Effective Supplier Management – Better Outcomes for Everyone

We are pleased to bring you this post from Richard Skelton, Procurement Service Manager (acting), ESPO. ESPO is a customer-focused, not-for-profit, public sector buying organisation owned by six member authorities. It has overall sales of £1 billion of which £44 million is drawn from catalogue sales based on 260 EU-compliant frameworks and a goods and services catalogue.

Imagine a construction worker who is often late for work and doesn’t put on all his protective gear until he’s shinned up the ladder? He saves a few seconds each time but jeopardises colleagues’ safety as well as his own.

Sadly, cost-driven organisations can sometimes view supply frameworks in the same way as our perennially late construction worker builder does site safety: they’re onerous rules that constrain individual choice, or drain away valuable time on seemingly long-winded procedures.

But in the same way that enforcing building-site regulations cuts out risky short cuts and promotes better build quality, so frameworks are helping buyers to secure better outcomes, however complex the end customer needs might be.

Buyers using frameworks find that there’s a clear path for tendering and supply, agreed pricing and minimum standards. Less obvious to many, is frameworks’ ability ‒ just as analysing the causes of site accidents improves building site safety ‒ to drive innovations and raise the bar on performance by systematically analysing management information.

It’s happening in five main ways:

  • First, like a watchful safety manager, professional buying organisations (PBOs) keep their ears to the ground. They combine category managers’ expert knowledge of goods and services with relentless analysis of information on customers and supply markets. PBOs thus monitor frameworks’ uptake by the market while identifying new commercial opportunities for potential suppliers.
  • Second, like effective checks of staff CVs, forward-looking PBOs examine supplier skills and resources before designing appropriate frameworks, with outcomes or outputs-based specifications, to suit different customers’ needs. This approach can be used to attract large or small firms or new market entrants. One provider’s current framework addresses building insulation needs by working with expert consultancies and then devolving work to local contractors – a proportional approach that will suit specialist suppliers with limits on geographical coverage.

Frameworks keep processes simple, particularly for smaller firms unaccustomed to public sector contracts. PBOs take particular care to avoid barriers to entry: using Lots on tenders, for example, helps small firms to compete that are otherwise constrained by their resources or the terrain they can cover.

  • Third, like a daily site safety briefing, successful frameworks involve mutual trust and tailored support to suppliers. PBOs provide tiered levels of partnership and support depending on the product, service or market need. Whilst the last Government aspired to having 25 percent of its contracts fulfilled by small and medium-sized enterprises (SMEs), some PBOs are awarding 80 percent or more of their contracts to smaller companies.
  • Fourth, like a construction group that nurtures specialist contractors, framework providers are harnessing minimum selection criteria to raise performance. Procurement specialists are gaining insights from different transactional and supplier data streams – to target continual improvements in frameworks’ quality and delivery.

Backed by data insights, PBOs build in key selection criteria and service standards (insurance cover, quality assurance licence and so on) to contracts and then enforce compliance to improve supplier performance over the framework’s lifetime.

Active supplier management drives innovation too: a recent wheeled-bin waste supply contract included options such as supplier buy-back of obsolete bins generating revenue for customers and giving suppliers an effective source of raw materials.

  • Fifth, like regular background checks on a building contractor’s credentials, management information is also harnessed to contain supplier risk. Procurement sector PBOs are constantly tracking and evaluating data on markets and customer spending as well as proactively guiding their suppliers with robust credit, minimum standards, contract performance and compliance checks.

Using frameworks, customers can procure complex services and products safe in the knowledge they will benefit from continual quality and service improvements ‒ and the legwork of proving that the suppliers are financially sound, accredited and EU-compliant has already been done.

Active supplier management in frameworks, for anything from equipment to complex business services, is driving innovation: just like the construction group that accepts no half measures from any of its team or supply chain in delivering top-notch build quality and safety.

First Voice

  1. Dan:

    LOL

    Ok, now I’ve picked myself off the floor, I have a couple of comments.

    One: how do you get around the fact that that PBO’s – not having any demand themselves and who simply provide services to other, independent, bodies – find it difficult to have any committed spend (which is how you get any value for money from a framework). In my experience you can quite often get better value by doing a procurement on your own. Remember the “we have lost the argument on frameworks” comment?

    Two: much of what you’ve listed above is about the procurement, not supplier management. In fact, the one example you provide (of the wheelie bins) is of a contractual condition inserted at the ITT stage, not supplier management (which by definition happens after contract award).

    Three: the five points you discuss are things that all professional procurers should be doing anyway, they are not particular to either frameworks or PBOs. Given this, and the difficulty of getting value for money raised in point one, what are the benefits of using a PBO?

    I will happily admit that there are some times that it makes sense to use a PBO-created framework, but they’re just another tool in the kit.

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