekly vendor staffing reviews and any anticipated changes to agreed upon work and/or demand from quarterly commitments of the monthly volume of agreed upon
- Periodic visits to vendor location(s) where work is being performed. Client opportunity to observe performance, meet and communicate to the vendor team, celebrate and recognize top performers strengthens the operational and business relationship.
Outsourcing and Vendor Management takes time, energy, skill, discipline and a passion to partner with your outsourcer employing strong processes, while still maintaining and strengthening your relationship that brought you together in the first place. But, it requires planning and investment to implement the above key fundamentals to insure consistent, repeatable and predictable service quality, while achieving your business goals. If you are not achieving vendor success or have only partially implemented vendor management processes, I recommend you begin with a full Outsourcing and Vendor Management Assessment to gauge your company’s current capability and commitment. Contact Us for Assistance
Senior Consultant, Service Strategies
Randall Selleck offers more than twenty-five years of accomplishment-laden experience in service re-engineering, customer service, field engineering and depot parts repair and distribution operations. As a senior consultant with Service Strategies Corp, Mr Selleck works with companies to optimize service operations and advise on best practice implementation. He has held senior level positions in sales, services and customer support and has extensive experience in BPO vendor management.