What is a Vendor Management System?
A vendor management system (VMS) is a digital or web-based software application that allows businesses to manage their company’s complete contingent workforce hiring process in one streamlined solution. The system facilitates the requisition and approval process, distribution of requisitions to suppliers for candidate submittal, the interview and selection process, the onboarding and compliance process, the submittal and approval of time and expenses, and ultimately, the invoicing process.
As a result, a VMS allows you to collect and store data for analyzation to forecast future needs and ensure items such as rate compliance, legal/regulatory compliance are maintained, service levels are met as well as understanding spend patterns resulting in an optimized contingent workforce. Additionally, a VMS can be used by managed service providers (MSPs) who optimize and manage a talent pool on behalf of a client on an outsourced basis providing transactional processing as well as insights into best practices, legal/regulatory and market trends.
Vendor Management System: Top 5 Business Benefits
Due to the many capabilities of a vendor management system, a single business can greatly benefit from implementing one to help manage their contingent workforce. Below, we explore five ways in which a vendor management system benefits your business.
#1. Obtain Measurable Results and Advanced Reporting and Analytics
As a vendor management system stores all your vendor and contingent worker transaction data in a single, cloud-based solution, you can transform data into measurable results through analyzing this data. With a VMS’ capability to produce advanced reporting and analytics, your business can better detect future contract management needs and opportunities and discover any dangerous inefficiencies in the process or insufficient leads in your sourcing of key contingent talent.
Furthermore, a VMS can also assist your analytics team in identifying new markets, products, and even potential projects to expand with your most trusted and valued suppliers. Alternatively, this can help you explore new vendors. As a result, the advanced reporting and analytics works to support your process in obtaining measurable results including higher quality products, lower costs, and building strong relationships with your existing and new vendors.
#2. Increase Efficiencies and Reduce Process Lifecycles
After implementing your vendor management system and entering in your suppliers, you can then begin tracking and measuring performance against the contractual Service Level Agreements (SLAs) and Key Performance Indicators (KPIs) to ensure your vendors are complying with your specified requirements. Doing so enables you to ensure optimal performance and detect any inconsistencies that may need improvements. As a result, a VMS works to effectively increase efficiencies within your contingent workforce.
Every process, contract, and transaction runs as a lifecycle. From purchase requisitions to staffing temp hires and invoicing, effective VMS usage streamlines each lifecycle by reducing cycle times. Therefore, a VMS improves cost savings, boosts your profitability, increases operational productivity, and builds value by capturing more discounts and incentives for early payments along with increasing vendor and contingent worker engagement resulting in a higher quality output.
#3. Reduce Operational Costs
Leveraging a VMS benefits your business by reducing operational costs in multiple avenues. For example, a VMS works to effectively manage your vendor payment system and can quickly note any discrepancies regarding overtime and exaggerated pay rates. With the increased visibility brought by a VMS, you can quickly detect invisible costs that you can eliminate or manage properly.
Additionally, this system allows you to access available resources that help avoid additional recruiting and training costs. As a result, your business can better understand different labor types and their accompanying rates to make better contract and onboarding decisions.
Likewise, building strong relationships with your suppliers—due to a VMS’ effective procedures and processes—can also help you negotiate better rates, accessing discounts and incentives that further increase your profit margin and reduce operational costs.
By automating invoicing through an interface/API with your Accounts Payable (A/P) system, you can reduce ongoing costs associated with manual processing as well as reducing errors caused by a manual process.
#4. Maintain Corporate Compliance
Businesses must be vigilant in remaining compliant with local and governmental regulations by having the correct contracts, insurance, onboarding protocols, and payment structures in place. A vendor management system benefits your business and mitigates risks by:
- Maintaining all your information in one system to generate endless audit trails
- Leveraging important reminders including VISA expirations, legal changes, tenure notices, or a licensing course requirement
- Creating controls around relevant approvals
- Streamlining and formalizing a closed system to eliminate rogue spend and invoice fraud
- Integrating all suppliers into your system for improved strategic planning on shared compliance issues
- Accessing single-entry points for all your locations and business units to prevent inaccurate or disjointed results
- Ensuring all proper/required paperwork has been completed, stored and tracked within the platform
#5. Improve Your Vendor Onboarding Process
Skilled workers are high in demand and are more apt to partner with businesses that are easier to work with. Therefore, a strong and efficient vendor management system works to benchmark pricing for talent with specific skills and experience requirements, allowing you to better run your contingent workforce hiring and onboarding process.
The time and resources taken to onboard new vendors can slow down your productivity and heighten operational costs if not properly conducted. However, with a supplier management system, you can effectively obtain all relevant vendor information such as bank details, capability information, regulatory data, and capacity details to input into the system in a fast and error-free way for approval. The sooner you onboard vendors, the quicker you navigate through the procurement process and begin building your vendor partnership.
It is important to note that automated processes contribute to worker retention and satisfaction by providing a streamlined solution for contractor productivity. A VMS simplifies the routine of initiating talent strategy, planning, and proposing qualifying candidates for available positions as well as providing better access/increased visibility across the enterprise for vendors. Furthermore, it creates a reliable system of invoicing, processing payments, and even distributing reimbursement when applicable.
Monument Consulting: A Highly Rated MSP with VMS Implementation
Although you have the internal staff to run a vendor management system independently, you may lack the configuration knowledge and best practices to choose and implement your VMS. However, consider partnering with our team of managed service providers (MSPs) at Monument Consulting to guide you and help implement the VMS on your behalf with the intention of handing it over for you to manage internally.
At Monument Consulting, we understand the importance of managing your contingent workforce in the most optimized and efficient manner. Therefore, our team uses vendor management systems to streamline our managed service provider services. Additionally, we offer contingent workforce management consulting services to share our expertise with your staff on how to operate your contingent workforce at maximum efficiency. Our team at Monument will train your team how to operate with a VMS and help with your configuration evaluation, system integrations, and VMS enhancements to tailor the program to your industry.
Are you looking to connect with Monument Consulting? Contact us today to ask about our contingent workforce consulting or managed service provider (MSP) services!