Podcast
Questions and Answers
What happens to SOWs in outsourcing relationships?
What happens to SOWs in outsourcing relationships?
- They are only used for internal departmental purposes
- They become flexible and adaptive to new requirements
- They dictate conventional and less-than optimal ways of performing tasks (correct)
- They prioritize innovation and continuous improvement
Why do internal departments create requirements that only the incumbent supplier can provide in an RFP process?
Why do internal departments create requirements that only the incumbent supplier can provide in an RFP process?
- To favour the incumbent supplier and prevent change (correct)
- To ensure a level playing field for all bidders
- To reduce the cost of the procurement process
- To encourage innovative solutions from new suppliers
What is the 'Honeymoon Effect' in outsourcing relationships?
What is the 'Honeymoon Effect' in outsourcing relationships?
- The stage where both parties go through a period of excitement and high expectations (correct)
- The point of contract termination and renewal
- The phase of contract negotiation and agreement
- The initial period of high performance and innovation
What prevents partners from raising service levels beyond what's contained in the Service Level Agreements?
What prevents partners from raising service levels beyond what's contained in the Service Level Agreements?
What opportunity is frequently dismissed in outsourcing relationships?
What opportunity is frequently dismissed in outsourcing relationships?
What is 'Sandbagging' in contract manufacturing or logistics?
What is 'Sandbagging' in contract manufacturing or logistics?
Why do suppliers bring innovations to the table towards the end of the contract?
Why do suppliers bring innovations to the table towards the end of the contract?
What is the outcome of not managing outsourcing relationships effectively?
What is the outcome of not managing outsourcing relationships effectively?
What is the primary purpose of determining metrics and reports in supplier management?
What is the primary purpose of determining metrics and reports in supplier management?
What is an example of a fully integrated reporting process for sharing sales data?
What is an example of a fully integrated reporting process for sharing sales data?
What should be included in a well-structured contract?
What should be included in a well-structured contract?
Why is it important to regularly review pricing models and risk assignment?
Why is it important to regularly review pricing models and risk assignment?
What is the benefit of a longer-term contract?
What is the benefit of a longer-term contract?
What should be considered when determining the contract length?
What should be considered when determining the contract length?
What is the purpose of developing a thoughtful plan to introduce improvements?
What is the purpose of developing a thoughtful plan to introduce improvements?
What may happen as the supplier gains more experience?
What may happen as the supplier gains more experience?
What is a typical characteristic of strategic contracts?
What is a typical characteristic of strategic contracts?
What is the purpose of including incentives in a pricing model?
What is the purpose of including incentives in a pricing model?
What is a key component of a good contract, as mentioned in the Element 7 Relationship Management Framework?
What is a key component of a good contract, as mentioned in the Element 7 Relationship Management Framework?
What is the primary purpose of transformation management in a supplier contract?
What is the primary purpose of transformation management in a supplier contract?
What is an example of a change that may impact key elements of a supplier agreement?
What is an example of a change that may impact key elements of a supplier agreement?
What is a provision that may be included in more strategic supplier relationships?
What is a provision that may be included in more strategic supplier relationships?
What is a key aspect of a formal change management process in a supplier agreement?
What is a key aspect of a formal change management process in a supplier agreement?
Why is it important to have a clear outline of the relationship management framework in a supplier contract?
Why is it important to have a clear outline of the relationship management framework in a supplier contract?
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Study Notes
Element 5 Performance Management
- Trading partners should determine metrics reports and frequency to manage the business
- Performance reporting can be as simple as an Excel spreadsheet or fully automated and integrated, like Walmart's Retail Link
- Partners can access sales data via an Internet portal, tracking product performance in near real time
Element 6 Pricing Model
- Contracts should outline pricing or the pricing model to compensate suppliers
- Pricing models should consider balancing risk and include a plan to introduce improvements that reduce total program risk
- Partners should regularly review pricing models and risk assignments over the contract's life
- Contracts can evolve from transaction-based to outcome-based pricing models as the supplier gains experience
- Contract length should be commensurate with the payback period for suppliers' investments
- Incentives should be included in the pricing model, promoting behaviors and outcomes that benefit both parties
Element 7 Relationship Management Framework
- Contracts should clearly outline the relationship management framework
- A good contract will outline all six relationship management components
Element 8 Transformation Management
- Contracts should outline transition expectations, including project milestones, reviews, and escalation paths
- A formal change management process should be outlined, including how to handle changes impacting the agreement
- More strategic relationships may include provisions for continuous improvement processes
The Honeymoon Effect
- Both parties go through a honeymoon stage at the beginning of a relationship
- The level of excitement wanes after the initial ramp-up, and performance levels may not improve beyond the contract's expectations
- There is an opportunity to use lessons learned to develop innovative new ways to deliver desired outcomes, but it's often dismissed due to lack of incentives
Sandbagging
- Suppliers may bring innovations to the table near the end of the contract to secure a new agreement
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