Why Does My Company Need a Vendor Management System?

Whether it’s to meet rapid industry change, fill skills gaps, or attract top talent, many of today’s companies are bringing on more extended workers (temps, consultants, gig workers, and so on) than ever before. In fact,36% of workers surveyed in 2022 self-identified as independent workers, up from 27% in a study conducted in 2016. This shift is bringing extended worker management to the forefront of business strategy.

As a result, many companies are looking for technology to help manage the end-to-end lifecycle of contingent labor, from sourcing, engaging, managing, and invoicing through reporting and offboarding. The report“工作force Ecosystems: A New Strategic Approach to the Future of Work,”from MIT Sloan Management Review and Deloitte, says managers today often feel squeezed between two realities.

One is that their workforce increasingly depends on external workers. The other is that their management practices, systems, and processes are designed for internal employees.

The best option for supporting change and workforce adaptability in extended worker management is to use a vendor management system (VMS) that will seamlessly connect to your human capital management system (HCM). With a VMS, you benefit from having a system dedicated to your extended workers, providing robust invoicing capabilities, improved collaboration with vendors, and unique functionality to support the contingent workforce.

What Is a Vendor Management System?

At its simplest, a VMS is a software solution that allows you to manage the life cycle of extended workers. Storing and managing contingent worker data is a basic feature most VMS solutions offer, but many also provide a wide variety of features to support the extended workforce, such as:

• Invoicing capabilities
• Direct sourcing
• On/offboarding policies
• Statement of work (SOW) management
• Vendor collaboration and performance management
• Resourcing and spend management
• Data accuracy and reporting

As the extended workforce grows, a VMS is essential to a successful extended workforce strategy. While VMS solutions are most often used by the program management office (PMO) team or a managed service provider (MSP) to help with daily management tasks related to extended workers, the data collected can be leveraged across the organization. Leaders in human resources (HR), finance, and IT can access and analyze the data with ease, enabling better workforce planning and an actionable workforce strategy.

What Can a Vendor Management System Do for My Organization?

Mercer’s“Global Talent Trends” reportshows that 62% of organizations are giving HR more ownership and influence over external talent. As HR teams hire more external talent to fill important skills gaps, they need to be able to account for contingent workers in budgeting, planning, and forecasting. According to theSociety for Human Resource Management, as much as 68% of the external workforce hasn’t been accounted for in talent planning and budgeting.

Many executive teams are currently in the process of searching for technology that can unify people, financial, and operational data to help modernize business strategies and evaluate external workforce needs during planning. A VMS can provide the data teams need to plan for the extended workforce, whether it involves working with gig workers, consultants, or other short-term contractors. It also provides a place to collaborate with vendors in a more secure way, allowing for better visibility into vendor performance and fostering a mutually beneficial relationship.

VMS solutions are additionally valuable in creating aligned technology ecosystems—a high priority for executives across teams. If it has native connections to HCM and financial software, a VMS can create a hub for all things related to your extended workforce, seamlessly sharing that data between systems. This provides greater visibility into contingent labor costs, sourcing, and planning, while also building a simple, aligned technology ecosystem that can be used to manage your entire workforce.

Robust reporting and analytics, as well as detailed cost breakdowns when working with SOW projects, give executives a top-down view of their extended workforce needs. Leaders can then account for extended workers from the start rather than treating them as an afterthought—enabling stronger overall strategies and better financial planning.

Centralize Contingent Workforce Data

Labor costs are some of the largest expenses associated with the contingent workforce. While many companies capture contingent worker information, they tend to use their HCM or another system that isn’t built for extended workers. Without a single view of all extended worker types, procurement teams can find it difficult to track and manage related costs.

Having a comprehensive, single source of data related to contingent workers allows your procurement team to manage costs and workers efficiently. By unifying your data, predicting costs and needs becomes a streamlined process, which can be bolstered by a native connection between your VMS, HCM, and financial software.

Manage Your Total Workforce

Once your organization has a single source of data for contingent workers, connecting that system with your HCM can provide additional visibility. Rather than looking at full-time and contingent data separately, leadership is able to see and analyze data about the total workforce. By getting an end-to-end view of total workforce spend, resourcing for SOW projects, and more, your executive team can strategically plan hiring and budgeting.

Connecting your VMS and HCM also provides significant value to your employees who use the systems daily. Eliminating tedious tasks and increasing data efficacy in the system create accurate talent pools for hiring managers—without a lot of data entry. Alignment across both systems also means simplified workflows that provide your employees a streamlined and efficient way to do their job.

Reduce Security and Compliance Risk

Looking for ways to reduce security risks when employing extended workers? VMS solutions provide simplified workflows from sourcing to onboarding, ensuring that every step is completed as a worker moves through the life cycle.

Workflows can be created to suit your company’s specific needs. Whether you are focused on tenure compliance or need to remove access after offboarding, a VMS works with your systems and processes to support your contingent workforce.

Choose a VMS That Supports Change

As your extended workforce grows, your company will have new needs for provisioning equipment and paying your workers. If your team can’t reconfigure your VMS or finds the system difficult to navigate, your employees may not want to use it at all.

The right VMS for your business will be intuitive and flexible enough to suit your needs even as your company or the economy changes. Adjusting workflows to fit your team’s needs also increases agility and allows it to work smarter, not harder. And if these workflows ever need to change, your team can manage those updates as you see fit, offering the flexibility you need to remain agile long after transitioning to a VMS.

When connected to your HCM, a VMS offers end-to-end visibility and automation to reduce tedious administrative tasks and empowers you to manage your total workforce. As you continue to optimize business strategies and utilize extended workers, a VMS will provide you with everything you need to adapt as required.

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