Supplier Management Process
ISO/IEC 20000 Toolkit Version 7 ©CertiKit
Supplier Management Process
Implementation Guidance (The header page and this section must be removed from final version of the document)
Purpose of this document This document describes how the service provider will engage and communicate with its suppliers.
Areas of the standard addressed The following areas of the ISO/IEC 20000:2011 standard are addressed by this document: 7. Relationship processes 7.2 Supplier management
General Guidance You may have a large number of suppliers of varying types and the key to meeting the requirements of the standard in this area is to categorise them in the way described in this document. The highest degree of effort may then be used appropriately in managing the suppliers that are strategic to the service provider rather than trying to treat them all equally. Ensure you keep minutes of all supplier meetings and that the supplier database is kept up to date with contact details and references to contractual documentation.
Review Frequency We would recommend that this document is reviewed annually.
Toolkit Version Number ISO/IEC 20000 Toolkit Version 7 ©CertiKit.
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Revision History Version Date
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Contents 1
INTRODUCTION ....................................................................................................................................... 7
2
SUPPLIER MANAGEMENT PROCESS................................................................................................. 9 2.1 PROCESS TRIGGERS ................................................................................................................................... 9 2.2 PROCESS INPUTS ....................................................................................................................................... 9 2.3 PROCESS NARRATIVE ................................................................................................................................ 9 2.4 SUPPLIER CATEGORISATION.................................................................................................................... 10 2.5 SUPPLIER PERFORMANCE MANAGEMENT ............................................................................................... 11 2.6 CONTRACTUAL DISPUTES ....................................................................................................................... 11 2.7 END OF SERVICE ..................................................................................................................................... 12 2.8 PROCESS OUTPUTS .................................................................................................................................. 12 2.9 PROCESS ROLES AND RESPONSIBILITIES ................................................................................................. 12 2.9.1 Supplier Management Process Owner .......................................................................................... 12 2.9.2 Supplier Manager ......................................................................................................................... 13 2.9.3 Customer ....................................................................................................................................... 13 2.10 RACI CHART ..................................................................................................................................... 13
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SUPPLIER MANAGEMENT TOOLS ................................................................................................... 14 3.1 3.2 3.3 3.4 3.5
4
SERVICE DESK SYSTEM............................................................................................................................ 14 EMAIL ..................................................................................................................................................... 14 INTRANET................................................................................................................................................ 14 AVAILABILITY MONITORING TOOLS ....................................................................................................... 14 OFFICE PRODUCTIVITY TOOLS ................................................................................................................ 14
COMMUNICATION AND TRAINING ................................................................................................. 15 4.1 4.2 4.3 4.4 4.5
CUSTOMERS AND IT MANAGEMENT ....................................................................................................... 15 SUPPLIERS ............................................................................................................................................... 15 PROCESS PERFORMANCE ......................................................................................................................... 15 COMMUNICATION RELATED TO CHANGES .............................................................................................. 15 TRAINING FOR SUPPLIER MANAGEMENT................................................................................................. 15
5
INTERFACES AND DEPENDENCIES ................................................................................................. 17
6
REPORTING ............................................................................................................................................ 18
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CONCLUSION.......................................................................................................................................... 19
List of Figures FIGURE 1 - SUPPLIER MANAGEMENT PROCESS ................................................................................................... 10 FIGURE 2 - SUPPLIER CATEGORIZATION MATRIX ................................................................................................. 11
