The Trick to Vendor Management Systems

Get more out of your company's vendor management system by merging the interests of the human resources and procurement departments. Here's how.


To achieve this type of a common vision the project requires executive-level support and sponsorship. Perhaps it comes from a chief information officer or chief financial officer who stands up at a meeting and says, We need to come together in a way to reduce costs, but not at the expense of obtaining quality talent or services. This is a critical first step.

Implementation often entails a significant amount of legwork, and cookie-cutter approaches don't often work in this environment. Each client has a different purchase order (PO) process, a different review process, a different set of vendors and different techniques by which it hires contract talent. A managed services provider, therefore, must come in to the company and diagnose what the company is trying to accomplish, how it is currently conducting temporary staffing, and how that process can be improved through a VMS e-procurement tool. There is no easy way to automate the set up.

There is no question that companies can perform this function internally if they possess enough resources. However, the effort usually requires at least two people totally focused on the project for several months. With downsizing, many HR or procurement departments simply do not have the bandwidth or personnel to spare.

A proper MSP should be able to facilitate the discussions that have to be made between all these departments, including setting up weekly status meetings, developing the necessary specifications and then working with all parties involved to implement them. In the case of a vendor management program, it's a 60- to 90-day process involving appropriate stakeholders who are working to build a program that will both improve cost savings and quality of talent.

A Bright Future

The rapid pace of VMS implementations across the industry is having an impact that validates these trends. A recent survey conducted by the Jordan Group Inc. of client companies with annual revenues ranging from $300 million to $50 billion claims organizations have been drawn to VMS programs seeking administrative efficiencies, better control of spend and improved reporting and record-keeping. The survey goes on to state that 53 percent of respondents reported realizing dollar savings from 10 to 15 percent of their total spend for IT contingent labor as a result of their VMS programs.

And for the most part, the VMS are operating with a zero cost to the end client. The same survey shows that 60 percent are being operated with a vendor pay model in which staffing vendors pay the fees associated with implementing the program, training the consultants and vendors, and actual implementation of the software. This cost is borne by the vendors, so there is zero cash outlay typically to the end client. The survey also shows that 63 percent of clients surveyed said the quality was positively affected by vendor management.

In 2003, the human resources, information technology and procurement/finance functions at Dallas-based retailer The Neiman Marcus Group pulled together to add structure and gain control over their company's use of contingent labor.

The solution was a third-party, vendor pay model with Neiman Marcus maintaining responsibility for day-to-day VMS management. The benefits not only included a higher level of management over their use of contingent labor, but executives in all three departments gained better analysis through a wealth of new reports and spend statistics, all available in real time.

All this portends well for a future where VMS is adopted by both procurement and HR departments across enterprises. Only then can the full benefits of VMS be realized for the enterprise.

About the Author: Gary Wood is the vice president of Managed Services at MATRIX. He has more than 25 years experience in IT sales and service. Gary is currently responsible for the management of MATRIX Managed Services, which includes operational management, strategic direction and customer interface responsibility. He can be reached at Gary_Wood@matrixresources.com.

SIDEBAR: VMS: Cost Savings Are Here To Stay

First introduced in the late 1990s by and for the staffing industry, VMS is now mature enough and economically sound enough that companies are not going to retreat back to the old ways of hiring contract labor, such as managing staffing procurement through manual processes that include paper-based record keeping, phone calls and faxes.

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