The Fundamental Problem With Contingent Workforce Management Today

In today’s global economy, firms like Amazon, Apple, GE, P&G and Walmart all compete on how well they manage their extended supply chains and associated spending on critical goods and materials. But, in an increasingly services-based economy where nearly everything is becoming a "service" (including all the non-production elements associated with creating a product), applying the same rigor in managing external services spending should also be important.

This matters even more as overall company value chains become increasingly virtualized, with “contingent labor” being the ultimate example of on-demand resources and expertise. However, in conversations with a range of procurement executives, consultants and software providers, Spend Matters has found that relevant best practices and principals in managing materials spending are not well applied to services spending – particularly in the area of contingent labor.

But perhaps before exploring this further, we should define the subject of our topic. To this end, for the purposes of this analysis, we define contingent labor and a contingent workforce simply and broadly as non-payroll labor spending where the buying firm is not the “employer of record.” It includes not just the spending with staffing firms, but also with independent contractors, consulting firms, outsourcing firms and providers of any type of managed labor-based services.

Traditional research models in this area have examined services procurement (and contingent labor in particular) from a human capital and staffing lens. There is nothing wrong with this approach, but the findings of our recent research suggest a more holistic examination of the area, factoring into account comparative indirect (e.g., MRO) and direct materials (e.g., parts, components, raw material) management and sophistication, can shed even more light on areas for continuous improvement and focus in the buying and management of services.

In the coming weeks on Spend Matters, we will be exploring this topic in significant detail, including sharing the findings from our recent survey data on the topic, as well as our own analysis about what the information means for procurement organizations. In the meantime, we encourage you to download the full findings from our recent study in the area, based on a survey of more than 100 procurement organizations.

Before it becomes Spend Matters PRO subscriber-only content, the full report, Applying Supply Chain Rigor to Contingent Workforce Management, can be downloaded for a limited period of time. This post is based on content from the broader study and paper.

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