Labor e-Procurement Technology Explained

Over the years, I have heard labor e-procurement technology referred to by many different names in branding campaigns, including human capital management software (HCMS), hourly worker management software (HWMS), hourly hiring management systems (HHMS), contingency workforce software, and others. Regardless of what it is called, this technology is essentially just an enterprise procurement tool that streamlines your recruiting processes and lowers the costs associated with the acquisition of your contingency workforce. But since the technology is a tool for your contingency workforce, confusion often exists as to who the originating buyers and owners of this technology are within an organization. Human resources, procurement, shared services, legal, and IT can all be contributing buyers or influencers within a given company. For example, in a recent experience of mine, I observed three different groups of a major financial institution (HR, IT, and procurement) unknowingly pursue independent acquisition of this technology. Nonetheless, when your organization is ready to move forward, each group can be valuable, if not critical, in the research, selection, and negotiation of these tools. In today’s market, understanding the role of labor e-procurement technology has become increasingly more difficult as technology vendors continually push to build single-source solutions that encompass many recruiting, HR, and procurement functions all in one application. Unfortunately, fragmented industry promotion and unique vendor “brandings” have created much confusion of the role of this technology for many prospective buyers. In this article then, I would first like help better define the role of labor e-procurement technology within the organization, and second, outline the major benefits and potential limitations associated with this technology. WHAT IS LABOR E-PROCUREMENT TECHNOLOGY? A true enterprise e-procurement solution should consist of several components, including requisition management, vendor management/workflow, time and expense, consolidated invoicing/billing, and reporting. Each piece of an enterprise solution is described below: 1. REQUISITION MANAGEMENT The procurement process kicks off with the creation and approval of a requisition for a contingency worker. Most labor e-procurement solutions are rules-based, allowing designated users (usually hiring managers) to create requisitions for contingency workers. The requisition flows through the client-dictated approval process, as would a requisition for a direct hire. The technology usually allows for unique requisition approval processes based on individual users, groups, or divisions, even company-wide. Each party in the approval process is notified via email once a requisition enters his or her workflow and can usually link back into the application to approve or reject the requisition. Once completely approved, the requisition enters the vendor workflow phase. 2. VENDOR WORKFLOW AND MANAGEMENT The vendor management piece is also client-directed. This process is determined solely by the client and generally can be configured again on a user, group, or global basis. The client dictates which vendors receive the approved requisitions. In certain cases, special staffing vendors receive open requisitions with specialized requirements. This process can happen real-time or on a time delay depending on the client process. Some consulting organizations with labor e-procurement solutions in place use a time-delay feature to check the bench (consultants not currently assigned to a project) or to reference consultant skill sets against open requirements before external distribution to staffing vendors. Most clients expect to see better efficiencies in their recruiting process due to the single, streamlined process. Maverick hiring managers or overly aggressive staffing vendors are roped into following one client-directed recruiting process for acquisition of contingency workers. Candidate management and selection workflow are also managed from the application. This aspect of the technology does have limitations as a “standalone” solution though. Labor e-procurement technology is still quite dependent on the “human element” to actively manage the staffing vendors and ensure the integrity of the recruiting process. Some of the technology vendors make the mistake of branding their application as a vendor-neutral, turn-key technology solution. But the effectiveness of this tool is directly affected by a designated resource, whether supplied by the technology vendor or an internal resource of the client, to be accountable for vendor management. There is a level of buy-in from staffing vendors that is required for the technology and process to be effective. The designated resource(s) ensures opportunity, integrity, speed and management of the recruiting process by reducing preference to specific staffing vendors for most open requirements. The designated resource also is accountable for any issues and problems that occur during this process and is a key component to ensure effective communication between client and staffing suppliers. 