A study of vendor satisfaction in outsourcing in large scale public sector enterprise

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No organizations are self-reliant, nor does any organization have unlimited resources. With the limited resources the organizations are not able to meet their unlimited wants. These wants compete for the scarce resources of the organization.

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), INTERNATIONAL JOURNAL OF MANAGEMENT (IJM) Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) IJM Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME: http://www.iaeme.com/IJM.asp ©IAEME Journal Impact Factor (2014): 7.2230 (Calculated by GISI) www.jifactor.com A STUDY OF VENDOR SATISFACTION IN OUTSOURCING IN LARGE SCALE PUBLIC SECTOR ENTERPRISE Dr. B. Padmapriya Banking and Finance, Jagran Lake City University, Mugaliyachap Bhopal, Madhya Pradesh, India ABSTRACT No organizations are self-reliant, nor does any organization have unlimited resources. With the limited resources the organizations are not able to meet their unlimited wants. These wants compete for the scarce resources of the organization. This further aggravates the need for organizations to outsource work that can be conducted by others at lower cost and with greater efficacy and effectiveness if not it will be a of waste valuable resources in the pursuit of capabilities that can be readily purchased from others. Moreover, engaging in outsourcing allows an organization access to skill, knowledge and competence found outside its boundaries. Through outsourcing, a business can seem bigger than it actually is and provide its clients with total event solutions. Knowing how to outsource, when to outsource, and whom to outsource to are crucial skills for any business. Coming to the definition of Public Sector, in most of the countries of the world, Public Sector Company is essentially a presence of government in the form of a business activity. The type of company can vary, depending on how its funding source is established. The government level can be national, state or local. Common examples of a Public Sector company can be seen in social services, city and urban development areas, and military services. The “Vendor Management is the key to outsourcing success”. The need of the hour is to study and evolve a fool proof supplier evaluation system after amalgamating the existing and the best practices. Vendors play a very important role in governing the quality of products and services. Successful organizations lay maximum stress on the selection and control of suppliers to ensure continuous and timely flow of products which is a vital link in the supply chain management. All these processes necessitate the need for a comprehensive study of outsourcing to evolve a system which can be uniformly applied to any industry. This shall include identification of products /services to be outsourced, selection of reliable suppliers and continuous measurement of the performance of the Vendor. Keywords: Government, Outsourcing, Public Sector, Vendor Management. 16
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME 1. INTRODUCTION In the recent times Outsourcing has become a very popular. Outsourcing is made up of two words – ‘out’ and ‘sourcing’. Hence, to define outsourcing we must first be clear on the meaning of ‘sourcing’. Sourcing refers to the act of transferring work, responsibilities and decision rights to someone else. It means “acquiring a product or service rather than producing it yourself”. The history of outsourcing goes back a lot longer than most people realize. Outsourcing originally started thousands of years ago. When societies began to form, individuals began to develop specialized skills. Certain tasks which involved specialized skills were given to these individuals, and thus this led to the inception of outsourcing. Today, outsourcing is a significant part of the business world because it helps businesses and individuals universally come together to serve customers more efficiently. Though outsourcing began thousands of years ago, it rose in popularity and status during the Industrial Revolution of the 18th and 19th centuries. Since the Industrial Revolution, companies have come to grips with how they can exploit their competitive advantage to increase their markets and their profits. The model for most of the 20th century was a large integrated company that can “own, manage, and directly control” its assets. In the 1950s and 1960s, the companies strategically focused on diversification to broaden corporate bases and take advantage of economies of scale. To increase their flexibility and profits, companies during the 1970s and the 1980s started focusing on their core competencies and began outsourcing the non- vital functions to those who had the time and the expertise to handle such tasks. These experts could be in the same city or in another country. Outsourcing is becoming increasingly popular, essential, important and strategic component for many Big/Medium and even small companies belonging to private as well as Public Sector organizations dealing with variety of products, services etc. One can even say in today’s scenario where highly complex products, processes and businesses are handled it will be highly impractical and expensive not to resort to outsourcing. Moreover as time passed on with the advance of technology, the sophistication of business operations and the need for constant growth are circumstances that suggest a focus on functional core competencies for all type of organizations/firms. This is true especially in modern times where we can be badly outmoded /outclassed even in our core business unless we try hard to improve it. So it is high time to abandon the old school of thought that outsourcing is only for cost savings or fast return on investments. Therefore there is a need to realize that outsourcing has other valid and strategic angles, aims and reasons in today’s scenario. 