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Services Procurement Benchmarking – Truth in Numbers to Achieve a New Level of Program Results

Benchmarks and KPIs have become an integral part of successful contingent workforce management initiatives and now, SOW programs. As procurement organizations become more sophisticated in managing services spend, many are quickly learning about the benefits of looking at overall quality and the total cost of ownership of a given relationship on top of the hourly costs of individual contingent workers. This move has come as leading-edge companies are pushing to answer “why” as much as “what” or “how much” when it comes to both vendor (e.g., rate compliance, response time, etc.) and internal performance. Moreover, effectively managing procurement-led KPIs and benchmarking is becoming a stepping-stone to incorporate organizational inputs from HR, finance and other areas of the business.

A number of trends have converged to drive an increased interest in services procurement not just in kicking the KPIs and benchmarking tires, but hopping in the vehicle from the start. These include an increasingly geographic distribution of flexible workforces as well as the need to get more from contingent procurement savings given the state of the overall economy. Moreover, as companies expand globally, benchmarks and KPIs can play a key role in helping centralized procurement functions – as well as decentralized managers – keep a pulse on actual activity.

Yet not all organizations place an equal emphasis on measuring and managing by the numbers. Those more inclined to focus overall program management and direction around benchmarking and KPIs are likely to view contract labor as a more strategic component of their overall business. In addition, companies with more sophisticated quality and operational excellence programs in place (i.e., lean, Six Sigma, ISO) or those within in heavily regulated industries where careful reporting is required are more likely to adopt a data-driven management model. In many cases, organizations choosing to go down the KPI and benchmarking path have implemented a strong vendor management office – which Spend Matters has observed is more common across IT services spend than other categories. Likewise, those companies with an experienced internally managed operation (often with a multi-year track record of results) or those that rely on a stronger MSP are also more likely to use numbers at the core.

This paper explores how best to deploy KPIs and benchmarks in a services procurement context — including which areas to focus on and prioritize (going far beyond just rate cards). It also explores CareFirst BlueCross BlueShield’s experience getting more from their VMS implementation by leveraging benchmarks and KPIs at the core of their effort to measure and improve performance.