Buying business services: towards a structured service purchasing process

The Authors

Wendy van der Valk, Eindhoven University of Technology, Eindhoven, The Netherlands

Frank Rozemeijer, Maastricht University, Maastricht, The Netherlands

Abstract

Purpose – This paper aims to uncover the specific difficulties associated with buying services and proposes a structured purchasing process which can help organisational buyers to overcome the problems associated with services purchasing.

Design/methodology/approach – The authors investigate the supposed differences between goods and services procurement by means of literature research and a questionnaire distributed among Dutch purchasing managers. Additionally, they draw on experiences from additional case study research and business practice to better understand the results of the survey and to further explore the actual process of buying services.

Findings – The results of the literature review and the survey show that developing a proper specification is an important prerequisite for purchasing services successfully. Based on these findings, an expansion to the traditional purchasing process is proposed which incorporates the steps of pre-selecting suppliers and detailing the initial specification.

Research limitations/implications – The survey is limited to The Netherlands. Furthermore, the questions in the survey consider the respondent's perception and not the “truth”.

Practical implications – For organisational buyers, the importance of a proper specification implies that they should involve service providers early on in the service purchasing process. The service providers consequently can exercise the appropriate resources to develop a high quality solution, but need to be able to demonstrate this added value in these early phases of the services purchasing process.

Originality/value – The paper adds to the discussion on buying services and tries to find out why this is perceived as complicated. It highlights three problem areas and proposes a solution to tackle these.

Article Type:

Conceptual paper

Keyword(s):

Services; Buyer-seller relationships; Purchasing; Specifications; Performance management.

Journal:

Journal of Services Marketing

Volume:

Number:

Year:

2009

pp:

3-10

Copyright ©

Emerald Group Publishing Limited

ISSN:

0887-6045

An executive summary for managers and executive readers can be found at the end of this article.

Introduction

This paper investigates when and what kind of difficulties arise when buying business services in order to help buying companies to develop an appropriate process for these purchases. With business services we mean services that are exchanged between organisations such as ICT services, consultancy, cleaning, marketing and legal support. The purchase of these services has become a substantial element in a firm's total acquisition of external resources (Axelsson and Wynstra, 2002; Van Weele, 2005). At the same time, there are many opportunities in the area of buying business services. Bales and Fearon (1995) state that the opportunities for increasing profits through more effective purchasing for service buying is large. Stradford and Tiura (2003) show that when cost savings were pursued, the savings on services ranged from 10 to 29 percent versus an average of 5 to 17 percent for other commodities or materials. Patel (2005) interviewed 30 main board directors of leading companies and observed that 70 percent of them worry about how their companies buy professional services (e.g. consulting, legal, banking and marketing services). They also believed that CPOs and their procurement departments can make a difference in service buying and want them to do so.

Research in the area of purchasing has traditionally focused on the purchasing process for industrial goods. Wittreich (1966) states that “unfortunately, the tried and true rules for buying goods do not work when applied to the buying of professional services”. Organisational buyers consider the purchase of business services as being essentially different from the purchase of goods (Jackson et al., 1995; Stock and Zinszer, 1987). Axelsson and Wynstra (2002) claim that the characteristics of services (intangibility, heterogeneity, simultaneity and perishability), affect the purchasing process in the sense that certain aspects become more important and/or difficult than, or just different in comparison with, the purchase process for goods. This may imply that the purchasing practices for goods cannot directly be applied to services.

Vargo and Lusch (2004a, b) discard the four service marketing “myths” as these do not distinguish services from goods. For example, many services can have tangible results. Gummesson (2000) provides the example of being on the operating table of a hospital). For products, intangibilities, such as brand image, can be equally or even more important than its tangible characteristics (e.g. the i-Pod from Apple). Assuming that services and goods are not that different, it seems counterintuitive that organisational buyers experience difficulties with buying services. This paper, therefore, investigates conceptually where and why these difficulties arise and proposes an adjusted purchasing process for business services. We posit that these difficulties mostly relate to the interactive nature of services. The interaction model (Håkansson, 1982) has extensively dealt with the interaction that takes place between buyers and sellers after the contract has been signed: in our view, the interaction between buyer and seller in the initial stages of the purchasing process is equally important.

The structure of the paper is as follows. First, the specific issues associated with services buying will be explored in a literature review and a survey conducted among Dutch purchasing managers on their current services purchasing processes. Subsequently, the three main problem areas identified are discussed in more detail. Then, an expansion to traditional purchase process models is proposed, which in our view helps to overcome the problems observed. We conclude the paper by discussing the applicability of our process and by identifying areas for further research.