1.1 Review of literature 1.1.1 Public sector present liberalized scenario and statistics around the world What is happening to the outlook and mode of working of Public Sector organizations around the world? In general the recent economic recession has made the calls for cost savings more urgent than before. All means to cut people’s tax expenses are being considered and outsourcing appears to be a very viable solution to this demand. In addition, more such organizations are looking at outsourcing as a means to gain specific value-added benefits to the services that public agencies are delivering to the people. Very interesting, valuable and important Details are available through surveys and in-depth interviews with senior Public Sector executives regarding above subject which broadly reveals the following facts – In general the recent economic recession has made the calls for cost savings in public spending even more urgent than before. All means to cut people’s tax expenses are being considered and outsourcing appears to be a very viable solution to this demand. In addition, more government agencies are looking at outsourcing as a means to gain specific value-added benefits to the services that public agencies are delivering to the people. 17
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME A survey conducted with senior-level government executives in eight countries on various important/top organizational priorities, with direct experience managing outsourcing initiatives Government executives, irrespective of country, rated the potential importance of outsourcing for achieving their strategic mission, higher on average than its current effectiveness. Further important, interesting frequent responses from government executives were – their top priorities were reducing costs (79 percent) and improving the satisfaction of their customers (77 percent). In addition, they plan initiatives intended to increase operational efficiency, including enhancing productivity (68 percent); recruiting and retaining the best people (65 percent); and adopting the right technologies (61 percent)... Government executives are beginning to look at outsourcing as a means to transform their organization. They are attracted to the opportunity to share risks, but they face certain obstacles, some of which are unique to the Public Sector. They considered the following as the top Organizational impediments - Public Sector executives are far more worried than private sector counter parts about lacking organizational commitment at all levels (57 percent in the Public Sector compared to 48 percent in the private sector) and creating disgruntled employees (53 percent compared to 41 percent). They also foresee a unique issue—the political acceptability of their outsourcing relationships (55 percent) 1. As mentioned earlier in general the recent economic recession has made the calls for cost savings in public spending even more urgent than before. All means to cut people’s tax expenses are being considered and outsourcing appears to be a very viable solution to this demand. In addition, more government agencies are looking at outsourcing as a means to gain specific value- added benefits to the services that public agencies are delivering to the people. These engagements often entail the provision of IT solutions for Public Sector segments such as pensions and social security, taxation, assets registration, welfare programs such as food stamps distribution and financial assistance for the unemployed, and other e-governance initiatives. Further, as governments have strived to become more technologically efficient, more attention has been given to Public Sector outsourcing as they lacked expertise and special equipments ,gadgets, hardware software etc in-house2. 