PRODUCT

PRODUCT HIGHLIGHTS

Managing risk Insights

De-risking longtail services supply chain

How to use technology to manage the risk of outsourcing to a diverse, longtail network of suppliers and consultants.

Posted by: Zivio Reading time: 6 minutes

In a survey conducted by BlueVoyant, 80% of technology and procurement chiefs had experienced issues when looking specifically at IT security. But in the longtail of the services supply chain, IT security is only element of risk that needs to be managed.
 
When working with a large number of diverse suppliers on services projects of all shapes and sizes, there are some additional considerations.
 
Security and access
Working with external consultants, suppliers and service providers means letting people into your organisation. In today's workplace, it may be easier to think about who has access to your internal document storage, collaboration or reporting systems. But it also applies, very simply, to knowing who all the people in your office or building are at any given time.
 
Without technology, it may be challenging for procurement teams to understand and control which suppliers (and their individual staff members) require and have access to specific files, reports or systems.
 
Of course, technology can help an organisation to understand the scope of a project, who is involved and what levels or types of access are required for any given milestone. In addition, automated onboarding workflows can ensure suppliers are fully compliant and all necessary documentation is present, signed and current.
 
I.P., rights, and ownership
In projects that involve creativity, strategic advice or knowledge transfer, the organisation should ensure there are controls in place to document a) the ownership of the project's outcome and b) protect any existing intellectual property or 'trade secrets' exposed during the project.
 
Whilst it's unlikely any large consultancy project doesn't have this sort of protection in place, the risk increases in the longtail where spend levels may not mandate procurement's oversight. In other words, smaller projects initiated directly between business unit and suppler may inadvertently expose some I.P. risk.
 
The solution technology can provide is in its ability to increase procurement's scope to address and oversee more of the longtail. Automated workflows and templated processes can help category managers free up time enabling them to control and oversee projects they would otherwise be too busy to think about.
 
Laws and taxes
The differences between employment, contracting, statement of works and outsource service provision is a hot topic at the moment. Specifically, in the UK, IR35 reforms are pushing more organisations to rethink how work is resourced.
 
In cases where the best solution to get a piece of work done is to outsource the requirement to a services supplier as an outcome-focused statement of work, it's important that the statement of work is managed correctly and doesn't become disguised headcount.
 
Whist an application can never magically exempt a piece of work from legislation or "take it outside IR35", technology helps create a clear framework when there is an opportunity for getting work done in a different way - for example, helping to structure a project with a clear outcome, or collaboratively defining milestones, or even helping to fit the best fit between a project's requirements and the capabilities/experiences of a supplier.
 
Getting what you paid for
One of the biggest risks with any service-based project is getting a good return on investment - the desired outcome, at the agreed cost, on the agreed date.
 
"We always use X for this sort of project", "No one ever got fired for using Y" are examples of how delivering services projects on time and on budget are de-risked. However, the 'tried and tested' approach has a couple of flaws: 
 
1-    Better-placed alternatives may get overlooked. This can lead to project/supplier mismatches because it feels safer. In practice, Consultancy A may not be the best fit for your next marketing project because they've historically done a really good job in previous change management projects.
2-    An impact on supplier relationships. 'Safe' supplier selection can remove the diversity (or innovative-thinking) from an organisation's supply chain.
 
A major advantage technology brings in measuring return on investment is its ability to leverage quantitative and qualitative data to provide procurement insight.
 
By analysing hundreds of data points, including milestone delivery, cost control, quality reviews, and comparing supplier's side-by-side performance across a range of project types, technology can assist procurement in shortlisting and selecting the right supplier for any given project. And this insight can extend to every supplier, even those in the longtail, ensuring decisions on how best to reduce the risk of a poor outcome can be made on every project.
 
Technology also addresses the root cause of risk in the services supply chain longtail
 
As you will have spotted, all the risk factors mentioned above stem from some underlying issues:
 
A lack of visibility - the scale and pace of services procurement means the typically lean services procurement team are normally focused on the larger projects. But as an organisation continues to push for innovation and progress, business units find themselves engaging suppliers on projects without procurement's assistance or guidance. 
 
Even where the procurement teams do have the time and headspace to add value, manual processes and reporting restrict their visibility to top-level metrics and mean the valuable detailed insights are often missed.
 
A lack of tools – visibility and awareness of a problem is only the first step. To impact performance, services procurement teams also need a toolkit to be able to influence decisions and affect change.
 
Our services procurement benchmarking survey shows the majority of organisations are still trying to manage their services spend (even those spending millions every year) with spreadsheets, ill-fitting VMS, HR, or goods focused procure-to-pay software. 
 
Experience shows that a critical factor in the success of a technology solution is the how well it is adopted by the people using it. Clunky, confusion work-arounds usually perpetuate the very problem they are intended to solve. Truly de-risking the longtail of the services supply chain starts with the correct use of best-in-class technology.

LATEST RESOURCE

Brand Purpose in the Services Supply Chain

What a brand stands for is already critically important for customers and employees, but its role in the services supply chain is an emerging consideration for procurement teams.

Read article

FEATURED RESOURCES

The power of good, clean data in services procurement

Highlighting the importance of addressing dirty data in services procurement

Read article

Statement of Work, IR35 and the People vs Task conundrum

How the shifting balance between people and task that's happening in the global workforce impacts people, HR and business culture

Read article

View all resources