Buying business services

Academic knowledge about services purchasing seems limited in comparison with knowledge about product purchasing (Sheth, 1996, p. 14). An analysis of the articles in The Journal of Supply Chain Management showed that of the 774 articles published in the first 35 years of the journal's existence, less than ten were on services purchasing (Carter and Ellram, 2003).

The little research available has demonstrated that purchasers view the purchase of services to be substantially different from the purchase of goods. Jackson et al. (1995) find that determination of quality is more difficult for services than for goods and that a higher degree of collaboration between buyer and seller is required. Fitzsimmons et al. (1998) point out that the purchase process for services is more complex because it implies different risks for the buyer with regard to evaluating the vendor, and specification and evaluation of the service. Smeltzer and Ogden (2002) also mention as risks evaluating performance, writing statements of work, and added establishing target costs and total costs. They also stress, however, that top management perceives services buying as less complex than materials buying, as a result of which they tend to assign new and inexperienced buyers to services buying.

These findings originate from the four generic characteristics of services intangibility, simultaneity, heterogeneity and perishability (Grönroos, 2000; Kasper et al., 2006; Lovelock, 1983; Zeithaml and Bitner, 1996). The intangibility of services makes it difficult for organisational buyers to examine them in advance of, or even after, the purchase. Day and Barksdale (1994, p. 49) argue that the client level of expertise regarding the service purchased can complicate the purchase process: in the case of novice buyers (who, according to Smeltzer and Ogden (2002) are usually assigned to services), the service provider may have to educate the buying company about what can be achieved considering the budgetary and time constraints at hand. This echoes Burton (1990), who claims that the characteristics of services make it more difficult for consumers to understand the decision concerning the selection of a particular service provider than to understand the decision between brand alternatives in a product class. Service marketers, therefore, help the consumer construct a frame of reference and have latitude in doing so. This equally applies to a business-to-business setting.

Furthermore, services are mostly consumed and produced simultaneously in interaction between customer and service provider, which implies a dual role for the buying company (both consumer and co-producer). Empirical research by one of the authors indicates that this production responsibility of the buying company is often neglected during the purchasing process. It seems to be difficult to determine the supplier's and the customer's responsibility. Furthermore, services are provided by human beings and as such are related to the exchange of human knowledge, expertise and capabilities: since these objects of exchange can fluctuate (Ellram et al., 2004), it is difficult to produce services with consistent characteristics and quality.

Finally, services cannot be stored; they exist only during the time of production. This emphasises the importance of a well-defined service recovery process to compensate for inaccurate forecasting and planning.

The alleged differences between goods and services are reflected in the results of a recent CAPS (2003) study, in which respondents reported lower levels of competence in sourcing, procuring and managing services as opposed to goods (weighted averages of 4.5 for goods versus 3.7 for services, rated on a five-point Likert scale). A NEVI (i.e. Dutch Association for Purchasing Management) Purchasing Excellence benchmark study (2002) revealed that the best performers in the information intensive services and asset intensive services industries were lagging behind in purchasing excellence compared with the best performers in other participating industries (e.g. mass manufacturing, project industry, consumer products, raw material processing). Also, since 1984, the vast majority of the medals of excellence that US based Purchasing Magazine has awarded to companies for outstanding purchasing performance were given to companies from manufacturing industry compared to services industry (www.purchasing.com).

A US study into the involvement of internal departments in goods and services purchases among 158 private and public organisations shows that the purchasing department is involved in only 41 per cent of total purchases (Bales and Fearon, 1995). Smeltzer and Ogden (2002) conclude that the purchasing department is much more likely to be by-passed when services rather than goods are being purchased. In many companies, services are seen as non-strategic and are often bought indiscriminately. Ellram et al. (2007) state that the decentralised nature of the services buying community (“users”) creates an opportunity to place orders with an unapproved supplier or for the supplier to deliver a non-standard service. The services that are regarded as important and strategic are, on most occasions, bought by non-purchasing specialists (content professionals like marketers, and logisticians). Van Weele (2005) states that internal customers and specialists have strong relationships with their suppliers in which they do not want purchasing to interfere. In the cases where the purchasing department is involved, it seems that the purchase process for services is perceived as being different (Jackson et al., 1995) or even more difficult (Ellram et al., 2007; Smeltzer and Ogden, 2002). The next section elaborates on the specifics of the purchase process for services.

