The Supply Chain Management Ecosystem

We live in a world of ecosystems.

For many of us, our education in this fundamental theory started in 4th grade, when we learned in science that everything is connected to everything else. Fortunately, I paid attention to what Mrs. Greenspan taught us at Farview School. Because what occurs in nature plays out in business as well.

Successful companies and people thrive in business ecosystems. Grids of partnerships, supply chains, exchanges and outsourcing deals directly impact the long-term position of what a leader or business delivers.  Every participant in a network shares in the outcome of the network and the companies that build powerful ecosystems win because they focus on developing the overall value and health of that network.

The contingent workforce marketplace has several networks that have been evolving for years, including supply chain management and two favorite subjects of mine: digital sourcing and social media. For this post, though, I’m going to focus on an ecosystem that’s highly tenuous at this moment in time: supply chain management.  For some reason, MSPs, VMSs and branch-level staffing firms haven’t applied the tenets of supply chains to human capital and built a value proposition around supply chains to take a leadership role in the market. SourceRight and Tapfin are two MSPs that have developed a degree of an offering, but few others have. (Full disclosure: I have previously advised SourceRight on the development of their go-to-market strategy.)

And, with technologies and business models advancing as well as some recent M&A activity, I can guarantee that the role of supply chain management will change in the very near future by a company that’s outside of the contingent workforce world.

Managed staffing firms began disintermediating the recruitment industry in the late 1980s. What began as on-site programs quickly turned into supply chain businesses and as VMS software took hold at the turn of the century to significantly reduce transaction costs, dozens of firms have been managing dozens of webs of suppliers. Unfortunately, these networks have become efficient only because MSPs have slashed markups. Few have used logistics management principles to develop a supply chain strategy, improve the performance of existing suppliers, optimize operations, and maximize the value of their outsourced partnerships.

There’s a fairly easy fix for MSPs and their VMS brethren. Stop managing supply chains by markup alone. Allow your business partners to help reduce costs by eliminating profit-sucking processes. Further, help identify how each member of the ecosystem can participate in ways to optimize the overall program.

For example, working with suppliers to move from time-and-material consultants to variable- or fixed-price solutions is one way. Another is the use of teams of independent consultants that are managed by the MSP. A third is the use of sub-specialists to manage program components, including independent contractors and solutions firms to improve upon the weaknesses associated with general management firms.

Jim Lanzalotto

Jim Lanzalotto
Jim Lanzalotto runs Scanlon.Louis, a strategy and marketing outsourcing firm that helps companies grow. He can be reached at jim (at) scanlonlouis (dot) com.

Jim Lanzalotto

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