Vendor Inventory Metrics

Business process outsourcing contracts are often strong on quality and turnaround time metrics.  The reason is simple: most back office operations focus on these two metrics and then grind their internal operations staff through mandatory overtime periods to work through excess inventories.  Vendors, on the other hand, will charge for overtime, will resist excessive overtime to avoid expensive attrition, and will manage inventories unevenly – often giving vendor managers heartburn!

More outsourcing contracts should address inventory metrics.  If nothing else, addressing this dimension of back office operations gives a vendor manager visibility.  With penalties on the line, vendors will be more likely to consistently meet timeliness metrics (which are more important) because inventories will be better managed.  Finally, managing inventories effectively are essential to creating a positive customer experience.

We wouldn’t suggest that inventory metrics  should be weighted the same as quality and timeliness, but they deserve a seat at the table.  Good examples inventory metrics are average inventory age, days work on hand, and percent of inventory older than 14 days.

Related posts:

1. Week in Review: Scheduling, Forecasting, Requirements, and Inventory
2. Scheduling: One Reason Outsourcing Deals Fail
3. IT Outsourcing Metrics: A Good Example of Management Controls
4. Forecasting: Why Do Outsourcing Relationships Forget?