Three Keys to Managing Multi-vendor Environments for Success

How do you manage a multi-sourced environment to success while reducing costs and adding-value to your business? This question is often raised when companies want to grow their operations. While some are hesitant to move to a multi-sourced environment for fear of generating more overhead or cost, I’m of the opinion that the benefits outweigh the cons for making the leap to a multi-sourced platform.

By engaging multi-sourcing, I believe you can empower your organization to be more prosperous and profitable for long-term success. People choose to expand for many different reasons that include business continuity and generating vendor competition to increase performance, generate negotiation strategies and align strategies with partners providing specialized services. Whatever your reason may be for multi-sourcing, it’s my experience that while it’s more complicated, the reward can be great by applying the right management principles and tools to ensure your success.

There are three important principles that I want to communicate in this article to assist you with managing a multi-sourced environment. First, a multi-sourcing strategy must be established prior to engaging new vendors. Second, the tools to manage multi-sourced environments must be in place to measure performance and success. Finally, you must challenge and promote an innovation paradigm with your vendors to add-value and build brand equity for your own business.

Multi-Sourcing Strategy

To make the leap to multi-sourcing, it’s necessary to outline your strategy and goals for what you want to accomplish. Traditionally, outsourcing strategy documents will always have verbiage around cost reductions, removing non-core functions, transforming fixed-cost to variable cost, reducing technology obsolescence and addressing business risk. However, when multi-sourcing, strategy needs to really focus on the need to expand operations and the benefits that can be gained from that expansion. It will be necessary to develop your business case to show the benefits for why you want to spend more money and take on additional overhead. I have never heard an executive become excited about expanding a cost center, so you’ll need to demonstrate both the quantitative and qualitative value for multi-sourcing.

In my experience, management always wants to know the “numbers” before understanding the qualitative value. When building your case, try to model how improved performance, increased sales, and better service will affect the top line and bottom line prior to hitting the decision makers with the ideas of generating competition, planning for business continuity and creating negotiation strategies. You must build your case for reducing costs and earning value when moving to a multi-sourced environment.

After obtaining executive buy-in, there will be a need to push for earned-contract value reinvestment so that you can appropriately manage the relationships you strategically align with your business. From being in the space and participating in several discussions about multi-sourcing, I’d say that it appears that anywhere from five percent to eight percent of earned contract value needs to be reinvested to maintain the strength of your relationships. This money should be leveraged by your internal global sourcing group to govern the business unit and your vendors. How you manage the budget is unique to everyone; but one thing to research in addition to human resources would be the tools necessary to manage outsourcing relationships and vendor performance.

Multi-sourcing Tools

Performance management is necessary to assess how you diversify your multi-sourcing portfolio to achieve optimal success. From my perspective, sourcing executives will ensure their own success by pushing their vendors to produce better results. Managing vendor competition is challenging, but if the paradigm is kept objective and results-driven, you’ll see greater success in the long run. If multiple vendors are supporting the same line of business, then you’ll want to reward the vendor that performs with more work. Additionally, you’ll want an easy way to see how all vendors are performing and how vendor performance impacts the business.

In our situation, to provide a consolidated reporting methodology that met all our portfolio management requirements, we recently added an outsourcing relationship management (ORM) product to our team’s tool set. With my current role, I found that managing multiple vendors through excessive spreadsheets and arbitrary reports was creating multiple problems for my team. Further, our responsibilities to our clients were also expanding in that we needed to provide reporting for client-specific programs. To combat the issues of performance management and to appease our clients’ reporting needs, we began researching software that could assist us with consolidated views of our vendor performance, which could also be extended to clients as a mechanism to drive their own reporting.

Janeeva was the company we selected to provide us the solution we desired. Janeeva Assurance took approximately 11 weeks to implement and was not overly demanding of our team’s resources to deliver the final application. The process consisted of defining the performance indicators, assurance indicators and data hierarchy and setting up data extracts from our systems at both the internal and vendor facilities. After we defined these requirements, Janeeva had the system live and active within weeks.