List of Tables TABLE 1 - MEETING FREQUENCY BY CATEGORY ................................................................................................. 10 TABLE 2 - RACI MATRIX ....................................................................................................................................... 13 TABLE 3 - PROCESS INTERFACES AND DEPENDENCIES ....................................................................................... 17 TABLE 4 - PROCESS KPIS .................................................................................................................................... 18
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1 Introduction 1.1
Purpose
The correct management of suppliers is a vital part of providing effective IT services to our customers as rarely can all requirements be fulfilled without the involvement of third parties. The process of engaging with key suppliers must take into account their value in achieving the objectives of the business and the level of risk associated with inadequate oversight. The purpose of this document is to set out in detail the [Service Provider] process in the area of Supplier Management. As such, this document will represent an initial design for the enhancement of existing Supplier Management processes and will be updated on at least an annual basis thereafter as [Organization Name] and its IT service management needs develop. 1.2
Objectives
The objectives of the supplier management process are to: • • • •
1.3
Define the way in which suppliers will be managed and their performance reported on so that consistency is achieved within the organization and a sound basis for decision-making is provided Ensure that the management of suppliers takes due account of business priorities and helps to maximise value to the organization Foster an effective and efficient approach to the management of suppliers that presents a positive image to both the business and suppliers Ensure that information about suppliers and contracts is communicated to the relevant parties in a timely and accurate manner at all times Scope
The scope of this process is defined according to the following parameters: • • • •
Organizational o [List organizations and parts of those organizations covered] Geographical o [List locations from which suppliers will be reported on and managed] Services o [Define the services covered by the process] Technical o [If necessary, cover the technology managed via this process]
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The following areas are specifically excluded from this process: [Describe any areas that need to be clearly stated as outside the scope]
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2 Supplier Management Process 2.1
Process Triggers
The supplier management process is initiated as a result of one or more of the following triggers: • • • • • •
2.2
A new requirement for a product or service to be procured A change in requirements within the scope of an existing supplier contract Legal or regulatory changes As a result of an ad-hoc report , review or audit The need to renew or terminate a contract A request for assistance from one or more areas of the business
Process Inputs
The process of supplier management requires a number of inputs in order to be able to function effectively. These may not always be available but will ideally be: • • • • • • •
2.3
Business requirements for a product or service High level business strategy and commercial policy information Legal and regulatory advice e.g. contract law Technical specifications for IT configurations to be sourced Feedback regarding perception of supplier performance Incident and problem data regarding areas covered by suppliers Budgets and information about contract terms
Process Narrative
The approach to be followed for supplier management is shown in the following diagram. This process approach will be carried out in the context of the Design and Transition of New or Changed Services process within the ISO/IEC 20000 quality process. A Supplier and Contracts Database will be used to document details of the suppliers of IT goods and services to [Organization Name], including contacts, service levels, sub-contracted suppliers and the main contract terms.
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Strategy
Supplier Management Policy
Supplier Categorisation, Contracts DB, Set up of new contracts
Design
Continual Service Improvement Transition
Establishing new suppliers
Operation
Supplier performance management Contract renewal and termination
Figure 1 - Supplier management process
2.4
Supplier Categorisation
The nature of the relationship [Service Provider] needs to have with its suppliers will depend upon a combination of the business value that the supplier provides (i.e. the supplier’s importance to the organization) and the degree to which the goods or services provided could be sourced from elsewhere (i.e. the level of risk and impact if the supplier were no longer able to provide the goods or services). These combinations of factors are shown on the diagram in Figure 2. This analysis places each supplier into one of four categories: 1. 2. 3. 4.
Commodity Operational Tactical Strategic
The recommended frequency of supplier management meetings between [Organization Name] and each supplier is determined by the supplier’s position on this matrix according to the following table. Supplier Category Commodity Operational Tactical Strategic
Recommended Meeting Frequency None On contract renewal Annually Monthly/Quarterly
Table 1 - Meeting frequency by category
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Value and Importance
Supplier Management Process
Operational Suppliers
Tactical Suppliers
Strategic Suppliers
Operational Suppliers
Tactical Suppliers
Tactical Suppliers
Commodity Suppliers
Operational Suppliers
Operational Suppliers
Risk and Impact Figure 2 - Supplier categorization matrix
Each supplier will have a designated contract manager within [Service Provider] who is responsible for arranging, chairing and documenting the meetings. The name of this individual is held within the Supplier and Contracts database.
