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Cost savings and transparency are major benefits of supplier rationalization, but getting there takes careful planning, internal input, and expertise.

Supplier rationalization is a tool that organizations can use to drive down cost and increase efficiency and visibility.  In the world of contingent labor, this process can present some unique complexities and pitfalls.  Staffing is often sourced at the department level whose needs can vary widely.  In addition, vendors are often chosen to satisfy the unique needs of that department for niche positions.  For these reasons, supplier rationalization in contingent labor can be a complex endeavor, requiring input from department heads and research into a wide range of pay rates and markups. 

Eastridge MSP works with their clients on ensuring the best mix of suppliers through the supplier rationalization process. This first occurs during the implementation process as well as regular intervals throughout the duration of the MSP program.  Based on this experience, we’ve developed a best practice road map for supplier rationalization that is proven in real-world operations. 

A Process for Change

In order to fully realize the benefits of staffing supplier rationalization, a company should go through the following process: 

  • Evaluate the current staffing suppliers and associated agreements
  • Identify and apply quality metrics and KPIs
  • Identify gaps in service, savings opportunities and risk mitigation 
  • Identify the existing suppliers to be onboarded into the new program
  • Identify new suppliers as necessary to meet any talent or other gaps

Getting the Details Right

These steps may sound simple, but in reality this is complex upfront work needed to not only reduce the number of suppliers, but also to avoid any business disruption for disengaging any suppliers that will not be invited to join the MSP.

For example, in Eastridge’s process for implementing an MSP we conduct a complete review of each supplier including  the staffing agreement (including COI and risk mitigation language), historical activity, and current workers.  Eastridge MSP also spends time with key client users to gain their experience with the suppliers they have used. Once all research is completed, Eastridge MSP provides recommendations for suppliers to be included or off-boarded. After our client is consulted, key elements of the project plan are refined including communication, supplier onboarding, and training. 

Impactful Results

An upfront process like this that is informed by key stakeholders and careful market research takes time, but the payoff can be big in terms of cost savings, efficiency, transparency and compliance.  For Eastridge MSP clients, results have been a reduction in suppliers by more than 50% with an average supplier markup reduction of 20%.

Because these programs are implemented with a strategic process, these reductions are often welcomed by suppliers who remain in the program, many of whom see an increase in overall volume.  While the initial cost savings are impressive, the supplier rationalization continues to pay off with a contingent labor MSP program that can ensure that suppliers continue to deliver quality, consistency, cost savings, and compliance. 

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