1.1.2 Public sector outsourcing - some success stories In US Department of Defense (DOD), adopted outsourcing as a management practice mainly with the intension of cost saving in the early 1990s in response to the post–cold war funding reductions that ran as high as 60 percent. Its goal was to cut operating costs faster than the budget was dropping in order to free dollars for reinvestment in modernization. As DOD began competing various internal activities against the commercial marketplace, it found that it generated, on average, a 30 percent savings. If the internal team won and the work was kept inside, the competitive process alone yielded an average 20 percent savings. If the activity was outsourced, then the average savings were 40 percent. The first 2,000 competitions DOD ran generated more than $1.4 billion dollars in annual savings. Areas outsourced included equipment maintenance and repair; base services, such as food and custodial; property construction and operations; and logistics3. Outsourcing is proving to be one of the fastest-growing segments of the US federal IT budget over the past few years. A study by INPUT (December 2004), a research agency, Its “Federal Outsourcing Market View” forecasted federal IT outsourcing will grow 55 percent from $11.7 billion in fiscal year 2004 to $17.4 billion in fiscal year 2009. That’s a compound annual growth rate (CAGR) of nearly 8.3 percent. According to Chris Campbell, Senior Analyst, Federal Market Analysis at INPUT, “An organization will be most effective when it focuses on things that it does best. In other words, the Department of Defense is best at fighting military actions, not administering data centres. The Federal Bureau of Investigation is best at investigating crimes, not developing software,” he continues. Cost savings are a further plus, the feds have figured out4. 18
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME Another area where It is clear one trend is going to be a large increase in outsourcing by government /Public Sector bodies as they can no longer afford to manage IT in-house as it involves frequent up gradation both with respect to hard and soft ware requirements, expertise, skilled man power training, incorporating up-to-date safety enhancements etc. As Seymour Pierce analyst Caroline de La Soujeole explained this week, approximately £80bn of Public Sector services are currently outsourced but she predicts this could exceed £140bn by 2015. As this is a serious and abrupt development involving number of Public Sector IT personnel potentially losing their jobs novel approaches to outsourcing, like the one which provides a more comprehensive outsourcing package to businesses and organisations who can no longer manage their IT. This model allows businesses to outsource IT management, maintenance and the day to day running of their technology but, crucially, also includes internal employees within this too5. If we take the case of U.K– viewed as one of the economies hit hardest by the recent crisis, facing huge budget deficits to the tune of £175bn – thanks to an over-reliance on financial services, outsourcing contracts already account for around 13% of government spending. UK is widely viewed as a ‘world leader’ in public-sector outsourcing wants to drive towards efficiency via outsourcing which has become its entrenched policy6. The U.K government spent £7.57bn on IT, networking and related costs last year, excluding staff costs, according to figures released by the Office of Government Commerce (OGC).The biggest single spend, £2.33bn, was on outsourced and managed services 7. In contrast the situation in US is often a highly confused and muddled and mired in controversies. Dissenters claim that the government needs to refrain from outsourcing because this is exacerbating unemployment in the country (especially in U.S.) and causes data in -security. But opposed to these considerations public opinion is steeped in anger on the cut-throat union monopolies contributing hugely to the disparities between equivalent jobs in public and private sector wages - Public Sector salaries are far more lucrative on average than the private sector and pensions -- retirement benefits overall -- are leaps and bounds richer than their private equivalents eating into large chunks of tax- payers money. Perhaps outsourcing can play a vital role in reducing these disparities/ problems8. In spite of all these controversies, Input forecast that state and local spending on outsourcing will increase from $10 billion in 2009 to $18 billion by 2010, a compound annual growth rate of 12%9.A slow but steady improvement in the macroeconomic environment in 2010 should support a return to modest growth in overall IT spending, according to Gartner, Inc. Worldwide IT spending will reach $3.4 trillion in 2010, a 4.6 percent increase from 200910. Among the bigger spenders in Public Sector outsourcing are the US, UK, Canada, India, Hong Kong, Japan and Singapore – who have been reported as the most experienced governments in outsourcing Public Sector processes. In India several examples can be cited for Government /Public Sector outsourcing. As a prominent example -Tata Consultancy Services and the Ministry of External Affairs (MEA), Government of India have recently agreed on a Passport Automation Project - the largest mission-critical E-governance project valued at over Rs.10,000 million. TCS after implementation of the Project will also manage it end-to-end. Passport to be completed in three working days, while passports issued under the Tatkal scheme will be dispatched on the same day, subject to address and police verifications of applicants. ADM, Data Management, and Infrastructure Management are some of the fields involved in this transaction11. In Australia outsourcing has already been accepted as a well-marked path to efficiency and cost management for the Public Sector. While it can be difficult to accurately measure the benefits, based on examples from both State and Federal governments outsourcing has delivered the following: Greater ability to manage costs and deliver improved quality of service; Best practices on a local and global scale; For example the contract between Australian Government (Australian Department of Immigration and Citizenship) and Unisys is worth US$39.7 million and the contract 19
