I hope that you enjoyed the article, “How To Manage Service Procurement Risk.”

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In the article, I referred to “intangible services,” which I defined as “work whose quality you can’t experience prior to performance.”  Here are some examples of intangible services:

  • Advertising services – Just because an ad agency created an effective TV, radio, or print ad for another client doesn’t mean that the one that they create for your organization will result in a spike in business
  • Product design services – Just because a research and development firm designed a high-quality product for another client doesn’t mean that the one they design for your organization will result in a competitive advantage
  • Physical security services – Just because another client had no security problems when it hired a security firm doesn’t mean that your organization’s experience with that firm will be as good.  The quality of physical security is highly dependent upon the specific personnel deployed and the situation in which they are working.  There may be a higher chance of disaster if inexperienced security guards are deployed at a socially-divisive rally compared to experienced security guards deployed at a Neil Diamond performance, right?

Now, I do have to say that the degree of procurement risk isn’t equally high for all intangible services.  A few of the general variables that affect your degree of risk include similarity to previously-done work and frequency of performance.

For example, if you were procuring voice-over services, chances are that if you heard recent samples of the voice-over talent’s work on projects that are similar to yours, quality should not be dramatically different.  And if an interior designer who you are hiring to design the interior of your company’s new facility has designed hundreds of office spaces, results should not vary too much if you have a decent specification for the work expected.

But it’s those intangible services where the work you want is not similar to what the supplier has done before and/or is not something that is done frequently that can give you those procurement headaches for the ages.  So, be careful and use the three tactics described in the article when you procure these types of services.

Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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