Vendor Management Systems: A timely solution to compliance and spend management

At first glance, creating a contingent workforce program seems like a win-win strategy: It can offer your company flexibility, cost savings and access to workers with specialized skills at just the right time. 

Yet it is also a hugely complicated endeavor. Companies may be overcharged by suppliers, waste time in the selection process or assign the wrong workers from the start. Even more perilously, they may lose track of compliance requirements, increasing legal risk. 

The answer to this sort of chaos? A vendor management system (VMS) — web-based software that manages the end-to-end lifecycle of extended workers and statement-of-work needs. 

“We are human — we cannot keep track of everything, even on a spreadsheet,” says Kerry Kiley, principal extended workforce program manager for Workday. “There’s a huge gap if you don’t have this tool to ensure that you’re bringing in the right talent at the right time for the right price.” 

Time to Take Back Control 

Without the help of a VMS, companies find themselves tracking financial, compliance and other records for workers from multiple suppliers. Their programs may not produce expected savings or efficiencies and can inadvertently leave the door open to wrongful practices. 

“Technology is going to be critical to managing this increasingly complex workforce,” Kiley says. “Even if your volume isn’t big, you could suffocate under the weight of the complexity.” 

There are many ways a VMS can manage and streamline this complexity, but there are two key areas in which it is particularly invaluable: budgets and compliance. 

How a VMS Helps Balance Your Budget 

For one, a VMS is a vital tool for controlling spending — both in planning and in real time. 

If a manager is considering hiring a contingent worker in San Francisco, for example, the VMS can show how much more that will cost than hiring for the same position in Atlanta. 

“You’ve got proactive planning budget support as you’re initially kicking off the position,” Kiley says. 

It can also show the differences in skill set availability between the two locations, allowing the manager to make an informed decision about whether the higher cost is worth it. 

And once positions are being filled, the VMS helps monitor budgets — for example, by flagging suppliers whose candidates cost more than the rate card indicates they should. 

“They think they’re finding special candidates,” Kiley says. “Maybe they are — but it allows you to ask the right questions: Who is showing up in my program with quality candidates, and who is doing that at the most reasonable price? Then you can make supplier management decisions.” 

A VMS can catch situations where managers are working outside the system, bringing in overpriced workers. It can track data, allowing a contingent workforce program manager to find and claim any supplier-promised volume discounts or other rebates. And the VMS’ big-picture look at the program’s costs allows managers to make data-driven decisions, whether about expansion into new areas or about cost-cutting during a downturn. 

How a VMS Can Support Compliance 

Compliance is another vital category in which a VMS can help companies stay ahead of regulators and risk. Hiring, onboarding and managing contingent workers requires a mountain of paperwork, from background checks to confidentiality agreements to policy acknowledgments. Some must be done before the worker starts, some within the first week, and some may need to be renewed annually. 

“How do you track that? I don’t know how people do that with a spreadsheet — without technology where you can run a report and set a flag,” Kiley says. “This is all made much more manageable with the technology of a VMS.” 

When companies lack visibility, numerous risks emerge: A worker whose background check was not done correctly may not get converted to an FTE. Paperwork may have been mistakenly filed in a way that triggers additional investigation. The company may not be keeping track of which workers’ classification as an employee or independent contractor has been validated. 

A VMS offers “detailed information about where you need to drive your compliance efforts,” Kiley says. In highly regulated industries such as healthcare and finance, the VMS can also track workers’ licenses and other requirements. 

How a VMS Can Improve Efficiency and the User Experience  

A VMS can also improve company performance in other ways: 

  • The goal of a contingent workforce program is to fill positions quickly, with the right workers, at the right price — and a VMS can help make this happen. “The number of workers you can get on board and manage is much higher when you’re using technology than if you’re trying to manually manage things,” Kiley says. 
  • User experience. A smoothly running contingent workforce management program makes it easy for all the players to do their jobs: hiring managers, staffing partners, the contingent workers themselves. A VMS can make it easier for hiring managers and staffing partners to fill positions and for the workers to accurately report their hours. 
  • The goal of having a contingent workforce program is to bring in the right workers at the right price — but it’s not always easy to know if that’s happening. A VMS can provide the data that helps assess suppliers: how many of their workers convert to FTE, how many positions they fill, how long it takes, whether they are charging fees in line with the budget. 

With a VMS, your contingent workforce program can be the win-win you envisioned from the start. The technology enables flexibility, efficiency and provides smart data for real-time staffing decisions. And above all, it is crucial for budgets and compliance. 

“The power that a VMS gives you, with the data and the visibility it provides, really is the difference between a program being best in class or just kind of limping along,” Kiley says. 


To continue learning about the value a VMS can bring to your business, please see Understanding the Value of a VMS: Assess Your Organization’s Technology Maturity.

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