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Supplier rationalization: Unearth their value before trimming their ranks

As contingent workforce programs continue to gain maturity and evolve their practices, optimization efforts are turning to the staffing suppliers themselves. The term supplier rationalization has become more widely used as more programs hit the point in their maturity where they start to reevaluate the staffing organizations they work with.

One concept that may be driving this trend is direct sourcing, which has organizations taking some of the opportunity away from these vendors, lessening their need for the same volume of suppliers that they may have historically required. The increasing difficulty in finding talent is also forcing organizations to get smart about the suppliers they use to find the contingent workers they need. Here are some ways that organizations are approaching their staffing supply base to rationalize and optimize this population.

Trim the list. The first thought that comes to mind for most organizations when thinking about rationalizing this population is reducing the vendor population. Whether done through a go-to-market event like an RFP or even a simple shortlisting of the highest-volume suppliers, this tends to be the first approach. This may make sense for programs that have not held a competitive event to review these suppliers in several years or if there has been low barrier of entry for new suppliers that may not fully vet the right suppliers early in the relationship.

To help with this ongoing evaluation of top suppliers, many organizations are taking this opportunity to introduce key performance indicators and service-level agreements to ensure vendors are active and continue to perform at optimal levels. By reducing vendors, many companies are looking to reduce the burden of managing these relationships as well as create room for new suppliers to show value.

Determine value. Before you start cutting vendors from your list, though, I encourage you to think beyond just reduction to better understand the real value of these relationships. A great starting point to your rationalization effort is to create an inventory of all your suppliers and who they are. What do you know about them? I am often surprised by how many programs have yet to create a direct relationship and dialog with the suppliers that may be actively supporting them every day. Starting a conversation with these companies can help you to better understand their competitive differentiators in the market, which may in turn show you the best way to partner with them. Also consider soliciting their feedback on processes and challenges with how they support your program.

Vendor neutrality? My next recommendation may come as a shock to many program managers who have spent the last two decades building their programs with control and consistency in mind: Move away from a vendor-neutral model. Treating all suppliers the same way and giving them all equal opportunity may be creating the wrong behaviors. This concept may work while you are trying to understand this supply base, but shouldn’t be a long-term strategy. Consider isolating or focusing each supplier on their stongest area so they can contribute value in the best way. By releasing requests to a smaller group of specialized suppliers, you will remove excess activity from your processes. These suppliers will have more opportunity when they are engaged and more easily focus their support to where you need them the most. By identifying these areas of specialization, you may actually find that you need more suppliers for specific skills than a reduction in your supply base.

Key to success. However you approach supplier rationalization, your organization should consider what its objectives are in this effort. Focusing on the right suppliers can lead to organizations making conscious efforts to shift the relationships with their suppliers from tactical to strategic. Regardless of the approach, one thing to remember is that the supplier population that supports our programs is key to our success; we need them for our organizations to thrive. Supplier rationalization can help our programs evolve to the next level of program maturity.

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