12 Steps in Choosing a Vendor Management System | DCR Workforce Blog

12 Steps in Choosing a Vendor Management System

As I listened to last week’s SIA Staffing Industry report webinar, I was extremely surprised to find them reporting that the penetration of Vendor Management Systems (VMS) has stalled at about 77% over the past 3 years but the spend flowing through the Vendor Management System has risen sharply. Surprised because, from where I sit, I can only see my colleagues working extremely hard churning out new proposals in response to companies seeking a VMS solution. That naturally had me wondering whether companies with an existing Vendor Management System are going out to bid for a new one and, if so, what exactly are they looking for? Have we reached the point where every single VMS offers the same functionality and companies are struggling to find differentiators? As the use of temporary workers continues to grow, how must a VMS evolve to support the changes that come with that growth? Is it possible that the VMS selection process is so complicated that companies are disappointed with the outcome, forcing them to continuously reconsider the decisions that they have made?

Selection Criteria for a Vendor Management System

Let us look at the selection criteria for choosing a VMS.  Of greatest importance: the value a VMS could bring to the management of your staffing needs. A carefully designed process will enable you to take your pick of the vendors and their offerings. Follow this list step by step:

  1. Examine your use of contingent labor so that you know where you are starting from.  What types of contingent labor do you use?  Agency contractors, independent contractors requiring 1099 compliance, small SOW-based project teams?  How many contingent workers do you use? What skills do you need?  Where do you use them?  What’s the average length of each contingent engagement?
  2. List your greatest pain points.  Don’t develop a laundry list, stick to the areas of greatest cost or risk to your company.  This list will define your priorities in evaluating potential VMS systems.
  3. Consider your goals for system usage today and for each of the next 3 – 5 years.  How do you see the use evolving?  What would you need to see in the tool to ensure that it can grow with you?
  4. Consider your organization’s culture and structure.  Is it practical to plan an enterprise-wide implementation when your company is composed of fairly autonomous divisions?  When you implement a VMS, will the internal program sponsor have the needed influence inside your company to eliminate roadblocks and encourage full participation?
  5. If you have a VMS system in place, develop a deep understanding of how it is currently being used and by whom.  Poll all stakeholders to determine what they like and dislike about the system.  This will help to define your requirements and will also gain support for the VMS program.
  6. Now that you know what you’re looking for, develop a Request for Proposal (RFP).  Avoid the most common trap companies fall into in this process: don’t attempt to boil the ocean!  Too many RFPs attempt to cover every possible aspect of VMS usage, resulting in responses that are at times hundreds of pages long!  I can tell you from experience that you will be overwhelmed by the responses, adding weeks to your planned review schedule and potentially leaving you so confused that you lose sight of which vendors are offering the best solution for your needs.  When in doubt, go back to step 2.
  7. When issuing the RFP, directions should clearly state the overall process, timeline, and protocols for asking questions or communicating with you during the process.  Be sure to clearly state what youdon’t want (e.g., “the MSP and its affiliates will not be allowed to serve as a supplier of contingent labor under our program.”)
  8. When clarifying questions are submitted, take them seriously and provide as much detail as possible.  Remember that a greater understanding of your company’s needs will result in a proposal that directly aligns with what you’re looking for.
  9. When evaluating proposals, consider your criteria, assigning each a value (on a scale of 1 to 10) strictly according to your team’s evaluation of the feature’s importance to your business goals and strategy.  Rate each response against these criteria.
  10. Design the RFP so that respondents have a clear opportunity to explain why they differ from others.  Does this system offer functionality that no other program does, covering aspects which you yourself have never truly considered?
  11. Take the extra steps to truly consider each proposal.  Carefully check references.  If questions surface, request additional information or references.  Use independent market research to evaluate each Vendor Management System (be sure to use more than one source to get a balanced view.  Some analysts confuse biggest with best).  Request demos of the software, providing clear direction on the functionality that you want to see.  Consider providing use cases and data to be used in the demo.
  12. There is no denying the fact that any new buyer of a services procurement tool like a VMS – or for that matter any buyer of any product or service –will consider price. Do the VMS modules come bundled at a discount, or separately at higher cost? What are the hidden costs?  Does the vendor charge for -implementation?  Integration with back-office systems?  Training of your staff and your suppliers?  Ongoing updates?  Ongoing user support?  Does the vendor charge each supplier a “sign on fee?”

VMS technology is constantly changing.  Great strides have been made in supporting project-based services, multi-national programs, industry-specific requirements, and regulatory compliance. Products differ in strengths and weaknesses.  To find the right system for you, look beyond the industry giants and focus on the alignment between your top priorities and the strengths of the system under consideration. Take a holistic view, also considering the vendor’s customer service track record.  Once you have made your selection, you can then move into the intensive phase of negotiating the Service Level Agreement, communicating with your contingent workforce ecosystem and implementing the system.

We’re interested in your experiences with Vendor Management Systems.  Share with us the one question you wish you had asked before selecting your current system.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.