Consultant Zone

Selecting and monitoring your third party suppliers – a case study

We have previously reported on the importance of carrying out due diligence on suppliers.

Behind any well-presented “sales pitch” by suppliers is the seemingly obvious need to ensure that your individual business requirements can be accommodated within your chosen supplier’s processes.

We have been in dialogue with one of our customers who commented on the challenges within the selection process, not only to ensure in a competitive market that the choices it made were sound financially, but also that criteria was in place in order for it to base its buying decisions with more certainty.

We were presented with a renewal contract for review against our customer’s own processes and found that it did not define:-

  • The need for the supplier to provide the correct level of reporting or notification requirements
  • The guarantees and indemnities in detail to ensure they were adequate
  • The extent to which the service provider would provide business continuity for its outsourced operations
  • Whether exclusive access to its resources was agreed

This case study showed us, and our customer, the importance of the initial selection procedure, specifically the ‘exclusivity’ point proved to be a significant operational risk as the customer was not given the level of support it expected.

It did not end there though; continued monitoring of how the supplier was performing against set criteria, which to date had been done by only a cursory annual review of contracts, helped resolve some significant issues before they arose.

With our help, the result was a more defined contract, proper regular reporting of performance and ultimately a healthier professional business relationship between the parties. That brought the added benefit of an independent audit trail which will re-assure the regulator too.