At a time of growing talent and skill shortages, it is becoming increasingly common for companies to rely on external talent to support their business. Many groups are transitioning from their own sourcing strategy based on a preferred supplier panel, to a more agile way of working. This shift towards flexible sourcing that relies on several marketplaces represents a natural evolution towards a new world of work that is emerging, providing access to niche skills that were previously difficult to source.
Is your company looking to expand its supplier panel in order to source particular skills you might be lacking? This transition could be challenging for your company in terms of existing supplier relationships, prompting you to ask yourself the following question: how can you best succeed during this change while making all stakeholders understand the challenges and benefits of such?
How can you shift towards market-based sourcing while protecting your existing supplier relationships?
The job market, and especially the intellectual services market, has changed significantly in recent times. Experts are now looking for projects with a positive human impact. The job market is growing, with the development of freelancing and expert communities. It is therefore becoming essential for companies and their procurement departments to adapt to this transformation, ensuring to always work with the best skills at the best time for each of their projects. As a result, it is becoming increasingly necessary to use a marketplace in order to reach out to these new communities. Using a marketplace allows clients to centralize all their sourcing, contract negotiation and invoicing process in one place, and reduces some of the legal risk associated with subcontracting.
Wondering what “market-based sourcing ” means? It’s simply about having access to a wider panel of experts. When an RFP is published on a platform, you can leave it open to your preferred suppliers, as well as other suppliers on the marketplace who have not signed a framework agreement with you. Thus, these new partners can provide their expertise on your projects without going through the traditional referencing process. Preferred suppliers are not cast aside, but rather have the opportunity to demonstrate their suitability to be in the panel as well as the quality of their proposals.
Similarly, being listed as a supplier on the marketplace gives them the chance to offer their skills to new clients they have not yet worked with, and thus gain access to new markets. This agile approach is also key to reducing the rate of economic dependence between various stakeholders.
This new sourcing strategy has many advantages for both you and your suppliers:
- A healthy dose of competition, encouraging different stakeholders to be more competitive on their rates and the suitability of their proposals;
- Access to niche areas of expertise that are often difficult to source;
- The opportunity to work with a supplier (IT service provider or freelance) or client at the right price, without subcontracting chains (and thus cost accumulation) thanks to ‘salary portage’.
Market-based sourcing as a cost optimization solution
Your longstanding supplier panel was initially put together based on their expertise in a core business area within a particular field or area of technology. If they work with you, it is because they have demonstrated this expertise. A market-based sourcing approach does not challenge their expertise, but rather encourage them to focus on their core business area. Therefore, by expanding your panel, you have access to the experts you need, while retaining the loyalty of your preferred suppliers for their key skills. In this way, these suppliers won’t waste time trying to identify skills that don’t match their expertise just to satisfy a client. Your overall level of satisfaction will be greater as a result.
Therefore, using a market-based sourcing approach for your RFPs is now a really relevant and viable option for finding the ideal expert while optimizing costs. Indeed, the service cost can be lower on a marketplace because the process is more direct and transparent. The subcontracting (often cloudy) process can lead to an additional cost of 15 to 40%. Some marketplaces, through their working methods and application screening process, greatly limit subcontracting chains. This therefore reduces the overall service rate. Pricing grids can be applied to the application to ensure that your budgets and requirements are respected, but also to highlight the key skills of your preferred suppliers. These grids can be fine-tuned based on profile type, resulting in an even more efficient and accurate pricing grid. However, don’t forget that platform-based sourcing is just one feature of a tool, which needs to be adapted to your needs. How often you choose to use a marketplace for sourcing depends on the parameters you select when setting up the platform and publishing RFPs.
What are the best practices for selecting service providers when you open up your supplier panel to marketplace?
Seeking the expertise of suppliers who are not referenced could result in a reduction in the number of services usually provided by preferred suppliers. When working with preferred suppliers, contracts and agreements are signed, such as year-end discounts. How can you ensure that these contractual agreements are fulfilled if other stakeholders are involved?
Several measures can be put in place in order to secure such agreements, and maintain good business relations with your stakeholders:
- A clear and concise communication to all stakeholders explaining the future processes and strategy that will be implemented from now on;
- Training on how to use the platform to ease the transition towards this change.
Once these measures are in place, understood and followed by all, the process of issuing RFPs and opening up your panel to new expert communities can only improve the performance of each stakeholder within their respective area of expertise.
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