Case Studies

Procurement outsourcing advisory

Our client was a multinational medical devices manufacturer who had decided to outsource a significant proportion of their procurement function to a third-party service provider.

The client had already identified potential service providers, gathered their inputs on how best to outsource procurement through an extensive RFI and reference calls, and shortlisted preferred vendors.

nVentic were brought in to provide expert advice to help the client achieve two tasks:

• Create an RFP that would ensure that bids were comparable and minimize opportunities for scope creep
• Draft a contract that could form the basis of the future relationship to a sufficient extent that it could be included in the RFP

While the client had an extensive team of procurement professionals working on both the RFP and the contract, they had no in-house resources with actual experience of putting together or operating such an outsourced arrangement.

nVentic has deep expertise in just this type of outsourcing contracting, from both a client and vendor side. This enabled us to add significant value to the client in a number of ways:

1. Creating a commercial structure that incentivized performance without driving the wrong behaviours and allowed both parties to benefit from strong performance
2. Helping the client to understand the benefits and risks of the principle commercial models: input vs output vs outcome based
3. Creating a contract that gave the client certainty of cost over multiple years, while retaining flexibility for the inevitable changes that are likely to occur
4. Advising the client on various pitfalls that typically plague such contracts when not put together well
5. Helping the client to understand how the service providers function and what incentives would generate the right behaviours
6. Creating an RFP that was sufficiently prescriptive to facilitate comparison of responses, while allowing different vendors to propose different approaches
7. Helping the client to understand the risks and benefits of different transition approaches: lift and shift vs transformation
8. Advising the client on what was most important when it came to the Service Level Agreement and the weighted scorecard for assessing RFP responses

nVentic worked directly with the CPO as well as the project leadership and gave them the benefit of objective third-party and deep experience of many such outsourcing contracts.

This allowed the client to run the RFP, select their preferred vendor, with the most important contractual elements already fixed in advance.