A Vendor Management System (VMS) will help employers and their company gain access to the critical real-time data needed to manage their contingent workforce far more efficiently and cost effectively. It’s estimated employers who implement a VMS reduce contingent workforce costs by 10 to 15 per cent.
If there's any certainty in today's uncertain world of work, it's that the coronavirus pandemic will have a lasting impact on how traditional full-time workers and contract workers work and how business gets done. One of the large-scale shifts that has business owners re-considering their workforce strategies, for example, is the accelerated rise of the contingent workforce - with Gartner revealing 32% of companies are replacing full-time employees with contingent workers as a cost-saving measure.
Gaining access to better contingent worker data with vendor management systems
However, contingent workforce management is a complex employer responsibility and understanding contingent worker data and intelligence is critical to gaining insight into the impact Independent Contractors have (such as quality management, project output, cost, risk management, etc.) on the company and work being done.
As the contingent workforce continues to rise, employers must harness the power of Vendor Management Systems (VMS) in order to expand their program, mitigate risk and manage the growth of their contingent workforce.
The information below will help employers gain a deeper understanding of how a Vendor Management System aids in contingent workforce management and also give insights into how a VMS will help provide better access to the data employers need to drive business and their contingent workforce forward:
What does a Vendor Management System do, exactly?
A Vendor Management System (VMS) is a software application, typically cloud-based, that helps to facilitate the process of contingent worker procurement and contingent workforce management. A VMS will automate and streamline the sourcing, engaging, managing and payment of contingent workers sourced through an organization directly or by their Managed Services Provider (MSP).
A Vendor Management System allows companies to engage and manage high-quality contingent talent, while also improving collaboration with suppliers. At its most basic level, a VMS will manage every stage of external workforce engagements - from candidate selection, onboarding, time and material tracking, payroll and offboarding of the workers.
What does a Vendor Management System include?
Whether a company is operating a mature contingent workforce or is engaging contingent workers for the first time, a robust grasp of contingent workforce management and a VMS isn't required to understand that data should drive significant decisions within the program. Effective Vendor Management Systems should provide reporting and analytics that serve several roles in managing and measuring contingent labor. These roles include:
Tracking all contingent worker spend within the VMS, including services engaged through Statements of Work (SOW), and analyzing costs against enterprise budgets.
- • Managing all suppliers of contingent work within the VMS.
- • Providing visibility into all projects that utilize contingent workers within the VMS.
- • Providing visibility that can be leveraged to ensure regulatory controls are in place to mitigate contingent worker risk and aid in compliance.
- • Providing employers with intelligence needed to make better data-driven decisions that address immediate, current, short and long term business goals.
Effective workforce management solutions will provide organizations with real time access to data to review active headcount of workers, tenure, spend, consumption by business unit and other VMS reporting related to contingent labor.
How do you automate vendor management to achieve better data?
A vendor management solution will guide users step-by-step through each process associated with procuring external resources. From creating a requisition to offboarding, Vendor Management software will seamlessly complete each task within the VMS. With automation eliminating tedious administrative responsibilities, organizations can save time and money.
For example, the AI technology driving effective Vendor Management Systems will use predictive analytics to compile, analyze and identify opportunities and provide recommendations on how to:
Save on hiring costs
Recommendation: Hiring through Austin TX branch will save 12%
Recommendation: Source internally before engaging vendors to decrease time to fill.
Maintain hiring manager satisfaction
Recommendation: Increase NPS in Raleigh, NC location
A VMS can also integrate vendor management solution. Through this management solution, organizations can track and manage pre-defined performance metrics. This allows companies to gain greater visibility into their vendor relationships and have more control over their vendor selections. A vendor management solution that integrates with a VMS can give employers confidence in the quality of services that are being delivered.
Why access to data is critical right now
A Vendor Management System solution will ensure data, processes and procedures are consistent across all areas of business departments and locations - even if their contingent worker programs are managed independently. This capability not only sets the standard approach to management, but also ensures that companies are compliant with local legislation. For business leaders, effective vendor management is critical for the following reasons:
VMS will help save on costs in an uncertain economy
Saving on costs are a top priority in an uncertain economy. One of the most significant benefits of vendor management of is saving on pricing, and managing vendors from a central data hub allows companies to save on costs in many ways. The information assessed within the VMS technology allows employers to:
• Tap into talent pools already within the system - saving on additional recruitment costs and time to hire.
• Better manage payroll and flag errors in overtime pay and higher than usual rates.
• Provide insights into rate cards in order for employers to make better hiring decisions.
• Help manage Diversity, Equity and Inclusion (DE&) at the staffing vendor and worker level.
A VMS will ensure better rate card management
Sometimes, vendors will charge inconsistent rates for the same skillset without providing any transparency into markups or pricing. A VMS will ensure that employers pay fair market pricing for resource skillsets while achieving visibility into cost savings and vendor markup. This allows for fair and controlled pricing.
A VMS will help mitigate risk
A Vendor Management System will ensure data, processes and procedures are consistent across all areas of an organization's departments and locations - even if their contingent worker programs are managed independently. This capability not only sets the standard approach to management, but also ensures that organizations are compliant with local legislation.
A VMS will aid in better vendor selection and classification
In United States, agencies such as Consumer Financial Protection Bureau (CFBP), Federal Financial Institution Examination Council (FFIEC) and Federal Reserve Board (FRB) are becoming more involved in assessing regulatory compliance. The increased focus is forcing employers to re-evaluate how they select their vendors.
A VMS will help put emphasis on measuring CyberRisk
With greater data generated and stored in cloud-based applications, data breaches are a continuous threat to organizations and their vendor management software. Hackers can gain access to data by exploiting vendor's security loopholes. An effective Vendor Management System will safeguard their property in the cloud and provide the best performance in the market. A VMS can ensure a company receives the highest level of performance and security.
Getting it right
Effective contingent staffing and contingent workforce management will require executive communication within the company. When sourcing and implementing a VMS, it's important to get the support and buy-in from the key stakeholders in the company. Once management is on board with your vendor management strategy, the key to supporting your organization's management objectives is planning, choosing and configuring the right vendor management software to suit your business needs.
If your company is considering VMS solutions or are re-evaluating your current solution, significant operational changes can require a new contingent workforce management solution as you remodel your workforce. A Managed Service Program (MSP) will support these tech changes across the entire contingent workforce delivery.
Are you interested in gaining deeper insights into Vendor Management Systems?
Download our free Case Study to learn how Procom's VMS technology helped one client partner save on contingent workforce costs and more.