Seemingly decent performance may not be enough to keep you on the playing field

Just over two years ago, we launched our MSP with incumbent contingent labor suppliers. That was when we began to realize just how large our supplier pool really was. Everywhere we looked, under every rock we turned, we’d find yet another contingent labor supplier that needed to be rolled into the program. The list quickly grew to nearly 100 and nobody was happy — not the MSP, not the program sponsors and definitely not the suppliers.

After around nine months we finally had enough data to begin rationalizing and paring down our list. Some of it was easy; suppliers that chose not to engage with the MSP were out. That alone got us down by about 20%. After another nine months, we cut more, this time due to poor performance — candidate quality, turnover, price, etc. This process was also pretty easy because the data was hard to dispute.

Fast forward another three months to the oil and gas market downturn. Contractor volumes are down and the pressure is on to reduce cost. Accordingly, we no longer need to maintain a large number of suppliers in our program, including our solid performers. This made our recent rationalization to cut nearly 50% of our remaining suppliers not so easy.

I recently had a tough conversation with a supplier to inform them that they would no longer be an active supplier in our MSP program. Did they provide quality workers? Yes. Did managers like them? For the most part. So the inevitable question came “why?” These are the things I’m telling these suppliers. If you find yourself off the supplier list, some self-reflection on these points may help you to understand why.

  1. Number of placements. Although volume was down, the key indicator of how well a supplier performs is the number of placements they are able to make. If the candidate doesn’t get hired, it doesn’t count.
  2. Program volume of new requisitions by sub-category. We reviewed program activity for the last two quarters. If there were 20 new requisitions that were distributed to 10 sub-category suppliers, this does not motivate our suppliers to provide high-quality candidates. We have to right size the supply base to fit the anticipated needs of the business.
  3. Response to cost reduction initiatives. Yes, I know that we’ve implemented several cost savings measures and the margins for contingent labor suppliers shouldn’t be that substantial, but the only way we can respond to our customers’ demands for savings is to take it out of our supply chain. How do you respond to procurement’s request? Do you make a good-faith effort and take a creative approach to reducing cost? Will you take a long-term view of your relationship with our company?
  4. Ease of doing business. Do you engage with the MSP? Do you refer hiring managers to the MSP instead of engaging directly? Do you display a generally positive attitude about working with our company? Have you accepted our preferred contract terms and conditions?
  5. Performance in relation to peers. I think this is pretty self-explanatory. When I take all of the above into consideration, if four out of five accounting suppliers are on a positive trend and doing all that we expect, they deserve to be rewarded with more business opportunities.

Decisions to cut the ties with staffing suppliers are never easy for us. But in a highly competitive market and volatile industry, a solid performance is not enough to stay on the list. You must meet and exceed with both qualitative and quantitative measures to stay on the team.