Compassion & Cost-Effectiveness do not have to be mutually exclusive.
Supplier Optimization is of key importance when managing a contingent workforce program.
Balancing Cost Efficiencies with a Compassionate approach can be challenging. Here are FIVE (5) ways you can maximize both. Compassion and Cost:
Assessment -
does the Pareto principle, also known as the 80/20 rule, apply?
Analyze current spend to identify the number of existing suppliers who are supporting your enterprise
Take a more in-depth look at the job category and location.
Identify the number of top suppliers by each category and location.
Remove any statement of work providers and Independent contractors.
Based on that analysis - Establish your “Ideal” state or mix of suppliers
Once you know how many suppliers make up the bulk of each category’s spend, you can establish your desired state, and whether that’s 30 suppliers or four, there is no right number. It’s based on your organization’s need, the performance of those suppliers, etc.
For some reason, I like 5 suppliers. that way, if 1 or 2 stop performing, you still have 3 others, no one has the bulk of the business, and as shown below, you are sourcing for additional suppliers.
Once you have the desired number of suppliers, model discounts that are will best benefit your organization. These discounts can include:
Volume discounts
Rate discounts
Tenure discounts – and/or
Conversion discounts
Vendor performance objectives
Once you know what your desired state looks like, you have to determine how you will measure the vendors’ performance to begin rationalizing the list.
One of my consulting clients had significant challenges with suppliers not following the contractual obligations of a program. Therefore we established that their compliance measures would be weighted at the largest percentage of their scorecard.
Another client was having difficulty getting candidates quickly and getting them through the background check process efficiently. We established that speed was the most considerable portion of their measurements and measured how quickly candidates were submitted.
Communicate your “desired state” to your Suppliers
Host a vendor town hall, where these objectives are communicated to your supplier community simultaneously to everyone.
Maintain and distribute the recording to any new suppliers your onboard to the program
Note that the plan includes any required contractual changes to achieve your objectives, an explanation of their performance measurements, and the schedule by which these measures will occur.
Now it's time to execute against your plans.
Once the measures are established, try not to change them. No one likes a moving target.
Measure and rank Suppliers anonymously based on performance.
Those that perform poorly are removed from receiving new job orders. Keep their contracts active to cover their existing headcount and terminate the contract once their final workers have ended the assignment.
Those that perform in the middle of the pack provide them with feedback and ask them what they can do to increase their performance before the next performance meeting.
Award Top Providers by discussing other job categories, locations, etc.
Be OPEN to new providers.
Source new suppliers from referrals and industry organizations.
Ask about technological innovations, case studies, hard data that can sway you to consider them.
Ask about performance on other accounts and programs, validate their performance with your peers and other contingent workforce program leaders.
Being Compassionate means being honest – and – having the hard data to back up your messaging with Suppliers. Know how suppliers perform – know what you want – let everyone know the game's rules in your program and the key measurable outcomes. Then and only then will you balance a Cost-Effectiveness program with a compassionate approach. With this exact approach, I have maintained great supplier relationships throughout the years, even when having to dismiss a supplier from the programs I've managed and run.
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