The practice of moving domestic operations such as manufacturing to another country as a way to lower costs, avoid taxes, etc. In many cases, organizations outsource to a supplier who then offshores the work. Offshoring is particularly common in outsourced IT and Business Process Outsourcing (BPO) workscopes.
Internal “back to back” agreements that define how the buyer and supplier will work together. An OLA often includes hours of operation, responsibilities, authorities, response times, supported systems, etc. OLAs tend to be more technical than SLAs since they define IT supporting IT. Not every SLA requires unique OLAs, and just a few key OLAs can help resolve the silo problem. However, it can be difficult to implement OLAs
Tactics used in this process include formal meetings, lectures, videos, printed materials, or computer-based orientations to introduce newcomers to their new jobs and organizations. Research has demonstrated that good socialization techniques lead to positive outcomes for new employees such as higher job satisfaction, better job performance, greater organizational commitment, and reduction in occupational stress and intent to quit. Onboarding techniques can and should be applied to ramp up new suppliers.
An agreement in which the buyer has the right to see exactly what the suppliers expenses are. In a Vested Sourcing Business Model often the buyer and supplier both use an open book approach in order to best calculate a true Total Cost of Ownership.
Expenditures required for the day-to-day functioning of the business, such as wages, utilities, maintenance and repairs. These expenses also include depreciation of plants and machinery which are used in the production process.
A well-structured agreement compensates a supplier’s higher risk with a higher reward
The set of performance measures (metrics) used to monitor activity in the operational area of the business. These include those related to employee and machine productivity.
A provision (or exercise of a provision) which allows a continuance of the contract for an additional time according to permissible contractual conditions.
The creation of relationship and communication mechanisms that enable a company and the service provider to work together effectively to achieve the mutually defined desired outcomes.
Refers to the mechanism through which new employees acquire the necessary knowledge, skills, and behaviors to become effective organizational members
Achievement of economic or strategic value as the result of doing something. Often an outcome can only be achieved when multiple parties work together collaboratively. As such, outcome-based thinking incorporates an end-to-end perspective.
An economic model in which a supplier is paid for the realization of a defined set of business outcomes, business results, or agreed-on key performance indicators. An outcome-based model typically shifts risk to the supplier for achieving the outcome, but requires both a buyer and supplier to work together to achieve the outcome. See also Outcome or Outcome-Based Metric.
A measure typically defined by a formal Service Level Agreement to measure the success of a buyer and a supplier’s ability to achieve an outcome. Example: Machine Reliability or Spare Parts and Consumables Inventory Optimization.
Achievement of a well-defined and easily measured event or a deliverable that is typically finite in nature. An output typically relates to the purpose/functionality of the good or service instead of the activities or inputs needed to create the good or service. Outputs can be achieved by a supplier without help from a buyer. However, often a buyer has inputs to a supplier. As such, output-based metrics/service level agreements should only be based on what is in a supplier’s control.
An economic model in which a supplier is paid for achieving a pre-specified output-based metric. An output-based model shifts risk to the supplier for achieving the output, but requires both a buyer and a supplier to work together to achieve the outcome. See also Output or Output-Based Metric.