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Rising operational costs, along with a charge from above to “do more with less,” place pressure on organizations to identify effective strategies to reduce spending. In the world of vendor management, this pressure often translates into a decision to assess current suppliers, evaluate which are true business partners and whittle the number of total vendors down to a chosen few.
The task appears simple: reduce your organization’s current number of suppliers to extract the most cost-savings and gain increased service level performance. However, the process of consolidating your vendors and instituting a revised model by which to optimize them is complex, time consuming, and at times, very tedious. To overcome the inherent challenges of vendor consolidation and realize the gains of improved partnerships with your supplier base, it is critical to invest upfront effort and learn from those who have gone down this path before you.
The process of consolidating vendors can be daunting. Some common challenges experienced by many organizations include:
As most organizations seek “quality” outcomes from their vendor populations, it is critical that an organization define what quality means for various vendor services.
While various approaches to vendor management exist, many organizations choose to either outsource vendor management to a Managed Services Provider (MSP) or manage their vendors via an in-house model. Each option offers distinct pros and cons, so organizations must decide which factors are most important relative to their strategic goals.
Under this model, the organization outsources vendor management responsibilities to an MSP. The MSP helps to identify organizational priorities, selects vendors deemed best-suited to support those priorities, and then runs the Vendor Management System (VMS) post vendor-selection.
The benefits of this model are simple: organizations do not have to invest their in-house resources to define and manage the vendor program. Rather, they can offload this responsibility to an MSP with industry expertise as well as set Service Level Agreements (SLAs) while they focus instead on their core business.
The cons are not as clear, but can have significant impact nonetheless. For one, an organization runs the risk that its MSP manages the vendor base as though all vendor services are commodities when, in truth, the MSP is commoditizing services that could add value. By instituting processes and policies that meet the MSP’s desire for managerial simplicity more than the organization’s need for high-quality services (i.e. no contact with the end-using managers), an MSP can inhibit or discourage vendors from acting as true business partners to the end-using organization. Vendors operating within this type of MSP model may meet the MSP’s objective measures of performance, such as fair rates or compliance with policies, but they do not go beyond these measurements to truly understand the business’ objectives and offer creative solutions to achieve desired results.
Consider the following attributes of an MSP-focused vs. organization-focused model as it relates to the acquisition of IT staffing services:
In contrast to the outsourced model, organizations that in-house vendor management must invest the time, effort and resources to manage the vendor population. However, in doing so, these organizations may find it easier to more directly represent the goals, objectives and quality standards of internal stakeholders, while also ensuring vendors act as true partners in accomplishing their organizational priorities. Instead of relying solely on the MSP, the in-house vendor management model can allow those customer stakeholders directly impacted by supplier performance, to define and evaluate vendor performance.
Typically, organizations that effectively utilize this model require all impacted stakeholders to help shape vendor performance expectations. They then work with vendors to set realistic targets and develop strategies (i.e. quarterly performance reviews) that comprehensively measure more subjective performance indicators not easily captured through formalized metrics.
By continually monitoring and experiencing vendor performance, organizations gain an intimate understanding of each vendor’s strengths, weaknesses and service offerings. Organizations that use an in-house vendor management model may also have better success encouraging their vendors to go above and beyond standardized performance metrics to add enterprise value.
If you are considering or are currently in the process of consolidating vendors, here are three recommendations to help you along the way:
By understanding the various options for vendor consolidation, and the potential challenges to implementing such an effort, you can make better decisions regarding what may and may not work within your organization. Ultimately, a successful vendor consolidation initiative is worth the time and energy you invest. Companies that rely on a consolidated list of vendors tend to achieve higher levels of vendor performance, internal productivity and enterprise-wide cost savings.
People are at the heart of every successful business initiative. At TEKsystems, we understand people. Every year we deploy over 80,000 IT professionals at 6,000 client sites across North America, Europe and Asia. Our deep insights into IT human capital management enable us to help our clients achieve their business goals – while optimizing their IT workforce strategies. We provide IT staffing solutions, IT talent management expertise and IT services to help our clients plan, build and run their critical business initiatives. Through our range of quality-focused delivery models, we meet our clients where they are, and take them where they want to go, the way they want to get there.
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