PurchasingAutomation.com
September 2003
Building eProcurement Spend Volume - Shell Case Study
By Debbie Wilson
Contingent Labor Procurement at Shell Oil
Last year, Shell Oil Products U.S., a division of the mammoth $26 billion Royal Dutch Shell, conducted a study of its SG&A (selling, general and administrative) expenses to identify areas for potential improvement. One of the attractive opportunities it uncovered was its contingent labor procurement and management processes.
Contingent labor was a decentrally managed spend category at Shell; pay rates for contingent workers in similar jobs were all over the map. In addition, Shell was concerned that its manual systems were inadequate for tracking contractor assignment terms. "It's important to monitor the length of time contractors work here, to limit our co-employment risk," said Laura Mitchell, contingent workforce management category manager for Shell.
Was the tremendous size of Shell’s contingent labor expenditures, which rang up to $100 million in 2001, the primary reason for its interest in this particular spend category? "Yes, it was, but another key goal was to make the process more efficient,” explained Mitchell.
Shell launched a task force to explore the various alternatives to improve its contingent labor management process. The task force first looked at SAP, a solution the company already leverages extensively for other processes. But according to Mitchell, the ERP lacked key functionality to meet the requirements the team had established. “We needed to be able to track the hours, pay rates, and assignments for individual contracts, not just the total spend with a particular supplier,” Mitchell explained.
The team eventually chose software from IQNavigator, and it implemented the system nine months ago to streamline the hiring and tracking of IT, accounting, administrative, and clerical temporaries, as well and professional consulting services. So far, Shell is quite happy with its work in this area, as evidenced by its recent public testimonials on behalf of IQNavigator.
Embedded in its new system are a number of controls. The company’s strategic agencies are the only suppliers end users can solicit for candidates; procurement must approve the addition of any new agencies. Unless individual contractors log their hours into this web-based system, they aren’t paid. This feature gives Shell visibility into the precise length of stay each for each contractor. Shell’s agencies don’t have to duplicate these efforts; each has access to the logs their workers create through IQNavigator’s web-based interface.
Shell's new contingent labor solution is proving effective in terms of delivering hard cost savings. IQNavigator enforces competitive rates through pre-negotiated rate ranges and pay rate caps for various positions. The new fulfillment process reduces pricing through competition: end users are encouraged to send any new requirement to Shell’s multiple approved agencies, instead of just settling for the first good candidate that comes along. "We also expect to receive volume discounts as a result of consolidating our spend with fewer suppliers, and we’ll be in a much better position to take payment discounts with a more automated process,” added Mitchell.
