Sustainable subcontractor management for service providers with a variable remuneration structure
The service provider has a variable remuneration, or an hourly wage, and their estimates of expenses for future assignments are unclear. It is therefore difficult for the purchasing department to ensure that the service provider is offering competitive prices in their quote. In addition, the internal customer/business partner has a high interest in consistency in the supply chain.
ECG’s solution approach:
ECG’s two-stage service provider management plan. This is divided into performance/risk measurement and cost monitoring. Within the performance/risk measurement, key performance indicators (KPIs) are defined, which serve to evaluate the service provider in areas such as reliability, problem-solving skills, financial stability, coverage area and own dependency on the service provider.
These KPIs are then collated internally at least once a year and the results discussed with the service provider. To reinforce this discussion, a target agreement with the service provider and a bonus/pentalty system are implemented accordingly. This enables the purchasing department, internal customers and service providers to carry out a structured measurement of soft skills. Regarding cost monitoring, an agreement is concluded with the service provider that allows the ex-post review of tenders during the year. If this results in better costs for the customer than those offered by the service provider (within a tolerance range), the latter must make a penalty payment. ECG helps to develop these two levels of control and to negotiate them with the service providers.
Takeover/Interims Management/Consulting of an international tender process
The customer is facing an important tender process which is intended to meet the needs of the head office but also of some local branches. In the past, there have already been difficulties in coordinating internal requirements with the respective branches and subsidiaries, as these felt that their decision-making authority had been limited. In addition, there was a lack of a structured process, as well as of solid communication with potential service providers. The success of the tender, due to little data being available and the communication not being professional, led to poor participation by suppliers and a poor tender result, which weakened the reputation of the head office among the branches and suppliers in the long term. The result of the tender itself fell well short of expectations.
ECG’s solution approach:
ECG’s Sourcing Pack & Process. ECG itself took the lead for this project with the help of ECG’s Sourcing Pack & Process. In the first step, local stakeholders were systematically surveyed and not only the needs but also the local requirements and special features were taken into account. After defining and coordinating the sourcing strategy with the head office and the local branches, the potential service providers, who had been screened in advance, were approached in several stages and analysed with regard to their capabilities and prices.The partial results were continously aligned internally with all stakeholders. This procedure made the final vote much easier. The results and internal acceptance were much better due to the good demand analysis and communication. The final contract negotiated by ECG also secures good pricing in the long-term and a solid position in conflicts.