Unveiled: The 18 hidden strategies for effective outsourcing success
In a groundbreaking study, researchers at Portsmouth University have identified 18 components of a successful outsourcing agreement. The research, based on interviews with the UK division of pharmaceuticals giant Eli Lilly, sheds light on the factors that contributed to the outsourcing agreement with facilities management company Interserve being deemed a success.
While the exact 18 components identified by Portsmouth University are yet to be disclosed, the research underscores the importance of well-structured components in a successful outsourcing agreement. The components typically address all aspects of the relationship, governance, and performance.
One of the key success factors identified in the study is the cultural fit between the two parties. Although it can be challenging to define precisely, it plays a crucial role in the success of an outsourcing agreement. In the case of Eli Lilly and Interserve, the supplier demonstrated an understanding of the buyer's core values and beliefs, and the outsourced staff were treated with the same respect and camaraderie as internal employees.
Communication between the buyer and supplier is another critical success factor. Regular updates, meetings, and transparent reporting are essential to ensure both parties are on the same page. Top management commitment, as demonstrated by Eli Lilly's top managers receiving monthly updates and meeting with Interserve's management team three to four times a year, also contributes significantly to the success of the agreement.
Control of the contract is crucial, and Eli Lilly appointed dedicated staff to manage the outsourcing arrangement. The contract was structured with clear aims and objectives, with Eli Lilly and Interserve jointly developing written goal statements for their relationship. If there is a dispute over performance, Eli Lilly has the final say.
The agreement has yielded impressive results, with a 30% cost reduction in the first three years and a subsequent 5% reduction. The supplier's high calibre, as demonstrated by their ability to attract high-quality staff and offer training and qualifications, has been instrumental in maintaining service quality and driving continuous improvement.
The study also emphasises the importance of consistency in staff delivering roles, continuity and succession planning, and a healthy buyer-supplier relationship. The supplier's confidence inspires the buying organization to treat the service provider as a partner rather than just a supplier, fostering a collaborative environment that benefits both parties.
While the precise list of 18 components specifically identified by Portsmouth University researchers based on Eli Lilly’s case with Interserve is yet to be disclosed, the study provides valuable insights into the critical components of a successful outsourcing agreement. For the detailed list, you may need to consult the original academic publication or case study from Portsmouth University or Eli Lilly’s official outs sourcing project documentation.
- In the context of successful outsourcing agreements, finance and industry-specific knowledge are essential components for the supplier, as demonstrated by Interserve's ability to attract high-quality staff and maintain service quality, leading to cost reductions.
- For a fruitful outsourcing relationship, business practices such as regular communication, top management commitment, clear contract control, and a collaborative partnership between the buyer and supplier are key factors, as evidenced in the case of Eli Lilly and Interserve.
