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Vendor Management Systems (VMS) – Starting with the Basics

As enterprise organizations increasingly recognize the tremendous value their non-employee or contingent workforce brings to their business, a brief overview of the core technology for managing contingent workers can help enterprise talent leaders understand the tools at their disposal.

What problem does a VMS solve?

The largest expenditure for most organizations is for their people — more specifically accessing and deploying the talent required to achieve business objectives. According to a report by the U.S. Government Accountability Office, over 40% of the U.S. workforce is now made up of contingent workers. Anywhere from 35-60% of the average company’s workforce consists of non-employee workers. Coordinating all the elements of such a large and diverse extended workforce can be expensive and risky if not coordinated properly – and without the right tools. 

What does a VMS do?

A vendor management system (VMS) is an enterprise technology that coordinates and simplifies non-employee workforce management by digitizing and automating processes to source, hire, and manage non-employee workers. This includes enhancing user experiences for buyers, suppliers, and talent. A VMS also automates supplier invoicing while better managing your supplier relationships and measuring their performance.  


Additionally, a VMS provides reporting and analytics across the full life cycle of your non-employee workforce to help optimize your organization’s talent strategy and related spend. 


What are the benefits of a VMS?

According to the Staffing Industry Analysts (SIA) VMS landscape report, 81% of companies with more than 1,000 employees leverage a VMS. Organizations use a VMS like Flextrack to source and manage all their non-employees across a variety of different sourcing channels and categories of extended workers.

The benefits of a VMS reach non-employee workers, hiring managers, staffing suppliers, and talent program managers. Some of the most common and visible benefits of a VMS include:

  • Digitized and streamlined processes to make it easier and faster for managers to get the talent they need.

  • A mechanism for optimizing supplier performance and improving relationships with suppliers through a streamlined, digital experience.
  • Critical visibility into the organization’s non-employee workforce, including data on every step of the process to drive robust talent and spend analytics that lead to better controls and decision-making.

  • Improved process, risk, and spending controls via automated compliance with internal policies and regulatory requirements.

  • Integrations with an organization’s internal systems to drive a more streamlined process for hiring managers, business infrastructure, and provisioning teams.
  • Reduced costs and increased profits through process efficiencies, automation, and better buying controls with suppliers.

  • Improved non-employee worker candidate experiences.

VMS solutions are not all the same  

Historically, VMS solutions have been selected and deployed as contingent labor procurement tools, similar to other procurement tools. In this light, selection criteria for VMS technology have been focused on the comparison of features and functionalities, the experience of integrating with a specific enterprise resource planning (ERP) system, and the security and localization of solutions. As extended workforce management practices evolve, so must the tools and technologies needed to develop, deploy, and maintain an engaged, productive extended workforce.  Enterprise organizations have begun to add new criteria when determining which solutions meet their talent and technology strategies.

To read more about emerging VMS section criteria as the market evolves, check out this blog.