Efficient Temporary Staffing Sourcing

Any sourcing project generally has 3 main objectives - Cost optimization, supplier reduction and compliance strengthening.

For any sourcing project, one can use a structured approach on the lines of DMAIC-Define, Measure, Analyse, Improve and Control, to ensure a sustainable solution is discovered and implemented for future.

Defining and measuring phase involves capturing current data, stakeholder collaboration, setting Objectives etc.

Analyse phase is the most important as it helps identify gaps in the current arrangements to get us thinking on possible solutions.  In this phase, we one start with as basic as 5W and 1H model- Why, Who, What, When, Where and How. It is to go deeper to explore potential areas of improvement which can then became foundation for the next phases.

 Some examples from an analysis phase for temporary staffing requirement are:

1) Why are we paying the agency?

Answer- Agency is recruiting and managing the payroll of Contractor staff. Recruitment is one time activity and Payroll is monthly recurring.

This insight is useful as mostly organizations pay as a % of salary which remains constant throughout the life of temporary staff.  One can leverage and formulate a new pay-out model to ensure that one time effort and cost is segregated. 

2) Who are we paying the fee for?

Answer- Temporary staffing requirement can be in different functions such as HR, Facilities, customer service, IT etc.

This is a useful information as effort required to recruit a candidate in niche jobs is much more. One can design 2 different pay-out matrices based on type of staff, thus avoiding cost leakages in paying same level of costs say for a Facilities contractor vis a vis an IT/Networks Engineer/ Project Director.

3) What is the break-up of cost?

Answer: Find out with spend analysis whether you are paying mark up on reimbursements.  Mark-up on reimbursements should be completely eliminated.

4) When are we making the payment?

Answer- There are two models prevalent in market i.e. ‘pay & claim’ and ‘claim & pay’. In pay and claim suppliers first disburse the staff salaries and then raise the invoice to clients. Claim & pay works just the opposite. Try and tweak it to get tangible commercial benefit.

5) How are we paying the agency?

Answer- Generally organizations pay % of Salary of staff. Suppliers have all the reason to share candidate profiles having higher salaries (so that suppliers get paid higher agency fees). It is akin to a scenario where a transporter is being paid on the basis of Kilometres travelled 'sans' any guidelines on route directions.  This insight can be  leveraged in framing a pay-out model wherein instead of Agency fees as % of salary, a flat fee is paid.

Analysing and improvement phases can run hand in hand through brainstorming sessions with business stakeholders.

Once a buyer realizes the gaps in  existing commercial model, it makes the job easy to design a more effective framework and commercial model.

Designing an efficient commercial model is followed by standard sourcing cycle - Approach Suppliers (Incumbents and new prospective market players), launch RFI, shortlist basis RFI and then conduct formal RFQ with the shortlisted suppliers.  Negotiations is most effectively done using reverse e-auction tool, the fastest and fairest tool for effective negotiations.

Control phase in sourcing can be to close a long term contract, ensure all requirements and clauses are captured and monitored timely.

So how are you dealing with this category in your organization?

MSP, A growing fade!

35% savings in print/POSM material purchase, WOW!. 30% savings in temporary staffing, just WOW!

And with rationalization in number of suppliers, it is a pure gold!

I have been lucky to have completed multiple sourcing projects and make a positive impact with various initiatives.

MSP is surely one of those initiatives.

Business owners love it as they have less people to manage and far better results.

It’s a win-win for both i.e. business owners and procurement.

Where it is applicable: When you have multiple suppliers to manage and they all work at varying costs. And where you see or don’t see an opportunity to reduce cost. Doesn’t matter!! Saving would definitely come if it is done in a proper manner. It doesn’t need to be for one item/service but can work for entire category or set of similar goods/services.

Where it works well: Geographically, when you are taking supply and services within a country instead of multiple countries. Though it can also work there but it works well when it is within city/state/country.

What is MSP: Managed service provider which manages the suppliers efficiently and effectively to ensure goods/services are delivered as per expectations.

What do you need to get started: Spend data, suppliers information, SLA/KPIs applicable and Voila! You are good to go!

Step 1: Analyse the Spend. What items/services are being purchased and what are their specs/SOW.

Step 2: Look for standardization but not at the cost of business. An example if the organization is buying posters for marketing communication, and is buying posters of different sizes and GSM, then talk to marketing to seek opportunities of standardization. Less the variation, the better would be the outcome. We would be able to use economy of scale to get better financial benefits. (Standardization is not a mandatory step before going for MSP but if done, can give great rewards)

Step 3: Once the items/services are standardized and KPI/SLAs are known, we may share it with prospective MSP suppliers. They would ask for volume forecast, delivery location etc. which needs to be provided so that can go out in market and explore on your behalf.

Step 4: Review and select good no of prospective suppliers. Discuss what is expected of them. More the number of quality suppliers, greater the benefit. Talk to business owner, google it, search your repository as key is to find sufficient number of interested parties.

Step 5: Suppliers can be shortlisted basis RFI (Request for information) which can include their revenue, current clients, presence in required locations, office locations etc.

