Cutting-edge research in supply management has highlighted the importance of considering service outsourcing from a triadic perspective.
A service outsourcing triad consists of three nodes (a service
buyer, a service supplier and the service buyer’s end customer)
with three links (see Figure 1 on page 35). Research has
shown that an omission or mismanagement of any link can
lead to devastating outcomes for a service buyer firm (such as
losses in the hundreds of millions of dollars and/or lawsuits).
The possibility of such scenarios should be all the motivation
a procurement organization needs to develop prevention tools
We take the procurement organization’s perspective and
recognize the need to simultaneously monitor the buyer-supplier link and the buyer-customer link in the triad. (From
the procurement firm’s perspective, we consider the supplier-customer link to be an extension of the buyer-supplier link.) We
derived a prescriptive model that recommends the best supplier
and customer monitoring options based on specific attributes
of an outsourcing project. This model factors in the trade-offs
between managing links in the triad and such KPIs as lifetime
contract cost, quality, customer satisfaction and risk.
In addition, we extend the findings from managing a single
project to optimizing across a set of projects with multiple
Effectively managing relationships between
suppliers and customers raises KPIs,
but can be a challenge for procurement
organizations in a cost-cutting
LINKS IN SERVICE
BY JOHN FOWLER, PH.D., AND MEI LI, PH.D.