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME has been extended until 2013 (original contract from 2007). The field of activities covers a wide range - ADM, Data Management, Contact Support and Infrastructure Management12. From the literature review above it may be seen that there are several studies on outsourcing but very few on outsourcing in Public Sector Units and there is none concerning BHEL. 1.2 Importance of the present study As already discussed Outsourcing is in an inflection point and growing/evolving rapidly into a very strong business tool. It is extremely important to keep abreast with the latest developments in the field. Time has come to create a much greater awareness and alertness about outsourcing among all concerned as already mentioned. One of the main aims of this thesis is to suggest means to raise the awareness and general understanding about outsourcing in our country and also be benefited by practice of the same. It’s needed to better prepare everyone involved in business for the emerging outsourced economy. It’s required to advance the management practice of outsourcing itself in our country. This study would help achieve, to a great extent, these goals. Special attention and emphasis is given to large Public Sector organizations taking the example of B.H.E.L one of the most prominent Engineering enterprise of its kind. The study lays emphasis on how such organizations could take advantages of outsourcing to keep abreast of modern developments and innovations in technology, quality control, business transformation etc. Detailed surveys were conducted assessing their General perceptions about outsourcing and also what they perceive as the chief driving forces for their outsourcing and what are their important pitfalls/risks of outsourcing in general and especially in the government sector. Their recent history about their activities, projects, developments etc and also about their recent history of outsourcing projects were traced and taken as inputs for the present study. These studies were used in turn to find out how despite being bogged down with their own internal and external pressures from factors like big and powerful unions, pressure from government regulations, they can help the country to forge ahead in the field of outsourcing. The Public Sector companies in general all over the world are now being compelled to break the barriers and forge ahead. Some discussion on history and evolution of these industries all over the world to understand their specific problems, their position in to-day’s liberalized scenario etc, their present level of understanding of the powerful tool of outsourcing. Some details for successful implementation of outsourcing projects especially in the background of their unique problems and means to overcome them to achieve success has also been discussed. The study plays a pioneering role in raising the awareness and general understanding about outsourcing by setting the example for successfully practicing outsourcing as a powerful tool in our country especially because of the prominent and leading position it occupies in our society. 2. METHODOLOGY Descriptive Analysis 2.1 HYPOTHESIS OF THE STUDY The study conducted at the Public Sector. The following hypotheses were established • H 1:-Buyer’s Vendor registration system is satisfactory. • H 2:-Buyer’s Vendor performance rating system is transparent and satisfactory. 20
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME 2.2 OBJECTIVE OF THE STUDY On the basis of previous work and literature available in the area of research i.e. Outsourcing in select Large Scale Public Sector enterprise, the objectives of this research study are as follows:- 1. To study the system and process followed in outsourcing for conceptual clarity and its implications. 2. To study the system, process followed in general and particularly in Public Sector Enterprises and specifically the BHEL Bhopal. 3. On the basis of this study of BHEL Bhopal suggest a system for identification, evaluation, approval and review for outsourcing which has macro application. 2.3 SAMPLE DESIGN The numbers of executives being very large in number the researcher has adopted, the random sampling methods have been adopted for the proposed study. The following table shows the sample taken of Vendors. TABLE NO: 2.3.1 SAMPLE TAKEN Particulars Total Number Selected Percentage Number of Vendors 150 100 67% (A Class Vendors) 2.4 METHODS OF DATA COLLECTION The proposed study includes the collection of primary and secondary data. Primary data has been collected with the help of specially designed questionnaire, personal interview and detailed discussions with the Vendors. The secondary, data has been collected from journals, magazines, published and unpublished research work of various eminent scholars in the field of research. Also a detailed study of the reports, manuals and records of the BHEL and the entire process and procedure followed in vendor enlistment, registration and performance monitoring done by the organization. 