Holistic management of third-party relationships
Enhancing visibility | Realizing value | Meeting ESG commitments
Approaches to managing third parties have generally failed to keep pace with rapidly expanding third-party networks and their role in organizational success. Meanwhile, most organizations have increased their dependence on third parties, which now include not only suppliers of goods and services but also affiliates and joint venture partners, R&D organizations, and sales channels, among others. In organizations that rely heavily on third parties, up to 80 percent of direct and indirect operating costs and 50 to 100 percent of revenues can be attributable to third-party relationships, based on Deloitte analysis with data compiled from research carried out by the Institute of Collaborative Working, Hiperos, and Deloitte.
TPM processes are strongly embedded in functional domains and use ad hoc processes within functional siloes to implement individual programs rather than standardized coordinated processes. As a result, the organization fails to gain significant synergies or connectivity across applications related to sourcing, procurement, risk management, contract life-cycle management, ongoing monitoring, and other TPM activities.
From siloed to integrated Third-Party Management (TPM)
A holistic perspective on third parties covers the entire TPM lifecycle—from sourcing, procuring, and contracting through to monitoring, financial processing, and executive decision-making—across all third-party relationships. That perspective, and the integrated approach it fosters, is becoming a prerequisite for increasing efficiency, reducing costs, and meeting ESG commitments. Those benefits are realized by aggregating performance improvement opportunities and creating synergies across TPM processes.
Siloed third-party management presents a range of challenges and opportunities. The challenges relate mainly to excessive costs, lack of visibility, and compromised operating and risk-response capabilities. The opportunities stem from more timely, accurate, and actionable information on third parties and greater efficiency and effectiveness in TPM.
The business case for integrated TPM
As an organization’s third-party network grows in terms of size, spend, and strategic importance, the business case for integrating TPM becomes stronger. Benefits of integrated TPM include reduced costs, enhanced shareholder value, greater responsiveness to change and crisis, and improved ESG performance (and perceptions).
The business case for integrated TPM closely aligns with the case for digitalization. Deloitte research into digital maturity has found a strong link between an organization’s digital maturity and its financial performance. That heightened performance is driven by data mastery, flexible yet secure IT infrastructure, and rationalized connected workflows.
An integrated solution tailored to the organization
Deloitte’s integrated solution consolidates third-party data drawn from existing TPM systems and, when useful, from external sources. It then applies analytics to that data to generate actionable insights and support strategic decision making. Such a solution can connect disparate software and platforms and support any individual or function with a role in TPM, as well as senior executives responsible for enterprise growth and value.
TPM Maturity Model
Many organizations get to the “developing” stage but then struggle to advance further in being able to integrate their TPM systems. Deloitte can assist such organizations with a smarter way to accelerate the journey to TPM integration using technologies such as UI and UX together with an analytics layer to overcome this barrier. This integrated approach can then be further enhanced by complementing it with a managed services platform where appropriate.
TPM processes are strongly embedded in functional domains and use ad hoc processes within functional siloes to implement individual programs rather than standardized coordinated processes.
Some evidence of alignment and coordination across specific TPM processes exists, although inconsistently across the end-to-end process and the organization.
TPM processes are aligned and coordinated across the entire organization, with mature capabilities used to achieve data mastery by aggregating siloed data and related systems.
In addition to being integrated, process performance is continually improved through both incremental and innovative technological enhancements.
This solution encompasses four core Deloitte services, potentially on a managed-services platform:
Spend Management as a Service (SMaaS)
which enables source-to-contract (S2C) process design and improvement and procure-to-pay (P2P) processes that enhance visibility and control over spend across the third-party network and the relationship lifecycle.
Legal & Commercial Services
which deliver full contracting support as our lawyers and legal, business, and process specialists optimize the value of legal spend through negotiation, review, drafting, remediation, and renewal of contracts.
Third-Party Risk Management (TPRM) Managed Services
which provide third-party screening, background checks, on-site and remote inspections, and ongoing monitoring of risks and risk events to free internal resources for more strategic initiatives.
which illuminates the flow of services and products across the value chain to enable validation of the network, allocation of costs, and mitigation of risks to boost supply chain performance.
To further explore the key themes and trends, and for more information about how Deloitte can help you succeed with TPM journey, please connect with one of our regional TPM leaders.
Global and EMEA
+44 (0)20 7303 4110
Americas and Canada
+1 416 566 5929
+60 3 7610 8853