Vendor Management System

Whether a business relies on suppliers, contractors, or service providers, ensuring smooth collaboration can directly impact operational efficiency, cost savings, and regulatory compliance.

A VMS is a software solution that streamlines the management of third-party vendors by automating processes, consolidating data, and improving visibility across the supply chain.

Unlike traditional vendor management methods that often rely on spreadsheets, email chains, and disconnected tools, a VMS provides an automated, integrated solution that enhances transparency and control. With a VMS, companies can mitigate risks, improve supplier relationships, and make data-driven procurement decisions.

A VMS is particularly important for managing a contingent workforce. Businesses that rely on contingent labour often need to track worker engagement, compliance, and payment terms across multiple vendors. A VMS simplifies this by:

• Automating onboarding and contract management for contingent workers.
• Tracking time, attendance, and performance metrics to ensure quality service delivery.
• Managing compliance with labour laws, tax regulations, and company policies.
• Integrating with payroll and finance systems to streamline worker payments and reduce errors.

Incorporating a VMS into contingent workforce management, businesses can improve efficiency, maintain compliance, and gain real-time visibility into their temporary labour force.

When choosing a platform, businesses need to carefully assess the functionalities of a VMS to ensure it meets their workforce needs and aligns with industry regulations. Selecting a system with the right features can lead to streamlined operations, reduced administrative burdens, and improved decision-making. Here are some features companies should consider:

1. Centralised workforce management

Managing a contingent workforce can be complex, especially when dealing with multiple vendors, contracts, and compliance requirements. A VMS simplifies this by consolidating all worker-related information in a single, easy-to-access platform. This includes:

• Worker profiles and employment history: Store comprehensive details on each contingent worker, including their roles, experience, and project history.
• Vendor contracts and agreements: Keep track of contracts with staffing agencies and independent contractors to ensure proper terms and conditions are met.
• Compliance documentation: Maintain records of certifications, background checks, and legal requirements to ensure compliance.
• Payment and invoicing records: Streamline financial processes by keeping all payment-related details in one place.

With these capabilities, businesses gain enhanced visibility into their contingent workforce, enabling better planning, tracking, and decision-making.

2. Automated contingent worker onboarding

Hiring contingent workers involves lengthy paperwork, contract negotiations, and compliance checks—processes that can be time-consuming and prone to errors. A VMS automates onboarding by:

• Digitising worker contracts and compliance checks: Ensure contracts are generated and signed electronically, reducing administrative delays.
• Managing background verification and approvals: Automate the process of verifying worker credentials and obtaining necessary approvals.
• Ensuring workers are assigned correct classifications: Help businesses properly classify contingent workers as independent contractors or temporary employees to comply with labour laws.

With a streamlined onboarding, a VMS reduces delays, ensures all workers meet company standards, and enhances overall workforce efficiency.

3. Performance monitoring and reporting

Tracking the efficiency and reliability of contingent workers is essential for workforce planning and cost management. A VMS provides tools to:

• Monitor productivity metrics in real-time: Gain instant insights into worker performance, attendance, and task completion.
• Evaluate vendor and worker performance: Assess how well staffing vendors and individual workers are meeting business expectations.
• Identify underperforming resources and optimise hiring strategies: Use data-driven insights to improve workforce quality and replace underperforming workers or vendors.

With real-time monitoring and customisable reports, businesses can make informed decisions to enhance workforce productivity and vendor effectiveness.

4. Compliance and risk management

One of the biggest challenges in managing a contingent workforce is ensuring compliance with labour laws and regulations. Misclassification of workers, tax mismanagement, or failure to meet industry-specific requirements can lead to hefty fines and legal disputes. A VMS helps mitigate these risks by:

• Tracking worker classification: Ensure workers are correctly classified as independent contractors or temporary employees.
• Managing industry-specific labour regulations: Keep up with labour laws and ensure vendors and workers comply with them.
• Ensuring proper tax withholdings and worker documentation: Automating tax compliance and documentation storage to prevent misfiling or legal complications.