3. TIME AND EXPENSE Once a contingency worker is on board, all time and expense is entered into the application usually though a web interface. Having a time and expense system in place to capture, manage, and process all timecard data and expenses is a standard piece of a labor e-procurement solution. Most technology vendors should be able to adapt the tool to the client environment. While the standard is a web-based solution that allows contingency workers to add billable time in a 24/7 fashion, not all companies maintain a “web-savvy” employment base. Therefore, make sure your technology vendor integrates with other hardware, such as swipe card or scanning technology for instance, to capture this data. Managers should have the option to approve, manage, and report contingency worker time and expenses from this module. Once a contingency worker’s time is added into the solution, the approving manager is notified of the transaction in the system and can either approve or reject the time. Once time and expenses are approved, the data is fed to the invoicing system real-time. 4. BILLING/INVOICING By having an invoice management in place, the client is able to outsource this complex and labor-intensive process to the technology vendor. Since all contingency workforce data is captured and approved in the system, the technology vendor can manage invoicing for the approved staffing vendors directly with the client. Only data that is captured and approved in the application is invoiced to the client. The technology vendor handles all management of billing to the client and payment to the staffing vendors. The capture of approved data ensures the integrity and timely payment to staffing vendors. This is an area of much sensitivity, with many staffing vendors apprehensive about a third party intervening with billing on behalf of their respective organization. However, with the right technology partner and clear and consistent communication, this relationship can be successful and profitable for the client as well as the vendors. As we know, nothing improves relationships better with staffing vendors than timely and consistent payment of invoices! 5. REPORTING Finally, most technology vendors provide in-depth reporting capacity. Information captured from your contingency workforce time and expense system can be tracked against projects and budgets. This reporting allows executives to see the big picture on global projected costs and forecasts — or allows line managers to drill down into line-item costs per project. Again, the format is generally through a web portal, and real-time, 24/7 report generation is usually the standard. BENEFITS AND LIMITATIONS Now that we know what labor e-procurement technology is, what are its major benefits and limitations? * PROCESS. We can come up with many scenarios depicting the translation of costs savings due to increased process efficiencies. If the process is managed through the technology, the rogue vendors (and hiring managers!) can be easily roped in and enterprise staffing costs managed and forecasted on a more consistent basis. Labor-intensive administrative tasks are reduced. Candidate workflow, time and expense data, invoicing, and reporting are managed under one roof — real-time, 24/7. Although there is a cost associated with an assigned resource to manage the process and vendors, most organization should experience a return fairly quickly after adoption. * REDUCED STAFFING SUPPLIER MARKUPS. The largest potential for mass savings for clients comes from the improved financial relationship with staffing vendors. It is generally recommended to streamline vendors during the adoption and deployment of the technology. Since volume generally increases, many companies take the opportunity to negotiate better contingency worker rates and margins with their staffing suppliers. Many staffing vendors will be more than happy to reduce markups significantly in order to be considered as a preferred vendor or tier-one staffing provider to your organization. However, your organization still may lose some preferred staffing vendors who do not want to take adjustments to their margins. It is critical that your technology vendor work closely with your staffing vendors to communicate the benefits of the technology — such as greater volume, quicker payment, and improved client/supplier relationships — and not isolate and remove them from direct communication with the client. * QUALITY AND SPEED. One of the core features of this technology is the promotion of a vendor-neutral environment. Staffing vendors will have an equal opportunity to work open requisitions, thanks to the process. Ultimately, this should increase the quality of the candidate pool presented to your hiring managers. However, the technology does distance your staffing vendors from the hiring managers. Staffing vendors with long-term relationships in place with hiring managers may feel isolated or even threatened by the technology. Although the technology is in place to increase quality and reduce cost, it is again critical to work with staffing suppliers as partners through the technology — and not just as expendable resources. * CONSOLIDATED BILLING AND IMPROVED VENDOR MANAGEMENT. Outsourcing vendor invoicing and consolidating billing reduces the need for internal resources to perform this function. By completely managing the invoicing process, staffing vendor generally can get paid in a timely and consistent fashion within contractual payment terms. Timely payment to staffing vendors can help improve the client/supplier relationship and hold the technology vendor accountable for this function. CONCLUSION A labor e-procurement solution can be of great benefit to your organization if you experience significant costs associated with acquisition of your contingency workforce. The greater the potential volume of hiring needs for your company, the greater the potential cost savings. The adoption of preferred suppliers, reduction in staffing vendor margins, internal process efficiencies, and consolidated billing all contribute to the benefits. However, it is critical to understand the value of each piece of this application to your organization and how it can impact your enterprise before you consider one of these solutions. In selecting a technology vendor for labor e-procurement, make sure your vendors clearly understand the value of your staffing supplier relationships. The key to the success of this technology is the suppliers. Effective communication and management of the supplier base ensures quality of the candidate pool. At the end of the day, the buyers are your hiring managers, and the quality and speed of the contingency candidate pool will be one of the defining factors in the success of this technology. But by properly managing the client and suppliers, the technology can help improve quality and reduce costs for your organization.