Stop trying to outsource problems, buyers told

31 October 2018

Organisations should stop attempting to outsource their problems to large suppliers, according to the director of procurement at NHS Scotland.

Jim Miller, director of procurement, commissioning and facilities at NHS Scotland, said organisations had a “terrible habit” of trying to outsource problems by putting them “all into a big bucket” and handing them over to a large supplier.

Speaking at the CIPS UK Conference in London today, Miller said only once an organisation had fixed its own problems would it be able to outsource contracts to an appropriate supplier.

“If you think about how people react domestically, we never outsource the things that we enjoy doing, we outsource the things we hate doing,” he said.

“Organisations treat themselves exactly like that and then are surprised when it doesn’t work very well, because someone had promised to take away the pain for them.

“Fix [your problems] yourself and then outsource on an eyes-open basis to the appropriate organisation that can really deliver that service.”

Speaking about balancing risk versus the value of contracting out to small versus larger suppliers, Miller said organisations needed to be equally careful they were not trying to outsource risk by choosing a large supplier.

“When we make poor decisions we seduce ourselves by thinking what we’ve done is transferred the risk to the large organisation, then they are responsible for the management of the supply chain,” he said.

“Actually we haven’t transferred the risk, we’ve given up managing the risk ourselves and then we get surprised when it all goes horribly wrong.”

Using supplier payment as an example, Miller said just because a contracting organisation pays its first tier suppliers promptly, this does not necessarily mean payments will flow smoothly down the supply chain.

He added: “The big organisations rely on the buying organisation to be a little bit lazy, because that transfer of risk equals cost. They presume that’s when they’ll begin to build a margin.

“[That] hides costs through the supply chain and passes that risk further and further down, which becomes much more difficult for the smaller organisations.”

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