On the surface, it may seem like having an abundance of suppliers vying for an open position means a better chance of finding a good candidate and filling the position. However, the opposite is true, with too many suppliers leading to inferior service and candidate quality. Leading programs realize that and are taking heed.
In SIA’s 2019 Workforce Solutions Buyer Survey [1], 66% of large companies cited “consolidation of staffing suppliers” as a workforce management strategy currently in place in their organization; 30% said it is a strategy likely to be seriously explored within two years.
“When we look at the top-performing programs — the best-in-class contingent workforce programs in the world — all of them have a really strong supplier strategy,” says Frank Enriquez, senior manager of contingent workforce strategies and research for Staffing Industry Analysts. And they keep a limited number of suppliers in their stable.
When looking at supplier consolidation through the lens of the QECR (quality, efficiency, cost, risk) performance framework — key dimensions that define a program’s overall performance — Enriquez notes that quality and efficiency decrease when requisitions are released to more than 20 suppliers, while risk and cost remain about the same. But at the other end of the spectrum, research finds that when requisitions go to only five to eight suppliers, quality and efficiency increase, cost goes down and risk is unchanged. Suppliers are more motivated when they have a one-in-five chance of filling the order than they are when the odds are only one in 20, and efficiency improves as fewer résumés and candidates need reviewing.
Pipelining
In a good relationship, suppliers know what the business’s future needs are. And when facing less competition, they will be more inclined to prepare proactively, investing time and energy on the chance they will get future business.
Conversely, it is difficult for program managers to effectively share what is coming down the pipeline with a large number of staffing firms. And even if they know what is on the horizon, staffing providers will hesitate to invest much time and energy when their candidate will have only a small chance of being selected, given the large pool of competing firms.
Additionally, a program with a large provider portfolio may likely automatically cap a requisition after a certain number of résumés are submitted to avoid having to review a plethora of candidates. As a result, recruiters will rush to submit and may not spend the time necessary to present top candidates.
“Now it just changed it into a speed game, because a supplier knows that if they are not on the ball and don’t submit a résumé within the first four to eight hours, they are going to get locked out,” Enriquez explains.
‘Plant to harvest.’ A few red flags signal the need to review supplier count.
Net promoter scores can reveal what your engagement managers think of your program; also consider whether time-to-fill is taking longer than you would like. And an excessive number of interviews may indicate a program’s provider portfolio is missing the mark early.
Turnover is another metric worth tracking for this purpose, albeit a “tricky one,” according to Enriquez. “The VMS technology is just not as sophisticated as we need them to be when it comes to turnover and measuring the reasons why and having direct input,” he says. “They have dropdowns and all that, but it’s just loose.”
An inferior candidate turns into an inferior contractor, but an engagement manager who endures a difficult three- to four-week process to get a person may keep a poor performer on board because they provide at least some amount of help. This, in turn, leads to higher turnover and less satisfaction at the end of the assignment because the dots are not connected properly early enough in the process.
Consider the saying, “You have to plant to harvest,” Enriquez says. Too many contingent workforce programs tend not to think that way, though. “We don’t plant to harvest. We don’t think about doing the work upfront.” But programs should. And once the groundwork is done, the process can keep itself going.
Take, for example, the MSP program at DCX Technology. In a previous CWS 3.0 article [2], Migle Varanaviciene [3], global MSP lead for DXC Technology, wrote of how she approached the global rollout of the company’s MSP program, which spans approximately 50 countries and entailed merging two organizations. Once established — assuming it is set up properly — she says supply base optimization should be an “evergreen” process and not a one-off exercise.
No magic number. Varanaviciene prefers to have five suppliers on each requisition — but at least three and not more than eight to 10. But there is no magic number overall; it is affected by factors such as the capabilities of the suppliers by labor category as well as geographic limitations.
And differing cultures among buyer organizations make it more art than science.
“It’s the art form of who’s going to be the best partner, because at the end of the day, when there is a problem with rationalization and optimization, it’s because suppliers aren’t treated like partners, they are treated as a commodity,” Enriquez says. “And when they start to be treated as partners, that’s when you start cooking with gas.”