The Point by Buyers Meeting Point
Book Review: Vested Outsourcing
At Buyers Meeting Point, we often have opportunities to recommend the publications we have read, reviewed and endorsed to our supply management colleagues. Vested Outsourcing by Kate Vitasek is one of the easiest books to recommend, not because it is excellently written – although it is, but because questions constantly arise in discussion groups and forums around strategic outsourcing relationships with suppliers and how to make them work.
Vested Outsourcing is based on a study conducted by the authors in their capacity as faculty members at the University of Tennessee Center for Executive Education and the United States Air Force. The study gave the research team an opportunity to examine “progressive companies that were exploring more innovative approaches to outsourcing.” The resulting approach became the foundation for a series of publications, speaking engagements, and Supply Chain Visions – a specialized consulting firm.
I also had the opportunity to speak with Kate Vitasek after reading her book and found her just as focused on the development of the supply management profession as she is on evolving models of outsourcing. She is active in a number of professional associations and through social media, and that makes her both reachable and hands-on in the supply management community. In fact, I first learned about Vested Outsourcing when she was the featured speaker on a Supply & Demand Chain executive webinar in October 2011. A year earlier she spoke on the Strategic Sourcing & Procurement LinkedIn group’s monthly member call. For all the notoriety her work and publications have brought her, she is an actively engaged member of our professional network.
Vested Outsourcing Philosophy
The core principle of Vested Outsourcing is creating outsourcing relationships where companies and their suppliers become vested in each other’s success. What this translates to mean in practice is that many of the barriers that have traditionally existed between companies and their suppliers need to come down in order to increase visibility, communication, and ultimately value creation. In fact, one of the core tenets of Vitasek’s philosophy is that once both sides are vested in the relationship, the potential benefit to both is greater than what either could have gotten in a traditional, self-motivated relationship model.
While Vested Outsourcing clearly outlines the process, motivations, and potential pitfalls of “Outsourcing 2.0”, it does not give the misconception that achieving a vested relationship is easy. Nor is it appropriate in most outsourcing arrangements. In fact, the resource investment required to make the dynamics work and to successfully maintain them in the long term would prevent most organizations from having more than a couple of vested relationships at once.
Since my background is in procurement that is the lens through which I read the book. Many of the challenges to be overcome in Vested Outsourcing conflict with the approaches commonly used in procurement. For instance, a Vested Outsourcing relationship must be based on outcomes rather than transactional or cost driven dynamics, and Vitasek acknowledges that the “difference can be significant for experienced sourcing people making the shift to Vested Outsourcing, so the rest of the [cross functional] team must be cognizant and supportive in helping the sourcing people adjust to this new method”.
While the concept of Vested Outsourcing may be outside the comfort zone of many procurement professionals, that is no reason not to read this book. In fact, knowing that such a mutually beneficial relationship can exist with suppliers is a good starting point for conversations about better collaboration, even within typical supplier relationships. Challenging ourselves to get as much as possible out of each contract can and will become a competitive advantage for the buying organization as a whole, and may enable procurement to address related topics such as cost effectiveness, sustainability, and risk management.
The format of the book lends itself to bookmarks and dog-eared pages in the reference ready sections. Examples of this are The Five Rules of Vested Outsourcing and The Ten Ailments of Traditional Outsource Relationships. In fact, the Ten Ailments should be looked at with regard to every new contract, as they encourage buying organizations to focus on total costs rather than on pennies per unit, to trust the knowledge and expertise of potential suppliers (especially with regard to outlining specifications/requirements) and to fight the constant battle of territorialism within the organization.
Even if you haven’t purchased the book (yet), a number of key resources are available on the Vested Outsourcing website after free registration:
- Business Model Mapping Template
- Statement of Intent Example
- Requirements Roadmap Template
- Risk Mitigation Template
- Workload Allocation Template
- Vested 10 Elements Quick Guide
- Vested 10 Elements Detailed Checklist
Kate Vitasek is an internationally recognized innovator in the practice of supply chain management and outsourcing and is the lead researcher in the award-winning concept of Vested Outsourcing based on research with the University of Tennessee. Vitasek is co-author of two must-read books based on the concept: Vested Outsourcing: Five Rules That Will Transform Outsourcing and Vested Outsourcing Manual: A Guide for Creating Successful Business and Outsourcing Agreements.
Vitasek’s approaches and insights have been widely published with more than 200 articles in respected academic and trade journals, including the Journal of Business Logistics, Supply Chain Management Review, Inside Supply Management, Forbes, Chief Executive Magazine and Aviation Week. She is also a columnist for Outsourcing Magazine and Procurement Leaders Magazine.