2.5
Supplier Performance Management
The performance of strategic suppliers will be monitored on a regular basis in line with the recommended meeting frequency. This will take the form of a combination of supplier-provided reports against the contract and internally-produced reports from the IT Service Desk. Where possible, a frequent cross-check will be made between the supplier reports and those created via the service desk in order to make sure the two present a consistent picture of supplier performance. Both sets of reports will be reviewed at supplier meetings and any actions resulting will be input to the IT Service Improvement Plan.
2.6
Contractual Disputes
In the event of a contractual dispute, the following guidelines should be followed: ➢ The Finance Director and Finance team must be informed that a dispute exists
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➢ ➢ ➢ ➢
The Finance Director must be approached to agree next steps Where applicable, legal advice should be obtained via the Finance Director All correspondence with the supplier must be in writing An assessment of the risk to IT service should be carried out prior to escalating any dispute, and contingency plans put in place
At all times the degree of risk to the business should be managed and if possible minimised.
2.7
End of Service
The following process will be followed for end of service, early end of service or transfer of service to another party: ➢ The end of service will be requested in writing within the terms of the contract if one exists ➢ Transfer to another party (including in-house support) shall be planned via the Design and transition of a New or Changed Service process and change control procedures followed ➢ An assessment of the risk to IT service should be carried out prior to ending or transferring the service, and contingency plans put in place ➢ Any budgetary implications shall be incorporated into the IT financial model The various aspects of ending a service should be carefully considered at initial contract negotiation time in line with Section 2 of this policy document.
2.8
Process Outputs
The supplier management process has the following outputs: • • • •
2.9
New or changed contracts with suppliers Supplier and contracts database Supplier review and performance reports Minutes of review meetings with suppliers
Process Roles and Responsibilities
The following roles have the stated responsibilities within the supplier management process. 2.9.1
• •
Supplier Management Process Owner
Owner of the supplier management process Responsible for identifying improvements to the process and ensuring it is adequately resourced
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• • • 2.9.2
• • • • • • • 2.9.3
• • • •
Provides information regarding the success rate of the process Runs the process on a day-to-day basis Ensures that annual reviews are carried out Supplier Manager
Acts as primary contact for the relationship between the organization and the supplier Co-ordinates the negotiation of an appropriate contract with the supplier Arranges and runs supplier review meetings Co-ordinates the production of regular reports regarding supplier performance Liaises with other areas of the business with regard to the products or services provided by the supplier Ensures that the organizational supplier policy is followed with respect to each supplier for whom they are the primary contact Deals with contract extensions, terminations and disputes Customer
Provides information about product or service requirements Participates in negotiation of the SLA Provides feedback on service performance Attends review meetings when required
2.10 RACI Chart The table below clarifies the responsibilities at each step using the RACI system, i.e.: R= Responsible
Step Strategy Design Transition Operation Continual service Improvement
A= Accountable
C= Consulted
Role: Supplier Manager A/R A/R A/R A/R A/R
I= Informed
Customer C R C C C
Supplier
C C C C
Table 2 - RACI matrix
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3 Supplier Management Tools There are a number of key software tools that underpin an effective supplier management process. These are subject to change as requirements and technology are updated and so specific systems are not described here. However the main types of tools that play a significant part in the process within [Organization Name] are as follows.
3.1
Service desk system
The service desk system may provide key items of information regarding the performance of the supplier and the degree of success in addressing incidents associated with the contract. The reporting module allows useful graphs to be presented regarding success against SLA targets and service trends.
3.2
The email system is key to communication between the supplier manager, the supplier and the customer. In addition to allowing discussion about levels of service, it also provides a method of exchanging contractual documentation and arranging review meetings.
3.3
Intranet
The intranet provides a window for the user into the IT organization in general and supplier management in particular. Reports on supplier performance against the SLA can easily be made available via the intranet.
3.4
Availability Monitoring Tools
Software tools which report on and record periods of service downtime may be useful in establishing the reliability of services provided by a supplier in an objective way.
3.5
Office Productivity Tools
Tools such as spreadsheets and word processors allow reports to be easily produced in a professional manner and analysis of supplier service statistics to be performed and presented.
