3 Replies Latest reply on Oct 23, 2009 6:21 AM by SundarK

    Sourcing services with incomplete historical data

    Justin Fogarty Master

      What best practices recommendations can other provide for sourcing services with incomplete historical data?

       

       

      ***This question was submitted by an Ariba User Conference 2009 attendee via the online registration form***

        • Re: Sourcing "Services" with incomplete historical data
          SundarK Expert

          "Depends" is probably not a good answer, but before we go deeper, it would be helpful to understand the following:

           

          -  What types of Services? Since the type of services would dictate different best practices. Best practice for Sourcing "Legal Services" is not going to be the same as sourcing "Janitorial Services"

           

          - Spend under consideration

           

          - Region where the services are being procured/sourced

           

          One of the suggestions which came from the audience during the recent User group session in Nashville is to "collect" detailed cost breakdown for "Service category" being sourced and compare it a category  which is similar.  And I am sure once we get some clarity on the questions above, there might be other ways to benchmark quotes when historical data is missing or not available.

           

          - Sundar

            • Re: Sourcing "Services" with incomplete historical data
              jlinn Apprentice

              Services such as; Elevator Maintenance, Water Treatment, HVAC Maintenance, etc.   These services are evaluated often on two main cost basis; Preventive Maint Costs and Reactive Maint Costs.  The PM pricing can be reliant on types of equipment (which we often have incomplete data) and the SOW. Reactive Maint are often evaluated on Hrly Rates, OT Rates, Trip Charges, Material Costs, etc. Which can also be complex, b/c just b/c a vendor has low Hrly Rates doesn't mean he is the low cost, b/c it could take him twice the time to complete a service.

               

              Multiply this complexity across thousands of buildings in all geographic regions and you can understand the challenge.

                • Re: Sourcing "Services" with incomplete historical data
                  SundarK Expert

                  Yes, if you combine different geographic locations as well these different types of services, the Sourcing process can be very challenging and daunting at the least. Though it is challenging, the category needs to be sourced and to do this effectively, you have to break it down into manageable chunks in terms of data collection, requirements definition and supplier selection.

                   

                  What we have typically done in  these situations (where Ariba runs these type of projects on behalf of customers) is to determine the customers desired state around requirements, estimate volumes and populate into our standard templates (which are specific to individual categories - eg: HVAC, Temp Labor etc.), research the market for a suitable set of suppliers before goint out to the market to collect detailed cost breakdowns.

                   

                  Additionally, a rfp would be issued to gather available data points and cost breakdowns. Ariba Commodity Management researches the particular category/sub-category on a continual basis and identify the parameters that would adversely affect the overall TCO of the category being sourced. Some of these individual cost break down price points gets benchmarked (if there is no history) with similar services for other categories to get a feel for where the market is. For completeness, a site buyer site assesment could be conducted where they would be responsible for determining wha is ultimately required for the buyer.

                   

                  Ariba publishes a quarterly research newsletter called "Supplywatch" which provides Category specific market research and sourcing best practices. You can subscribe to this newsletter at http://www.ariba.com/resourcelibrary/supplywatch.cfm if you have not already done so.

                   

                  I have attached an illustrative example for HVAC. This is by no means a perfect answer, but something to think about.