Step 6: Formulate the commercial model. Formulate because it needs to be scientific. It needs to be designed carefully and intelligently. For example of posters. Price may significantly vary if you are buying 100 posters instead of 100,000. So make slabs so that you can get the benefit when volume is higher. Every business has fixed cost and variable cost. Higher the quantity, less would be the fixed cost/qty.  One major factor is to study the current trend as well. If most of the times, you purchase it in higher quantity lot, it doesn’t make sense to have slabs for lower volume. For example, if 90% of the times, you have ordered in excess of 5,00,000, 10% times lesser than 500,000 and 70% times between 5,00,000-10,00,000 then we need to target the volume slab of 5,00,000-10,00,000 more.

Step 7: Decide whether you want MSP to manage your current set of suppliers or you want MSP to ensure goods/services are delivered as per fixed KPIs/SLAs, no matter who is supplying at back end. That’s a decisive step. Suggestion would be to let MSP explore in the market rather than working with your set of suppliers. Reason being that current set of suppliers will not be willing to reduce cost and having an MSP would add up the management fee to current cost. We may suggest 2-3 suppliers during the transition period to mitigate risk but in long term, it works beautifully if MSP decides the supplier set and we decide the item/services, specs/sow, KPI/SOW etc. It has other benefits as well. It will make MSP the owner like it should be. In case of any delay, MSP should not come back quoting that our supplier is not delivering. If MSP decides the supplier, it would take complete ownership.  Moreover, MSP will go all out and use its expertise to negotiate the best cost with supplier. Have a penalty matrix in place with MSP in the contract/agreement and monitor it regularly.

Step 8: Conduct a RFP with your commercial model. This would help MSP to get familiar with commercial model, KPIs/SLAs, penalty matrix etc. Prospective MSPs can then go to market and get best cost for us. MSPs are expected to quote the end cost i.e. including their margin. Buyer can compare the cost with existing and see whether it is making any sense. If the cost if on higher side, don’t get disheartened as negotiation holds the key.

Step 9: Conduct reverse (E-auction) auction: It is not a mandatory step but an important step which might make/break the decision of having an MSP in place. You will be surprised to see the results and difference b/w RFP and auction rates.

Step 10: Compare the commercials to know which MSP has given the best commercials.  Evaluate other parameters as well as per your organization process and select the most preferred supplier. Calculate the savings comparing old model and proposed MSP model. Close the contract/agreement and you have reached the stage where you can reap the benefits of your hard work.

Elixir for Organization-AMC Management

Organizations used to have a secret sauce which gave them an advantage over others. Today, the scenario is different. In the age of communication, it is not difficult but impossible to hide what you are doing.

Now when there is very differential, it is of paramount importance to do the business efficiently so that enough value is created for all stakeholders.

Efficiently doesn’t mean that doing the job at lowest cost possible but getting the work done at optimum cost without compromising on quality and without exposing the organization to undue risk.

AMC management is an ever existing, industry agnostic area, every organization deals in.

Organizations, be it any industry, purchase a lot of capex equipment every year and these have to be maintained to support business operations with limited/permissible down time.

A simple example would be an AC running in offices, or generators for power back up. We will find plenty of equipment that run to make business run.

Higher lead time or in other words higher down time exposes the organizations to a huge risk. Operations can come to complete halt and strategic customer can be lost within a span of few seconds.

That is how critical it is to maintain all critical equipment.

From procurement perspective, AMC is a recurring cost which mostly increases with time and something in which business doesn’t want to take any risk.

Be it introduction of new AMC partner, shifting from non-comprehensive AMC to comprehensive (There can be different type AMC services which are discussed in a another of this blog), changing the SLAs so on and so forth, all expose organizations to some amount of risk.

Procurement needs to work in such a manner that business is delivered as expected and right cost is paid for it.

AMC management has different parts to it. It is to do with managing inventory of all assets (which is dynamic in nature), it is to do with tracking warranty dates, it is do with having updated partner details and maintaining the record of all maintenance activities, TTR (time to repair), records of downtime, performance records so on and so forth.

In this article, I would like to focus on the concept of Poka Yoke in AMC. To ensure that all activities pertaining to AMC are done effectively with no or significantly lower scope of failure.

The objective is to ensure that AMCs are renewed on time so that AMC partner can provide continuous support and at right cost.  If AMCs are not renewed on time, it may lead to exorbitant reinstatement charges as well.

Elixir for organizations when it comes to AMC management: AMC Management software and its effective usage.

Who are the OEMs of well-designed/developed AMC software are covered in another article.

AMC management system shall capture inventory of all assets, will send auto triggers to concerned stakeholders on nearing the warranty/AMC end date, shall capture the partners who are doing it with the cost and performance which will come in handy while selecting suppliers for next cycle. It will provide a single window exhibiting when the asset was purchased, from whom, what is the warranty period, which issues were faced and resolved, what is the cost trend, is the product obsolete (out of sales/support) so many other important information which is useful for buyers as well as business users.

It provides a systematic and scientific approach to deal with AMCs.

It can provide a much needed visibility and most importantly an edge on efficiency which does a long way in running the business the way it should be.

Process changes one can do to save on AMC cost is covered in another article on this blog.