Three Ways to Improve Vendor Management and Reduce Risk
Author: Jeff Thompson, Executive Director, AwareManager
Managing vendors is a lot like swimming in murky waters – it is difficult for facility leaders to peer below the surface and notice threats that could be lurking close by. This is largely fueled by a lack of transparency into the quality of work that vendors are performing on their behalf, making it difficult to decide whether or not that work measures up to what was agreed upon when contracts were signed.
Here are three ways to get deeper, real-time insight into vendor performance – a critical step in reducing the risks that can be associated with outsourcing work to external vendors.
(1) Require that vendors track all work in your facility
The first step is to take all critical vendor contracts out of the filing cabinets and transform them into active, living parts of your operations so they can be used to improve vendor performance. When you file contracts they usually remain as static and rarely used documents which never see the light of day unless there is a serious problem. By taking contracts, specifically including the Service Level Agreements (SLAs), and abstracting them into your operations management solutions, you connect what is expected with what actually happens. This means you can measure work performance against the agreed-upon terms far more efficiently than waiting on monthly reporting. It also creates a digital common ground between the various stakeholders, whose relationships are defined by contracts.
By tracking all vendor-performed work directly in your facility management system, rather than relying on vendor-produced reports, you can ensure that the information is timely, accurate and used in conjunction with all other critical, connected data. For example, you may want to assess your HVAC equipment performance over a certain period of time – and how that performance was impacted by the vendor in charge of that equipment’s preventive maintenance.
More importantly, when you track vendor performance within your own system you are taking charge of your own operational success. This puts you into a position to be proactive with automatic alerts and escalation plans if work is not performed according to the SLAs. By taking ownership of your facility data, you can see operational issues and problem areas from a distance, and take action before they get worse.
While some vendors may initially gripe about giving their customers this level of visibility, remember that any data created as a byproduct of work done on your behalf belongs to your organization.
Vendors also benefit from this level of transparency. It dramatically reduces miscommunication between all involved stakeholders because there is now a single source of truth, rather than two sides to every story.
(2) Track vendors and subcontractors’ insurance, training and safety certificates.
You can’t afford not to know if the people doing work on your behalf are properly trained and insured. You need to ensure that everyone has the training and certifications for the work they’re doing. Is isn’t enough to have an information system with a box to check that someone’s been trained on, for example, lock out/tag out procedures – without the business processes and transparency to ensure that information is accurate. For example, in the event of a workplace injury, finding out an employee was never adequately trained for the task during which they were injured is bad, but it’s even worse if the information system falsely indicates that they were.
As employees, vendors and contractors record their work – ideally updating your information solution in real time (see #1, above) – they should proactively acknowledge completion of all required safety steps before starting the job. For example, you want to ensure that all proper lockout/tagout procedures are performed prior to any energy-related work. You can implement this type of safety compliance easily within a facility management mobile app with checkboxes to record that safety procedures were followed and completed.
(3) Pinpoint exactly what you need to measure.
Before a vendor even steps foot to perform work on your property, have them update your information system with all relevant compliance information (training certifications, certificates of insurance, etc.). Leverage your information systems to trigger expiration notices and reminders in advance of expirations to ensure nothing slips through the cracks without creating an administrative burden.
Both of these concepts boil down to knowing exactly what you need to measure and how to do it. Too often, managers get too caught up in looking at 20, 30 or even 40 different metrics, that they lose focus on what actually has the biggest impact on operational performance. The other common roadblock is that managers spend more time gathering data and manually crunching numbers than they spend actually addressing issues uncovered by the data.
There should a small set of metrics to monitor daily, perhaps five to ten of the most essential. These need to focus on what has the biggest impact on the operational areas you are managing. In the case of vendor management, consider looking at:
- Today’s overdue work orders
- Work orders due today
- Expiring certificates of insurance
- Vendors performing under daily or weekly SLA
Additionally, there is an entirely different set of metrics you should monitor on a monthly or quarterly basis to better understand things like vendor score-carding, vendor-billed charges vs. contract terms, profitability of any vendor work billed back to tenants, etc.
Narrowing down what you actively monitor on a daily basis eliminates the noise and makes it easier to identify the problems causing the greatest impact on your organization.
At the end of the day, this all comes back to ensuring that each party is adhering to what was agreed upon at the very start – when the contract was executed – and finding new ways to improve operational performance, ultimately, getting a better return on your vendor relationships.