Encouraging your strategic suppliers to participate in Services Procurement

Introduction

As a manager responsible for contingent labor, you already realize the tremendous value of implementing a vendor management system (VMS) to source and manage your extended workforce. You also understand how key players, such as staffing suppliers, often play a large role in the success of your program.

In addition to managing contingent labor, you may also be using your VMS to manage statement of work (SOW) and project-based initiatives. Or you may be considering expanding your program to include a services procurement solution in the near future. In either scenario, it is important to understand how these initiatives operate under a variety of complex, contractual relationships with suppliers.

There is just one problem. Not all suppliers, especially the larger, well-known professional service suppliers, are willing to participate in a VMS-managed program for services procurement and SOW-based initiatives. When these suppliers are not managed via a VMS, your program suffers from a major lack of visibility and compliance, taking away your ability to gain valuable insights from reporting and analytics, and putting your organization at risk. In this whitepaper, we will equip you with information about how to get your strategic suppliers to use a VMS for services procurement and SOW-based initiatives, as well as open your eyes to the risks of not taking this approach.

Finally, we will leave you feeling empowered to have open and candid discussions about the topic with your executive team and your account managers.

The problem: relationship-based sales deal

Not all suppliers are the same. Some suppliers run smaller operations, and others are larger and more prominent in providing consulting or other professional services. Smaller suppliers are more likely to utilize the VMS for SOW-based initiatives because it helps them establish their name and footprint in the market. Larger suppliers, who account for millions or even billions of dollars in annual spend, tend to already have close relationships with C-level executives at enterprise companies who utilize a sizeable external workforce. These C-suite relationships can enable suppliers to bypass the VMS technology used by that executive’s company.

Some suppliers create relationship-based deals with executives, resulting in no paper trail, accountability, or visibility. When these suppliers bypass the VMS, you lose all visibility into their activity and spending and risk failing to maintain worker and organizational compliance.

The result: a lack of visibility and compliance

When your service providers are not in the VMS, how does your organization ensure it is operationally efficient and compliant?

Without a proper technology solution, how does your organization mitigate the legal and regulatory risks associated with using external workers to perform these service contracts?

When a supplier resists using the VMS, how do you ensure you are deploying your extended workforce appropriately?

Do you know everyone who is working for your company?

• Do you know who everyone who works for you is, where they are, and what they are doing?
• Can you give your executives a bird 's-eye view of what is occurring within the organization?
• Do you have the data and analytics to understand, in real time, the breakdown of the company’s SOW-based workforce spend and evaluate the balance of resources?

Are you operationally efficient with your invoicing?

• Do you have the ability to track up-to-the-minute spend, milestones, deliverables, and billing activity?
• Do you know what your supplier markups are?
• Do you have the ability to detect overbilling by a supplier and prevent overspending?
• Are you able to produce accurate financials, including accruals?

How do you track headcount?

• How many consultants work for you?
• Where are these consultants located?
• How long have these consultants worked for you?

Is your company compliant with regard to these workers?

• Which workers have access to your physical and intellectual property?
• How are the workers onboarded and offboarded?
• Are these workers compliant with applicable laws, regulations, and organizational policies?
• What measures do you take to validate the workers’ credentials on a regular basis?
• How do you ensure they are not maintaining badge or network access longer than their work requires?

A snapshot of spend

You may experience supplier resistance, especially from top-tier consulting firms and offshore IT service providers. However, you should know that most strategic suppliers already participate in VMS-managed services procurement contracts with some clients.

Recommendations: How to get your suppliers on board

Many Beeline clients have experienced success with getting large, strategic suppliers to participate in their VMS-based services procurement solution. Different program managers take different approaches, depending on what is best for their programs and relationships. We asked several of these program managers for their best practice recommendations.

Approaching your c-suite or executive leadership team

Explain to your C-suite that there is a massive assumption at play.

Bigger is not always better. A supplier’s size does not always guarantee the highest quality. Ask your C-suite how they currently assess the quality of their strategic suppliers. Explain that VMS technology allows users to measure objectively and report on supplier quality.

Explain that suppliers must use the VMS so the company can realize the tool’s visibility and compliance benefits.

Specifically, explain how the VMS can help detect supplier overbilling and provide insight into their markups. Also, alert your executives to the risk mitigation that the VMS provides the organization.

Reveal the amount of spend captured in the tool.

Point out how much spend is not being captured by these suppliers bypassing the VMS.

Explain how relationship-based deals create an uneven playing field in the industry.

Smaller service providers participate via the VMS, so allowing the larger suppliers to bypass the VMS is not fair to the participating suppliers. This creates a lack of competition and an unfair competitive advantage among suppliers.

Conclusion

Resistance is not unusual. In fact, contingent workforce programs have experienced this resistance before. Twenty years ago, some enterprise companies were not willing to utilize a VMS at all. Over time, hundreds of these organizations grew to appreciate and now depend on the visibility and compliance a VMS provides. Approximately 80% of companies worldwide with more than 1,000 employees have implemented a VMS.

The same will become true for suppliers participating in VMS-managed services procurement initiatives over time. Until then, it is crucial to explain to your C-suite how getting all suppliers on board will provide the visibility and compliance currently lacking with the larger, more strategic suppliers.

Do not hesitate to have this critical discussion with your executives. Educate them on the current risks associated with these relationship-based deals and how getting all suppliers to participate in the tool will mitigate that risk. If you need further guidance, reach out to your Beeline account manager. Your company’s larger, strategic suppliers may not want to participate in the tool, but the resulting lack of visibility and compliance is something that your program cannot afford.