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Outsource magazine: thought-leadership and outsourcing strategy | May 29, 2017

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Getting multiple suppliers to work together

Getting multiple suppliers to work together
William Hooper

Multi-supplier service is all the rage, together with its linking agent Service Integration and Management (SIAM). Wonderful in theory… How does one practically get multiple parties to collaborate towards a common end?

It was recognised early in the development of multi-supplier models that there needed to be a unifying agent. A great deal of time and effort went into the development of new operating models, associated structures and contractual mechanisms. Some of the measures proposed have been found to be inadequate. This is not to say that the efforts have been wrong, just that the task is enormous. The implication is that any CIO staking a career on its delivery had best tread with caution and regard what they are told with scepticism.

“End-to-end” in itself can have several perspectives, commonly including customer journey, ITIL process and service lifecycle. Successful performance requires coherence across all.

Outcomes Sought

An article such as this can look only generically. Your organisation will have its own drivers and priorities. The most commonly encountered drivers that require immediate action are:

  • the expiry of current sourcing arrangements; and
  • a financial crisis requiring a significant change in the way things are done.

Commonly desired business outcomes of service model change include:

  • Move faster, capture benefit sooner
  • Achieve more for a given level of resource, make better choices
  • Optimise risk

To be meaningful within your context and specific to your environment, these high-level objectives need to be driven down to much lower levels so that they become measurable and can be put into action. The outcomes that good levels are likely to contribute to include:

  • Reduced friction and management cost for coordination efforts, including management time
  • Faster implementation of change and higher success rates
  • Productive improvement across the supply chain

Absent effective collaboration, symptoms include:

  • Multiple and protracted arguments concerning who is responsible for implementing aspects of a decision and who is to pay what
  • Lack of clarity of impact to be expected from change and glacial decision-making
  • Service failures are frequent, the reasons are not clear and the action to be taken to stem them is unknown
  • Information does not flow effectively between parties; it is slow and insufficient

There is no one simple action that can be taken to fix this. Many and coordinated measures need to be taken in a coherent manner. This is hardly surprising as there are many parties, each with many aspects to direct with approaches developed over time and divergent interests. The elements are so inter-dependent that it is rightly known as a “complex” problem.

Levers Available

The greatest volume of discussion has been heard in the areas of contract and structure. Research by McKinsey that led to the production of the 7S framework pointed to wider considerations also being necessary. The 7S model and levers below are based on the theory that for an organisation to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance, or to maintain alignment (and performance) during other types of change:

Contract, Commercial Management
The contractual terms have to be consistent with the agreement that the parties wish to implement. Initial experiments focused on strong “collaboration agreements” with obligations and sanctions applied to each supplier based on overall performance. These have been progressively weakened as suppliers complained they were being held accountable for the failings of others. They are now generally as robust as a wet paper bag. Recent examples seen have used “principles” for collaboration and joint working together with individual suppliers’ obligations and standards for interchange. Think of the contract as up to 20% of what you need to address: big, vital, but not the whole story. The time taken to complete major contract change can be months, so these are not at all flexible.

Incentives
Contracts frequently have aspects that address incentives, be it reward or censure. These can be useful and are important to get right. High-stakes incentives can have perverse consequences and should be used with caution. Creative incentives can include elements such as speaking on behalf of a supplier. This can be immensely valuable for the supplier when the message is positive, having a strong influence on their ability to win other business.

Charm, Cajole (and Other Behaviours)
It is cheap to deploy, sensitive to situation and infinitely flexible. Its application takes skill. Its success relies upon the making of promises to satisfy the real needs and desires of the other. This is predicated upon listening hard enough to discern what they are. Persuasion can be delivered both directly and creatively. I can quietly let your boss know that attention lapsed to gain your concentration next time. People are remarkably sensitive to behaviours, particularly where there is inconsistency between what is said and what is done. The example set by those in a position of influence (consciously or otherwise) is most important. They can praise and nudge to obtain the required state – or ignore it and face the consequences.

Issue Resolution, Drive
There is a great deal of work to be done to drive implementation and sustain performance through continual improvement. Part of the coordination role is to pick up on issues and drive them to resolution. This requires skills in those occupying a position in which they look end-to-end and ensure that where obstacles are encountered, they are overcome. Those who perform it with talent and integrity earn high levels of trust from all. It is the embodiment of working in the overall interest of the customer. If issues are important, known and remain un-resolved, they will drag down performance of the system and demotivate performance.

Process, Procedure, Policy, Standard, OLA
Dull but vital. These formal mechanisms are the life-blood of predictable daily operations. The key role to get right is the Process Owner who looks end-to-end at the process’s effectiveness and brings the parties together to drive improvement (see ‘Issue Resolution’ above). OLAs (operating level agreements) are useful to support the low-level interactions that occur many thousands of times. Operational people get these as a great boon to mutual support and cooperation. Commercial types are frequently terrified of additional obligations. Standards (including architecture, security) are vital for coordination. Keep these clean and recognise that when you change them, there may well be a cost. These are only of value if it is ensured that people work to them.

Tooling
Invariably a source of great pain. Customers, never having had to think about it neglect the cost, time to get it properly configured, and low-level data definition that is required to get organisations to exchange data effectively. Neglect this at your peril! Customers realise that there are some coordinating assets over which they simply have to retain control, but they can still hire an expert to help them deliver.

Organisation / Structure
The arrangement and relationship between components of the overall structure, their relative roles and responsibilities can be depicted on easily comprehensible PowerPoint pictures. It is useful to get this right. Most overstate its significance in sustaining success. Of greater importance is the capability of the organisations and their interactions to realise the requirements imposed upon them by the chosen model. It is in this area that problems occur. Structure is easy to model. Organisation requires work and consistent application to be realised.

Measurement, Management, Reporting
Management plans, builds, runs and monitors activities in alignment with the direction set by the governance body to achieve the enterprise objectives. This activity is typically structured in accordance with the governance levels it supports. The trick is to ensure that the right questions are asked (see here and here), so that the measurements reported provide the insight and guidance required by governance to act intelligently. This requires a high degree of skill and intelligence in key roles.

Strategy, Goals
Strategy is the plan or approach by which goals are achieved. Where articulated, clear and shared it is an essential means of leadership. It supports intelligent resource allocation and holding people to account for its achievement. Strategy is stable, tactics are situational and change over time. Strategy is an element of planning. This then has to be executed in action. A plan, however elegant, that cannot be realised effectively, is a bad one.

Vision, Values
These are vital elements of leadership. They have a strong influence on behaviour. They are intangible and sit above transactions. The way that those transactions are performed can be consistent or inconsistent with the vision or values. As such, it is worthwhile working them out and stating them in the contract and elsewhere. Leaders should make frequent reference to them and guide behaviour accordingly. They have a role in the selection of suppliers; those who have incompatible values or a vision of domination have no place in multi-supplier operations. Hire one, and you will have grief for years.

Skills, Staff
Once a contract has been defined, there is a challenging on-going task to hold parties to account for performance of the obligations. Many struggle with this. It requires the customer to have managers at least as talented and energetic as those of the suppliers. Most common areas of challenge are issue resolvers, commercial and financial managers.

Integration is all about the coherent marshalling of many components towards a shared end. This cannot be done by working on elements in isolation. The capabilities required are frequently under-estimated, undermining the success of the venture. This does not make the multi-supplier model a bad one, just unsuitable for those who will not face up to the dependencies. The levers are principally soft and behavioural. They are however immensely powerful and difficult to wield well.

“I came to see in my time at IBM that culture isn’t just one aspect of the game: it is the game.” – Lou Gerstner.

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