Vendor streamlining
Tuesday, January 19th, 2010
It is fascinating to see that BP is of the opinion that in concentrating its supply chain for IT to one supplier – Computacentre, that it will reduce costs. I have no axe to grind on Computacentre. I have used them before and they are a thoroughly professional outfit, but they were not always the lowest cost supplier. As an IT Manager I usually found that I could reduce costs by multi-sourcing, but it did take some management time to monitor the arrangements and performance. An upside of the management involvement was that I was fully aware of the service level provided by the various vendors. It gave the opportunity to reward/punish service levels accordingly.
When I moved to a larger organisation (from 1500 employees to 75,000), that had streamlined vendors, I found that the support charges to users were five time higher than my previous employers. The service level monitoring by the client company of the single service organisation was significantly poorer and the goods supplied were more expensive.
In effected the client company had tried to outsource a management responsibility to one of its suppliers. Eventually this poor service level was mitigated, but not resolved, by employing additional Relationship Managers within the employing organisation.
BP need to be very sure of what problem they are trying to solve by removing 540 suppliers and replacing them with one. They may not get the result that they expect. Their financial processing may be simplified a little, but they may find that account management is much more difficult.
Guru