The purchase process for services

In our review of the purchase process, we draw on the six-step model by Van Weele (2005) (Figure 1). Although the purchase process has been modelled in many ways (see for example Day and Barksdale (1994, 2003) for a purchase process for services), in our opinion, they all come down to the six basic steps identified by Van Weele (2005). The process starts by determining specifications. Then, a suitable supplier is selected and contracted. During the contract period, goods or services can be ordered from the supplier, and these orders should subsequently be monitored and controlled. A final step in the process is evaluation of the contract/supplier.

Axelsson and Wynstra (2002) argue that as a result of the characteristics of services, some aspects of the purchase process become more difficult, more important or just different in comparison with goods. Firstly, services are hard to evaluate in advance of the purchase (or even in hindsight), thereby complicating supplier selection. Issues like supplier staff competencies and “customer skills” should be added to the existing purchasing criteria. Secondly, services are difficult to quantify in terms of costs and thus difficult to price. Even more difficult is the assessment of the value gained from purchasing the service in relation to the cost of acquiring the service. Finally, capacity and demand management, service recovery, personnel and the physical environment in which the service is provided are associated with certain difficulties. From the supplier's perspective, a thorough understanding of the customer's business processes is needed in order to be able to offer the most suitable service solution. Van Weele (2005, p. 336) emphasises a variety of additional aspects when buying services, among which are the level of “cultural fit” with the service provider and the issue of dispute resolution procedures. These latter issues underline the need for interaction between buyers and providers during the initial stages of the purchasing process.

Consequently, Axelsson and Wynstra (2002) claim that, compared to the purchase process for goods, differences can occur with respect to the amount of time spent on each stage of the purchase process, the level of detail with which each stage is carried out, the number and type of disciplines involved, and the information being exchanged between buyer and suppliers.

In a recent survey we explored the perceptions of Dutch purchasing managers on the differences between buying goods and services. We used paper-based questionnaires, which were distributed to members of the Dutch Association of Purchasing Management (NEVI), who were asked to indicate on a five-point Likert scale, ranging from 1 (totally disagree) to 5 (totally agree), the extent to which they agreed with a number of statements on buying services:

The buying process for services is different from the buying process for goods.
Services are bought in a less professional manner than goods.
Defining specifications is much more difficult for services than for goods.
When buying services, “soft” supplier selection criteria (e.g. trust and openness) are more important than “hard” supplier selection criteria (e.g. price and quality).
Quotations from service suppliers can hardly be objectively compared.
When buying services it is more difficult to: A. define a “good” price; B. define the added value; C. define the service level.
A good contract agreement is more important when buying services than when buying goods.
It is much more difficult to measure the performance of service suppliers than of suppliers of goods.
The internal customer has a stronger influence on the buying process when buying services than when buying goods.
The concept of total cost of ownership is not applicable to services.
It is more difficult to conduct a make-or-buy analysis for services.
There is insufficient (scientific) knowledge available on buying services.

Early October 2004, the survey was sent out by mail to 1,090 potential respondents. The survey consisted of an invitation letter for a seminar on buying services, a short summary on the survey and the questionnaire. After closing the response period early November 2004, 71 completed questionnaires were received by fax and e-mail, which adds up to a response rate of 6.5 per cent. However, our non-response analysis did not show substantial differences between respondents and non-respondents. The findings were discussed during a NEVI seminar, which was attended by about 100 participants (some of whom have filled out the questionnaire): in general, most attendees agreed on the findings.

The results demonstrated that the 71 respondents feel it is more difficult to develop specifications for services than for goods. The respondents also state that preparing for a detailed service level agreement (SLA) usually takes more time and effort and that it is more difficult to evaluate the performance of services providers. Similarities with buying goods are mainly found in the stages of selecting and contracting suppliers. The respondents indicate that the activities of defining supplier selection criteria, comparing supplier quotations and contracting suppliers do not differ much (a detailed write-up of the survey results can be found in Van der Valk et al. (2005)).

