Your Complete Guide to the Ins-and-Outs of a Vendor Management System (VMS)

Everything you need to know about vendor management systems and how they can revolutionize your organization's management of the non-employee workforce, and the vendors associated with it.

Improve How You Manage Your Non-Employee Workforce

Today’s use of non-employee workers is giving organizations an increasingly growing number of opportunities to reach their workforce targets in more ways than the traditional employee hire. This is bringing huge benefits to businesses around the world.

Yet, as the non-employee workforce grows and companies tap into it more than ever before, organizations must adjust how they procure and manage the contingent workers and vendors associated with it.

That’s where a vendor management system (VMS) comes in.

A VMS is now an essential aspect of any organization’s contingent workforce management program. This page will act as your complete guide to vendor management systems, answering all of your questions on the topic.


What is a VMS?

A vendor management system is a software platform, which is typically web or cloud-based, that acts as a mechanism for organizations to facilitate all of the processes involved in managing a contingent workforce program. 

Employees working on computer

A VMS will centralize, automate and consolidate your entire contingent workforce processes in one easy-to-use software solution. This tech solution will allow you to manage vendor relationships and measure vendor performance, as well as procure, manage and pay non-employee workers sourced either through a staffing agency or another sourcing avenue. 

By acting as a system of record for your company’s contingent workforce, a vendor management system will capture and store the data you need to make better vendor and hiring decisions in one centralized location (as opposed to being fragmented across your entire organization). 

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What is a Vendor Management System (VMS) and Why do You Need One?

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How Does a Vendor Management System Work?

Now you understand exactly what a vendor management system is, but you’re probably still wondering how it works. Well, let’s take a bit of a deeper look at how exactly a VMS improves your management of both non-employee workers and the vendors you use to procure them. 

VMS data on laptop

A vendor management system essentially works by acting as a centralized database for all of your contingent workforce management processes, storing all the information you need on one seamless platform.

It does, however, go above and beyond that. The functionalities of a VMS allow you to automate processes such as invoicing, process requisitions, process approvals, onboarding and much more to dramatically improve the accuracy and efficiency in which your company performs the processes related to managing vendors and non-employee workers. 

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How it Works

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Why is a VMS Important for the Management of Your Non-Employee Workforce?

The contingent workforce - which is made up of temporary workers (temps), independent contractors, consultants and gig workers - has grown exponentially over the past few years.

Workers in office

Just take a look at some of these statistics!

  • Roughly 25-30 percent of the US workforce is contingent - that number is expected to exceed 40 percent when statistics are released for 2020. Not only that, but the report predicts that more than 80 percent of large corporations plan to “substantially increase” their use of the flexible workforce in the coming years (Intuit).
  • Many large companies estimate that a staggering 30 percent of their entire procurement spend goes toward contingent workers (Deloitte).
  • 60 percent of top bosses expect the use of contract labour to increase over the next five years (The Economist).
  • More than 40 percent of workers are now employed in “alternative work arrangements”, such as contingent, part-time or gig work (Deloiitte).

Since you’ve read this far down the page, it’s likely that your organization makes use of the contingent workforce and has its own non-employee management program in place. If that’s correct, then you’ll know just how complex contingent workforce management is.

Yet, despite these complexities, a large number of organizations are still using spreadsheets, in-house databases or Sharepoint-like websites to manage their staffing agencies and contingent workers.

These manual and time-consuming ways to manage a contingent workforce simply do not work

No matter how diligent your organization is, these manual methods will lead to human error, time-consuming processes, and process inefficiencies. The result? Fragmented processes across your business, inefficient admin, vendor and worker overspending, and an overall lack of visibility into the performance of your non-employee workforce management program.

The use of a vendor management system, however, can completely transform your company’s ROI when it comes to the contingent workforce. 

In fact, 89 percent of organizations that are considered “best-in-class” in contingent workforce management have implemented vendor management systems into their programs (Aberdeen Group Research, as stated in this Fieldglass report).

Continue reading to learn how the use of a VMS will benefit your business.

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What are the Benefits of a Vendor Management System?

A VMS will bring a huge ROI to your company’s contingent workforce management program, and that’s because it’s capabilities will significantly improve your processes, reduce costs and lead to far greater visibility into your program.

Candidate waiting for interview

Here are just some of the many benefits your business will realize from the use of a vendor management system.

Improved efficiencies: The automation of processes such as onboarding, time entry and approval will save your organization countless hours and lead to better internal efficiencies across your company. 

Complete visibility into your program: Since your entire contingent workforce management program is now stored in one location, instead of being fragmented across different departments and hiring managers, you’ll have complete visibility into where you may be overpaying vendors or mismanaging non-employee workers.

Vendor consolidation: With your vendors consolidated into one location, your VMS will act as a central hub that gives you all the information you need to evaluate whether each staffing agency you use is helping you to meet your company’s unique workforce targets. This leads to more insightful and strategic vendor choices. 

Reduce costs: By helping you to get the lowest prices from vendors, cut down on rogue spend in your contingent workforce management program and save money on process efficiencies, a VMS can help your business improve its bottom line and become more profitable. 

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VMS Benefits

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How to Select the Right VMS for Your Company’s Requirements

Any successful contingent workforce management program must use a vendor management system to underpin and centralize the entire strategy, and that means you have to find a software solution that works for your organization’s specific requirements. 

Team meeting

The good news is that your organization probably doesn’t have a vast number of technologies to choose from, and that’s because developers in this space have previously only ever focused on building a solution for enterprise organizations with huge contingent workforce budgets. 

Thankfully, with the development of Conexis VMS, there are now solutions available to your business that don’t require huge non-employee workforce budgets and don’t feature the fancy functionalities that your company would never need.

When looking for a vendor management system, keep these key questions in mind?

  • Does it have features such as invoicing, process requisitions, process approvals and onboarding tools that will automate how you manage staffing agencies and contingent workers?
  • Will it consolidate your vendors in one location?
  • Does the solution work for your organization’s unique budget requirements?
  • Will it help your business to monitor and track vendor performance? 
  • Will it centralize all of your contingent workforce management data in one easy-to-use, seamless portal, helping to improve the visibility of your program? 
  • Will the improved visibility you have into your contingent workforce program ensure compliance and proper classification of workers?

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VMS Functionalities That Will Improve Your Vendor Management Initiatives

What is the Price of a VMS Solution?

In the past vendor management solutions were only developed for large enterprises which had huge contingent workforce spend. This meant there was no solution for organizations with smaller non-employee workforce spend (anywhere from $1m to $10m CAD).

Worker on laptop

With the development of Conexis VMS, that has now changed.

Conexis VMS is the very first vendor management system designed specifically for organizations with smaller contingent workforce management budgets. With no spend requirements this unique software has been designed specifically for companies that don’t have an option in the current marketplace. 

Built without the bells and whistles of the more expensive VMS solutions (the ones that you would never use!), Conexis VMS is the perfect solution to automate, centralize and improve your contingent workforce management processes no matter the size of your non-employee workforce.

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