1. A Case Study for Metrics Driven Vendor Management Services (VMS) Danniel Martinez-Iller05.05.2010

2. AgendaWhat is Vendor ManagementGoals & BenefitsLandscape Analysis: Sourcing Systems, Data,Technology, and ProcessFramework Design PrinciplesVMS Metrics FrameworkDashboardSample ScorecardResults AccomplishedLessons Learned 3. What is Vendor Management?Vendor management is the discipline ofestablishing service, quality, cost, and satisfactiongoals and selecting and managing third partycompanies and their resourcespeople,proprietary solutions, innovations ,and systems--toconsistently meet these goals. - 360o Vendor Management: "Definition of VendorManagement", page 1, 2007, with modifications initalics by Danniel Martinez-Iller & Joseph Choi. 4. Goals & Benefits Single Source of Truth (SSOT) 1) Resources 1) Average cost analysis (how much are we paying) 2) Consumption type (what are we buying) 3) Tenure limits (co-employment risks) 2) Vendors 1) Reduction (leverage economies of scale) 2) Core competency identification (who/where are our best vendors) 3) Risk mitigation (reduce or eliminate risks) 3) Spend 1) Where are we spending our budget? 2) How can we get more with less? 3) We need to reduce our budget, and where can we cut? 4) Performance 1) Supplier hit rates (How often do they fill) 2) Benchmarking (how can we increase if we dont have a baseline) 3) Vendor Satisfaction Survey (VSS) (how can we tell if our vendors are doingwell) 5. Landscape Analysis: Sourcing Systems 6. Landscape Analysis: DataOrg Name USIndiaChinaEtc., etc.Total Org_1/SVP_1$1,1 $1,2$1,3$1,m Total_1 Org_2/SVP_2$2,1 $2,2$2,3$2,m Total_2 Org_3/SVP_3$3,1 $3,2$3,3$3,m Total_3 Org_n/SVP_n$n,1 $n,2$n,3$n,m Total_n Total:Tot_USTot_India Tot_ChinaTot_??Gr. Total 1. Data can come from different data sources, e.g, ERP, SAP, etc. 2. Data can be generated weekly, monthly, quarterly or annually 3. Data can have many dimensions: By Sr. VP, VP, Director, Vendor, etc. 7. Landscape Analysis: Technology Here are some technology and/or process providers 8. Landscape Analysis: Process 9. Framework Design Principles 10. VMS Metrics Framework Relationship Scorecard Operational ScorecardThese metrics address:These metrics address:1. The overall Relationship Size, 1. Delivery capability Spread, Depth2. Quality of delivery2. Growth Overall growth, Areas of3. Compliance growth, Spread of Growth3. Breakdown of the Relationship By Skill, by Levels, by Contract type, by Location Financial Scorecard Satisfaction ScorecardThese metrics address:These metrics address:1. Partners Financial performance in1. Client satisfaction with the Partner Industry 2. Partner satisfaction with the Client2. Partner Financial parameters for the 3. Strengths and Weaknesses of the engagementPartner across multiple dimensions3. Key Financial parameters driven by Corporate goals Savings, etc. 11. Dashboard ConsolidatedScorecardsMetricListing Dashboard (Drillable) 12. Sample Scorecard Metrics TargetCurrent ValueOutside Services Spend $10M $12.5MFTE-to-Consultant Ratio70:30~50:50Offshore Leverage %85%~45%Blended Rates for India$15k $20kPartnersConsolidation % from US30%??0%vendors to India PartnersQualified Spend %85%80%Cost Savings $100k Monthly$125kAverage CSAT Score for India 4.50 4.25PartnersAverage CSAT Score for US4.50 4.15Qualified VendorsTenure Exposure