The benefits we have achieved with the Janeeva solution are exceptional. We have removed the manual report generation from our operations. This has saved us over three staff hours per day by automating the solution. Additionally, we’ve reduced the risk of error through system data transfers. Our clients now have the ability to query their own data, which eliminates the overhead of client management and assists with appeasing client report requests. Clients now have the ability to see what, when and where their service calls are being handled. The power to own the hierarchy of the system is also desirable. We have been able to add new indicators seamlessly when we’ve needed to start tracking new data elements. Overall, the Janeeva solution has been a tremendous asset for us as we continue to manage our global service delivery platform.

From our experience, I’d say that that managing vendor performance is achievable with a consolidated reporting solution. The solution you select for managing vendors and performance can be different, as it will need to fit your business; however, the basic principles of measuring objective performance and working to achieve efficiency, higher performance metrics, lower costs and better overall results will always be the goal in managing the multi-sourced model.

Promote Innovation

The concept of enforcing an innovation paradigm seems simple — push vendors to improve efficiency and customer satisfaction (CSAT) while driving down cost. Almost everyone will push their vendors to innovate; however, the real question is how do you measure the quality of innovation to gain the results you are looking to receive?

I define promoting innovation as engaging your vendors to assist with reinforcing the value proposition of products to build brand equity and increase customer satisfaction. At times, this can be challenging because vendors want to make money just like everyone else. If vendors focus on innovating, they leverage more resources that increase costs and reduce margins. However, I’ve discovered that it will be in the best interest of vendors to innovate in a multi-sourced environment. In the long-run, they build their own brand equity, build more relationships, and provide themselves with greater opportunity to win more business.

I can’t tell you how many times I’ve heard from our vendors that marketing and process improvement are the responsibility of our company, not theirs. If you find yourself in this situation, get out. There’s nothing good that can be gained by staying in that type of relationship. Without collaboration, vendors will become complacent with their services. As you may have guessed, this is a detrimental cycle your relationship management staff must avoid.

To combat this issue, it’s essential to promote a collaborative working relationship with your vendors. Additionally, you should never fear the paradigm of vendors competing for your business. To grow their own accounts and entrench their services, vendors need to prove their worth by adding value to improve your overall operations and customer satisfaction. I often challenge vendors to innovate, and I will never hesitate to ask them to produce more with better results. The vendors that want your business will collaborate with your staff to find solutions, pitch and research ideas, pilot new programs and instill the continuous improvement values into your programs. As a client, you need to provide direction for managing initiatives and drive implementation to success.

Two items that we recently engaged our vendors with was identifying better ways to educate consumers about our products to: 1) build brand equity, and 2) combat the issue of introducing risk with the reading of disclosures when English skills are deficient. For identifying improved ways to educate our customers, our vendor decided to enlist a third party group with no experience on our program; this third party conducted a 90-day analysis and derived quantifiable metrics that led to improved satisfaction and reduced cost by lessening average hold time. Further, it was proven that if we reeducate various product benefits for different call types, we are likely to extend the average consumer subscription and reduce the amount of calls into our centers.

Regarding the reduction of risk around legal disclosures and other complex forms of communication, our other vendor engaged our team to pilot a pre-recorded solution that has the capability to maintain a consistent service experience and remove the risk of ever saying any messaging incorrectly. This application allows us to see the exact messaging presented to consumers and their behavior from the messaging they receive. From a marketing perspective, both of these solutions are very powerful tools to grow our business for the future.

The Benefits of Multi-sourcing are Many

In this article, I’ve discussed the benefits of how a multi-sourced environment can help your business achieve greater success by defining a solid sourcing strategy, implementing the right management tools and adopting an innovation paradigm. Regarding strategy, you will always need to obtain buy-in and establish a steering committee for your multi-sourced solution. Without executive sponsorship, you’re highly likely to fail in your endeavors. Further, your vendors need to be partners that want to focus on a collaborative approach to add value.

When considering governance, it’s essential to include some mechanism for quickly assessing and managing partner performance. We settled on the Janeeva solution, which has been a tremendous asset for our team.

Finally, promote innovation and demand excellence from your vendors. The vendors that choose to schmooze need to lose. All vendors must add value to your business, help build brand equity through consumer education and continue to help drive down costs.

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