If You Don’t Know Where You’re Going…Or How to Build a Business Case for a Vendor Management System | DCR Workforce Blog

If You Don’t Know Where You’re Going…Or How to Build a Business Case for a Vendor Management System

As companies strive to assess their labor force, more and more are turning to the contingent workforce to provide key skills, close gaps and drive competitiveness as they hone in on cost savings and business improvement opportunities. When they do so, it becomes readily apparent that they can’t just jump in blind and think that they can manage an entire workforce without some type of technical assistance in the form of a Vendor Management System (VMS) to keep a watchful eye on the workforce, vendors and spend.

There’s an old saying: If you don’t know where you’re going, any road will take you there. That’s just as true in business as it is on the highways and byways. As more companies decide that a VMS is no longer a luxury but a necessity, they need to build a business case to win over the decision-makers. Here’s a broad overview.

Step-by-step on how to build a business case

  • Assess and analyze the current business state – here’s where the road comes in. The first step in creating a winning business case is understanding where you are currently at in your current contingent workforce management. So start with the basics: headcount, current spend, business rules, processes and any known inefficiencies. In fact, this part alone may help you to solidify your business case because often you are not able to identify your current state due to fragmented, or even total lack of, the very information you require.
    • Identify stakeholders from all of the functional areas across all business units and geographies. All functions will have a stake in the outcome, you they should provide you with data and insight from an internal perspective. You’ll want to gather worker number and type, spend under management, labor category, geography, business unit and trends over time as well as process gaps and known risks. The functional areas to gather information from includes:
      • HR
      • Procurement
      • IT
      • Sourcing
      • Finance
      • Accounting
      • Legal
      • Security
      • Compliance
      • Diversity
      • Hiring managers
    • Obtain supply chain information that includes headcount, turnover ratio, skill sets (including where lacking), classification mix, cost structures and financial metrics so you know the overall scope of your current contingent workforce.
    • Collect subjective information because this can be one of the biggest determining factors as the pain points provide vital insights into the processes (and lack thereof). But also ask why something is not working.
  • Examine return on investment (ROI) – so you can determine the drivers and when and where you can anticipate seeing the results. Once you have done an assessment, you must analyze the data.
    • What drives ROI? The funding model you select as well as spend through the system, implementation complexity, hard- and soft-cost savings, hard- and soft-benefits and resource reallocation should all be part of your ROI. You should create a matrix of what specific measurable improvements you expect and regularly pull reports to see if those metrics are being met. If not, discover what can be tweaked to attain them (or are they unrealistic?).
  • Find a champion – who will take the program and be the driving force. Ideally, you should have several champions who are engaged from the start and can provide ongoing insights toward your goals and objectives.
    • Designate an executive champion who will lead the way with authority and credibility in their commitment to change. Often he or she is a key stakeholder from procurement, HR or sourcing.
    • Identify key stakeholders from the departments who have the majority of contingent workers, for example, IT.
    • Explain benefits to key groups and what they can expect as far as finding the best talent, gaining visibility and insight into the program and minimizing risk.
    • Invest in the supplier base to strengthen the adoption of the VMS program. A strong partnership will build a strong program. Suppliers should be encouraged to share challenges so everyone can work together to overcome them and develop a better program.
  • Prioritize goals and objectives – because you need those benchmarks to ensure you’re making progress, not just spinning your wheels with a shiny new toy. You’ll need to prioritize which factors are the most critical to your business goals and objectives, so you can tailor the system to meet your needs. Here are the most common:
    • Visibility – seeing the “who, what, where, when and why” of your program is imperative for security, compliance, cost-savings and quality control. It allows you to track every contingent worker and provides the analytics and business intelligence to identify risks, improve processes and save money.
    • Efficiency – allows you to automate many steps in the process freeing up time to concentrate on other core tasks. You can gain control of statement of work (SOW) projects and spend as well as improve overall efficiencies throughout the entire service procurement process from sourcing through engagement, management, invoicing and payment to offboarding.
    • Cost – of course is one of the principal reasons you’re building a business case, but you need to think of the soft costs as well as the hard costs. Hard costs include better rates, standardization of volume discounts, overtime discounts, early payment arrangement and more. Soft costs are easy to overlook, but they include faster hiring cycle times, contract optimization, timecard error reduction, rogue spending reduction and more.
    • Compliance – is increasingly important as regulators are cracking down on misclassification and other compliance issues. Compliance has grown and now touches on many areas within an organization. And as the law states: Ignorance is no excuse. So build your VMS with the right controls in place to manage your risk.
    • Quality – is one of those areas that is difficult to ascertain, but necessary to gauge nonetheless. Use internal benchmarking to determine your supplier’s work quality, which workers to procure and what projects to implement. Track your desired outcome, costs, timelines and other relevant data. Your VMS should have supplier and worker quality performance scores and management built in.
  • Eliminate roadblocks – by taking all of these factors into consideration, you should have a solid business case for investing in a VMS. Yet you may still run up against some roadblocks. If you do, take the high level objections and break them down into smaller parts, then investigate each one and build a mini-business case for each one. At this point, you may identify some pain points that were not easily identified when you first spoke to key stakeholders.

Once you have a sound business case developed, you can make a calculated recommendation to support it. You should include why the recommendation makes sense versus the alternative (no VMS), and take into account all of the relevant factors. You must articulate the business goals and objectives and document all of the factors that may have an impact on the decision. For more details, read our whitepaper, “Building a Business Case.”

Additionally, at the conclusion, you will ideally present a list of next steps and how to move forward. This should focus on executing the recommendation through narrowing it down to your top three VMS providers, requesting demos from each provider and going through the due diligence phase.

This video gives you a quick rundown on how to build a business case for a VMS:

By going through the process and building a rock-solid business case, you will know where you’re going…and only one road will take you there.

Does your business case cover all of these considerations?

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.

One response to “If You Don’t Know Where You’re Going…Or How to Build a Business Case for a Vendor Management System”

  1. Lalita Vempati says:

    As you rightly said, a VMS provides a client with great control over their use of contingent workers, they get to enjoy complete transparency and visibility over how their contingent worker program is operating. It streamlines the processes and manages compliance requirements and also brings in cost savings.

    So, a business case for a VMS needs to keep in mind that the cost of a VMS depends on the model chosen and while a vendor like DCR bears the entire administrative cost of the program and most of the implementation cost; the actual cost would depend on the number of integrations required, customization factors and other bells and whistles.

Neha is responsible for developing and overseeing marketing strategy and brand identity at DCR. She and her team collaborate on marketing and sales strategies and product development for new initiatives.