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Selection Strategies for Suppliers

December 18, 2013

supplier selectionIf your workforce includes temporary workers, you are most likely depending on staffing agencies to provide them. Depending on your business needs, you may rely on one critical supplier, or you may engage hundreds of agencies.   Staffing suppliers will source, screen, employ, onboard, pay, and offboard these workers as a service to you.  Outsourcing the procurement of temporary workers promises to allow your internal HR team to focus on more strategic activities.  But, up-front work on your part is required to guarantee that the staffing suppliers you select will provide these services at expected levels of quality.

When seeking new staffing suppliers, what should you look for? Is it expedient to get suppliers on board based on their professed resources or capabilities and competencies? How can you really know or ensure that the chosen supplier will be able to deliver on the promises made? Because a mistake when choosing a supplier could affect your business very negatively, a strong contract would make sense, but keep in mind that an incompetent supplier cannot be pushed into turning into a capable one just because the contract has laid out tight terms. Most likely, all it will earn you is a load of litigation, along with a failed business strategy and a disruption of your operations.

As a client, you may be completely aware of the specific services you require, the industry norms for levels of service, and acceptable market prices. Savvy customers will never accept an offer just because the price is the lowest. After all, low prices could translate to poor service. Price has to be juxtaposed with quality to decide on the winning offer, but how does one ensure that the supplier is providing an accurate picture of its capabilities? To make things even more challenging, you may encounter requests for skills that can’t be sourced by your existing supply base that was selected through a lengthy bid process.  How do you quickly conduct the needed due diligence when you must onboard a new supplier in a matter of a few days? Clearly, the answer is to try to develop a holistic view of the potential supplier, verifying sourcing capabilities, business credentials, and style of work. To do this, your assessment should go beyond responses provided to a survey.  Ask the supplier to specify the recruiters and account team that will support you and, if possible, visit the supplier’s office(s) to meet and interview some key personnel. Always check customer references, including ones that the supplier did not provide.

Remember the following maxims:

  1. Expect What You Inspect – The supplier’s resources may appear to be reassuring, but are worthless without the ability to translate their abilities into results.  The supplier’s profile must indicate relevant industry or skills experience in supplying contract personnel. You need to know the types of requirements the supplier can fill, geographic areas covered, tier status, diversity status, etc. Successful references must verify past performance. Keep in mind that business qualifications are equally important and must also be verified.  The supplier should meet all of your requirements for background checking, drug screening, testing, etc. Suppliers must demonstrate that they are currently serving other clients, are in good standing with local and federal governments, and carry all required insurance.
  2. Businesses Hate Surprises – Take the time to develop a statement of work and contractual agreement that clearly specifies expectations on both sides.  Specify expected levels of service and the metrics used to measure performance.  Both parties must understand whether this relationship is one in which the agency is the sole or preferred supplier, or one of many.  You must also agree up front on whether the agency can subcontract to other suppliers.  If so, under what conditions?  Do you need to vet the subcontractor before they engage on your behalf?  If not, who carries the risk associated with their use?
  3. Give to GetSuccessful business relationships are based on the premise that both sides must benefit.  We have seen many situations in which clients were so “successful” in negotiating terms with their staffing suppliers that they included highly competitive bill rates, then clawed back even more by imposing early pay discounts, tenure discounts, and other financial reductions.  In these cases, the suppliers rarely indicated that they were withdrawing from the program.  Instead, they merely ‘cherry picked’ each job requirement, saving their best candidates for clients who paid higher rates.  Be sure that the net rates (after reductions) are competitive and include incentives for high performance such as higher standing in a tier structure or earlier access to more requirements.
  4. Never Assume – People management skills, which translate into team work, are necessary to provide the kind of outstanding service which makes for both parties’ success. Define a governance protocol that encourages continuous communication and early resolution of issues.
  5. Change is the only Constant – Openness to change and improvement when required, and the ability to quickly adopt a new process or technology, is essential.
  6. Communication is Key – Pay special attention to the supplier’s ability to keep lines of communication open, stay flexible and willing to track and measure their own performance while staying open to change in accordance with your needs. If a supplier is not open to feedback and unable to change according to the client’s requirements, or meeting the project deliverables or timelines, the relationship may prove untenable in the long run. You must always be prepared to replace a non-performing supplier.

The adage ‘Good judgment comes from experience and experience comes from bad judgment’, is highly applicable in this context, so please do share some of your own hard-won wisdom in this context with us.


Disclaimer:
The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.

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