Axelsson and Wynstra (2002) claim that not only is the initial purchase process for services different; also, the exchange processes following the purchase differ from the exchange processes for goods. In line with the services marketing discipline, which has consistently emphasised that services are produced and consumed in interactive processes between the buyer and the seller (Grönroos, 2000; Zeithaml and Bitner, 1996), Wynstra et al. (2006) argue that the main driver of differences in exchange processes is the presence of ongoing interaction between buyer and seller during the service exchange. It is in this service exchange that value is co-created (Vargo, 2006). This customer/co-producer duality implies that the buying company has a pro-active role to fulfil in the development, delivery and production/consumption of services. As such, the activities that make up these daily processes are very important in the case of services.

This idea of ongoing buyer-seller interaction has been extensively dealt with by researchers in the Industrial Marketing and Purchasing (IMP) Group (Håkansson, 1982; Håkansson and Snehota, 1995; Ford, 2002), but then in the context of industrial goods.

Many companies, however, seem to have neglected this aspect of ongoing interaction, and focus their attention on the initial stages of the transactional purchase process. Consequently, they run into problems in the ongoing phases of the contract. A study by one of the authors into successful interaction between buyers and sellers of business services showed, for example, that active contract management is a key success factor for successful service purchasing. Buying companies that had defined and designed their daily dealings with the supplier (in terms of people involved, communication channels and topics to be discussed), experienced fewer problems during the contract period and were relatively more satisfied with both the process of service delivery and the service delivered. Designing the ongoing interactions however is something that takes place in advance of signing the contract, thus, in the initial stages of the purchase process.

Towards a structured services buying approach

The survey findings identified three main problem areas in the purchase process for services:

Specifying the service.
Defining the specific content of an service level agreement.
Evaluating performance.

The difficulties with specification have to do with identifying the content of the service before it is purchased. Day and Barksdale (1994) state that the definition of “purchasing goals” is crucial for the steps following the specification (i.e. supplier identification and at a later stage, evaluation) in order to ensure the desired level of quality concerning both the client-provider relationship (i.e. service delivery) and the final outcome. They also state that such a definition is rarely found when studying the purchase of services. Fitzsimmons et al. (1998) claim that the specification of the service being bought is often less precise; Smeltzer and Ogden (2002) also say that service specifications are often less complete. Inline with our survey findings, Jackson et al. (1995) finds that buyers seem to feel that it is more difficult to develop service specifications than goods specifications. Developing specifications is a complex and time-consuming process and many of the buying companies we have dealt with in research or practice thus seem to be reluctant to conduct this step in the purchase process very thoroughly. However, they underestimate the consequences of not putting in the right amount of effort.

As a result of not putting in the required effort, it will become more difficult to determine the desired service levels and the specific content of the Service Level Agreement (SLA) on which the contract is based.

When a proper specification and SLA are lacking, the buying company (nor the supplier) will know what needs to be measured and how. This is in agreement with Smeltzer and Ogden (2002), who state that the complexity of the purchasing process for services depends primarily on the clarity and preciseness of the specification.

We, therefore, argue that the success of the service purchase is primarily determined during the first stage of the purchasing process. In developing specifications, one of the first steps is to identify the relevant stakeholders and to determine to what extent and in which way these people are affected by and/or are involved with the service, since this will help to identify each individual's objectives. Then, the buying company should think about what kind of specification they want to put on the market. Axelsson and Wynstra (2002, pp. 143-144) discuss four methods of specifying services.

We use the example of buying management consultancy to illustrate how these four specification methods differ. When the buying company specifies the service as a consultant with a certain degree and level of experience for a certain period of time, they use an input specification. When they specify a process of regular meetings with the consultant aimed at redeveloping the purchasing strategy, this is referred to as a throughput specification. When the specification is to attain an improved purchasing strategy, it is an output specification. Finally, when quantifying the final objective, for example as 10 per cent savings on contracts with partner suppliers, the buying company uses an outcome specification.

After the specification has been determined, the buying company usually moves on to the stage of supplier selection. However, business services are produced and consumed in interaction between buyers and sellers, which implies that some sort of coordination has to take place to fine-tune how the supplier and the buyer are actually going to work together in service delivery. Furthermore, as was noted earlier, it is very difficult for the buying company to determine the complete and exact content of the service upfront.

We therefore argue that instead of moving on to supplier selection, the buying company should take two additional steps:

The buying company needs to make sure that the specifications they have developed are complete and accurate. This step will be referred to as the initial specification step.
Buying companies should: send out requests for information to suppliers; and use the information obtained to, in interaction with the suppliers, develop a detailed specification.

