Can you answer these questions?
- How many contractors do you use? How many suppliers?
- Are your labour rates at true market price or better?
- What percentages of your contract spend goes through preferred suppliers?
Drawing a blank? If you are not sure what the answers are, that’s OK. It’s likely that you are either new to using a vendor management system or you are currently researching VMS solutions for possible implementation. If you’re not familiar with VMS solutions at all, you’re in for a treat.
Today more than 45 percent of the world’s total workforce has become contingent workers. That includes temporary workers, independent contractors, SOW-based labour, and freelancers.
Most organisations report that they expect their need for non-employee workers to grow more in near future. The problem is that every other organisation is looking for non-employee workers to grow their businesses. So how can you source and manage your extended workforce effectively and efficiently so that you don’t lose the war for talent?
The short answer: VMS.
The way organisations employ workers has shifted away from the full-time employees of yesteryear to a workforce of contingent workers that offer their specialties on a project-by-project basis.
The contingent workforce has significant benefits for the plethora of companies adopting this modern way of hiring. However, those who are hiring contingent workers but are still using manual processes and outdated automation tools to manage their workforce, will not be realizing those benefits, and could in fact be losing out.
This is why a vendor management system (VMS) is fundamental to the success of your contingent workforce management strategy.
The first step is to understand the five core benefits of a VMS—for both procurement and HR. Those benefits include:
- Cost Effective: Contingent workforce expenditures rank among the top spend categories in most organisations. Perhaps more troubling is the fact that most contingent labour is not taken into account when conducting financial planning, forecasting, and budgeting. That means that you may be spending more than you should. In fact, VMS user’s report 80 percent higher year-over-year cost savings compared to non-VMS organisations.
- Clarity: Lack of clarity is one of the key reasons organisations do not know what they are spending on contingent workers. Ardent Partners research indicates that organisations only maintain visibility into 45 percent of their total contingent workforce.
- Compliance:When it comes to contingent workers, if you do not know “who” is doing “what,” “where” they’re doing it, and “how” it is being done, you are setting yourself up for failure. Two important examples that come to mind are misclassification of non-employees and allowing unauthorised individuals access to systems or facilities.
- Quality Matters: The entire goal of leveraging the contingent workforce is to attract, retain, and utilize the best possible talent. A VMS can reduce time to fill and expand your access to quality talent. Some vendor management systems even allow you to source talent directly from the VMS!
- Efficiency: A VMS also drives efficiency by allowing you to automate procurement cycles, consolidate billing, and ensure invoice accuracy. It also makes it easier to measure and monitor your supplier performance. That will help ensure process and performance consistency.
Remodelling VMS Requirements
Today’s organisations increasingly need VMS software to manage both contingent workers hired as individuals and external companies doing project-related work. Many also have a greater need to stay compliant with international labour and tax laws surrounding global use of contingent staff.
HR and procurement leaders should use some key criteria if deciding to switch VMS providers or invest in a new system
- Support for Statement-of-Work Contracting
One of the keys buying considerations today is whether the VMS will be able to support you as you move from using it for the selection and tracking of contingent workers, to the selection and tracking of project consultants
Managing project work is more complex largely because of the different pricing mechanisms involved. Payment in these arrangements is not only time-based, it might also be milestones-based, deliverable’s – based or tied into performance on service level agreements. You’d like to be able to use the same software tool when you have the need for an individual contractor as well as a consulting company.
- Ease of Integration with Existing Systems
A VMS should integrate well with your existing technology platforms or processes for managing contingent staff. Many companies have reaped benefits from integrating its VMS with a core human resource information system, purchase order request system, supplier relationship management system and a security system for contract workers.
The integration reduces multiple steps from multiple systems and put them all into one easy-to-use, one-stop platform.
- Robustness of Analytics Tools, Bench-marking Data
The quality of reporting tools also separates VMS providers. One key metric is a time-and-tenure report that ensures contingent workers don’t work beyond the specified limit for co-employment.
- Vendor Neutrality
Vendor-neutrality means the system isn’t provided by a VMS owner who will steer you to contingent resources which may not always be the best or most cost-effective. This can be a concern if the VMS provider also has other contingent staffing services under its organisational umbrella.
Hopefully, we’ve covered all the basics of vendor management systems and you have a good idea of what to look for in a VMS.
At Pragna, we have the experienced team who understand the fast paced VMS environment and can submit potential candidates within a few hours of receiving the job orders. We have a good track record of supporting many customers with VMS support services and understand the nuances of working with such a system.
We at Pragna expertise in providing Customized RPO, Offshore Recruiting Service pertaining to all the Industry verticals, We strive hard to apply best practices, proven methodologies, and additional levels of diligence to improve the quality of our services.
A blend of ground-breaking ideas, detailed approach, and quality-oriented delivery has positioned us as a leader in the Recruitment process outsourcing (RPO) industry.
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