Common amongst many organisations is the practice of sub-contracting, often vital, elements of large projects to suppliers as work packages. In fact, on very large projects, there can be a chain of suppliers, from Tier 1 to Tier 2 to Tier 3, etc. For example, a motor vehicle manufacturer usually procures an engine management system from a supplier that, in turn, utilises sub-assembly suppliers who utilise sub-component suppliers. In such cases, a key part of the role of the overall project manager is to monitor and control the progress of the supply chain.
These suppliers will, very likely,be balancing the delivery of the work package for your project alongside those for others, and will have peaks and troughs of workload that will be more challenging to manage, the smaller the size of business that they are. There will, therefore, be risks associated with sub-contracting which should be managed using standard risk management practices.
Some years ago, I was responsible for managing the engineering and delivery of a one-off alternative fuel demonstrator vehicle for a well-known motor vehicle manufacturer. Timing was critical for this project as the demonstrator vehicle was to be exhibited and demonstrated at a national motor show, for which a lot of marketing materials were being created. Due to the special nature of the fuel system we needed to outsource the development and supply of the engine management system to one of the few suppliers with the necessary technical capabilities, but whom we had no experience of working with beforehand.
After a few weeks, it became apparent that the development of the engine management system was not progressing to the agreed milestones and we were aware that the supplier was busy working on other systems, destined for production for other vehicle manufacturers, which we suspected were being treated as higher priority than we were being led to believe. We managed the risk by taking the work package to another supplier to start work on in parallel, as a contingency,which we eventually switched over to when our confidence in this supplier delivering on time surpassed that of the original supplier.
Whenever possible, it is desirable, of course, to work with suppliers with whom you have developed confidence, which wasn’t possible in the above example, and will be the case occasionally for capability or capacity reasons. However, organisations often have a formal preferred supplier list which opens up the opportunity to set out requirements of suppliers in order for them to be considered for inclusion on that list. In my experience, many organisations, even if they have such a list, are not making the most of this opportunity to ensure that their suppliers perform well on their projects.
In order to do so, the suppliers must be at an appropriate level of project management maturity. They should have a project management framework appropriate to their business, which is managed, governed and supported by personnel with appropriate skills. The framework should include the use of plans working to agreed milestones and logs for risks, issues, changes, etc. that are shared with you, their customer.
A simple, but very rare, way to ensure that suppliers attain and maintain levels of project management maturity that ensure good project delivery performance, is to specify maturity level requirements which can be measured based on a standard model, such as P3M3®. By requiring, or at least encouraging, your suppliers to achieve defined levels of maturity across the project management disciplines, you will significantly reduce the risk of suppliers causing costly delays, as well as improving the quality of their deliverables, which will otherwise be compromised when they are struggling to satisfy timing requirements.
A common characteristic of a large project that includes work packages outsourced to numerous suppliers is the contest to be off the critical path. Suppliers are often aware that they can deliver late as long as they are not on the critical path. In other words, if one supplier is causing a delay to overall project timing that is masking the lateness of the other suppliers, then all the attention focusses on that one supplier until another supplier picks up the critical path baton by performing worse still. Imagine, therefore, how quickly your suppliers will improve their project delivery performance once you have gained some improvement momentum with the first few, by applying some maturity assessment requirements.