2.5 THE RESEARCH INSTRUMENT Self-structured questionnaires were formulated; information is gathered with this aid to solve the considered problem. This questionnaire was designed covering various important issues in the problem of domain. Questionnaire for Vendors mainly focused on assessing the satisfaction levels of vendors in the various procedures and systems followed, transparency levels maintained in various transactions like opening tenders, receiving prompt clarifications on all relevant matters, receiving registration forms on-line etc during conducting outsourcing projects with Public Sector firms. 3. OUTSOURCING IN BHEL BHEL is building capacity and capability to contribute fully for meeting the power forecast as envisaged by the government in their 5 year plan. Capacity addition of 82000MW is forecast in 12th plan. This provides ample opportunities for a quantum leap in its operations. To meet this challenge the company has embarked upon a two point strategy- enhancement of its manufacturing capacity with additional investments and secondly to maximize outsourcing. 21
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME The effectiveness of outsourcing function is critical for the success in current business scenario. This is the time of hyper competition where reducing product and project cost and cycle time shall provide a distinct competitive advantage. Timely availability of product and services at economical cost are the key factors which shall influence the business in future. This is important for company’s growth and meeting the aspirations of its stake holders. For a company of this size and magnitude it is necessary and essential to have a well documented policy that is clear, simple and rational. The delegation of powers at every level must be rationalized enabling speedy decision making. 3.1 Supplier performance rating (SPR) Supplier performance is assessed taking into account the following main factors and calculated for each order executed by the vendor. TABLE NO. 3.1.1 SUPPLIER PERFORMANCE ASSESSMENT Rating Weight age Quality 60 Delivery 30 Service 10 Total 100 Source: BHEL Supplier Evaluation, Approval and Review Procedure, Amended 2nd August 2010. The ‘Quality Rating’ is assessed based on the acceptable quantity of material / services. The ‘Delivery Rating’ of supplier is decided based on the delivery parameters wherein Delivery rating shall be 30 in case of adherence to the ordered delivery. For non-adherence ordered delivery (i.e. delay in supply), marks to be deducted in proportion of delay. The ‘Service Rating’ shall be based on the Demerit factor and is assessed based on feedback against the supplier for the given supply / services. Supplier Performance Rating (SPR) = QR + DR + SR (QR = Quality Rating, DR = Delivery Rating and SR = Service Rating). The following action is recommended based on SPR score:- TABLE NO.3.1.2 SELECTION OF SUPPLIER ON THE BASIS OF SUPPLIER PERFORMANCE RATING SPR score Grade Action >95 A1 BHEL may consider award appreciation/ commendation letter >90 75 =60
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME The feedback to the supplier is posted every quarter on BHEL unit website in the first fortnight of every quarter. The supplier shall be allowed access to view his performance rating. In addition, the annual SPR rating is also be intimated to the supplier by registered post/ fax/ e-mail. In case, the supplier does not contest the ratings within 30 days, it shall be construed that the supplier has accepted the ratings provided on the website. Based on the above, the vendor is considered for inclusion in ‘Product Material Directory’. All regular enquiries are then sent to vendors whose name appears in the PMD. BHEL maintains total transparency of system in following ways. 1. Supplier Registration Procedure and relevant formats are available on BHEL website . 2 Status of supplier registration applications is displayed online by each manufacturing unit on their website to enable the suppliers see the status of their applications. 3. The acknowledgement of receipt of application, feedback of registration or rejection, performance rating as per guidelines issued from time to time by the management are conveyed to the supplier. 