Most organisations enjoy the benefits of using flexible labour but to most businesses and that includes procurement, contract labour is seen as a dark art, which is normally left well alone.
With cost control firmly on the business agenda and a raft of new employment legislative changes taking effect, exploring a model that not only manages and mitigates risk but can also enhance both, the user and supplier experience as well as delivering cost savings has to be taken seriously.
So who is the market to provide a managed service:-
• Temporary labour organisations:
there are many thousands of recruitment / temporary labour organisations (as the barriers to entry are low). A minority provide a local (sometimes on-site) managed service. However the suppliers are typically focused on mark-up and headcount maximisation; as this drives margin return.
• Recruitment Process Outsourcers (RPO):
this is a growing sector of the recruitment market. RPO providers are remunerated typically on a mark-up basis, either ‘rostering’ temporary staff themselves directly (like an agency) or by adding a small mark-up to third party supplied staff (typically 2-4%). However they do little to address pay rate actively as it is not in their interest in absolute return terms.
• Procurement Outsourcers (GPO):
An expanding marketplace with a growing level of sophistication addressing service, process and importantly savings .
So what is it? Managed service is the practice of transferring day-to-day related management responsibility to a third party as a strategic method to improve effective and efficient operations. For a contract labour managed service this involves managing the full end to end life cycle from vacancy identification through to project completion.
In essence the role of the managed service provider is to inter-mediate between the customers (hiring managers) and the supply base, this allows the managed service provider to ensure that prefferred suppliers are utilised, to control service delivery and performance whilst also affecting both supplier mark-ups and labour costs. This control of labour cost or pay rate is integral to affecting 100% of the cost, as opposed to the supplier mark-up which may only account for 10% of the total supplied cost.
So far so good but to make the managed service an effective tool within an organisaton it requires a technology platform from which to operate and the provision of adequate resources both sitting with the customer and in the back office to make the manage service work smoothly and effectively. For any business thought needs to be given to the:-
• Implementation of a leading edge technology solution.
• Deployment of resources in the back office to undertake the invoice processing
• The deployment of both category management and resourcing specialists to ensure both financial delivery, service performance management and supplier management and legal compliance.
• The provision of a helpdesk service to manage customer queries.
Most managed service providers will come with a ready made platform but thought needs to given to compatibility with your existing business services and systems and how long any implementation plan will be. In choosing the right managed service provider a consideration needs to be around management information, what you require on a daily, weekly and monthly basis and more importantly can the managed service provider give you what you need.
Extensive management information that ensures vacancy fulfilment performance is measured and actively controlled, and supports the identification of spend patterns is a key requirement.
By means of implementing a managed service approach the customer will be adopting a single or common process. This will reduce the inefficiencies in the current processes and ultimately reduce the people and other overheads associated with the activity. The potential opportunity to integrate with a managed service provider P2P system/s will add rigor to the purchase and invoice approval processes and deliver added rigor to the procurement of temporary staff.
From a supplier perspective the simplified process will offer them business economies and ensure they are paid to time – a valuable lever commercially in the low margin, cash flow dependent temporary labour sector.
And the benefits of a managed service:-
• Compliance to preferred optimised suppliers
• Improved vacancy fulfilment
• A robust and standard framework to order and manage contractors
• Through the deployment of technology
- Improve and simplify billing and payment
- Improve candidate & supplier experience
• Production of management information
• Effective vendor management
• Risk mitigation to ensure temporary staff operating within legislation
• Pay rate harmonisation
• Single source supply & simplified process
• Process efficiencies within the back office
At Xchanging Procurement Services we manage over £150 million of contract labour spend through a Managed Service model.
What are your views on which approach derives the best value a vendor neutral managed service model or a supplier led master vendor programme?