Skip to Content
Man and woman walking together

What are the benefits of a vendor management system (VMS)?

Discover the top ten ways a vendor management system, or VMS, can benefit your business.

Most companies struggle to manage their contingent workforce

As the external workforce grows, companies must adjust their talent acquisition and management strategies. A vendor management system (commonly referred to as a VMS) can provide a holistic view of the external talent and services providers that businesses source across channels and around the world.


All VMS solutions, however, are not equal.


The importance of vendor management


Traditional HR and procurement management practices are not equipped to handle the unique aspects of external workforce management. To remain globally competitive, businesses are turning to cloud-based technology solutions such as a VMS, or vendor management system. Here’s why:

  • A VMS can manage labor costs, maximize productivity, and increase efficiency.
  • A VMS can provide the transparency that HR and procurement management needs to ensure their business engages eligible external talent with the certifications and other qualifications required.
  • With true collaboration between procurement and HR, and the implementation of the right VMS, the business can maximize the value of all engagements with services providers.

As you begin your search for a vendor management system, it’s important to understand and evaluate how each VMS solution can accelerate outcomes for your business.

Explore changing workforce needs and how they are being addressed by VMS technology. 

Ten benefits of vendor management system

To get started, here are the top 10 ways the right VMS can benefit your company and increase key business performance indicators.


1. Automate processes


Automated processes in the cloud can aid sourcing, vetting, assignment management, project management, on-boarding, off-boarding, and invoicing. VMS solutions simplify the process of extending assignments or contracts, managing expenditures, and responding to new opportunities. It also captures a record of the company’s external talent, so your organization’s hiring managers know who to re-engage and whether a worker’s certification is current. As the external workforce grows, it’s crucial that businesses maintain contractor records just as they do for full-time staff.


2. Ensure compliance


Your organization faces vital compliance issues — internally and externally — every single day. From governmental regulations that vary from country to country to corporate on-boarding policies, a VMS is able to mitigate risk by helping you:

  • Maintain all of your information in one system to create endless audit trails
  • Leverage important reminders, such as VISA expirations, tenure notices or a licensing course requirement
  • Create controls around relevant approvals
  • Access a single-entry point for all your locations and business units to avoid any inaccurate or disjointed results


3. Integrate your supplier partners


Through a cloud-based VMS, companies can select vendors tied to pre-defined metrics and track their performance for the duration of the contract. Make sure you also can integrate your suppliers. In so doing, companies gain greater control over supplier selection, and can be more confident about the quality and value that will be delivered.


4. Build mobility into payment procedures


A cloud-based vendor management system can support time tracking, payment processing and expense reimbursement from a desktop or mobile device. Robust solutions also give your organization the option of integrating your existing time tracking or payment processing systems with the solution. In either case, the net benefit is an efficient, cost-effective means of electronic invoicing to reduce administrative time and facilitate automatic, detailed reconciliation reporting.


5. Decrease costs


Leveraging a vendor management system (VMS) helps your business save money in a variety of ways. Better manage your payroll and note discrepancies in overtime or exaggerated rates. Tap into resources already in your system to avoid additional recruiting and training costs. Gain insight into different labor types and their associated rates to make better decisions.


6. Improve transparency


By implementing a central, reliable solution for managing your multi-channel workforce, you’ll have greater visibility into who is working for you, where they’re located, what assets and facilities they can access, and a better understanding of their value. A VMS grants direct access to the entire workforce to track and manage all types of labor, even if they receive payment through a third party.


7. Decrease requisition cycle time or “time to fill”


One of the most common key-performance indicators for talent managers is measuring time-to-fill. Automated sourcing solutions should help you tap the right talent quickly and create a better candidate experience. Speed is critical for outpacing competitors and shortening time-to-fill contributes to organizational agility. Imagine reducing your requisition time from many months to just days.



8. Improve the on-boarding process


Workers whose skills are in high demand are more likely to select the businesses that are easier to work with and that have a reliable process for invoicing, payments, and reimbursements. Clearly defined, automated processes contribute to worker satisfaction and provide a smooth path to contractor productivity.


9. Build a stronger workforce and ecosystem of talent


Make smarter decisions up front to ensure you have a more strategic workforce long-term. For example, use the platform to evaluate the ideal labor type (IC, temporary, intern, etc.) for each role and then determine the best way to source it (preferred supplier, known alumnus, existing temporary worker, etc.). Take note of the ecosystem of solutions that are integrated with the service provider. Such connections will be increasingly important to your businesses as you engage flexible talent via online marketplaces and want to use other complementary online services to increase agility and save time.


10. Leverage advanced reporting and analytics


Strong VMS solutions can provide you with robust data analytics and machine-learning capabilities that, within moments, allow you to benchmark pricing for talent with specific skills and experience requirements. They allow you to run hiring scenarios, initiate talent strategy and planning and, ultimately, propose candidates for positions. Once a person is on board, hiring managers can keep a pulse on what going rates are so a competitor can’t swoop in with a better offer and lure the best talent away.

Get started today with a VMS

Ultimately, the right VMS for your business will allow you to stay nimble, secure hard-to-find skills, scale up or down to meet demand, respond quickly to competitive threats, and pivot to capitalize on new opportunities in our fast-paced, always-on, global and digital economy.


It’s a lot to ask of a VMS, but your business deserves it.


Explore VMS external workforce tools

Effectively source, engage, and manage external workers and services providers.

SAP Insights Newsletter

Ideas you won’t find anywhere else

Sign up for a dose of business intelligence delivered straight to your inbox.

Further reading

Back to top