Let Your Suppliers Specialize

462276031With most contingent workforce programs, benchmarking is a great place to start in order to identify savings opportunities. It makes sense. You know a job category in your location averages at a certain amount per hour, and you can compare that with your own spend.

But that won’t work with Cisco. Why? Because 95 percent of our contingent workforce is statement of work. Yes, 95 percent. We process about 6,000 SOWs quarterly and 1,500 job postings.

Statement-of-work contracts are entirely different from standard temp worker categories. The contracts are project-based, dependent on deliverables. So we had to be creative in our efforts to identify savings opportunities.

When we engaged with a managed service provider, we promised our stakeholders a savings of 7 percent. That seemed conservative. From our research, we knew companies saved between 6 percent and 15 percent in general when engaging an MSP. But identifying those savings opportunities was a journey.

Our supply base was fragmented and huge — we had 2,500 suppliers. We were looking for a more efficient and cost-effective way to get our work done as well as to pare down our supplier pool.  In the course of many conversations and meetings, we realized our suppliers had suggestions on how we could work better.

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Some of our preferred suppliers came back with multiple proposals on improving processes and becoming more efficient. We executed on hundreds of these — ranging from what could be done in the cloud to what the supplier could take off our hands because it was the expert.

This process led to our adoption of the supplier specialization route. When a supplier says it’s costing us $1 million for a particular project or process, and they would do it for $600,000 or less guaranteed for the next three years, we listen.

Specialization. Here’s how it works. An information technology project, for example, might require people who can do product development, quality assurance and then its release to production. Each of those steps might have several SOWs, all engaged on an individual basis. That’s a lot of resources to manage, even for project-based work. With supplier specialization, the supplier takes on the entire product development end to end.

Internally, we focus solely on the service level agreements and key performance indicators as outlined in the contract, while the supplier has the day-to-day management of its resources.

This means we are resource agnostic. The only resources that are of importance to us are the top-level ones — senior management or the resources responsible for the governance of the activity.

The benefits are clear. Because the supplier is specialized, it has all the resources at hand to get the job done. There is a system in place for knowledge transfer and one for documentation. Should the supplier have attrition, it can replace the worker easily and seamlessly to us. The supplier has the opportunity to dig deeper into the project and communicate that data to our knowledge group, in turn providing better value to us.

In fact, we actually have found that this system has reduced attrition among our suppliers’ resources, because the resulting structure provides a clear view of how their career can progress. These workers gain in expertise, are accountable and own the project. That benefits the supplier, reduces recruiting and training costs. Cisco benefits, of course, with this retained knowledge and the fact that it triggers innovation that then improves the entire ecosystem.

This isn’t an option for everyone, but Cisco has found it a useful system for more than just IT work. We’ve got specialist suppliers for finance, marketing — you name it. We do still have a handful of traditional agency temps, but we believe this is the way of the future for Cisco.

With the world of work becoming more global in nature, specializing is sure to gain traction. Take a look at your supplier pool. Invite their suggestions. You might be surprised at what they come up with.

MORE: Manage SOW through VMS for better results

This post first appeared in Contingent Workforce Strategies 3.0, June 18, 2014.

Melissa Finley Neal
Melissa Finley Neal is director of category and supplier management, Cisco Systems Inc.

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