10 Best Practices for Supply Chain Vendor Management

Whether you’re in the process of identifying or implementing a vendor management solution (VMS), taking a best practices approach to contingent workforce management can help organizations better manage their temporary, consultative and professional services workforce. This includes implementing technology and communicating expectations on how vendors should work with the technology and operational processes to meet your business objectives.

Partnering with a vendor that understands your business goals, company culture and what you’re trying to achieve is as important as having the right technology in place to measure and optimize results. Whether that’s cost control, mitigating risk or achieving compliance, improving operational efficiencies can help organizations leverage the contingent and services procurement workforce as a strategic component of the overall human capital management strategy and allows organizations to better manage spend, compliance, risk and efficiency.

How can you get more value from your contingent workforce management program?

Show support from executive leadership – Communicate to vendors that executive leadership is driving the program and where it fits into business goals. This boosts adoption and engagement because vendors understand the organization’s commitment to the program.

Define the scope of implementation to create shared understanding – Whether you’re proceeding with a phased approach or taking an accelerated path to implementation, make sure the vendor community knows your intent.

Make it known that compliance is not optional – Communicate that the program is mandatory and that all vendors must comply. If you don’t communicate that it’s a mandated program, some vendors will perceive it as optional, making it harder to get to a steady-state.

Discuss measurable program objectives – Share with vendors the strategic optimization quality improvements you’re looking for, such as how you plan to achieve risk mitigation or what your objective is from a cost containment or rationalization perspective. By setting expectations at the forefront, you’ll eliminate back channel conversations, rogue spending and work-around processes.

Standardize contracts by primary service segment – Terms and conditions will differ between an administrative and technical provider. As you work with vendors, have some basic agreements that ask them to execute based on the segment of business.

Determine a clear pricing strategy – Decide if the pricing strategy will be based on a set mark-up or geographic rate card. Geographic-based rate cards are the best way to measure competitive pricing strategy, but mark-ups are sometimes necessary if you don’t have data or full visibility into rates. If you do proceed with mark-ups, reserve the right to implement geographic rate cards at some point in the future.

Institute consistent funding and vendor payment terms – Whether you choose to fund your program as a percentage of spend, share the burden with the vendor community or fully fund the program, be consistent. Information gets shared between vendors and not having consistency can create additional challenges. Likewise, when establishing insurance obligations, make sure everyone has the same requirement. It levels the playing field and helps with risk mitigation.

Get a rate commitment from vendors– If you don’t define terms upfront, you may experience vendors stating they misunderstood the engagement or have another reason they need to raise your rate. Put a stake in the ground and enforce that vendors live with the rates they committed to at the time of engagement.

Put performance guarantees in place – If a one week performance guarantee is built into the contract, be sure to also define what happens when it doesn’t work out. Is there a knowledge-transfer agreement? Outline your expectations and what you expect back if things go awry.

Establish an NPC – A National Primary Contract centralizes control and eliminates finger-pointing or work requirements “falling through the cracks”. This is especially helpful when working with a vendor organization that has multiple branches. A single point of contact increases accountability and puts the onus on the NPC to manage their organization.

The contingent workforce’s role in many enterprises has evolved significantly in recent years, with subcontractors, specialty firms and just-in-time solutions for both commoditized and highly skilled labor playing a larger role in day-to-day enterprise activities. Effectively managing this growing number of workers – who have many advantages from a management standpoint but also unique challenges and reporting needs – requires an in-depth and consistent approach.

Tom Tisdale

Tom Tisdale
Tom Tisdale is senior vice president of sales at Peoplefluent. He can be reached at tom.tisdale (at) peoplefluent (dot) com.

Tom Tisdale

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