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Implementing Effective Vendor Consolidation

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Companies on board with the non-traditional worker revolution understand the importance of effective supplier management. Indeed, the expanded use of statement of work (SOW) and independent contractors, freelancers, and consultants has been driven largely by the desire to control how much companies pay talent providers. Unfortunately, poorly controlled supplier relationships can cost organizations as much as half the cost savings they ordinarily would achieve through a comprehensive contingent labor program. The challenge is to bring talent vendor spend under greater control while maintaining security, fulfillment, and compliance and avoiding missing out on technology that can make the workforce more productive and labor demand more predictable.

Perhaps the best way to accomplish this is through vendor consolidation. By reducing the number of vendors providing contingent talent for your company, you can get a better handle on quality, fulfillment rates, lead times, and total transaction costs. You also will shorten the spending tail and make your workforce program more strategic through active management. Assessing each current supplier to determine its customer service, cost effectiveness, and any specialty procurement areas it covers is the first step. Those that do not qualify as active, value-adding partners can be safely dropped. Top performers can be short-listed and assigned to provide workers of the type and in the geographies in which they thrive.

Firms without short-list or preferred vendors subject themselves to an unwieldy, transactional procurement process. When a new service request is issued, multiple (often very similar) suppliers vie for the contract. Low bids win with little regard to how the vendor’s strengths stack up against the position needs. As transactions mount, different bid winners emerge. The company engages even more suppliers while collecting little relevant data. Costs fluctuate widely, quality suffers, and chaos reigns.

Enter the MSP

Still, many companies muddle through because they lack the staff resources and/or the institutional stomach for managing their vendors efficiently. The in-house approach requires significant change that can disrupt the entire organization. It requires dedicated employees, significant expense, revised workflow, and the participation of multiple stakeholders. It also requires some expertise as to how to categorize and evaluate dozens of labor suppliers based on factors such as regulatory and work rule compliance, fill rates, markups, worker quality, specialty niche, and more. Companies often determine that this is a job for a managed service provider (MSP). An MSP versed in your industry can make significant, money-saving and productivity-enhancing inroads into supplier consolidation. Partnering with an MSP to consolidate your vendor stable can improve service quality and reduce costs by inciting competition among suppliers seeking to win requisitions, carve out new territories, and offer additional services. The potential to garner additional shares of a company’s labor market spurs suppliers to devote additional personnel and other resources to ensure the customer is satisfied with their service.

Organizations trusting MSPs to optimize their non-traditional workforce management programs should insist their outsource partner deliver in several key areas:

  • Cost savings – As discussed above, working with fewer vendors concentrates your labor spend. Your MSP should be able to negotiate price breaks in exchange for the greater volume accruing to the chosen suppliers. Limiting the number of suppliers also allows the MSP to standardize and automate processes, saving time, effort, and expenses that it can share with you.
  • Objectivity – Quality MSPs develop workflows to ensure all preferred vendors are treated fairly. All will be fully informed as to the requirements and protocols for each requisition that is opened. This not only ensures a level playing field, but also allows the MSP to grade all suppliers on the same criteria.
  • Quality candidates and service – Suppliers know they will be gauged against their competitors, so they will strive to improve customer service and to provide fully qualified workers to fill each job.
  • Compliance – Compliance and worker classification verification is one of the most important services MSPs provide. Working with fewer vendors gives your MSP the time it needs to fully understand the way they work. This insight helps keep you compliant with tax and labor regulations as well as your internal rules for talent procurement.
  • Risk management – While supplier consolidation achieves its advantages by reducing the number of labor vendors in use, strong MSPs will build in failsafe measures to ensure their client companies are never left in a bind because their requisitions cannot be filled. They will fill the labor stable with the right mix of large and specialty suppliers to cover all contingencies and build vendor relationships that can grow along with the company.
  • Diversity – It may seem counterintuitive, but consolidating the supplier pool can actually increase the diversity of both vendors and the skilled labor they provide. While we will discuss supplier diversity in our next post, it is important to understand that each supplier brings its own strengths and specializations to your workforce management team. Better MSPs will have established protocols for engaging businesses owned by historically disadvantaged suppliers and that include women, ethnic minorities, the LGBT+ community, veterans, and other underrepresented populations among their candidates.

Metasys takes the burden of dealing with multiple talent providers, not only consolidating your suppliers, but allowing you to marshal your other resources for value-adding activities. When Metasys coordinates your contingent workforce vendors, you can rest assured that you will receive standardized billing and rates. We will integrate our services with your business processes, working collaboratively to optimize your resource management activities. Contact our experts to learn how Metasys can solve your labor supplier management needs.

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