Does a VMS transform Procurement’s Role? | DCR Workforce Blog

Does a VMS transform Procurement’s Role?

Some companies may not have a designated department for handling purchases, but every company needs someone to fulfill the duties required of a purchasing department; namely the procurement of products or services at a reasonable or lowest reasonable cost to the company. The quality of the purchase has to meet the expected standards and the relationship between the buyer and suppliers has to be maintained and developed for a long term association – which is built through offering contracts in a fair manner and making payments in an equally prompt manner – with a mutually dependent relationship of trust.

The procurement department is typically responsible for selecting the suppliers who can provision the products and services needed by departments in the organization. They call for bids (or quotations) and analyze them, with the active participation of stakeholders from the company’s business units, geographic locations and/or functions. The negotiate contracts with successful bidders which incorporate legal requirements, issue purchase orders, and maintain records tracking the performance of the suppliers.

When Procurement proactively handles all these actions, the company experiences a reduction in maverick spend and payment of market-driven rates and prices. Departments also benefit from reductions in the administrative effort required to qualify, select, negotiate with, monitor, and pay suppliers. As established in a previous blog, procurement of contingent workers is significantly more challenging than product provisioning.  The question that surfaces is: do Procurement’s responsibilities change with the use of a vendor management system (VMS) &/or managed services provider (MSP) to manage the acquisition of contingent workers? Will Procurement’s efforts to save money for the business be affected by an MSP who essentially takes over the task of leading, owning and managing the strategic sourcing of contingent workers? How are work steps affected by the use of a VMS?

Companies that have implemented MSP/VMS programs have found that, in many regards, the role of Procurement (and Human Resources) shifts from tactical to strategic.  Freed from many of the daily administrative tasks, Procurement has the time; tools and data needed to focus on continuous improvement of contingent worker indirect spend.

  • Whoever handles the day-to-day operations, whether procurement or HR, will have to guard the company against co-employment risk.  With a VMS/MSP program, their work shifts from compliance verification to oversight and auditing.
  • Monitor and manage the MSP’s delivery of the services, tracking SLAs and KPIs.
  • Track market pay rates and sourcing methods, evaluating monthly performance reports and ensuring that regular market assessments are conducted by the MSP.
  • Consider program expansion options, calculating potential cost savings that could be achieved by each program enhancement initiative.

While companies may outsource the daily operations and management of temporary workers, they do not outsource responsibility for the business benefits derived from the use of an extended workforce.  Procurement is ultimately responsible for building an effective supply base, maximizing return on investment, and ensuring compliance with regulatory, industry and company policies. When strategic partnerships are established with high performing Managed Services Providers, and innovative technology is utilized, Procurement officers are able to bring unprecedented levels of value to their companies.  Would you agree?

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.