Thus, interaction between the buyer and multiple potential sellers is required early on in the process. This enables the buying company to compare different solutions early on in the purchase process, and provides them with an opportunity to incorporate supplier innovative ideas into the detailed specification. The development of an initial specification with a sufficient level of detail requires an activity that is sometimes referred to as upfront SLA-thinking. An example one of the authors encountered in practice comes from a company buying catering services: this buying company agreed with the service provider to include value-adding initiatives in the specification, such as, making efforts to increase the number of customers and/or their average amount of payment, to reduce queuing at the cash register, or to improve the taste of the food (for example: average time per employee between entering the queue and payment at the register). These value-adding initiatives then need to be translated into smart collaborative KPI's.

Thus, we add two steps to the original process by Van Weele (2005): request for information and detailed specification (Figure 2), thereby extending IMP's notion of interaction beyond the ongoing relationship into the initial stages of the purchasing process. By thinking in advance about what is being bought and of what the performance of this service comprises, the service buyer and internal client together determine the SLAs. Through this, the buying company forces itself to become explicit upfront about what it is they exactly expect from the service provider (e.g. customer value) and who is responsible for which part in realising that value, both from the supplier and the buyer sides. The detailed specification is in that case developed together with the suppliers, based on the initial input from the buying company.

Upfront SLA thinking facilitates moving to performance-based contracts in which suppliers are rewarded for their contribution to the output and/or outcome of the collaboration (e.g. customer value, customer satisfaction). Also, KPI's are determined by both buyer and supplier and based on a shared deep understanding of the cross organisational processes that deliver the value (Akkermans and Van Oppen, 2006).

In our view, this could be viewed to some extent as “service development”, since the buyer and the supplier jointly develop the service into something that is customised for their exchange only, and which satisfies both the requirements of the buying company and the service provider. This view is supported by Jackson et al. (1995) who argue that the difficulties associated with developing services specifications implies that industrial services marketers need to collaborate more closely with their customers during the specification stage.

Subsequently, a selection decision can be made, not only for the best alternative in terms of service specification, but also for the best alternative in terms of ongoing buyer-supplier interaction. After all, by jointly detailing the specification, buyer and supplier obtain some shared understanding and ideas of their mutual fit in terms of culture, attitude and behaviour, and processes and systems.

Conclusions and discussion

Business services can have a significant impact on the functioning of organisations, since poor purchase decisions can lead to poor performance and, likewise, good decisions to good performance (Mitchell, 1994; Soriano, 2001; West, 1997). This result stresses the importance of conducting the service purchase process thoroughly and accurately.

This article has presented a structured process for purchasing business services. Building on the results of a literature review on buying business services and a survey among Dutch purchasing professionals about the practice of buying business services and the associated problems, we have extended the traditional purchase process by Van Weele (2005) with two important sub-steps:

develop an initial specification with a sufficient level of detail; and
obtain information and input from suppliers to further detail the specification.

We are thereby extending IMP's notion of interaction beyond the ongoing relationship into the initial stages of the purchasing process. We would like to highlight that it is important to, in the initial stages of the purchase process, take notion of the buyer-seller interactions that will take place after the contract has been signed. This results in a need to clarify those processes (read: the service solution to be developed and the actual delivery of the service) already in the specification/selection stages. As such, the buying company is forced to thoroughly think through its processes before going on the market, while at the same time, the buying company can fully benefit from the specific expertise and innovative ideas of service providers.

We do not claim that developing a proper specification upfront will be a one-time effort: over time, things will change and specifications have to be adjusted accordingly. It seems, however, that many buying companies use the fact that service specifications will change a number of times as an excuse for not thoroughly thinking through the specification upfront. We argue that if valuable collaboration with a service provider is to be sustainable, a lot of work should be spent on aligning contractual arrangements to present-day realities. Typically, this requires substantial efforts from everyone involved in both supplier and buyer organisations. This could be facilitated by some kind of exchange of suggestions for improvement from customer to supplier and vice versa (i.e. supplier suggestion program). Apart from the traditional customer satisfaction surveys, we also propose conducting so-called supplier satisfaction surveys. Through these surveys, suppliers are formally invited to indicate how they experience the collaboration with their customer and what they think can be improved (Rozemeijer and Van Weele, 2002).

Carrying out a service purchase properly is something the purchasing department cannot do on its own: it must work cooperatively with other departments if it is to make a meaningful contribution throughout the purchasing process. As one respondent stated in a study by Schiele and McCue (2006, p. 317):

Purchasing needs to do a better job at promoting itself. I was just not aware of what they could do for me … Having gone through this experience with the purchasing department, I will never do it again without them!

