In this Step you will learn:
- How to establish governance procedures for senior management within both parties
- How to hold structured, well-documented and timeous review meetings with the vendor
- How to determine if KPIs are being met and what to do if they are or are not
The context of good governance
Governance refers to the management procedures, activities, and reporting that guide the relationship with the vendor by the ministry of health to ensure performance is delivered against the contract requirements. Governance procedures establish the routines, roles and responsibilities for accountability within the contract. They also drive an enabling and high-performance environment for outsourcing partnerships.
In the terms of the contract, the third-party service provider must not only have the human and financial resources to fulfil its contractual supply chain obligations effectively and efficiently but also the capability to report to the client (the ministry of health) in a transparent and timely manner as to its performance delivery.
The establishment of governance procedures is done by the ministry of health and agreed to by the vendor. It includes the appointment of a Logistics Lead, an operations management team, assigning roles and responsibilities/accountabilities, setting meeting dates, the frequency of reviews and the development of key performance indicator (KPI) reporting formats. For instance, in an outsourced warehouse contract, outsourcing partners may provide the physical assets, equipment, and inventory management systems and pick-pack staffing. The ministry of health may have senior management oversight of the warehouse – it is important to define these roles specifically upfront and leverage each other’s capabilities to deliver high performance.
The scope and detail of these procedures will vary according to the size and complexity of what is being outsourced and could include the formation of:
- Steering Committee (cross-functional) including the ministry of health Lead, Vendor Lead, relevant departmental heads
- An implementation team including the Logistics Functional Head, Vendor Operations Head, Technical Support (as required)
Activities that build collaboration
Underpinning governance is the opportunity to enhance joint partnering and collaboration between the parties. This can be done in parallel with the formal meetings and performance reviews through supplier engagement days, technical working groups and best practice sharing. These activities build:
Openness and trust
An environment of trust reduces defensiveness when issues are raised. People react more honestly, ask questions more frequently, and are more spontaneous with their comments and ideas. This drives joint partnering.
Issues are resolved more effectively when performance challenges and alternative solutions discussed. Management teams must express opinions in a ‘safe talk’ manner in the interests of improving supply chain performance.
There should be a commitment at all levels to remove complexity. Being results-driven and having a collaborative approach are not mutually exclusive, but dependent on one another. Changes will occur in the outsourcing supplier project but having a joint partnering attitude and keeping issues separated can inform and deliver good outcomes.
It is important to leverage the strengths of both parties in the outsourcing contract to close gaps. Supply chain performance is improved by recognising what the ministry of health and outsourcing parties respectively bring to the contract.