Incentives are key to successful procurement outsourcing

3 February 2012

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3 February 2012 | Adam Leach

Bringing an outsourcing partner in-house builds a strong relationship but the contract should always be used to get them to fully deliver, according to Thames Water's head of procurement.

Speaking to SM, Simon Rutter, head of procurement at Thames Water, explained that a year after outsourcing the firm’s strategic sourcing to Efficio, he is very pleased by the decision. “The main strength is we have consultancy-level capability on tap. So high-quality people, leading-edge methodology and the best data-analysis skills,” he said.

Last year, the utility company awarded the contract to handle all of its procurement, apart from construction materials, to Efficio, which then employed 21 of Thames Water’s procurement professionals and added 15 to 20 of its own consultants to the team.

Rutter explained they have quickly developed a close working relationship as they all work out of the Thames Water office in Reading. But key to getting the most out of them are the incentives.

“Our contract is very heavily skewed to give them incentives for delivering a good deal for us,” he said. “Commercially they get better terms the better the deal they do for us, so that gives them the [motivation they need]. This way they’re incentivised to do the best job while still keeping our stakeholders happy because we’re carrying out quality assessments.”

Earlier this week, it was announced that Thames Water and British Gas are to partner up to promote energy- and water-saving products to their combined pool of customers.

Rutter explained that while there is currently no firm plan, he expects procurement to be involved in the partnership to some degree. “I would expect there to be something that comes down to us from a procurement point of view. So if there are further investments to be made then our guys will get involved in it.”


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