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Supplier Management from an ITIL perspective
Supplier Management plays a key role in Service Management.  It manages Suppliers, typically third party, although some can be internal suppliers, and services they provide to the client.  The aim is to ensure quality, consistency and value for money, in other words, at the right price.
Activities and tasks in this process stem from the Supplier Strategy, which is an input from Service Strategy and associated policy.
It is important to create a Supplier and Contract Database (SCD) which enable consistent efficiency and effectiveness when implementing the policy.  In an ideal world the SCD would make up part of the overall Configuration Management System (CMS) or Service Knowledge Management System (SKMS).  Data stored in these repositories should hold details about contracts, their length, what services are provided by suppliers and any associated Configuration Items (CIs).
In the case of using external suppliers it is extremely important to draw up a formal contract.  Steps to achieve are outlined below: 
  • Identify Business Requirements
    Produce a program of requirements, provide agreement by documenting a strategy and policy, and finally develop a business case.

  • Evaluate and select new suppliers
    This is covered as part of the Service Design process.  Points to consider are gaining references, assessing their ability and also financial position.

  • Categorizing suppliers and contracts
    This is a time consuming process so the amount of time energy put into this process is very much dependent on the supplier in question.

  • Introduce new suppliers and contracts
    It is key to utilise the Change Management Process to introduce new suppliers into the SCD.  Other Service Management processes such as IT Service Continuity Management (ITSCM), Availability Management and Information Security Management will all have an interest in the new supplier and their abilities to provide service.

  • Manage performance of suppliers and contracts
    Typically this is performed at the 'coal face' or Operational level.  The supplier must adhere to the clients Service Management policies and processes.  The performance of suppliers will also need to measured and managed with appropriate action taken if the supplier is under performing.  The supplier needs to provide the service that the business requires, and if that changes then the supplier will need to change service provision accordingly.

  • Renew or end a contract
    This is a strategic function and will the existing contract be relevant in the future if the business model changes?  If the supplier is no longer required an accurate assessment of the repercussions needs to be carried both from a financial and operational perspective.


2014-10-07 by "dsthalenberg"

How do I motivate a supplier to increase performance, beyond just putting a clause in a contract?
Reply on 2014-10-17
Not being flipant but money is often the fundamental driver. If the contract has not been structured to accommodate a minimum service level it is very difficult to motivate or encourage an existing supplier to improve their performance. Another approach could be the suggestion of a bigger or more lucrative contract if they perform better with the existing service. Potential publicity or increased visibility is another possible driver, the suggestion of producing a Case Study could possibly kindle some improvement. Ultimately you need 'carrot' to encourage an improved performance.

In my expereince having clearly defined and agreed minimum service levels in the contract are essential, but they must be supported with an appropriate service level reporting regime. Failure to meet service levels over three continuous months could, if stipulated in the contract, open the opportunity to terminate an under-performing supplier.

It is very difficult task attempting to retrospectively encourage an underperforming or even a 'performing' supplier to increase their performance without a well structured and supporting contract in place. You may want to explore whether the supplier has exclusivity or are you able to bring in another supplier to undertake part or all of the service. It may be that the negative impact the supplier is having upon your business leaves you with no alternative but to terminate the contract and pay possible charges and penalties and start again. Obviously seek professional advice and guidance from the company lawyers and solicitors, which may also incur further costs.

I am not sure if the above helps but if you have further questions then please do not hesitate to contact ITILnews for an independant opinion.
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Tags; Supplier Management,ITIL perspective,Service Management,third party,internal suppliers,Supplier Strategy,Service Strategy,Supplier and Contract Database,Configuration Management System
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