This is in line with Patel (2005), who states that an important way for purchasing to become involved in the buying of business services earlier is through internal marketing.

Managerial implications

We believe that our structured purchasing process for business services could benefit many purchasing professionals today, especially for the more complex professional services. A trend can be distinguished which shows that purchasing specialists are increasingly trying to get involved in the purchase of these important, large-spend services (Axelsson and Wynstra, 2002).

At the same time, the increased involvement of purchasing professionals in the purchase of such services sets certain requirements on the level of expertise and skill set of these professionals, and, as such, has implications for human resource strategy. Schiele and McCue (2006) suggest that purchasing professionals must be perceived by their business counterparts as benevolent and technically capable of contributing to purchase decisions and that management should, therefore, invest in developing the capabilities of the purchasing department's personnel. The survey findings also indicated that the respondents feel that there is a knowledge gap with regard to the purchase of business services. This opinion was found to be strongest among the CPOs that filled out the survey.

The implications of the extended purchasing process for the service providers are that they must try to be invited to the buyer's table as early as possible. Jackson et al. (1995) argue that since buyers deem drawing up specifications for services to be difficult, industrial services marketers need to closely collaborate with their customers in the specification phase. Burton (1990) discusses that service providers have the opportunity to help the decision-makers construct a frame for decision-making. For some services effective framing of the purchase/no-purchase decision precedes the frame pertaining to selecting from alternative providers.

Limitations and future research

A few critical remarks can be made with regard to this paper. First of all, all the ideas are conceptually developed and lack empirical validation. Although we have drawn on personal experience in business and a survey, our ideas need to be substantiated. Future research could be directed at intervening in an actual purchase process and implementing the structured services purchasing process (action research) to see whether this approach results in higher buying company satisfaction with the purchase process and with the exchange processes that follow. Another area for future research is to investigate the decision-making process for different types of services. Fitzsimmons et al. (1998) suggested that the decision process for services might differ depending on the service to be purchased. Smeltzer and Ogden (2002) state that an important future effort is to determine the extent to which differences exist between different categories of services. In order to identify such categories, Lovelock (1983) posits that one should look at the characteristics that draw services together rather than at the characteristics that set them apart. Thus, a categorisation system needs to be developed which integrates service characteristics and common dimensions among service types (Smeltzer and Ogden, 2002). This is in line with the results of our study among Dutch purchasing managers. The main results of our survey were discussed with the respondents during a seminar. The main lesson learned from that discussion was that the respondents found it difficult to fill out the survey, because for some services they agreed with the statement and for other services they did not. For example, a specification for cleaning services was not deemed to be much more complex than many other goods specifications, but a specification for strategic consultancy was. A classification of business services seems necessary when analysing and discussing buying business services. Current research conducted by one of the authors is aimed at determining the meaningfulness of a classification of business services, which is based on how the buying company uses the service with regard to its own primary processes (Wynstra et al., 2006). Roughly, the classification makes a distinction between services that remain within the buying company and services that are passed on to customers of the buying company. Wynstra et al. (2006) posit that the customer usage dimension is one of the main determinants of effective buyer-seller interfaces and interaction patterns. For example, each of the service types requires the involvement of different functional disciplines in the buying process. This is in line with Stenberg and Virolainen (2000), who state that the characteristics that are common for various services help purchasing managers to understand the service to be purchased in relation to the purchase process and to the buying organisation and its relationships with service providers.

Driven by outsourcing and specialisation, there has been explosive growth in demand for business services (e.g. ICT, cleaning, consulting, accounting, security) over the last decade. However, there has not been a parallel explosion in the most appropriate means of organising their supply or managing their performance. The majority of the service providers believe that they are offering high value to their customers. However, the nature of the value they deliver and the costs associated with its provision are often not challenged by their customers. We, therefore, propose that for services purchasing, the traditional purchasing process should be expanded to explicitly incorporate the steps of pre-selecting suppliers and detailing the initial specification in close collaboration with these suppliers. In this way, both parties can jointly make an effort to maximise the value for the buying company, and, as such, also for the service provider.

Figure 1Purchasing process

Figure 2Extended purchasing process

References

Akkermans, H., Van Oppen, W. (2006), "Offensive KPIs: improving buyer-supplier collaboration in interorganisational service supply networks", presented at the International System Dynamics Conference, Radboud University, Nijmegen, .