VMS First Principles: Why you should Source and Manage your Contingent Labour via a Vendor Management System (VMS)
Jan 13
8 min read
This post is a guest article from Chris Jasper, VP Of Sales for EMEA at Beeline the global leader in contingent workforce management solutions. In this short but comprehensive article Chris outlines the first principles of a Vendor Management System (VMS), from a definition and the benefits of VMS solutions through to how to select the right one for your organisation this article has it all. If your organisation manages a significant amount of temporary and contract labour, read on! (you will also find Chris' contact details in the article footer below)....
What is a Vendor Management System (VMS)?
A vendor management system (VMS) is a web-based solution designed to facilitate the procurement, management, and administration of temporary and contract labour. It is a centralised platform that automates and streamlines the entire lifecycle of contingent workforce management, from sourcing and onboarding to performance tracking and offboarding.
Why the world’s leading businesses use VMS
In today's dynamic business environment, companies increasingly rely on contingent workers — temporary staff, independent contractors (ICs), consultants, and outsourced service providers — to increase flexibility, reduce costs, and tap into specialised skills. Managing this external, non-permanent workforce poses unique challenges, which is why so many companies depend on a vendor management system (VMS).
While the first VMS platforms were designed to serve only the largest enterprises, VMS solutions are now available that can meet the needs of virtually any business. VMS platforms now range from enterprise solutions to smaller, simpler VMS solutions that organisations can deploy quickly to control and automate their contingent workforce programs.
What are five significant challenges only a VMS can solve?
Visibility of contingent workers
Without a VMS, companies don’t know who these workers are, where they are, what they are doing, or what access they have to facilities, networks, or data. A VMS tracks all contingent workers and their assignments, increasing security and enabling better-informed staffing decisions.
Cost savings
Without centralised control, businesses may experience unbudgeted spending and inefficient vendor engagements. A VMS can standardise labour engagement processes, compare bill rates to market standards, negotiate vendor rates, analyse overtime usage, and more, improving cost control and reducing contingent workforce spending.
Regulatory and policy compliance
Misclassifying contingent workers can lead to severe legal and financial repercussions. A VMS helps to facilitate compliance by automating and documenting adherence to laws, regulations, and company policies, reducing the risk of litigation and financial penalties.
Performance measurement and optimisation
It is crucial to measure and analyse the performance of staffing suppliers and the talent they deliver. A VMS can track performance metrics, such as time to fill positions, bill rates, contract extensions, and project completion rates. This data-driven approach helps to optimise workforce spend and ensure the timely delivery of high-quality talent.
Streamlined business processes
Managing a complex non-employee workforce using spreadsheets and other manual methods is error-prone and inefficient. A VMS automates critical processes, such as creating and distributing job requisitions, candidate evaluation, rate negotiations, onboarding, timekeeping, expense reporting, billing, and offboarding. It also integrates seamlessly with enterprise systems, ensuring accurate data exchange and providing a robust, auditable system of record.
What are six essential functions of a VMS?
Implementing a VMS offers several significant benefits to organisations:
Sourcing and procurement
A primary function of a VMS is to streamline the process of finding and hiring contingent workers. It connects companies with staffing agencies, freelance marketplaces, and other talent sources, making it easier to post job requisitions, evaluate candidates, and make hiring decisions.
Onboarding and compliance
Once candidates are selected, a VMS assists in the onboarding process, ensuring that all necessary documentation, training, and compliance requirements are met. This includes verifying certifications, conducting background checks, and ensuring contingent workers comply with company policies and procedures. Automating these processes reduces the risk of non-compliance and legal issues.
Time and expense tracking
A VMS typically includes tools for tracking contingent workers' time and expenses. This ensures accurate billing and payment, reduces administrative overhead, and provides transparency into labour costs. Workers can log their hours and expenses directly into the system, which managers can review and approve.
Milestones and deliverables
For outsourced service contracts, a VMS tracks project milestones and deliverables. It ensures payments are made only after deliverables are accepted and milestones are met.
Performance management
Managing contingent workers' performance is crucial for ensuring productivity and achieving business objectives. A VMS enables performance tracking through regular evaluations, feedback mechanisms, and key performance indicators (KPIs). This helps companies identify high-performing individuals, address issues proactively, and make informed decisions about contract renewals or terminations.
Reporting and analytics
Data-driven decision-making is a cornerstone of modern business strategy. A VMS offers robust reporting and analytics capabilities, providing insights into workforce utilisation, supplier performance, cost management, etc. These insights help organisations optimise their contingent workforce strategies, negotiate better rates with vendors, and improve overall efficiency.
What are the benefits of using a VMS?
Implementing a VMS to source and manage the extended workforce offers several significant benefits for organisations:
Enhanced visibility and control
A VMS provides a centralised platform for managing all aspects of the contingent workforce, offering unparalleled visibility and control. This centralised approach ensures managers have real-time access to critical information, facilitating better decision-making and resource allocation.
Cost savings
A VMS helps reduce the costs associated with managing contingent workers by automating administrative tasks and improving process efficiency. Additionally, the system's reporting capabilities allow companies to identify cost-saving opportunities and optimise their spending on temporary labour.
Improved compliance and risk management
Ensuring compliance with labour laws and regulations is complex, especially when dealing with a diverse contingent workforce. A VMS automates compliance checks and maintains detailed records, reducing the risk of legal issues and fines. This is particularly important for companies operating in multiple jurisdictions with varying regulatory requirements.