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4 Communication and Training The supplier management process requires a good degree of communication to be effective. The main communication methods are described below.
4.1
Customers and IT Management
Communication should take place with the customers of the IT service with regard to supplier services and the management of IT concerning resource utilisation and budget allocation. Depending on the health of the process it may be appropriate to hold regular meetings with customers and IT management to discuss the performance and agree any actions to improve it.
4.2
Suppliers
Regular communication should take place with suppliers categorized as strategic and tactical in order to ensure that service performance issues are raised and discussed and that both parties are aware of significant changes happening within each other’s organizations that could affect the contract. More communication is likely to be required around contract renewal or termination time and if any disputes arise.
4.3
Process Performance
It is important that the performance of the supplier management process is monitored and reported upon on a regular basis in order to assess whether contractual commitments are being met and whether the process is operating as expected. The content of performance reports is set out in section 6 of this document but it is vital that the reports are not only produced but are also communicated to the appropriate audience.
4.4
Communication Related to Changes
Changes to the IT environment can have a significant impact on the delivery of an effective IT service and supplier management must be aware of any changes that are due to take place prior to them happening. The supplier management process manager must have visibility of the change management schedule as a minimum and ideally will be briefed on any changes with the potential to give rise to amendments to a supplier relationship. This may be a regular meeting or carried out on an ad-hoc basis according to the frequency of occurrence of such changes.
4.5
Training for Supplier Management
In addition to a well-defined process and appropriate software tools it is essential that the people aspects of supplier management are adequately addressed. The
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process requires that training be provided to all participants in order that it runs as smoothly as possible. The main areas in which training will be required are as follows. • • • • •
The supplier management process itself, including the activities, roles and responsibilities involved Supplier management tools such as the service desk system reporting, intranet and office productivity Soft skills such as customer service, dealing with difficult conversations and avoiding technical jargon The basics of the technology and how it is implemented within [Organization Name] The business, its structure, locations, priorities and people
In addition, training should be provided to customers regarding the purpose, objectives and activities of the supplier management process. This training may be provided via short workshops and supplemented by on demand resources such as videos and user guides.
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5 Interfaces and Dependencies The supplier management process has a number of interfaces and dependencies with other processes within service management. These are outlined here and are described in further detail in the relevant procedural documentation. Process Business Relationship Management Service Level Management
Budgeting and Accounting for Services
Change Management
Inputs to Supplier Management from the named process Business requirements for supplier contracts Feedback regarding supplier performance Service level requirements for new or changed services Achievement (or otherwise) of service level targets contributed to by suppliers Budgets available for supplier contractual arrangements Spend against budgets on supplier products and services Changes that affect the provision of service under supplier contractual arrangements
Outputs from Supplier Management to the named process Feedback from supplier review meetings Agreed contracts Feedback from supplier review meetings about service level provision
Supplier payment profiles and terms Changes to contracts
Co-ordination of the supplier aspects of major changes
Table 3 - Process interfaces and dependencies
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6 Reporting Reports on supplier performance will be produced on a monthly basis and consolidated into the IT Service Report every quarter. The following KPIs will be used on a regular basis to evidence the successful operation of the supplier management process: KPI Ref. KPI1 KPI2 KPI3 KPI4 KPI5 KPI6 KPI7
Key Performance Indicator Number of supplier services for which service level targets are met Number and percentage of suppliers for which a written contract is in place Percentage of supplier performance reports produced on time Percentage of supplier review meetings held on time User satisfaction scores from user surveys Customer satisfaction scores from customer surveys Number of complaints about the supplier management service
Table 4 - Process KPIs
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7 Conclusion Supplier management is a key process which seeks to satisfy business and service requirements via the use of external resources in the delivery of IT services. As such, it has a wide variety of areas to communicate with and bring together into a coherent and consistent approach for the effective management of contractual relationships. It is important that this process is able to capture and present an accurate, objective view of how well services are being delivered by suppliers so that difficult and potentially costly decisions can be made about how such services should be delivered in the future.
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