Following the successful completion of a pilot trial, TNT Logistics is rolling out a nationwide program to reduce temporary agency staff costs, due for completion in April 2004.
The pilot program was completed in October 2003 and initial figures show significant reductions in total temporary agency staff costs. The program was launched and implemented in conjunction with de Poel Managed Service, a cost reduction consultancy that specialises in temporary agency staff costs and productivity.
In most large businesses, temporary agency labour is not considered an important strategic resource. Fragmentation among agencies has resulted in a lack of any significant national players, and the local nature of the customerVsupplier relationship prevents employers from optimising the supply of temporary staff in order to derive best value.
If the supply of temporary agency labour is managed properly, and the quality and legal issues are addressed, this resource can be of significant strategic value, offering flexibility in an area that has traditionally been unwieldy and difficult to manage. At TNT Logistics we are constantly looking at all the areas of our business to determine ways in which we can improve our operations and offer better value to our customers, says Simon Boggis, Head of Purchasing. Temporary agency labour was an area in which we could not only decrease costs, but also improve standardisation and develop supplier relationships.
The cost reduction program implemented in the pilot region was very similar to those commonly implemented in other areas of the supply chain. However, owing to the nature of the service provided by temporary employment agencies, the relationship had to be maintained at a local level. Initially, de Poel reviewed the existing agency relationships and determined TNT Logistics expenditure on temporary agency staff. de Poel then recommended standard charge rates to reflect the true cost of supply across the different regions of the UK. Once the charge rates were established, agencies were invited to bid purely on the value-added services they would provide X a process that removes the need for cost-based bidding. Once a supplier panel was selected, de Poel facilitated the agreement of Key Performance Indicators and delivered a bespoke Service Level Agreements to ensure consistency of supply and to define objective criteria against which the success of the relationship will be measured.
It is reasonable to ask why an agency would wish to enter this type of relationship and commit to Service Level Agreements, as the process is designed to reduce temporary agency labour costs and improve the levels of service they deliver. The answer is simple: temporary staff agencies traditionally turn over 60% of their client base per annum. Entering into a Service Level Agreement with TNT Logistics guarantees demand, reduces the agencies costs, enables them to concentrate on developing the relationship with the client, and provides opportunities for increased turnover through deeper account presentation. As a consequence of these relationships, the total number of temporary staff agencies supplying TNT Logistics in the UK will be reduced from over 570 to approximately 50.
In addition to reducing direct costs, TNT Logistics is also rolling out e-tipsÑ, de Poels electronic invoice and timesheet processing system. This revolutionary system will deliver substantial indirect cost savings by producing a single consolidated invoice covering all temporary agency staff costs - traditionally TNT Logistics received over 30,000 paper-based invoices per annum, with an accuracy rate of only 89% or less. e-tips also provides easy access to up-to-date management information and can be interegrated into most modern back office systems to deliver further cost reductions.
TNT Logistics is the first global logistics company to implement a program of this nature in the UK. We are proud to have had the opportunity to help develop and implement this exciting initiative and look forward to working with TNT over the coming months to deliver further quality improvements and substantial reductions in expenditure, says Michael Campbell, Director of de Poel.
TNT Logistics UK and de Poel form Ground Breaking Relationship
.