How an Effective Vendor Management System Supports Contingent Workforce Management

What is a vendor management system?

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. Similar to a staffing agency, a VMS will automate and streamline the sourcing, engaging, managing, and payrolling of contingent workers sourced through an organization directly or by their Managed services provider (MSP).

With today’s global talent pool, organizations have access to knowledgeable workers around the world who are digitally based and ready to complete projects and fill roles. Organizations that tap into the contingent talent pool gain the flexibility necessary to scale resources in an uncertain work world.

For many organizations, one of the answers to navigating the many complexities of contingent workforce management is a VMS.

How can a VMS optimize contingent workforce management?

Business leaders admit they lack insight into who works for them. A recent study conducted by Oxford Economics and Fieldglass find only 40% to 47% of business executives consider themselves highly informed about compliance, contingent workers’ responsibilities, tenure, quality of work, headcount, and access to facilities.

Similarly, a familiar pattern emerges with procurement professionals. The same study finds 53% of the executives surveyed are highly informed about the responsibilities of the service providers. Additionally,  even less are informed of the duration of work, access to facilities, systems and confidential information, work quality, progress against milestones and/or deliverables, and compliance with licenses and certifications.

A VMS tool will help employers achieve greater visibility across their entire contingent worker program while earning cost savings, improving program efficiencies, and enforcing compliance.

Why do organizations use a VMS?

In an increasingly complex, global workforce, a VMS will help employers take a more organized approach to manage their contingent workers. For any successful contingent worker program, a VMS solution is essential to providing visibility into who is working for you.

A VMS will enable organizations to take a more organized and systematic approach to manage their contingent workforce. While a contingent workforce comes with many benefits that are associated with the ability to scale up and down hiring needs, each contingent worker type also comes with its own set of legal obligations and tax requirements. Therefore, heavy penalties if employers aren’t compliant.

The Relationship Between Business Performance and Vendor Management Software

Through a vendor management system (VMS), organizations can track and manage pre-defined performance metrics throughout the duration of their contracts. This allows employers 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 delivered services.

How can your VMS realize if vendors are meeting expectations and business goals? Your VMS strategy must include key performance indicators (KPIs). These are critical to measuring the efficacy of your vendor management software.

To evaluate vendor performance, KPIs should be unique to your organization and your business goals. The KPIs below are examples of quantitative and qualitative methods that measure vendor performance.

Cost management

A VMS will provide employers with increased visibility into costs that will allow for better control over budgets.

Relationship management

Do you have solid and transparent relationships with your vendors? Do you feel as though your vendors are committed to your organization’s business goals? Are your vendors up-to-date with technology that can better manage your staffing and procurement needs?


Are your vendors subject matter experts in their field? It’s important to measure staff expertise and the compliance of your vendors.


Do your vendors deliver services on time and with accuracy? What is their response time to issues and/or emergencies? It’s important to measure these customer service KPIs.


Your VMS performance KPIs should also evaluate financial, operational, compliance, and data security risks.

What are the benefits of a VMS?

A VMS will help employers achieve greater visibility across their entire contingent worker program while contributing to cost savings, improving program efficiencies, and enforcing compliance. A VMS will also help employers achieve the goals listed below.

Automate and streamline processes

A VMS 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. With automation eliminating tedious administrative responsibilities, organizations can save time and money.

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 data and the ability to reject or accept any items 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 capabilities of a VMS enable organizations to make better enterprise-wide decisions. The management system gives users direct access to the data that allows employers to gauge the success of their programs and make adjustments accordingly.

Efficient processes and compliance

A VMS will ensure that data, processes, and procedures are consistent across all areas of an organization. This capability not only sets the standard approach to management but also ensures that organizations are compliant with local legislation.

Getting it right

When sourcing and implementing a VMS, it’s important to get the support and buy-in from the key stakeholders in the organization. Once management accepts your vendor management strategy, the key to supporting your organization’s management objectives involves planning, choosing, and configuring the right technology.

If you’re considering a VMS or are re-evaluating your current system, then significant operational changes can require a new management solution as you remodel your workforce. A managed service provider (MSP) will support these changes across the entire contingent workforce delivery.

Are you interested in gaining deeper insights into an effective VMS? Download our free case study to learn how Flextrack’s VMS technology helped one client partner save on contingent workforce costs and more.