4. SURVEY ON VARIOUS ASPECTS OF OUTSOURCING CONDUCTED ON VENDORS Questionnaire for Vendors mainly focused on assessing the satisfaction levels of vendors in the various procedures and systems followed, transparency levels maintained in various transactions like opening tenders, receiving prompt clarifications on all relevant matters, receiving registration forms on-line etc during conducting outsourcing projects with Public Sector firms. The Questionnaire with a brief introduction about outsourcing formed the instrument for conducting the survey. A glimpse at their outsourcing statistics in general indicates they are comfortable with and not averse to outsourcing. They are also very much aware that they cannot waste their energy, focus and attention on routine works like House Keeping, Repair & Maintenance of Office Equipments like AC, Xerox machine, Fax machine etc., Machining of parts, and Site support activity for project execution, Computer server and system maintenance.etc, if they have to be competitive in their core functions. They have also resorted to outsourcing in various sub component manufacturing examples Magnet frames of Traction Motors, Spiral casing fabrication, Butterfly valve body, Stator frame fabrication and many more of such components. The Machining, Insulation of various products like Hydro generators, Thermal sets, AC Motors, Traction Motors, Transformer and Switchgear etc. From the above it is evident various types of works like Fabrication, Machining, Insulation of various products like Hydro generators, Thermal sets, AC motors, Traction motors, Transformer and Switchgear are extensively outsourced by BHEL. The Management is very much aware though these jobs are very vital and main stream they are routine repetitive requiring no further developments and they can best be done by outside capable providers. They are also aware that by resorting to outsourcing in these cases they save lot of money by not investing in space overheads in the form of various machineries some time quality control equipments etc facilities costly unionized labor etc. This activity is handled by their subcontracting division. Though they are not yet considering outsourcing as a core function like other functions like manufacturing, HR, quality control etc they have a separate department which they call as their subcontracting division where some staffs are trained in the tradition anal form of outsourcing. It is also reported that they have in place a very good procedure for vendor selection that has been evolved especially suitable for their “Public Sector Environment”, their training, contracting and 23
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME management etc which has helped them to successfully conduct various outsourcing and contracting jobs. The survey conducted in BHEL basically focused on the perception of the Vendors about their satisfaction levels. Vendors were asked to rate the system in a scale 1-5 with 1 as minimum and 5 as maximum satisfaction level. 5. VENDOR ANALYSIS 5.1 Buyer’s Vendor Registration System is satisfactory The general perceptions of 100 vendors surveyed are elicited. To the question whether buyer’s vendor registration system is satisfactory, 35% of the vendors have stated that they were extremely satisfied with the vendor registration system and they have given maximum level of 5. 40% have rated the system at level 4, 20% rated the system at level 3 and the remaining 5% gave level 1 to the satisfaction level of the Vendor Registration System. TABLE NO. 5.1.1 SATISFACTION LEVEL OF VENDOR REGISTRATION SYSTEM Options(Satisfaction Level) % of respondents 1 5% 2 10% 3 20% 4 40% 5 35% Source: Survey Data CHART NO. 5.1.1 SATISFACTION LEVEL OF VENDOR REGISTRATION SYSTEM 50% 40% pecentage 30% 20% 10% 0% 1 2 3 4 5 Satisfaction level Source: Survey Data 5.2 Buyer’s vendor performance rating system is transparent and satisfactory Performances of vendors are assessed by buyer on complete execution of every purchase order. The question pertains to the satisfaction level of vendor on buyer’s vendor performance rating system being transparent and satisfactory. To this, 40% of the respondents have given maximum level of 5, 35% have rated at level 4, 15% rated at level 3 and 5% at level 5% of the respondents have rated at level 1. 24
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME TABLE NO.5.2.1 BUYER’S VENDOR PERFORMANCE RATING SYSTEM IS TRANSPARENT AND SATISFACTORY Options(Satisfaction Level) % of respondents 1 5% 2 5% 3 15% 4 35% 5 40% Source: Survey Data CHART NO. 5.2.1 BUYER’S VENDOR PERFORMANCE RATING SYSTEM IS TRANSPARENT AND SATISFACTORY 45% 40% 35% 30% Percentage 25% 20% 15% 10% 5% 0% 1 2 3 4 5 Satisfaction level Source: Survey Data 6. HYPOTHESIS TESTING H0-1: Buyer’s Vendor registration system is satisfactory. Interpretation: The satisfaction level of most of the respondents is Maximum for Buyer’s Vendor registration system is satisfactory. Result: Hypothesis is accepted. 25
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME H0-2:-Buyer’s Vendor performance rating system is transparent and satisfactory. Interpretation: The satisfaction level of most of the respondents is Maximum for Vendor performance rating system is transparent and satisfactory. Result: Hypothesis is accepted. 7. RESULTS Assessment about the Vendor satisfaction levels during conducting outsourcing projects with BHEL This part mainly focused on assessing the satisfaction levels of vendors in the various procedures/systems followed, transparency levels maintained in various transactions like receiving/opening tenders, receiving prompt clarifications on all relevant matters, receiving registration forms on-line etc during conducting outsourcing projects with Public Sector firms. The vendor survey mainly focused on assessing the satisfaction levels of vendors in Vendor enlistment process with regard to the procedure followed, transparency levels maintained in tendering activities like receiving /opening tenders, receiving prompt clarifications on all relevant matters. It also encompasses order placement, execution stages covering inspection, dispatch and payment related issues. The trend was studied and the following trends could be concluded. 