Over the last two years, I have managed a global rollout of our MSP program, which spans approximately 50 countries and entailed merging two organizations — each with its own processes, tools, supplier bases, etc.

One of the key activities in that process was to merge, rationalize and optimize our supplier base to fit our organizational and business needs, something many organizations are looking to do as they strive for further efficiencies and cost improvements.

Once established — assuming it is set up properly — supply base optimization should be an “evergreen” process and not a one-off exercise. Here is how we approached the process.

Goldilocks approach. Supply base rationalization is a starting point and it is necessary to determine the right number of suppliers are in place to cover our capability and geographic needs. Ideally, we’d have five on each req, but at least three and not more than eight to 10.

This process comprised several steps. For example, we reviewed all labor suppliers in use and considered their size based on our spend and headcount with them. We also took into account the suppliers’ geographical coverage as well as their capabilities. For example, are they niche providers with unique capabilities or do they have a wider range of capabilities? We took into account our own business needs and plans as well — would this be a one-off demand as per client project need or a longer-term or new offering capabilities?

Capabilities and geography. To review in more detail suppliers’ capabilities and geographical coverage, we developed a brief questionnaire, in which suppliers listed the number of assignments with us they had per location.

Stacking them up. Using all of the data collected, we grouped suppliers into three categories: strategic/gold, regular supplier/silver and supplier on probation/bronze. Bronze suppliers are reevaluated at the next quarterly supplier performance review, at which time they could be moved up a level or slated to be delisted upon the completion of their existing orders.

Based on that, we developed a maintenance and onboarding strategy.

Leave the supplier in place and terminate at the end of the services if the project is no longer than six months.
Onboard via a payroll/umbrella supplier and sunset organically after services are completed.
Onboard directly into the program. These suppliers (and only these suppliers) will be receiving new and future open requests for contingent labor.

After implementation, it’s a matter of maintenance, which requires having regular discussions with your MSP and/or suppliers regarding any issues that you may have. With the help of score cards, you can discuss their performance and delivery, ensuring you are focusing on the right metrics and maintaining a balance. And if a supplier’s performance is not meeting expectations, be prepared to work out an action plan, including taking the step to delist.

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Cultivating the optimal supplier base

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