Better talent quality
By providing access to a broader talent pool and enabling efficient candidate evaluation, a VMS helps organisations find the best talent for their needs. Performance management tools help track and measure the quality of talent suppliers and workers. The VMS can advise hiring managers on which contractors to rehire and which staffing agencies consistently deliver the best talent at the best prices.
Scalability and flexibility
As business needs change, quickly scaling the workforce up or down becomes crucial. A VMS offers the flexibility to adapt to these changes seamlessly, ensuring that organisations can quickly respond to market challenges and opportunities.
How to choose the best VMS
Selecting the best VMS platform is crucial for effective contingent workforce management. The decision often involves choosing between an integrated suite from a large software vendor or a best-of-breed solution tailored to specific organisational needs. While consolidating suppliers might seem convenient, this approach can lead to suboptimal outcomes if the chosen system doesn’t fully meet the organisation’s requirements.
Critical considerations for selecting a VMS:
Functionality and flexibility
A robust VMS should handle traditional contingent staffing, complex services procurement, and emerging talent sources within a single platform. The system must also provide sophisticated analytics for total talent management and workforce optimisation.
Total cost of ownership
Evaluate beyond the initial acquisition cost. Consider program office staffing needs, MSP service requirements, and hidden implementation, integration, and customisation costs. A thorough analysis ensures a comprehensive understanding of long-term expenses.
Service and support
Superior VMS providers offer extensive support beyond the basic help desk or “break-fix” services. Look for providers that offer strategic counsel, operational management, and 24/7 support to ensure smooth transitions and ongoing system optimisation.
Integration capabilities
The best VMS solutions can integrate seamlessly with leading ERP and HRIS systems. The decision should focus on which VMS offers the best functionality, flexibility, configurability, and support services rather than solely on integration claims by ERP or HRIS vendors.
Innovation and future-proofing
Choose a provider committed to continuous innovation and capable of adapting to future needs. A forward-looking VMS will help capitalise on opportunities and protect against emerging threats in the workforce management landscape.
What to look for in a VMS provider
When you select a VMS, you are not simply choosing a software solution. You are choosing a technology partner for your extended workforce management journey. Seven important qualities will determine the success of your partnership. Here is a summary:
Analytics
Effective workforce management is data driven. A VMS should include analytic tools that empower you with insight to inform strategic decisions. Ask VMS providers to show you how their workforce analytics help organisations extract actionable insights from their data to achieve efficient program management.
Data security and privacy
Ensuring data security and privacy is paramount. A VMS provider should adhere to rigorous international standards and invest heavily in systems and processes that protect client data. Their commitment should include compliance with global data privacy regulations and robust internal security practices.
Talent focus
The focus should be on engaging and managing talent rather than merely controlling costs. The best approach to VMS technology is the one that delivers qualified external talent across all labour categories while ensuring compliance with various legal and regulatory requirements worldwide.
Global expertise
Combining global solutions with local expertise is essential for successful program expansion. An efficient VMS should offer a single platform for managing non-employees globally, with features that accommodate local requirements and regulations. A VMS provider with an extensive global footprint and a deep understanding of regional differences can ensure smooth program implementation across multiple countries.
Quality of service
Exceptional service is crucial for sustained success. Look for a VMS provider whose high-touch, consultative approach includes comprehensive support services, from implementation to ongoing program optimisation. Your provider should facilitate peer-to-peer collaboration and continuous improvement through various client engagement channels.
Scalability
A scalable solution is vital to accommodate changing workforce needs. A truly scalable extended workforce platform is designed to manage all non-employee requirements globally, with continuous investment in product development to stay ahead of market trends and client needs.
Innovation
Embracing innovation is vital for future success. A VMS provider should collaborate with clients to drive product development, incorporating cutting-edge technologies like artificial intelligence to enhance efficiency and outcomes. Only a provider that is committed to innovation can ensure that clients benefit from the latest advancements in workforce management technology.
You need to evaluate all these qualities to select the right technology partner. Only then can you ensure that your VMS solution will align with your organisation's current and future needs.
Get expert advice
Industry experts recommend a detailed evaluation of VMS providers, considering their track record, contingent workforce expertise, and commitment to innovation. This involves probing beyond standard product capabilities to ensure the provider can deliver on their promises and support your long-term strategic goals.
Several reputable analyst organisations regularly compare VMS solutions and providers. One of the most respected is Everest Group, which annually publishes its Vendor Management System PEAK Matrix® Assessment.
What industries use VMS?
Businesses in virtually every industry use vendor management systems to manage their contingent workforce. According to Staffing Industry Analysts (SIA), approximately 80% of companies with 1,000 or more employees use a VMS. Leading companies in all the following industries depend on VMS solutions to source and manage external talent:
Government and public sector
Banking and financial services
Energy and utilities
High technology and communications
Pharmaceuticals and life sciences
Manufacturing
Retail
Healthcare
In conclusion
Over the last 20 years, a VMS has become indispensable for organisations that rely on contingent workers. A VMS enhances visibility, control, and efficiency by automating and streamlining the procurement, management, and administration of external talent. It helps companies achieve cost savings, improve compliance, and ensure the quality of hires, ultimately enabling them to build a more agile and responsive workforce. As the nature of work continues to evolve, robust VMS solutions will become ever more essential components of modern workforce management strategies.
If you are interested in learning more or looking to deploy a VMS solution, let’s talk.
You can contact Chris directly via:
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