October 2011

Relationship Management  

Over 60% of outsourcing deals are not delivering what was expected!

This was the claim made when Grange recently attended a seminar on BS11000, the BSI standard that aims to help collaborative business relationship management. Whilst not all companies will wish to obtain the standard I'm sure the majority of companies would like to achieve more from their suppliers.
 

"How do I get more out of my suppliers?"

A good starting point is to write down what you expect from a supplier. Below is a list of the areas to consider:

• Why did you outsource in the first place?

• What were your objectives and are you meeting them?

• Were they realistic?

• Did you explain to potential suppliers your expectations?

• Are your expectations matched by the contract and commercials of your relationship?

For the final point above you will need to be honest with yourself. There are three types of relationship with a supplier: - 1) commodity, 2) partnership and 3) collaboration.

Sadly, the term partnership is often used incorrectly by both suppliers and customers. If, for example, you have negotiated a lowest price solution with a tight service level agreement then it is unrealistic to call your supplier a partner and expect high levels of added value from them.

If your contract reflects your requirement for partnership then contract governance should reflect this along with the commercials. Time and money will need to be allocated to delivering goals such as innovation and added value.
 

"How do I move to a collaborative relationship?"

The key here is to 'move to' a collaborative relationship. Grange would strongly advise customers not to contract initially for a collaborative relationship. The lowest risk and most successful approach is to work with an existing supplier when the relationship has already reached a mature level.

A good supplier relationship should progress through three stages: steady state, effective and mature. Grange recommends early adoption of continuous improvement during the steady state stage. During the effective stage the supplier should be delivering innovation and moving towards collaboration.

Only at the mature stage does a supplier become trusted and this is the time to use a supplier collaboratively. The contract should allow for this refinement over time but there will be some negotiation on the detail of collaboration at this stage. Rewards should be based upon business outcomes such as increased sales or business activity.

IT Industry Update

Acquisition activity remains high with the acquisition of Siemens IT Solutions and Services by Atos to create the 2nd largest IT professional services provider in Europe and the 6th largest in the world. Capita has also been busy with the acquisition of call centre provider Ventura and the private sector part of Vertex.

In the Indian offshore market revenue growth continues but has slowed in the last quarter.

The FTSE SCS (Software and Computer Services) Index is down 1% by the end of quarter 3 2011 compared to the FTSE 100 which is down 13%.

Grange Update

Below are some of the assignments that Grange has been working on:

• Advising a logistics customer on an improvement programme for their supplier relationships. This is the customer and supplier working closely together to identify improvements leading to savings or increased sales. The initiatives identified have found over 100k of profit improvement through this process.

• The programme management of a company turnaround.

• The sourcing strategy of a Utilities provider