The Dangers of Fragmented Supplier Bases In Facilities Management

4 Jan The Dangers of Fragmented Supplier Bases In Facilities Management

Posted at 14:01h

As technological, economic, and environmental risks continue to grow in both severity and frequency, it’s becoming increasingly clear that many UK organisations need to develop their resilience measures.

While recent floods and the eye-opening flood resilience review perfectly demonstrate this need for more focussed investment in protective measures, flood protection is just one of many areas that call for greater vigilance from UK businesses.

Agendas and scaremongering aside, even the most optimistic professionals can see that risks now face businesses from all angles.

From an economic point of view, there’s the constant speculation surrounding Brexit and the very real possibility that it could drive legislative changes that could have wider impacts on supply chains or regulations in certain sectors, for instance.

There’s also the matter of security to consider: just recently the UK Chancellor called for the UK to build greater cyber-attack capabilities given foreign rogue states’ growing ability to digitally attack our infrastructure.

From a practical point of view, it is obvious that many organisations will need to call upon the services of niche service providers in order to protect themselves from such varied and unpredictable risks. This is especially true in the case of unexpected floods and spillages where emergency response and remediation is necessary, and in the defence sector where security and compliance remain top priority.

Typically it is Facilities Management companies that are responsible for delivering these specialist services, outsourcing to suppliers with the necessary expertise and capabilities to handle such unique challenges.

As a result, it is not uncommon for FMs to depend on the services of multiple suppliers, each with their own niche.

“Increasingly companies are finding that the ability to bring in specialist suppliers, particularly where complex technologies or services are concerned, does pay dividends.” – Mitie, 2013 –

However, while this approach clearly has its merits, it is not without its dangers.

Fragmented Supplier Bases

Recognising that their client organisations’ needs are changing, many FMs find their roster of suppliers growing rapidly to cope with increasingly specialised demands. If not monitored effectively, this can lead to needlessly complex and fragmented supplier bases.

To reduce the risk, waste and expenses created by these fragmented supplier bases, FM companies should consider consolidating specialised services where possible. This is a step many are already taking.

“Companies are becoming more interested in exploring opportunities to consolidate multiple services from single suppliers as a way of improving value.” – Mitie, 2013 –

While it’s worth noting that consolidation should never be at the expense of delivery in niche areas, where there are clear crossovers in supplier capabilities, consolidation presents some clear benefits for FMs.

Reduced Purchase and Management Costs

As the number of suppliers reduces, buying power naturally increases. Similarly, consolidation also allows FMs to achieve greater savings on indirect spending and landing costs such as shipping, handling, taxes, and duties or fees.

FMs should also consider the hidden costs of procurement and supplier management when assessing the efficacy of multiple suppliers. More suppliers means more transactions, more time spent managing supplier relationships, and more resources spent sourcing suppliers. When magnified over the course of years, the cost savings achieved via consolidation can be significant.

Reduced Non-Compliance

According to research from the Hackett Group, improved compliance is one of the largest benefits of supplier consolidation, second to cost savings.

While this will of course depend on the supplier’s track record for compliance and delivery against SLAs, fewer suppliers generally means FMs can better monitor and address poor performance or failure to meet expectations.

More Strategic Relationships

To some degree, silos and barriers to effective communication are to be expected when large quantities of suppliers are concerned. By consolidating service providers, FMs can focus their resources and effort on a much smaller pool of suppliers, exercising greater control over delivery and how it supports the client organisation’s strategic aims.

Master of All Trades

As reiterated in an article from Adler & Allan CEO, Mark Calvert, there are many FMs offering mutually beneficial least-cost, compliance only services to satisfied clients. Of course this is to be expected and I genuinely hope these organisations can continue to steer clear of the risks that call for more specialised services.

However, the fact remains that in today’s climate, many FMs are diversifying their supplier bases to help their clients meet new challenges.

Given Adler & Allan is one of the largest FM support service providers in the UK, I am definitely an advocate for the ‘master of all trades’ status FMs are creating by calling on third party support to delivery in niche areas.

I am not however, an advocate for the duplication of efforts or on spending cash where it is isn’t absolutely necessary. I believe that by casting a more watchful eye of over specialist service providers and consolidating suppliers where possible, FMs can not only drive down costs, but can more effectively deliver against client expectations.

This article was inspired by our latest Facilities Management industry white paper, available for download here.

Henry Simpson

Henry Simpson
Commercial Director


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