07 May How Vendor Management Systems Provide Competitive Advantages
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 can streamline vendor performance to better manage labour costs, maximize productivity, ensure compliance, and increase efficiency. A VMS is also essential to achieving total talent management across an organization.
As the need for flexibility continues to drive business decisions across the globe, employers are augmenting their traditional employment models with contingent workers.
However, organizations’ human resources (HR) 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 report on human capital trends finds that 84% of organizations lack the established policies and practices that are required to manage a blended workforce.
What’s a vendor?
Vendors are the individuals and organizations that provide goods or services to other businesses. Often, employers will engage hundreds of vendors and come with unique business processes, pay rates, and points of contact. This adds to the complexity of workforce management.
As a result, one of the most common mistakes employers make is mismanaging their vendors. This results in overpaying for goods and services as well as having no visibility into hidden costs within their current program.
What is 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.
Without the proper management of these vendors, you can soon find that your organization is overpaying for goods and services while losing money on a range of hidden costs.
Why is vendor management important?
To remain competitive and effectively manage the traditional and contingent workforces, it’s essential for a business to invest in technology solutions such as a VMS.
To achieve the benefits provided by a VMS, HR and procurement departments must first foster collaboration and communication to promote the types of cross-functional strategies that lead to greater visibility, data access, and enhanced control.
Breaking down the silos: Human Resources, Procurement, and a Vendor Management System
While human resources will track performance metrics like vendor engagement and vendor retention, procurement key performance indicators (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 a less costly manner.
What does a vendor management system do?
A vendor management system (VMS) 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 VMS, business leaders can maximize the value of all engagements with service providers and performance across the entire talent supply chain.
Benefits of a VMS
A VMS will help employers achieve greater visibility across their entire contingent worker program while managing vendor performance. A VMS involves improving program efficiencies and mitigating risk by enforcing compliance. The examples below pertain to the other advantages of a VMS for employers.
Save on costs
One of the most significant benefits of a VMS is the ability to save on costs through managing vendors from a central data hub.
The information assessed within the VMS software allows employers to:
- Tap into talent pools already within the system to save on additional recruitment costs
- 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
A VMS makes it easy for an organization to achieve total transparency over its 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, which ultimately increases cost savings, improves worker performance, and mitigates risk.
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
A VMS can 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 other tasks, employers have access to hiring information and the ability to reject or accept any information in the workflow.
Reporting and analytics
A VMS allows organizations to gather comprehensive data 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.
The analytics capabilities of a VMS enable organizations to make better enterprise-wide decisions. A VMS 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 VMS will ensure that processes and procedures are consistent across all areas of an organization’s departments and locations. 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 vendor contracts. This enables employers to gain greater visibility into their vendor relationships and has 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.
Stronger vendor relationships
The relationships employers foster with vendors are just as important as the performance of vendors. Employers should continuously work to strengthen these relationships. A VMS will track the performance of vendors, but it can also solidify relationships with these external partners. With the effective management of vendors, business leaders 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 records management, a VMS can eliminate data duplication and cut down on administrative costs and clerical errors. Additionally, a VMS can ensure compliance and better business practices. VMS technology can also help employers better manage their relationships with vendors by ensuring heightened efficiencies and compliance.
Decrease in time to hire
Time to hire is one of the most important hiring metrics for recruiters and hiring managers. VMS technology will give employers access to automated sourcing solutions that will find talent quickly and effectively. This not only decreases the time to hire, but also creates a better candidate experience.
VMS Technology grants employers the ability to 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 VMS technology?
Download our free case study to learn how Flextrack’s VMS technology helped one client partner save on contingent workforce costs and more.