In today's ever-evolving business landscape, the usage of contingent or temporary labor has become more prevalent than ever. Companies are turning to contingent workers to meet their changing workforce needs and to ensure agility and flexibility in an unpredictable environment.
To manage this diverse and dynamic labor pool, many organizations have adopted Vendor Management Systems (VMS). But is your business set up to successfully manage its contingent workforce with only the implementation of a VMS?
For many businesses, a vendor management system simply isn’t enough. In this blog, we take a look at four key reasons why relying on a VMS alone may not be enough for many organizations.
Firstly, What is a VMS?
Before diving deep into the challenges of relying solely on a VMS, it is crucial to understand what a VMS is and its role in contingent workforce management.
A Vendor Management System is a web-based application designed to facilitate the procurement and management of contingent labor - such as temporary workers, independent contractors, and freelancers.
The VMS acts as a mechanism for businesses to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.
Companies utilize VMS to automate many elements of the contingent worker lifecycle - from requisition to payment.
The VMS provides significant advantages by offering a centralized system for tracking and managing contingent labor. This can lead to cost savings through improved operational efficiency, better compliance with labor regulations and company policies, enhanced visibility into contingent labor usage and spending, and improved decision-making through data and analytics.
Yet, while a VMS can automate and streamline many aspects of contingent labor management, its use still requires a business to have the necessary resources and contingent workforce expertise to plan, implement and improve the overall contingent workforce strategy.
Why a VMS May Not be Enough for Successful Contingent Workforce Management
1 - Lack of Resources
VMS technology is efficient and effective in processing and organizing information about contingent labor. It can streamline procurement, deployment, and management of temporary and contract staff. However, it's crucial to remember that a VMS cannot replace the human resources required to execute these tasks effectively.
A lot of the workload involved in managing contingent labor requires human intervention and management, with a huge amount of complex paperwork and processes associated with onboarding, offboarding and paying staffing agencies.
Businesses still need a team of well trained HR and/or procurement staff with the time and skills to manage these tasks to ensure an efficient and harmonious contingent workforce environment.
2 - Insufficient Contingent Workforce Expertise
While VMS technology provides a structured platform to manage contingent labor, it doesn't inherently provide the expertise or strategic knowledge needed to optimize your contingent labor strategy. Areas such as understanding competitive market rates, insights into changing contingent labor laws, strategies for sourcing top contingent talent are where an internal, or outsourced third-party expert, team contingent labor experience can provide invaluable insights.
It's crucial to remember that strategic planning and policy-making for contingent workforce management require a deep understanding of the industry, the workforce, and the specific needs of the company. These elements are beyond the scope of a VMS, underscoring the importance of having contingent workforce experts as part of your team.
3 - Ineffective Processes
A VMS can indeed automate various processes. However, automation of processes is only as effective as the actual processes themselves. If the company's strategy or process for sourcing and managing contingent labor is flawed or ineffective, using VMS technology to automate this process will only result in perpetuating the inefficiency or even amplifying the issues.
Optimizing processes to ensure they are effective before automating them is crucial. Companies may need to invest in process review and redesign before they implement a VMS, to make sure the system enhances the company's operational efficiency rather than detracting from it.
4 - Lack of Integration With Other Workforce Systems
A VMS operates best when it's integrated with other critical business systems, such as Human Resources Information System (HRIS), payroll, or procurement systems. These integrations allow the company to create a holistic view of their workforce, which is crucial for effective workforce planning and management.
Without these integrations, companies may run into issues with data silos, making it challenging to get a complete, unified understanding of the contingent labor force. Consequently, this lack of comprehensive view can lead to misguided decisions and strategies for managing contingent labor.
VMS technology should never be implemented and operated as a silo, or businesses will lack the necessary visibility and control required to make contingent workforce program improvements that drive results.
Are you struggling to improve contingent workforce management ROI with your vendor management and looking for additional expertise? Get in touch with the Contrax team of contingent workforce and staffing agency management specialists today.
