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What is Subvendor Management and do I need it?

Nov 12, 2021

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Subvendor management streamlines the contractual process by allowing an organization, or 3rd party payroll provider, to manage all subvendor relationships within a single Master Services Agreement (MSA). When evaluating the need to outsource subvendor management to a 3rd party payroll provider or keep the function in-house, organizations must consider current vendor relationships as they align with future growth strategies.

Whether you’re responsible for vendor management within a large enterprise or are operating a small-to-medium-sized business, contingent workforce management becomes increasingly complex as organizations continue to engage resources outside of their preferred vendor lists, AKA: Subvendors. And keeping up with your different contingent resources can be a massive undertaking.

As a result, independently managing subvendors can lead to overpaying for services. For this reason, many organizations are outsourcing these responsibilities to a 3rd party payroll provider.

So, what is  subvendor management is do I need it?  

A leading motivating factor for why organizations partner with a 3rd party payroll provider is that these agencies help avoid overpaying on vendor costs.

Before discovering the benefits of subvendor management, however, it’s important to understand why many organizations might be overpaying for  in the first place. While there are many factors that can contribute, the most common include:

Lack of Rate Control

A lack of rate control is a common challenge among organizations who engage contingent workers, especially when working with niche or specialized subvendors.

Since these subvendors possess such unique skills, they are more prone to overcharging and are rarely held to the same standards as other staffing suppliers.

Lack of Visibility

If an organization relies on a decentralized network of MSAs to regulate engagements with subvendors, the lack of visibility over HR and Procurement hiring practices leads to inconsistent rates being paid to workers who are hired for the same work.

Additionally, HR staff may have difficulty conducting audits of subvendors if they lack visibility over all resources. When this happens, an organization might be exposed to civil liability.

Lack of Options

Many organizations are under the impression that the subvendors they work with are the only options available.  This belief causes employers to overpay as there is no competition.

Do I Need Subvendor Management?

Leveraging subvendor management solutions and technology can offer tremendous benefits for your organization. This is true for large enterprises, small businesses, and virtually every kind of company in between.

If you rely on vendors for staffing and supply purposes, you should strongly consider taking advantage of subvendor management solutions. By doing so, you can improve:

Compliance

State and federal governments have placed significant restrictions on businesses of all types. It is vital that your organization adheres to these regulations, especially when working with subvendors.

However, this can be extremely difficult due to the divergent MSAs used to manage your vendor relationships.

When working with a subvendor management services provider, all contracts will be managed by a single entity. This reduces your compliance-related risks while simultaneously streamlining your relationship with your vendors.

Auditing

Audits are an integral part of running a business, and conducting these annual audits can be incredibly stressful and tedious.

The more complex your organization’s  network of subvendors is, the higher the risk is for overlooking critical data during your audit. A 3rd party that also provides subvendor management can mitigate these risks by keeping detailed records of your MSAs and interactions with providers.

A 3rd party payroll provider can also audit your program to ensure that they’re providing optimal value to your organization. This presents a considerable cost-savings opportunity for your business.

Rate Control

Rate control among your network of subvendors is essential to maximize profits without compromising your quality of services.

A subvendor management services provider will implement data-centric, rate-control practices consistent with industry standards and current demand. This will increase savings while encouraging healthy competition among subvendors.

Overall Business Value

Subvendor management can add substantial value to your organization in a variety of ways. First and foremost, subvendor management can drastically cut costs by helping your organization attract top talent at competitive rates.

Outsourcing vendor management to a 3rd party payroll provider provider can often save a business tens of thousands of dollars. In addition, a trusted partner can help you identify the best candidates for vacant positions while simultaneously avoiding compliance issues.

Are you interested in gaining deeper insights into the benefits of subvendor management?

Learn how Procom helped one client partner drive cost savings with our our tailored subvendor management program by viewing a copy of our case study:View Case Study

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