After covering #5 Direct Materials, #4 Travel & Expenses and #3 Transportation, we’re down to the silver medalist in our countdown: Temporary Labor. Like the other categories, Temp Labor has been impacted by the fluctuations in the US and global economies. But unlike the others, the impact of rising fuel and commodity prices is not directly responsible for the current sourcing opportunity.

Instead, the market conditions making now a good time to source temporary labor are rising unemployment rates and a trend towards ‘nearsourcing’. Typically when a company is looking to cut headcount, temps are the first to go. So with unemployment rates on the rise, there is a relatively large (and possibly well qualified) labor pool to choose from. And as the US$ continues to loose value, it may make sense to shift positions from abroad back closer to home - a niche temp labor can fill relatively quickly AND reverse course as quickly if necessary in the future.

So, what does Justin Falgione - the Services Category Manager who led this portion of the SIG webinar - recommend in order to make the most of current conditions?

• Improve Visibility via Contracts - Make sure any Temp Labor contracts you’re entering into or renegotiating includes language that guarantees you better visibility into your spend. For example, be sure you’re able to access data on all mark-up components. That level of granularity will allow you to seek greater efficiency, say by changing turn around time requirements from 2 days to 1 week if the need doesn’t outweigh the cost.
• Evaluate Your Model - Reconsider all of your options, including using Management Service Provider, becoming vendor neutral or a hybrid of the two. Perhaps your company’s needs, resources and budget have changed and you’d benefit from a greater level of service from a managed staffing firm could provide. Or perhaps going vendor neutral will allow you shop around for more cost effective talent.
• Consider Temp-to-Perm - A softening labor market means you could have a deeper pool of talent to choose from. And with fewer job options on the table, strong candidates may be more willing to accept temp-to-perm offers, allowing you to try before you buy.
• Look at Offshoring/Nearshoring - The weak US$ coupled with rising wages abroad has compressed the wage gap. So it’s a great time to evaluate your IT and professional temp labor mix. The price might be right for moving operations back to the US or closer to home. Or maybe some variation of a Global Delivery Model, as many leading companies have deployed, is the optimum, cost-effective solution.

Justin Fogarty is Managing Editor of Supply Excellence. Any feedback or questions about the blog, its content or contributors can be directed to Justin at jfogarty[at]ariba.com.

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