Key Factors that Impact Labor Sourcing Models

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In an interview with Peter Ludwig, Director of Solutions Design at TAPFIN, we discussed what key considerations should be taken into account when evaluating which MSP sourcing model would best suit client needs.

1. What are the fundamental differences between Vendor Neutral and Master Vendor models?

Peter Ludwig: First, the optimal model could be fixed (meaning Vendor Neutral or Master Vendor) or a variable sourcing model (a combination of both). When we talk about Vendor Neutral, basically we're talking about a focused competition environment. When we're referring to a Master Vendor model, we're talking about an exclusive supply model where a sole supplier, primary supplier or master vendor would be present.

Definitions:

  • Exclusive Supply Model (sole/primary/master vendor): A sourcing method in which one vendor is selected to provide services for a company within a particular skill category, geography, or business unit or for the entire company.
  • Focused Competition Model (multi-vendor): A sourcing method in which multiple vendors are selected for a customer and are organized in one or more tiers. Orders are sourced to all vendors at the same time depending upon tier of vendors, completely based on quality, price and timing.

2. What are the key benefits to each model?

Peter: The key benefits of each model are as follows:Focused Competition: Vendor neutral, you have a business that wants more and will move at a faster pace, possibly pricing more competitively. They want the quality and the quantity at a better price. Value proposition; ability to leverage volume for the ability to leverage quality.
Master Vendor: You have price leveraging from a single company selected. Wanting more skill, getting the best and willing to pay for the best.

3. What questions should an employer ask/answer in order to assess which model is best suited to their needs?

Peter: This is not a one-dimensional answer. There are several factors.

  • Complexity of spend – The degree of uniqueness in skill and an experience level required for a particular job category and location.
  • Demand for labor – The current and future need in the market for a particular job category, and geographic location.
  • Supply for labor – The availability of qualified talent within a particular labor market (job category and geographic market) to meet the aggregate demand.
  • Supply base capacity to market need – The capacity of the supply base, sufficient resources, experience and organizational structure to support a specific labor market for a company’s area of need.

One example is Exclusive Supplier Sourcing Model, where job categories which are more commonly used and have a moderate to low level of complexity. The exception may exist within a high demand and low supply environment, where a focused competition sourcing model had the greater ability to ensure delivery and candidate quality.

Another example is Focused Competition Sourcing Model, where job categories which are less commonly used, require a higher level of experience and education, and are performing more specialty duties.

An exception may exist when: 1. Many vendors in a respective location have the required capacity to meet the needs for those positions; and 2. Demand is low and a high supply level exists for that particular category and location. Limited supply sourcing models may be recommended in these cases.

4. Should the same model be deployed in every part of their business, in each region around the world, or is some variation necessary? Why?

Peter: Certainly, based on the diversity sourcing conditions and requirements that exist for a business, and regional market variations, a one model fits all probably will not fit. The key is defining all the variables and working through a decision model to arrive at the best sourcing model.

Peter Ludwig is responsible for supporting the company's growth and thought-leadership objectives within Service Procurement Management (SPM) and Independent Contractor Management (ICM).  Key areas of focus include: market research, solutions development, knowledge transition, and subject matter expertise.  Before joining TAPFIN, he served in various management functions in MSP operations, implementation, sales, and solutions design. Peter holds a BS in Business Management.