Lessons From IT/BPO Vendor Management Applied to General Procurement: Looking Beyond Metrics

Lisa Erickson-Harris recently wrote a great piece for Nearshore Americas on the measurement of IT services delivery with a particular emphasis on debunking common vendor management standards and myths. Do read the full piece, Vendor Management Heads Speak Out: The Trouble With IT Service Quality, if you have any remote interest in IT procurement or vendor management – it’s definitely worth the time. But for those with less of a curiosity around the topic, there are a few key lessons that we can apply to general procurement sourcing and supplier management.

The first of these is looking beyond metrics. In the IT space, “a common mistake is to rely too heavily on metrics—defining and measuring key performance indicators that measure every facet of the service. This approach is often combined with an assumption that best practice standards work as a means to ensure quality service.”

In contrast, what is needed is a focus on evaluating and sustaining the relationship. Specifically, developing, nurturing, and managing “the relationship between organizations” because if a “relationship is solid, then all parties involved in the service delivery chain are more likely to be pleased with the outcome.”

A focus on the relationship is one of the oldest tricks in the procurement book. And it’s one of the reasons that until the Detroit automakers got operational and profit-driven – especially those who took government bailout money – Honda and Toyota were developing vastly superior platforms from an initial quality and longevity perspective.

By partnering closely with suppliers and focusing on the relationship – picture two teenage boys cutting each other’s arm and co-mingling blood and you get the level of commitment – they were able to focus on new ways of engineering out cost and engineering in superior quality, and oftentimes performance as well. Under these scenarios, sourcing becomes an effort in dividing business between optimal suppliers and using should-cost models to direct suppliers to a reasonable unit cost starting point (and then finding new ways, together, of reducing cost further).

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