Temps could ease aerospace supply chain pressures

An increase in demand for aircraft has seen some of the world’s biggest names in aviation plan a significant increase in output. Whilst this is great news for the wider economy, the added pressure on the supply chain may cause problems.

With a notoriously complex supply chain, the aerospace sector is vulnerable to varying demand. The smaller firms, lowest in the chain, are arguably the most integral and many will be both elated and concerned about the news. A report by PwC aerospace and defence, Mission Control: 2011 annual and fourth-quarter review, supported these supply chain fears.

“The need to rapidly expand production in a number of aerospace platforms is putting strains on the supply chain. Our analysis indicates that a significant proportion of suppliers are at risk of not being able to deliver the ramp-up that is required.”

Unfortunately the problem is underpinned by an industry skills shortage. The sharp increase in demand has left many positions unfilled and the recruitment process requires a significant amount of time and cost. However, with the military and defence sector heading in the opposite direction to the commercial industry there is a pool of workers with transferable skills and experience becoming available. By employing these workers on a temporary basis suppliers are able, at least to attempt, to keep up with the demands of the sector.

Taking on temporary agency workforce with the goal to invest and train them to have the required skills is also a workable option. The flexibly allows employers to ‘try-before-they-buy’, reducing wasted investment.

Whilst a larger workforce will not alleviate all the pressures of increased demand, it will give suppliers the tools to give it their best shot.

Optimising spend within the temporary agency labour category

Setting a standard and optimum matrix of pay and charge rates is key to managing your temporary agency workforce spend, throughout 2012. Arguably the most important phase as you seek to leverage your expenditure, it allows you to balance and regulate worker and agency payments in the absence of an official Government ombudsman.

The key point to remember is that spend management through rate optimisation and standardisation, is specific to the recruitment industry. With a total of more than 17,000 agency suppliers in the UK, all operating under varying, verbally-agreed, informal terms of business creating a fragmented and unscrupulous marketplace, rate optimisation and standardisation is unavoidable as a means of managing spend.

Indeed, it seems that rate inconsistency is the chief factor in rendering the relationship between agencies and their clients so unhealthy.. As a result, recruitment campaigners have been calling time for employers to have more power to set prices according to their finances, especially in light of the recession, which put strain on recruitment budgets.

There are two main aspects to rate optimisation: finding the optimum, job-specific pay rate and finding the optimum agency margin.

To start with, it is important to realise that establishing the “optimum” rate for a job does not mean selecting the best or average payment. Rather, it requires finding a balance between a market-driven agency pay rate and a competitive pay rate that will attract high-quality staff. Thus, the best way to find the optimum pay is to carry out a full analysis of your industry. Look at the job in question, what you would normally pay that candidate if they weren’t supplied through an agency. Be aware the geographical variations.

Then consider the median pay across those who get the job via an agency. Take into account the current jobs market and economy and analyse employment and unemployment statistics within your industry to gain an insight into candidate availability at that specific time – vital in setting the optimum rates for all job types since the higher the number of available candidates, the less the pay rate is going to need to be.

The next step is to optimise agency margin.