A Vendor Management System (VMS) is a cloud-based software application that helps to facilitate the process of contingent worker procurement and contingent workforce management. Employers who invest in VMS technology will streamline vendor performance to better manage labor costs, maximize productivity, ensure compliance and increase efficiency. A Vendor Management System is also essential to achieving Total Talent Management across an entire organization.
As the need for flexibility continues to drive business decisions across the globe, employers are augmenting their traditional employment models with contingent workers now more than ever.
However, organizations' Human Resources and Procurement Departments are typically not equipped to handle the unique challenges of engaging contingent talent and managing the hundreds of vendors involved in workforce management. In fact, Deloitte’s 2018 Human Capital Trends report finds 84 per cent of organizations lack established policies and practices to manage a blended workforce. And employers are missing out on opportunities to leverage human capability and tech to gain access to the types of better worker data that will drive business forward.
What's a vendor?
Vendors are the individuals and organizations that provide goods or services to another business. Often, employers will engage hundreds of vendors and each will typically come with its own unique business process, pay rate and point of contact - adding even more complexity to workforce management.
As a result, one of the most common mistakes employers make is mismanaging their vendors, resulting in overpaying for goods and services as well as having no visibility into hidden costs within their current program.
What's vendor management?
Vendors are the individuals and businesses that provide goods and services to your organization. It's likely that your company works with hundreds of different vendors all with varying pay rates, contract terms and points of contact.
This, of course, can become complex. Without the proper management of these vendors you can soon find that your organization is overpaying for goods and services, and losing money on a range of hidden costs.
Why is vendor management important?
To remain competitive, and effectively manage their traditional and contingent workforces, it's essential for a business to invest in technology solutions such as a Vendor Management System (VMS) in order to achieve better management.
To achieve the benefits provided by a Vendor Management System, HR and Procurement must first foster collaboration and communication to promote the types of cross-functional strategies that create greater visibility, access to data and enhanced control.
Breaking down the silos: HR, Procurement and a Vendor Management System
While Human Resources will track performance metrics like vendor engagement and vendor retention, Procurement KPIs will focus on performance metrics like vendor cost and vendor risk. As such, it’s critical for each function to identify and embrace a shared business goal.
This means breaking down the silos between departments to understand what drives the other business function and what objectives they must meet. Understanding the needs of both business functions and connecting priorities encourages each one to work towards their common performance goal: filling skill gaps with high-quality workers in the most cost effective manner.
What does a Vendor Management System do?
A Vendor Management System can provide the transparency that Human Resources and Procurement Departments need to ensure their business successfully engages and manages contingent workers with the same processes, protocols and efficiencies across the entire business supply chain.
With true collaboration between Human Resources and Procurement business functions, and the implementation of the right Vendor Management System, business leaders can maximize the value of all engagements with service providers and performance across the entire talent supply chain process.
Benefits of vendor management system
Vendor Management Systems will help employers achieve greater visibility across their entire contingent worker program while managing vendor performance, improving program efficiencies and mitigating risk by enforcing compliance. Vendor Management Systems will also help employers:
Save on costs
One of the most significant benefits of management of vendors is saving on costs, and managing vendors from a central data hub allows employers 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 data-driven hiring decisions.
Achieve Greater workforce visibility
Vendor Management Systems make it easy for organizations to achieve total transparency over their workforce. The information within a VMS grants employers visibility into who is working for them, where the workers are performing the work and the process involved to perform the work. This information provides employers with insight into the value of each resource - ultimately increasing cost savings, improving worker performance and mitigating risk by enforcing compliance.
Automate and streamline processes
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 and process. With automation eliminating tedious administrative responsibilities, organizations can save time and money with vendors.
Accurately track applicants
Vendor Management Systems have powerful applicant tracking capabilities that create a more efficient hiring process across all areas of an organization. With automation tackling the administrative tasks associated with onboarding, offboarding and all tasks in between, employers have access to all hiring information with the ability to reject or accept any information in the workflows.
Reporting and Analytics
A Vendor Management System allows organizations to gather comprehensive date on their contingent workers and program. Employers will have access to data that can accurately evaluate costs, time-to-hire, candidate quality and quantity and the organization's exposure to risk. These data-driven reports allow organizations to evaluate their numbers against the competition and the industry.
The analytics capabilities of Vendor Management Systems enable organizations to make better enterprise-wide decisions. A Vendor Management System gives users direct access to the information that allows employers to gauge the success of their programs and make adjustments accordingly.
Efficient Processes and Compliance
A Vendor Management System will ensure 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.
Through a VMS, organizations can track pre-defined performance metrics during the duration of the contract(s) with vendors. This enables employers to gain greater visibility into their vendor relationships and have more control over the selection of their vendors. A vendor management solution that integrates with a VMS can give employers confidence in the quality of services that are being delivered.
Stronger vendor relationships
The relationships employers foster with vendors are as just as important as the performance of vendors, and employers should continuously work to strengthen these relationships. A VMS will track the performance of vendors, yet it can also solidify relationships with these external partners as well. With effective management of vendors, business leaders can can create mutually beneficial processes that build the trust and loyalty needed to keep great vendors as part of the organization's talent supply chain.
Greater administrative efficiencies
While vendor performance is a significant benefit of a VMS, additional benefits of Vendor Management include greater administrative efficiencies. Acting as a central hub for vendor data and record keeping, a VMS can eliminate data duplication, cut down on administrative costs and clerical errors, while ensuring compliance and better business practices. VMS technology will also help employers better manage relationships with their vendors by ensuring heightened efficiencies and compliance.
Decrease in time to hire
Time to hire is one of the most important hiring metrics to Recruiters and Hiring Managers. VMS technology will give employers access to the automated sourcing solutions that will find talent quickly and effectively. This not only decreases time to hire, but also creates a better candidate experience.
VMS Technology grants employers the ability gain control over their workforce while also helping to achieve Total Talent Management in a global and digital economy.
Do you want to gain 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.