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Operational contract management
“Operational contracts” often involve the
repetition of similar activities (e
...
supply of
production components, office cleaning services,
etc
...
2-1

Operational contract management
Contrasting the approach (cont’d):

 Risks

 Sometimes there is less risk to worry about
 Having a risk register is still useful!

 Measuring & controlling performance:

 This is equally important here
...
although the process may be less formal
 Sometimes there is no need for a review report

 Contract administration & relationship
management:

 Are broadly similar and equally important

ITC

M9:U8:8
...
2-1

Operational versus project-type contract
management
Describe the main differences of approach in your company
(or one that you know well) between managing operational and
project-type contracts
...
2-3

Line of Balance

 Technique for planning, monitoring &

managing repetitive projects and replicating
production-line processes

 LOB computations can be used to estimate

feasible production capabilities in terms of:




ITC

Duration scheduling
Planning unit quantities

M9:U8:8
...
3-2

Action Point

8
...
You have
been appointed as contract manager and you want to use the
Line of Balance technique to plan, monitor and manage the
contract
...
It shows the milestones and the
duration of each activity linking the milestones
...
3-3

Action Point

8
...
Prepare the production flow plan for one end item unit
...
Prepare the time-line ruler representing a single unit
cycle
...
What is the pacer activity in this process?

4
...
3-4

Line of Balance

 Planning & evaluation
 Determining a realistic production schedule

ITC

M9:U8:8
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3-2

Line of Balance – realistic production schedule
After the preliminary steps covered in Action Point 8
...
Use the data and your answers from
Action Point 8
...

1
...


ITC

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3-2 (Cont’d)

Line of Balance – realistic production schedule
2
...

3
...


ITC

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3-2 (Cont’d)

Line of Balance – realistic production schedule
4
...

5
...


ITC

M9:U8:8
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3-9

Action Point

8
...
Use the data and your answers from
Action Point 8
...

1
...


ITC

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3-3 (Cont’d)

Line of Balance – realistic production capability
2
...

3
...


ITC

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3-12

Action Point

8
...
Three cabins
need to be finalised and the production schedule has
been calculated to be 18 weeks (with only one team
consisting of specialised crews for each activity is
available)
...
3 1 to answer the following questions
...
Plot the individual milestones of each sub-process to
create the planned production schedule
...
3-13

Action Point

8
...
You have been asked to prepare a progress report in
week 9
...


ITC

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3-4 (Cont’d)

Line of Balance – monitoring & progress analysis
3
...
Plot these data on the progress status
chart
...


4
...
If there is any delay, which activity is
causing this?
ITC

M9:U8:8
...
)
Delegation of call-off responsibility
Stock holding
Elimination of inspection / quality assurance

 Leverage





ITC

purchases

Demand forecasting
Re-engineering of processes
Benchmarking against industry norms
Using e-commerce (e
...
auctions)

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4-2

Action Point

8
...

• Operational strategy 1

• Operational strategy 2

ITC

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5-1

Action Point

8
...


ITC

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switching

 Extend the contract if:

 The supplier is performing satisfactorily
 The supplier is able to accommodate future
needs

 The terms of the extension are competitive
(e
...
for leverage & critical items)

 The costs of switching to an alternative
source of supply are substantial

t
c
a
r
t
n
o
C
ITC

M9:U8:8
...
switching
 Switch to a new supplier if no option to renew
exists or if extending is unacceptable

 Always review the contract before inviting new
suppliers to offer & get feedback from users

 Make sure you revise the specifications to:

 reflect any changes in needs
 ensure the flexibility to accommodate any future



ITC

needs
incorporate the learning from the past contract
ensure that the specification has not been written
around a particular supplier
M9:U8:8
...
switching
 Managing the supplier transition phase
 Consider the risks associated with changing
suppliers

 Communicate any new arrangements to all
concerned

 Training of staff may be required
 If services will be provided at
the buyer’s premises, supervision,
security, etc
...
6-3

Action Point

8
...
switching to a new supplier
Look at a contract for an ongoing requirement that you
are involved in and that is close to ending, and answer the
following questions:
• Assess whether you would recommend renewal of the
contract or switching to a new supplier
...


• What kind of transition problems would you expect if your
company would decide to switch to another supplier, and
how could these be prevented?

ITC

M9:U8:8

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