Last year financial services company Washington Mutual, Inc., of Seattle deployed about 1,000 contingent workers per month in three areas:  home-loan processing, information technology and general clerical work.  In 2003, during the refinancing boom, nearly 10 percent of its total workforce was contingent. Understanding the necessity to manage such personnel procurement efficiently, the company’s HR department issued a request for proposal and eventually chose Chimes’ Centralized Vendor Management (CVM) from Chimes, Inc., of Troy, Mich.

Besides collecting all information on workers and suppliers, it calculates and compares bill rates, empowers managers to submit requests and requirements, prompts managers for input as needed and provides for executives an general view of spending. Other modules handle time sheets, invoicing and payment.

Within Washington Mutual, two groups share responsibility for the contingent workforce management process.  HR managers the contingent staffing program and Chimes, while the sourcing group negotiates contracts and deals with the suppliers.

The vendor management system first rolled out to the IT group in July 2004.  There was a pressing need for it; at the time the company decided to adopt a VMS, more than 100 suppliers were eligible to provide talent in this sector.  “IT was the most challenging because we had to vet so many vendors,” says Brian Powers, Washington Mutual’s vice president and non-technology vendor manager in the strategic sourcing division.

The first task for Chimes after the system went live was to evaluate the IT suppliers and reduce their number. Once existing data, including bill rates and performance reports from managers, was entered through a combination of data transfer and manual input, the implementation team was able to compare vendors.  As a result, Washington Mutual was able to negotiate lower fixed bill rates among the approximately 30 vendors that remained.  Ultimately, Powers says, “We achieved a 27 percent reduction in costs, most of which were attributed to direct expenses such as reduced bill rates, invoice processing and short-time assignments.”

Over time the company launched the Chimes modules in its mortgage and clerical units as well.  One key step in the process was to rank all suppliers in one of three tiers.  Following that, the sourcing group negotiated service-level agreements (SLAs) that specify time-to-fill limits for the clerical (48 hours) and mortgage (72 hours) categories; if top-tier suppliers fail to deliver within the specified time, the requisition is automatically sent to the second level of suppliers.  Vendors rise or fall through the tiers according to this and other performance measures.

Currently, clerical and mortgage each have a single tier-one (or preferred) vendor, while there are 14 preferred vendors for IT. “We’re able to be very specific with vendors who want to get to tier one,” Powers says.  For instance, SLAs with the top suppliers specify fill-rate percentages for all positions, which prevents them from artificially boosting their ratings by selecting only the easy-to-fill positions, he explains.

When VMSs were introduced, staffing companies used informal business arrangements without consistent oversight balked at the operational visibility they provided to clients.  For example, when Washington Mutual implemented Chimes, “We had vendors refuse to work with it,” Powers recalls.  “It helped us to weed them out.”

The suppliers that remain have accepted the system; some even like it.  “They’re starting to see the benefits of efficiency,” he notes.  From the agency point of view, a well-run procurement management system can reduce disputes with clients over time worked or approved, automate paperwork and speed payment.  And for those who perform well, it can mean more business.

Tiering systems, which prioritize vendors and reward performance, appear to be a good way to motivate them.  “It gave us a mechanism to introduce new vendors and manage out the under performers,” Powers explains.  “The tier-one suppliers have to continually outperform or risk losing their position and first look at the requisitions.”