Driving Cost Out Of The Contingent Labor Supply Chain

Another winning post title.

When I speak with a procurement professional, the discussion always comes around to bill rates for contingent labor and how our rates compare to others. The importance of low bill rates is constantly impressed upon me, and the offering of most favorable pricing and terms is a requirement to win the contract. Then, the next items discussed are service levels and the added value that I as a supplier of contingent labor can provide to my clients.

I wonder whether this has been given real thought. It seems to me that to drive costs down in the contingent labor supply chain, there needs to be efficiencies in both the supplier AND client organizations. For example, that coverage SLA that the supplier needs to meet? It INCREASES costs to the client because the supplier has to staff recruiting to cover requirements they have no hope in ever filling.

To date most of the discussion in the IT space has been aimed towards the supplier, and solely in the form of rate management. Rates are only one aspect of managing cost. What about sales costs? Administrative costs? Recruiting costs? The cost of a reactive supplier model vs. a more proactive model?

For example, there are many clients that require the assistance of a skilled sales person to help them define their IT staffing need. The sales person has to spend time with the hiring manager, be knowledgeable about the technology and role, and step the hiring manager through definition of their need. Then, the sales person has to accurately communicate this need to internal recruiters who screen and match up candidates with the position, rewrite the candidate's resume', and present the candidate.

Think of the costs incurred by the supplier:

- Sales person salary
- Recruiter
- Time spent: determining need; communicating to recruiter; finding, recruiting, screening and presenting candidate.

This doesn't even get into the interview phase. When the hiring manager decides who they want to interview, the sales person is contacted, then a series of back and forth communications to get the candidate confirmed occurs, candidate prep is done, and then we go from there.

Now, what if it worked like this:

Client company regularly communicates contigent labor forecast for the next 30, 60, 90 days so supplier is able to proactively recruit talent. Hiring manager goes to a portal where he can search through a pool of available candidates from approved vendors. Hiring manager selects candidates they want to interview and sends an interview request along with available times. Candidate and vendor respond back through the portal. Interview happens.

A lot of cost is eliminated in this type of model. There is really no "selling" going on at the transactional level. The supplier's role becomes more of a "resource pool management" and "fulfillment" type of role, and the sales person really becomes more of a true Account Manager, ensuring the process moves smoothly, and that the supplier focuses on value adds rather than managing the individual transactions.

There are other variations of the supplier model, and there are parts of the current processed that can be greatly improved with minimal cost. Still, the point is that a mature client organization and a mature supplier organization can work together, collaboratively instead of adversarially, to effectively to minimize costs in the supply chain, benefiting both organizations directly through cost saving efficiencies and indirectly through increased competitiveness in their respective markets.

So far, the vast majority of the dialog I have read or been exposed to has happened solely within the supplier community or solely within the client community.

I wonder what would happen if a group of supplier organizations with relatively mature processes and a group of client organizations with relatively mature processes got together and discussed how to make the contingent labor supply chain more effective and drive cost out of the process. Think of the discoveries that could be made and the "light bulb moments" that could occur when both client and supplier organizations look at the process as a whole, and work together to optimize it.

Nah, it'll never happen.