Supplier Management

Supplier Management

The Supplier Management process ensures that suppliers and the services they provide are managed to support IT service targets and business expectations. The aim of this section is to raise awareness of the business context of working with partners and suppliers, and how this work can best be directed toward realising business benefit for the organisation. It is beneficial that Supplier Management processes and planning are involved in all stages of the Service Lifecycle, from strategy and design, through transition and operation, to improvement. The complex business demands require the complete breadth of skills and capability to support the provision of a comprehensive set of IT services to a business, therefore the use of value networks and the suppliers and the services they provide are an integral part of an end-to-end solution. Suppliers and the management of suppliers and partners are essential to the provision of quality IT services. The purpose of the Supplier Managment process is to obtain a value for money from and to ensure that suppliers perform to the targets contained within their contracts and agreements while conforming to all of the terms and conditions.

The main objectives of the Supplier Management process are to:

  • Obtain the value of money from the supplier and contracts
  • Ensure that underpinning contracts and agreements with suppliers are aligned with business needs, and support and align with agreed targets in SLRs and SLAs, in conjunction with SLM
  • Manage relationships with suppliers
  • Manage supplier performance
  • Negotiate and agree on contracts with suppliers and manage them through their lifecycle
  • Maintain a supplier policy and a supporting supplier and Contract Database (SCD)

Scope

The Supplier Management process should include the management of all suppliers and contracts needed to support the provision of IT services to the business. Each service provider should have formal processes for the management of all suppliers and contracts. However, the processes should adapt to cater to the importance of the supplier and/or the contract and the potential business impact on the provision of services. Many suppliers provide support services and products that independently have a relatively minor, and fairly indirect, role in value generation, but collectively make a direct and important contribution to value generation and the implementation of the overall business strategy. The greater the contribution the supplier makes to business value, the more effort the service provider should put into the management of the supplier and the more that supplier should be involved in the development and realization of the business strategy. The smaller the supplier’s value contribution, the more likely it is that the relationship will be managed mainly at an operational, with limited interaction with the business. It may be appropriate in some organisations, particularly large ones, to manage internal teams and suppliers, where different business units may provide support of key elements.

The Supplier Management process should include:

  • Implementation and enforcement of the supplier policy
  • Maintenance of a Supplier and Contact Database (SCD)
  • Supplier and contract categorization and risk assessment
  • Supplier and contract evaluation and selection
  • Development, negotiation, and agreement of contracts
  • Contract review, renewal, and termination
  • Management of suppliers and supplier performance
  • Agreement and implementation of service and supplier improvements plans
  • Maintenance of standard contracts, terms, and conditions
  • Management of contractual dispute resolution
  • Management of sub-contracted suppliers

Figure 1 

IT Supplier Management often has to comply with organizational or corporate standards, guidelines and requirements, particularly those of corporate legal, finance and purchasing as illustrated figure 1. In order to ensure that suppliers provide value for money and meet their service targets, the relationships between each supplier should be owned by an individual within the service provider organization. However, a single individual may own the relationship with one or many suppliers, as illustrated in figure 1. To ensure that relationships are continuously developed in a consistent manner and that suppliers performance is appropriately reviewed and managed, roles need to be established for a Supplier Management process owner and a contract manager. In smaller organizations, these separate roles may be combined into a single responsibility.

Value to the business 

The main objectives of the Supplier Management process are to provide value for money from suppliers and contracts and to ensure that all targets in underpinning supplier contracts and agreements are aligned to business needs and agreed on targets within SLAs. This is to ensure the delivery to the business of end-to-end, seamless, quality IT services that are aligned with the business to business needs and agreed with targets within SLAs. This is to ensure the delivery to the business of end-to-end, seamless, quality IT services that are aligned with the business expectations. The Supplier Management process should align with all corporate requirements and the requirements of all other IT and SM processes, particularly, particularly ISM and ITSCM. This ensures that the business obtains value from supporting supplier services and that they are aligned with business needs.

Policies and principles of basic concepts

The supplier Management process attempts to ensure that suppliers meet the terms, conditions, and targets of their contracts and agreement, whilst trying to increase the value for money obtained from suppliers and the services they provide. All Suppliers Management process activity should be driven by a supplier strategy and policy from Service Strategy. In order to achieve consistency and effectiveness in the implementation of the policy, a Supplier and Contracts Database (SCD) should be established, as illustrated in Figure 2, together with clearly defined roles and responsibilities.

Figure 2

Ideally, the SCD should form an integrated element of a comprehensive CMS or SKMS, recording all supplier and contract details, together with details of the type of service(s) or product(s) provided by each supplier, and all other information and relationships with other associated CIs. The services provided by suppliers will also form a key part of the Service Portfolio and the Service Catalogue. The relationship between the supporting services and the IT business services they support are vital to providing quality IT services.

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Eddie Potts

Principal ITSM Consultant +44 (0)7595 205885

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