What Staffing Agencies Want You to Know About Building Better Supplier Relationships | DCR Workforce Blog

What Staffing Agencies Want You to Know About Building Better Supplier Relationships

By definition, the relationship between the organization and its myriad suppliers is a supply chain, and we all know that the strength of a chain depends upon its weakest link! So, it becomes imperative to ensure that all the links in the chain are strong and capable of withstanding the constant and unrelenting pressures that come from numerous sources, market conditions being among the foremost.

Many companies have elected to outsource responsibility for the procurement and management of contingent labor to staffing agencies who may work directly for the company, or through Managed Services Providers (MSP). Outsourcing can allow an organization to devote its total energies to its core areas of operation only when its suppliers’ performance is more than satisfactory. This requires efforts by both sides to establish a mutually supportive relationship.

Over the past two decades, we have managed the efforts of hundreds of staffing agencies participating in our clients’ MSP/VMS programs.  Based on our experiences, here’s our list of their ‘must haves’ for mutually beneficial relationships.

  • Market-based rates: Most suppliers are selected through a competitive bid process in which they are asked to provide their most aggressive pay and bill rates.  Increasingly, savvy clients require complete transparency into bill rate composition.  Procurement officers and others involved in the supplier selection process should know that, when the customer pushes for ‘below market’ rates, agencies do not walk away from the bid process.  Instead, they ‘cherry pick’ requirements from that customer, only attempting to fill the ones that offer an appropriate margin.  The result? Positions go unfilled, top candidates are not offered, hiring managers are unhappy… you can guess the rest.  It’s not long before suppliers are replaced, and companies are back out to bid.
  • Heads up on requirements’: Effective sourcing is all about communication.  When companies invest time in helping suppliers know what they’re looking for – both in terms of skills and style – they see faster results with higher quality candidates.  In the most effective relationships, companies (or their MSP) brief their suppliers on upcoming projects and initiatives.  This allows suppliers to create a standing pool of pre-screened candidates who can quickly be contacted, qualified, and submitted for consideration.
  • Opportunities for additional business: Suppliers are willing to invest in their clients, accepting aggressive rates in exchange for potential increases in business opportunities resulting from placement in a higher tier, expansion of the program to include additional classes of temp workers or additional services, or – when working through an MSP – the potential of being included in other programs managed by the MSP.
  • Fair consideration: Tiered requirement distribution structures, master suppliers, and preferred suppliers are accepted practices in this industry.  However, smaller and diverse suppliers want you to know that they can offer far more than achievement of diversity spend targets.  They can provide levels of client service and knowledge of local and specialty markets that large, global players can’t match.  Consider a balanced program that includes different types of suppliers.
  • Timely and accurate payments: Staffing agencies typically pay their contractors weekly, and are reimbursed monthly.  To meet weekly payrolls, many rely on lines of credit.  In these cases, delays in payment result in significant interest charges.  When customers require longer payment terms (e.g., net 60 days), the cost of borrowing is embedded in the bill rates, driving up costs for the customer.  Most suppliers will agree to better bill rates in exchange for better payment terms.
  • Performance feedback: Suppliers appreciate timely, constructive feedback.  Customers who offer guidance on why candidates are accepted or rejected get more attention than those who don’t.  They work best when given clear, measurable performance goals and the tools needed to assess their performance against those goals and against their competitors.  By establishing a “coaching” relationship, you will enjoy significant gains in the timeliness of submittals and quality of candidates.
  • Vendor Management Systems: Many suppliers initially used to discourage customers from adopting vendor management systems (VMS).  Concerns centered around supplier-funded models in which a small percentage of their bill rate mark-up is paid to the VMS provider.  In addition, suppliers feared that MSP and VMS solutions would dilute the personal relationships established with certain hiring managers, and would potentially result in a reduction in rates.  Times have changed.  When using the best VMS systems, supplier dashboards provide instantaneous feedback on performance.  Requirements are automatically distributed and candidates are electronically submitted, reducing time and effort.  Onboarding checklists make it easier to comply with all client requirements.  Supplier profiles enable self-service updates of capabilities and credentials.  And, the best VMS systems automatically trigger supplier payment upon approval of contractor timecards, eliminating errors, delays, and the administrative costs of issuing an invoice.

All great business relationships start with shared expectations and a recognition of how each side will benefit from the relationship.  Performance over time builds trust.  Is it time to do a reality check on your contingent workforce management program?  Examine all of the touch points between your suppliers and your company.  Ensure that all stakeholders share a common understanding of the program’s goals, priorities and processes for interaction.  Identify and address issues that are negatively impacting results or satisfaction.

A VMS has been known to bring in savings in time and costs. Apart from this; the improvements brought in by a Vendor Management System include operational efficiency and data-mining opportunities. A VMS brings in analytics and reporting functions by tracking relevant information needed for fact-based discussions.

 In a future blog, we’ll explore this issue from the buyer perspective.

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.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.