Customer Value Story:
You Can Outsource Work, But You Can’t Outsource Risk

The pandemic has disrupted operating models of businesses across the globe. Since the beginning, LogicManager has partnered with our clients to help them pivot and prepare. As we wrote about in our blog, our company was built on a foundation of seeing around the corner. In February, we rolled out a COVID-19 relief package to our customers. In May, we rolled out a Return to Work and Preparing for Wave 2 Solution package.

Over that critical period of time, we collected over 160 value stories from our customers about how they leveraged our guidance to drive their businesses forward. This series will delve deeper into those stories in hopes of helping other businesses throughout this challenging time.

Topic: Streamlining vendor management to safeguard from critical risks that have both hard and soft dollar cost consequences

Company Profile

A healthcare organization offering home health, palliative and hospice care, this organization has over 50 locations across the state of Florida, with over 1,000 employees. They aim to enhance the lives of those affected by advancing age or illness by offering a wide variety of compassionate healthcare services – from grief support, to pet therapy, to a veterans program and more. When the pandemic posed new and complicated risks to their operations, they decided it was time to invest in their risk management efforts.

Challenge

In the healthcare industry, operating in silos with antiquated technology hinders collaboration and adds obstacles to an already challenging environment. When vendors are involved, it exponentially increases risk exposure; you must take responsibility for the actions of those vendors that you rely so heavily on. While this client could outsource processes, they knew they could not outsource risk. The majority of their higher risk vendors are software companies focused on the healthcare industry. Since it’s impossible to have a direct line of sight on those companies, our client needed an effective way to increase visibility.

This client’s vendor risk management program lacked automation and involved manual data collection; there was no way it could withstand the heightened demands of the pandemic. To better serve their patients and staff, they needed flexible software to facilitate efficiency and transparency.

How We Helped

Our Advisory Team worked with this client to identify the information they wanted and needed to collect on their various vendors, like contract SLA monitoring, operations and performance data, business continuity planning and more. Within the vendor management tool, we created visibility rules for the different levels of questionnaires each vendor should receive. For example, vendors of higher criticality received more in-depth questionnaires. The questionnaires also had weighted scores on the vendors’ responses to determine the level of risk they posed.

Again, when we began this process, there was no automation in place. In order to route the action items that followed the vendor questionnaire review, our Advisory Team created a New Vendor Onboarding workflow. This ensured consistently thorough evaluations. We then created an Ongoing Vendor Review workflow to alleviate this process being carried out in the long term. Finally, we worked with our client to generate a comprehensive report to display the most important information about each vendor, including the risks associated with each relationship.

Business Outcome

Let’s take a look at the ROI this client will see as a result of implementing a mature vendor management program with LogicManager:

Soft Dollar Savings 

Not a direct cost savings guaranteed, but rather tied to efficiencies and intangible new benefits.

Increased efficiency: This client now has an efficient and effective methodology in place to assess their vendor risks. They can open a report and instantly identify how many points a particular vendor received out of the total possible points for a simplified overview of that vendor relationship. LogicManager’s software delivers a 60-80% gain in efficiency in time and effort by eliminating silos and streamlining governance activities. This leaves our client with more time to focus on delivering quality service and upholding their core values.

Preservation of employee morale: It’s no question that modern and efficient technology enables seamless operations and ultimately leads to happier employees, but did you know that having a mature vendor management program can actually prevent a drop in company morale? 80% of company scandals result from vendor management negligence. When the public finds out about something like a data breach, contamination, or accusation of malpractice at an organization, it has a negative impact on employee attitudes. This is referred to as the “scandal effect,” coined by a 2015 Harvard Business Review study. Avoiding the scandal effect is more critical than ever during these challenging times, when it’s essential to retain optimism and motivation levels.

Hard Dollar Savings

Actual money saved, and/or the reduction or avoidance of an existing cost.

Liability protection: We have already seen more than 1,300 lawsuits throughout this pandemic against companies for failing to keep their employees and customers safe. With a dependable and flexible vendor management program, this client is positioned to handle unexpected challenges resulting from COVID-19 that could provoke a lawsuit, such as liabilities stemming from sick workers or a 2nd wave of the virus that enforces another lockdown and puts employees out of work.

Ensured compliance: The workflows also serve as an important feedback loop to connect front line personnel to vendor management, which enables them to meet the changing jurisdictional requirements and evolving practices that are inevitable during the pandemic. The ability to adapt their compliance activities protects this client from being found guilty of noncompliance, which can result in lofty penalties and fines. Additionally, leveraging LogicManager’s software and expertise reduces total internal and external audit consultancy costs by more than 15%.

Negligence prevention: Prior to COVID-19, Chipotle’s pattern of negligence and subsequent scandals involving their bacterial outbreaks (that stemmed from their lack of vendor due diligence) earned them fines upwards of $25 million. While this client may not be in the restaurant industry, this risk applies to them in today’s world where all organizations are suddenly under obligation for public health and safety; for the air in their facility to the sanitation of anything anyone touches. Having proper documentation of their due diligence efforts during the pandemic enables our client to provide timestamped evidence should they need to prove it at any point in time to avoid negligence claims.

Using LogicManager allows for a clear line of sight so that they can remain proactive as opposed to reactive amidst a crisis. While this client originally partnered with us to upgrade their vendor management program, after just a few months, they have implemented 5 of our other solutions areas. By alleviating pain points across their organization, they can now focus on what matters most: alleviating the pain of their patients.