service provider management

Increasing performance through service provider management

Every procurement manager is familiar with the topic of supplier management, which has become increasingly important in the organization in recent years in order to cope with cost pressure and the simultaneous quality demands of customers. But what about service provider management? The control of the performance of internal and external service providers is often neglected. From assembly, to logistics, to building cleaning or externally outsourced services directly at the customer’s site, the most diverse forms of relevant services are possible for a company. But why are companies reluctant to address the issue of service provider management?

Stumbling blocks to implementing service provider management

The continuous evaluation of service providers during service delivery is extensive. Each trade has its own particularities and even the analysis of the currently existing service level agreements (SLAs) is often postponed in day-to-day business due to the complexity involved. Possible reasons for this include a shortage of resources and a lack of specific knowledge about tools and processes. The fact is that the analysis of existing SLAs and the evaluation of services rendered is more complicated and extensive and therefore appears to be more time-consuming compared to material suppliers.

Risk management is the focus of what happens in service provider management with the aim of ensuring careful evaluation and management of the risks arising from the involvement of external service providers. To this end, it is important to classify the respective components of the service level agreement according to the level of risk and to fix framework conditions (e.g., KPIs) in the SLA.

During the course of the service relationship, service provider management must ensure that the service provider fulfills its tasks in accordance with the agreements made. This is where the agreed, written and meaningful KPIs such as „response time in first-level support“ or „availability“ come into play for monitoring service quality and corresponding financial agreements such as bonus and malus regulations. Service provider management can also use defined KPIs (e.g., „number of critical errors“) to control and monitor identified risks. As soon as the relevant KPIs are broken on a sustained basis, suitable countermeasures must be developed and enforced against the service provider.

In the worst case, the service provider may fail. Fast response times are important here in order to select another service provider or to ensure that services are intercepted as quickly as possible.

Assessments of service providers are still not widespread today, which means that targeted service provider management is not always possible. As a result, procurement often has to rely on guesses, memories, and opinions that are recorded at a later point in time and cannot be measured.

Why be complicated when service management can be simple?

ISO 9001 requires companies to assess and select their service providers based on their capabilities. At the latest when ISO certification is sought, the establishment of criteria for the selection, assessment and reassessment of service providers is essential. The type and scope of the assessment and control processes depend on various factors such as the size of the company, the complexity of the service level agreements and the current organizational structure as well as existing processes in your company.

It is not necessary for employees in service provider management to know every single activity in detail and to master it themselves, because in this case outsourcing would not make sense. However, it is necessary to have basic competencies and knowledge about the outsourced (sub-)process.

An increase in performance and thus real added value through active supplier management and the associated service provider control is only generated if the effort is targeted and appropriate and the result supports the procurement department in concentrating on the „right“ suppliers and service providers.

Contact us and we will take your service provider management to a new dimension to generate added value for your company.


Sinja Krauskopf

Consultant, ADCONIA GmbH