The Orbys Guide to Sourcing Management

Introduction

A well-managed outsourcing arrangement can deliver sustained savings or added value of between 30% and 50%. But achieving this level of benefit requires not only a sound sourcing strategy and a comprehensive sourcing implementation approach but alsoand perhaps most importantlyan effective sourcing management framework in place throughout the life of the relationship.

Scope

• The aim of this report is to answer key questions about the final phase of the sourcing journeynamely ongoing sourcing management.
• This report provides best practice and "lessons learnt" for sourcing management, basid on experience from over 700 Orbys sourcing engagements.

Highlights

• Industry leaders recognize that the short-term costs of implementing effective sourcing management structures are more than outweighed by the potential costs of termination and re-competition should these relationships fail.

Reasons to Purchase

• In Orbys' experience, a well-managed outsourcing arrangement can deliver sustained savings or added value of between 30% and 50%.
• A self-assessment scorecard is provided for an initial assessment of the effectiveness of your current sourcing management framework.

Table Of Contents

OVERVIEW

Catalyst
Summary
Methodology

EXECUTIVE SUMMARY

Sourcing management starts with a strategy review
Understand the difference between a benchmark and a health check
Transformation of relationships is a specialist project
The importance of the retained organization

Table of Contents
Table of figures
Table of tables

INTRODUCTION

The benefits of sourcing management
Framework for effective sourcing management

SOURCING STRATEGY

Start with a sourcing strategy review
Recommendations arising from a sourcing strategy review
Reviewing the sourcing strategy regularly
Self-scoring assessment scorecard
The value of using a sourcing advisor to support sourcing management

DEAL PRINCIPLES

Revisiting deal principles regularly

SOURCING TRANSFORMATION

Drivers for sourcing transformation projects
Managing a sourcing transformation project
Case study: ITO sourcing transformation for major public sector organization delivers £2 billion in savings
Obtaining executive support
Structuring the requirements
Renegotiating existing contracts
Managing the department's implementation responsibilities

SERVICE MANAGEMENT

Improving current service management
Service management with multiple suppliers
Supporting service contract managers

PERFORMANCE MANAGEMENT

The need for active management of suppliers
Balanced scorecard for outsourcing performance
Regular performance review meetings

RELATIONSHIP MANAGEMENT

Improving relationships with suppliers
Dealing with a breakdown of relationship

BENCHMARKING AND HEALTH CHECKS

The difference between a benchmark and a health check
The limits of benchmarking as a negotiation tool
Approaching a benchmarking exercise correctly
Use benchmarking sparingly, with regular health checks

VALUE ASSESSMENT

The value of value assessments
Understanding the sources of value in existing relationships
Quantifying outsourcing value in cash terms

VALUE REALISATION

Driving suppliers to deliver additional value
Does value realization really work in practice?

INDIVIDUAL SUPPLIER STRATEGIES

A strategy for each supplier
Using developed supplier strategies

RETAINED ORGANIZATION

The importance of the retained organization
Keeping the RO up to scratch

RENEGOTIATION AND RE-COMPETITION

Regular renegotiation prevents deal drift
Planning a proper renegotiation
What happens if the supplier refuses to renegotiate?

TERMINATION AND EXIT

Considering contract termination
Questions to answer before planning a termination

IN SUMMARY: KEY FACTORS FOR SUCCESSFUL OUTSOURCING MANAGEMENT

Top tips for achieving maximum potential from existing sourcing arrangements

CASE STUDIES

Value assessment for existing ADAM relationships: global agrochemicals company
Pricing and contractual health check prior to contract extension: financial services group
Health check: pricing
Health check: contract

APPENDIX

Sourcing Management Scorecard
Orbys Consulting
Disclaimer

List of Tables

Table 1: Sourcing management effectiveness scale
Table 2: Sourcing management scorecard

List of Figures

Figure 1: Orbys sourcing management framework
Figure 2: Sourcing strategy: the overall approach
Figure 3: A balanced scorecard for outsourcing performance
Figure 4: Orbys relationship management model
Figure 5: Orbys approach to health checks and benchmarking
Figure 6: Typical output of an Orbys outsourcing value assessment
Figure 7: Value realization
Figure 8: Model RO
Figure 9: Phased approach to renegotiation and re-competition