Rethinking Vendor Management Systems

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When the Kohler Company began using more contingent workers following the Great Recession, HR leaders there sought a certain type of vendor management system (VMS) to help manage the shift in workforce strategy. Two top requirements in a VMS were advanced reporting capabilities and an ability to address contractor-related security issues, said David Pittner, a senior HR analyst and head of external labor management with Wisconsin-based Kohler, which makes kitchen and bath products.

In the past, contingent staffing providers used by Kohler might submit reports on the use of their people at irregular times. “We couldn’t consistently and reliably analyze that data at one time across the company,” Pittner said, “and we could do little of the custom reporting we needed on the use and costs of contingent staff.”

Having an accurate count of contractors working in Kohler facilities also was a concern. When a company plant was hit by Hurricane Katrina in 2005, security staff there received a request from the Federal Emergency Management Agency to account for all workers who had been in the facility. 
“At that point we could only tell them who our full-time employees were, not who the contractors were,” Pittner said, noting that the local office of the contingent labor provider also was closed at the time.

To address these evolving vendor management needs, Pittner and his team turned to a cloud-based VMS from vendor Fieldglass.

Changing VMS Requirements

Companies have long used vendor management systems to automate and manage the complexities of their contingent workforce programs, from hiring to onboarding to processing invoices. But as the definition of “contingent” expands to more project-based work, and more organizations employ nonpermanent workers overseas, the capabilities required from a VMS have changed.

Today’s organizations increasingly need VMS software to manage both contingent workers hired as individuals and external companies doing project-related work, said Andrew Bartels, a research analyst with Forrester Research who follows the VMS market. Many also have a greater need to stay compliant with international labor and tax laws surrounding global use of contingent staff.

HR and procurement leaders should use some key criteria if deciding to switch VMS providers or invest in a new system, Bartels said:

Support for Statement-of-Work Contracting

 “One of the key buying considerations today is whether the VMS will be able to support you as you move from using it for the selection and tracking of contingent workers, to the selection and tracking of project consultants,” Bartels said.

Managing project work is more complex largely because of the different pricing mechanisms involved. “Payment in these arrangements is not only time-based, it might also be milestones-based, deliverables- based or tied into performance on service level agreements,” Bartels said.  “You’d like to be able to use the same software tool when you have the need for an individual contractor as well as a consulting company.”

Ease of Integration with Existing Systems

 A VMS should integrate well with your existing technology platforms or processes for managing contingent staff, Bartels said. “For example, has the vendor worked hard to build relationships with issuers of credentials for positions like health care workers or other skilled positions requiring licenses?”

The Kohler Company has reaped benefits from integrating its VMS with a core human resource information system, purchase order request system, supplier relationship management system and a security system for contract workers, Pittner said.
“The integration reduced multiple steps from multiple systems and put them all into one easy-to-use, one-stop platform,” Pittner said.

In a May 2014 research report, Claire Schooley, a talent management analyst with Forrester, referenced gaps that exist in today’s HR technology between managing permanent and contingent workforces. In particular, Schooley said most applicant tracking systems lack the capabilities to address the contingent workforce, and some HR organizations feel that contingent workers fall outside their core competencies. 

“Although great strides have been made, more work needs to be done to allow one technology solution to meet as many of the workforce needs as possible,” Schooley wrote in the report.

Robustness of Analytics Tools, Benchmarking Data

Bartels said the quality of reporting tools also separates VMS providers. At Kohler, for example, one key metric is a time-and-tenure report that ensures contingent workers don’t work beyond the specified limit for co-employment. 

Using Fieldglass’s analytics software, Pittner can now create report dashboards for all of Kohler’s business units and plants, providing the latest data on time-to-fill contingent job openings, spend-per-vendor and the longevity of contingent assignments. 

The dashboards make it easier to have data-driven discussions with vendors around their performance, Pittner said. “If we want our time to fill to be X number of days, and the dashboards show they are being filled in Y number of days, we can ask our vendors to explain the gap,” he said.
Bartels said more VMS vendors also are making available benchmarking data captured from their clients. “Vendors aggregate that data and make it anonymous, then can go to a particular buyer looking for, say, a Java programmer, and tell them the current hourly rates being paid for those programmers in a certain geography,” he said.

Vendor Neutrality

“Vendor-neutral means the system isn’t provided by a VMS owner who will steer you to contingent resources which may not always be the best or most cost-effective,” Bartels said. This can be a concern if the VMS provider also has other contingent staffing services under its organizational umbrella.

More companies now split their VMS selections from their managed service provider (MSP) decisions, according to a February 2014 study from Forrester. Of the 32 companies interviewed for the research, 11 picked their VMS based on a MSP’s recommendation, and the other 21 made the decision without that assistance. That represents a significant change from a few years ago, said Bartels, when most companies purchased MSP/VMS solutions as a bundled package. “It makes sense to choose the MSP and VMS separately, because it gives you the freedom to switch MSPs if needed, if you’re seeking better service or price, without forcing your employees to learn the ins and outs of a new VMS tool too,” Bartels said.

Dave Zielinski is a freelance business journalist based in Minneapolis. 

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