7.1 Following were the main findings of Vendor Survey 75% of vendors have responded that the Vendor Registration System is satisfactory. 80% have stated that the Vendor Registration form is easily accessible at Buyer’s website. 70% vendors have stated that questions are relevant and easy. 64% vendors have stated that Clarifications are easily obtained from Buyer’s Vendor development cell. 60% have indicated that System of acknowledging vendor registration form is satisfactory. 55% have stated that the time taken for registration process is satisfactory. 60% of vendors have indicated that Proper feedback for rejection of registration is given. 65% vendors have indicated that Buyer's systems of Purchase Department are clear & transparent 55% have indicated that Clarification sought from purchase department are easily obtained. 58% are satisfied for Receipt of Enquiries in time 60% is the Satisfaction level of most of the respondent for all relevant documents like drawing, specification etc. are received along with the Enquiry. 70% of the respondent is satisfied with the Details provided in Tender Documents and that they are adequate to quote properly. 60% is the satisfaction level of respondent for method of receiving Tenders. 65% is the satisfaction level of respondent for method of tender opening being transparent Satisfaction level of 50% of the respondent is average for the details available on purchase order are sufficient. Satisfaction level of Most of the respondent is Average (55%) for the method of sending purchase order is satisfactory. 26
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME Satisfaction level of Most of the respondent is Average 65% for All drawings, specifications etc. are properly provided with purchase order. Only 20% is the maximum satisfaction level. 60% have stated that the delivery time stated in the order is reasonable and in line with the agreement. 70% have indicated that Quality of Inspection is satisfactory 55% have indicated that Dispatch clearance is given timely 55% have rated that Supplier’s materials are unloaded promptly and stored properly 55% have indicated that Deficiency/Rejection of Materials if any, are informed in time 50% have indicated that Payments are made as per agreed terms 75 % have stated that Buyer’s vendor performance rating system is transparent and satisfactory. 60% have stated that they would like to have long standing business relations with buyer. The vendor responses are very significant and important. They indicate that majority of vendors are satisfied with the Vendor Registration System. Vendors have stated that questions are clear & simple and the vendor performance rating system is transparent and satisfactory. It indicates that lot of care has been taken in formulating the registration form and system. The rich experience of managers has been skillfully used in evolving the new vendor registration form & the evaluation system. 8. CONCLUSIONS Assessment about the Vendor satisfaction levels during conducting outsourcing projects with BHEL. The conclusions drawn were The study reveals that the optimum satisfaction levels of vendors in the various procedures/systems followed, transparency levels maintained in various transactions like receiving/opening tenders, receiving prompt clarifications on all relevant matters, receiving registration forms on-line etc during conducting outsourcing projects with Public Sector firms. It also encompasses order placement, execution stages covering inspection, dispatch and payment related issues. This is revealed by the positive responses to the various questions asked to the vendors. According to the responses of Vendors the following areas of improvement were identified:- From the analysis it was noted that improvement is required in speeding up the time taken for registration process. The feedback system for rejection of registration needs to be improved. This could be due to inadequate manpower in the supplier registration department. The documentation part during tendering and order placement stage needs improvement as the satisfaction level is average. Only 55% have rated that Supplier’s materials are unloaded promptly and stored properly and that the Deficiency/Rejection of Materials if any, is informed in time. This indicates the area of concern which if addressed properly can help enhance the satisfaction levels. It is important that utmost care is taken in handling & properly storing the material received from vendors. Deficiency / Rejection of Materials if any must be informed immediately so that corrective measures are timely taken. Only 50% respondents have indicated that Payments are made as per agreed terms. The reason for delay in payment could be on account of vendor or the buyer. On vendor’s part, it could be due to incorrect invoicing or incomplete documentation submitted for payment. 27
