Managed Testing Services Market Procurement Intelligence Report

The market for Operation of Industrial Facilities and its sub-segments such as Managed Testing Services are at an interesting intersection. As market presence of companies become global, there is a growing preference towards service providers who can provide services seamlessly across the globe and have excellent understanding of local regulations and culture.

Suppliers have historically gained handsome margin-on-margin by sub-contracting a part of their work to another contractor. However, Buyers are now delving deep into the business models of suppliers and negotiating hard to avoid further sub-contracting. In cases where it is imperative to sub-contract, category managers are employing should-cost models to keep supplier margins on sub-contracting to the minimal.

Suppliers are shedding the category expert tag and moving up the value chain to offer an integrated approach to their services. With this new approach, suppliers can offer a wide portfolio of services and position themselves for large contracts that go beyond just Managed Testing Services.

Trends like these and many others discussed in this report are necessitating a relook at the way Managed Testing Services is procured and the procurement cost saving opportunities that exist.

As market conditions become more dynamic and procurement practices get more sophisticated, category managers need to be cognizant of the best practices that work for their Managed Testing Services category procurement. The report offers a succinct analysis of Managed Testing Services procurement best practices.

For example, Buyers should set a baseline against which the performance of suppliers can be benchmarked along with setting measurable/quantifiable KPIs. Defined KPIs provides suppliers with clarity on the scope. Besides setting standards for operations, pricing, and performance, KPIs must provide tangible goals in terms of the quality of solutions.

Category managers must explore opportunities to integrate planning and management activities of categories using analytics, to gain better control over category spend. This will also allow them to consolidate their supply base easily, as well as to segment suppliers based on requirements and spend on each supplier.

Benefits of an integrated program are more apparent over a period of 5-7 years, and the goal in such relationships is to achieve cost savings and improve performance in the long run. Buyers should opt for suppliers that have a track record of long-term engagements as this will increase the probability of these suppliers sustaining in a mutually beneficial relationship for a longer duration.

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Managed Testing Services procurement managers also need to proactively identify and mitigate potential risks that can arise in the supply chain or contracts for Managed Testing Services procurement. Some examples include:

• Pricing terms in the contract could prove to be inadequate to safeguard the buyer from impact of a sudden increase in supplier's cost, often arising from a lack of clarity on scope of products or services to be delivered
• Suppliers are often faced with challenges such as shortage of labor, as the demand for FM services is very high. Shortages can interrupt operations, leading to delay in projects and cost overruns
• Suppliers regularly outsource services such as housekeeping and food services to the third-party vendors. However, when third- party vendors fail to offer service due to technical or operational constraints, this results in significant losses to the buyers

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