Get more out of your company's vendor management system by merging the interests of the human resources and procurement departments. Here's how.
Progressive corporations that have used the Internet to electronically procure materials to build their products are now doing likewise with workforce planning or services, especially with information technology (IT) consultants, which is usually the most expensive type of contract labor.
The analyst firm Gartner Group foresees growing demand for services procurement applications, with 30 percent of Fortune 1000 enterprises using a services procurement solution by 2007. Furthermore, the Bureau of Labor Statistics predicts that the number of temporary workers will increase by 49 percent from 2000 to 2010, compared to a 15 percent increase expected in permanent workers during that time.
Many companies are considering e-procurement tools that include a vendor management system (VMS), either as a standalone solution or embedded in a larger e-procurement toolset. Some reports show that 30 percent of the Fortune 100 already use VMS, or are in the midst of assessing proposals regarding VMS solutions. It is clear that many more will be analyzing and planning to implement VMS as a cost saving tool over the next few years.
Though there are several VMS implementation business models, one of the more popular employs a managed services provider (MSP) as a "partner" to work with the employer to assist or manage the procurement and administration of contract labor. Any other staffing agencies that support the customer also work through the MSP partner.
Fork in the Road for VMS
Though most often positioned as a standalone human resources (HR) solution, vendor management systems are beginning to be packaged and scaled up to a more general services procurement offering, where add on modules accommodate fixed-bid project and request for proposal (RFP) bidding, affirmative action, and other functionality.
At the same time, general services procurement tools are downsizing into specific niches by building modules to perform contract staffing, or acquiring products that offer this functionality, and blending them into their larger products suites.
This merging of capabilities promises to bring to market a whole new series of tools that either manage procurement activity or manage staffing, or both.
This presents a dilemma for the vendor management function/administration. Does VMS become a procurement toolset championed by procurement, or a human capital toolset driven by HR?
The answer is & it all depends.
Experience shows that companies with priorities that have been driven by cost savings generally put human capital under the domain of procurement. Others focused on diversity programs, affirmative action or other quality metrics allow HR to drive the train. Seldom is the responsibility shared or these two silos brought together.
Best of Both Worlds
Though there are often significant obstacles to doing so, companies should seriously consider merging the interests of these two groups. More is to be gained by getting both groups together and working in cooperation. HR's goals are to make sure the company is obtaining a diverse workforce, hiring the best talent and maintaining acceptable turnover levels. HR also works to find the right soft skills, such as cultural fit and communication, not just the hard technical competencies.
Procurement, on the other hand, is often focused on good and fair pricing with a competitive landscape where multiple staffing vendors are working with the client to provide the best possible talent, at the lowest possible cost.