Measuring Up: How to Get More Out of Your VMS Program

200350296-001It’s the start of a new quarter and for many companies, that means it’s time to gear up for quarterly business reviews. As is common in these reviews, there is a large emphasis on metrics – be it measuring efficiency, supplier performance or cost savings – often defined with VMS and MSP providers as Service Level Agreements (SLAs). Each quarter, your partners report back to you, highlighting how those SLAs have been reached.

PREMIUM RESEARCH: Buyers’ Satisfaction with Suppliers

A large majority of VMS and MSP buyers have come to the realization that metrics around SLAs only serve as indicators of basic program health; they fall short on offering any value outside of designating a pass/fail grade. After these reviews, program sponsors are still left to wonder: how do we leverage our data to improve programs?

Regardless of a program’s size or maturity, companies overlook a few important data points that could lead to program improvement. These three examples include such metrics and how customers benefited from taking a closer look.

  1. Hiring manager decision-making. The most common measure of efficiency is time-to-fill, or cycle time – but companies don’t often look beyond the overall number. One customer recently indicated that hiring managers were unhappy with the high cycle time and wanted suppliers to submit candidates faster. After a review of their data over the past six months, we determined that the supplier response time only accounted for 8 to 10 percent of the total cycle time, leaving 85 percent of the entire process in the hands of the hiring managers to review candidates, conduct interviews and make decisions. As a result, the customer worked with us to make the review and hiring process easier and more efficient. This led directly to an improvement in another program metric – hiring manager satisfaction.
  2. Cost savings measurements. Most discussions around cost are in the context of bill rates and their relationship to rate cards and/or market rates, but there are other valuable metrics.In analyzing its invoicing process,one customer found that almost 8 percent of weekly invoices failed during processing for a variety of reasons– ranging from incorrect overtime hours submitted by workers to invalid cost allocations in external AP systems. As a result the customer implemented a series of invoicing rules to catch and correct errors prior to being submitted to the AP processing systems – reducing weekly invoicing errors to less than 2 percent. Translated to the number of invoice corrections that were reduced annually, this measurement added up to a large cost savings opportunity for the customer.
  3. Supplier performance and quality.Companies often measure “time-to-respond”as part of the supplier scorecarding process, and reward those who respond quickly to requisitions. However one client recently questioned if a quicker response necessarily translated to better quality candidates and a quicker hiring decision. To investigate, we looked at two simple metrics: the candidate rejection ratio for the entire supply base, and the response time for the hired candidate. We discovered that more often than not, the first candidate submitted, on average, in 0.7 days, was more likely to be rejected by the PMO or hiring managers than the third candidate, submitted on average, in 2.5 days. (Each supplier is only allowed to submit three candidates). In short, suppliers were submitting under-qualified candidates quickly to meet the SLA, but then taking their time to find the right fit candidate and submitting him/her later. As a result, the customer implemented a 48-hour “no-review” window where suppliers were given two days to submit the best available candidates before the PMO would review and make a decision. Overtime, the customer hopes candidate quality improves and the supplier is encouraged to be a better partner.

These are just a few examples of how customers can focus on data that can improve their programs, instead of measuring SLAs that only indicate past performance. As you start prepping for your next business review, think outside the box. What are some of the metrics that you are interested in seeing?

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Arjun Dutt

Arjun Dutt
Arjun Dutt is senior business intelligence solutions consultant with Fieldglass. He can be reached at adutt (at) fieldglass (dot) com.

Arjun Dutt

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