Supplier Optimization practices: Compassion & Cost-Effectiveness are not mutually exclusive
by Cheryl Tracz – Draper Jones Consulting
March 29, 2021
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 80/20 rule apply here too?)
- 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. (Stay tuned for a later blog on how to incorporate these additional categories into your contingent workforce program!)
- 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
- 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 a hard time 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.
- 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.
- 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 discussion other job categories, locations, etc.
- Be OPEN to new providers
- Source new suppliers from 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
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 rules of the game in your program and what are the key measurable outcomes. Then and only then will you balance a Cost Effectiveness program with a compassionate approach.
Cheryl Tracz is a Sr. Solutions Consultant at Draper Jones Consulting (DJC). Draper Jones is a group of proven practitioners making a difference in the extended workforce.
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