The Honeymoon Period Continues
Since beginning to channel its temp labor spend through the NEW Procurement Center in 2001, Avaya has seen the payback on its work with ProcureStaff ramp up over time. In 2002 and 2003, Battaglia says, the company saw an average 7 percent savings on its average billing rate. But by 2004, the company was already seeing a 29.5 percent reduction in average bill rates. Battaglia credits this jump in savings to the tracking tools available through the ProcureStaff solution, which provides information on all the resources that the company has sourced over a three-year period and which have allowed Avaya to create a baseline for the average price that the company has paid for a given service. With this information, ProcureStaff set up a job library customized for Avaya with 278 unique job titles. "Now each time we source a contractor through the program, we have the backup to know what [bill rate] that person should be coming in at, and that's where we see our savings," explains Battaglia.
As of mid-2004, Avaya had 2,000 managers procuring temp labor for 67 different sites through the center, including at Avaya operations outside the United States in Canada and five European countries (England, Ireland, Belgium, Netherlands and Germany). As a result of the initiative, Battaglia reports that the company had reduced the number of its preferred temp labor suppliers by 73 percent and seen direct sourcing activity drop by 81 percent for the locations up and running with the new center. In addition, the consolidated invoicing has resulted in process savings for accounts payable.
Interestingly, as Avaya has rolled the NEW Procurement Center out to its operations in different countries, the company, at times, has had to adopt new models to accommodate local requirements. In the Netherlands, for example, local laws do not permit a third party to stand between Avaya and a temp labor agency. As a result, in the Dutch market, Avaya has direct engagement relationships with its agency suppliers and pays the vendors directly. Battaglia credits ProcureStaff with assisting Avaya in researching the requirements of the different markets and ensuring that Avaya remains in compliance with all local labor laws.
Perhaps the icing on the cake for Avaya is the fact that the NEWs program has no budget, since it is funded by the suppliers. When the suppliers sign up under their preferred contract to participate in the center, they agree to a fee (typically 2 to 5 percent) for each contractor that they bring to the program (depending on the volume for a program and how many people it takes to run the program), and those fees go to ProcureStaff. "Our purchasing folks have put a lot of hard work into the program," says Battaglia, "but ProcureStaff does assume a certain risk in ensuring performance. So it's a no-brainer."