NEWS AND INSIGHTS
Why Does My Company Need a Vendor Management System?
Is your company expanding your external workforce? It might be time to consider how your team is managing those workers.
Author: VNDLY Marketing
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, etc.) than ever before. In fact, 36% of workers surveyed in 2022 self-identified as independent workers, a significant increase 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. In the report, “Workforce Ecosystems: A New Strategic Approach to the Future of Work,” Deloitte states:
“Managers today tell us they often feel squeezed between two realities.
- One is that their workforce increasingly depends on external workers and multiple types of contributors.
- The other reality is that their management practices, systems, and processes are designed for internal employees.”
Author: VNDLY Marketing
As organizations try to resolve these two disparate realities, they sometimes turn to their human capital management (HCM) software to manage their extended workforce. However, HCMs were built to manage full-time employees and while they can provide a way to record worker information, they lack some of the tools needed to best support the contingent workforce.
A better 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 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 lifecycle 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 your extended workers, the data collected can be leveraged across your organization. Leaders in 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” study shows that 62% of organizations are giving HR more ownership and influence over external talent. As HR teams hire more external talent in order to fill important skill gaps, they need to be able to account for them in budgeting, planning, or forecasting. According to SHRM’s article, “The Alternative Workforce: Not So Alternative Anymore,” as many 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 which 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 they 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.
Looking for greater visibility into:
- Extended worker headcount?
- Contingent worker performance?
- SOW spend?
- Contingent labor costs?
A VMS might be right for you.
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, provide executives with a top-down view of their extended workforce needs. This allows leaders to 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 which isn’t built for extended workers. Without a single view of all extended worker types, it can be difficult for procurement teams 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 which 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 streamlined workflows from sourcing to onboarding, ensuring that every step is completed as a worker moves through the lifecycle.
Workflows can be created to suit your company’s specific needs. Whether you are focused on tenure compliance or need to remove system 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 your teams 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.
If you’d like to learn how VNDLY, a Workday company, is empowering organizations to quickly flex to meet organizational and market needs via robust configurability, get in touch today.
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