Opportunities for Procurement in the ‘Strategic Plan for External Labor’

External labor is one of the largest expenditure categories for many organizations. Yet the role of Procurement in this area is often limited to operational tasks: securing contract terms, issuing purchase orders, and processing renewals. This stands in stark contrast to the strategic importance of this category: crucial projects, scarce skills, and high cost impact. A "Strategic Plan for External Labor: Sourcing & Talent Management" offers Procurement the opportunity to broaden that role by adding better insights, market knowledge, and quality control.

Why does external labor for procurement remain stuck at the operational level?

1. At present, Procurement is forced to remain operational due to a lack of insight. Without a complete picture of who is working externally, what skills are being hired, and how suppliers are performing, Procurement can only act tactically. As a result, Procurement's contribution is limited to terms and conditions and invoice flows, and there is little strategic negotiating power. This means that this spend category remains largely uncontrolled.

2. The category does not align with the organization's future skills needs. Without insight into which skills are becoming scarcer, which role types are structurally external, and how the business is developing, it becomes impossible to determine a supplier or market strategy. As a result, procurement cannot add value through market research, rate negotiations, and advice on sourcing options.

3. Finally, there is hardly any control over the price-quality ratio. Once an external professional is brought in, the process falls completely outside the scope of Procurement. As a result, there is a lack of performance or turnaround time data, retention information, and benchmarks for price/quality. The result: contracts remain generic and do not focus on what really matters: skills, quality, and productivity.

What you can achieve with a Strategic External Labor Plan

1. Procurement becomes a strategic partner in a large, complex category. With better insight into spend, skills, and supplier performance, Procurement can influence choices that are currently made behind the scenes, thereby adding strategic value.

2. Powerful market research that directly matches skills needs. Procurement can advise the organization on where shortages exist, which suppliers or channels are needed, and what rate trends are coming. This way, market information becomes a direct input for strategic (workforce) decisions.

3. A supplier mix that truly matches talent demand. When Procurement seeks collaboration with HR, you can use skills data and HR information to help the organization identify niche suppliers and refine the preferred supplier landscape.

4. Price/quality frameworks that focus on results rather than just rates. Gaining insight into performance and productivity creates a basis for mature quality management, based on KPIs that result in better agreements with suppliers, sharper benchmarks, and more reuse of high-performing talent.

5. Improvement of total cost of ownership (TCO), not just rates. Focusing on quality subsequently results in a better overall cost price in relation to production. And with renewed control over this category, the quality level is increased by the added value of the expertise of Procurement.

Steps toward a Strategic Plan for External Labor: how do you approach it?

Step 1. Analyze the current situation. Gather the available information and organize it. Look at spending, the structure of the supplier landscape, and the knowledge and skills provided.

Step 2. Work with HR and the business to identify future needs. Which skills will become scarce? Which roles are structurally external? Where are the risks and opportunities?

Step 3. Develop a joint sourcing strategy. How should the supplier landscape change to meet our future talent needs?

Step 4. Agree on responsibilities. Pay attention to the distribution of responsibilities: who assesses quality, who monitors performance, and who owns the process?

Step 5. Integrate the necessary data. A plan is not a plan without a method to measure its success. Ensure you have a single view of external labor: skills, rates, performance, turnaround times, and spend.

Procurement can take a more strategic approach to this spend category by focusing on a Strategic External Labor Plan, in collaboration with stakeholders within the organization. This creates room for real value: market knowledge, quality control, and strategic leadership in what is often one of the largest and most important categories within the organization.

Would you like to seek advice about such a plan? Then please contact our team. We can advise you on the approach, but also on how to embed the collected information and agreed processes in systems.

Please contact our colleague Edwin Welner via LinkedIn or call us at 088 999 3 999.