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME Delay in payment could also be due to cash crunch with the buyer. This needs to be analyzed on case to case basis. 9. RECOMMENDATIONS From the analysis it was noted that improvement is required in speeding up the time taken for registration process. For this it is recommended that a fortnightly or monthly review is to be held at the management level to review each pending registration cases and decide action plans to speed up the same. 1. The feedback system for rejection of registration needs to be improved. This could be improved by providing additional manpower to the supplier registration department. This aspect should also be reviewed at the management level meeting suggested above to ensure that feedback is sent to the vendor. 2. The documentation part during tendering and order placement stage needs improvement as the satisfaction level is average. It is recommended that the latest tools of sending soft copies like scanned drawings and documents is adopted to improve the satisfaction level of vendors. 3. Only 55% have rated that Supplier’s materials are unloaded promptly and stored properly and that the Deficiency/Rejection of Materials if any, is informed in time. It is recommended that utmost care is taken in handling & properly storing the material received from vendors. The concerned staff at the receiving stores must be given feedback of vendor’s observations and educated on the handling and storing aspects. Deficiency / Rejection of Materials if any must be informed immediately so that corrective measures are timely taken. This is important to ensure the early arrival of corrected/rectified material. 4. Only 50% respondents have indicated that Payments are made as per agreed terms. The reason for delay in payment could be on account of vendor or the buyer. On vendor’s part, it could be due to incorrect invoicing or incomplete documentation submitted for payment. It is recommended that a checklist of documents be provided to vendors to check completeness of documentation submitted for payments. Delay in payment could also be due to cash crunch with the buyer. Here it may be recommended that management conducts regular meetings to review the payment status of vendors and keep adequate reserve funds for the same. This study has clearly brought out the advantages of outsourcing with regard to reduction in cost, improvement in quality, work efficiency as well as provision for performing workers and professionals. The recommendations drawn from this intensive study will have far reaching implication in the improvement of the working of the unit, its efficiency and economy which is probably most important for any unit not only to survive but to grow in a competitive situation. 10. ACKNOWLEDGEMENT The study is a result of the help and guidance I have received from institutions and individuals. Firstly I feel indebted to the authorities of BHEL who permitted me to collect the relevant literature not only from the library but also from the records maintained. I could not have completed the research paper without the help and cooperation of the Vendors to whom I owe my thanks. Very often I have disturbed the HR Department of BHEL which was extremely cooperative and supportive throughout my entire study, Iam grateful to them. My research guide Late Dr.D.P.Sharma has been a great source of inspiration and guidance. 28
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 7, July (2014), pp. 16-29 © IAEME 11. REFERENCES 1. http://www.summitconnects.com/Articles_Columns/PDF_Documents/ 05_03_05.pdf. 2. http://www.computerweekly.com/blogs/read-all-about it/2010/07/government-spending-on- it-2009.html. 3. John B. Goodman, “Improving the Combat Edge through Outsourcingand Privatization,” The Outsourcing Leadership Forum, Washington, D.C., April, 1995, 10. 4. http://www.outsourcing-center.com/2005-05-input-report-us-government-outsourcing-to- grow-55-percent-by-2009-article-37629.html. 5. http://www.computerweekly.com/Articles/2010/05/27/241376/Government-spending-cuts- can-outsourcing-save-public-sector-IT.htm. 6. http://directorblue.blogspot.com/2010/05/one-answer-to-public-sector-unions.html. 7. http://www.outsourcing-center.com/2005-05-input-report-us-government-outsourcing-to- grow-55-percent-by-2009-article-37629.html. 8. http://directorblue.blogspot.com/2010/05/one-answer-to-public-sector-unions.html. 9. http://www.computerworld.com/s/article/108154/Labor_Crunch_Pushes_State_Government _IT_Departments_Toward_Outsourcing. 10. http://www.gartner.com/it/page.jsp?id=1284813. 11. http://www.tcs.com/news_events/press_releases/Pages/GOI-awards-Passport-Automation- to-TCS.aspx. 12. http://www.unisys.com/unisys/news/detail.jsp?id= 1120000970000310441. 13. Dr. Dattatry Ramchandra Mane, “To Study the Impact of Multi-Vendor Outsourcing on the Performance of the Suppliers and Rejection Levels”, International Journal of Management (IJM), Volume 4, Issue 2, 2013, pp. 273 - 284, ISSN Print: 0976-6502, ISSN Online: 0976-6510. Manuals 1. BHEL SUPPLIER EVALUATION, APPROVAL & REVIEW PROCEDURE (SEARP) Amended as on 2nd August 2010. 29