5. Invoice and payment processing

Managing payroll and vendor payments manually increases the risk of errors, such as miscalculations or missed deadlines. These mistakes can result in delayed payments, strained vendor relationships, and potentially lead to costly fines and penalties. A VMS minimises these risks by:

• Automating invoice generation: Ensure vendors and workers are paid accurately according to agreed terms.
• Ensuring accurate and timely worker payments: Reduces payroll discrepancies and late payments.
• Reducing payroll errors: Automates financial record-keeping and approvals, eliminating manual errors and preventing payment disputes.

With a VMS in place, companies can focus on other important aspects of their business rather than on administrative burdens.

A managed service provider (MSP) is a third-party firm that helps businesses manage their contingent workforce more effectively. MSPs handle vendor relationships, track worker performance, and ensure compliance on behalf of organisations. They often use a VMS to streamline these operations.

How MSPs and VMS work together:

• Workforce oversight: An MSP uses a VMS to oversee vendor contracts, worker performance, and spending patterns.
• Automation & efficiency: The VMS automates onboarding, invoicing, and reporting, reducing manual workloads for MSPs.
• Scalability: As workforce demands fluctuate, MSPs ensure the VMS scales accordingly to support growth.
• Strategic workforce planning: MSPs leverage VMS analytics to recommend workforce adjustments based on market trends and performance insights.

When companies combine the strength of an MSP and VMS, they can achieve better cost control, improved workforce efficiency, and enhanced compliance management.

For example, Boeing and its subsidiaries across Europe struggled with rising contingent workforce costs, inflated supplier margins, and compliance issues. Without centralised oversight, supplier contracts varied across countries, leading to inefficiencies and a lack of visibility into workforce spending.

To address this, CXC implemented a customised MSP solution with Beeline as the VMS, leading to significant cost reductions and compliance improvements.

CXC was able to deliver a successful procure-to-pay MSP service model across eight international locations including, Sweden, Germany, and Poland, with over 800 contractors under management.

Read more: Visibility, compliance, and direct sourcing for Boeing through a global MSP

By combining an MSP with a VMS, Boeing achieved cost control, enhanced workforce efficiency, and improved compliance, while gaining full visibility into supplier performance and workforce trends.

Businesses that rely on contingent workers usually face challenges like administrative inefficiencies, compliance risks, and uncontrolled costs. Without a centralised system, tracking worker performance, managing vendor contracts, and ensuring legal compliance can become overwhelming.

With VMS, companies can overcome these challenges, allowing them to optimise their contingent workforce. Below are some of the key benefits of using a VMS.

1. Improved efficiency

Companies managing contingent workers often struggle with administrative bottlenecks, such as delayed onboarding, contract mismanagement, and payment errors, which can slow down operations and create unnecessary friction.

For example, a company hiring multiple independent contractors for a short-term IT project may face delays if contracts are not processed efficiently. Miscommunication between departments can further slowdown approvals, leading to project setbacks. A vendor management system automates key processes like onboarding, invoicing, and reporting, eliminating inefficiencies and allowing businesses to focus on strategic workforce planning. With a VMS in place, workers can start their assignments promptly, and HR teams can efficiently track their progress without administrative hurdles.

2. Greater workforce visibility

One of the biggest challenges of managing a contingent workforce is tracking worker utilisation, vendor performance, and overall labour costs. Many companies operate in the dark when it comes to understanding where their budget is being spent and whether they are maximising their workforce potential.

In the U.K., for example, IMG faced difficulties managing contractors across their production and events teams. With no structured system, they lacked visibility into contractor engagement, compliance, and workforce costs. To solve this, CXC provided a customised MSP solution with VMS in place, streamlining compliance, contracts, and payroll management. This transition helped IMG:

• Improve efficiency by standardising contractor onboarding and compliance.
• Ensure full compliance with industry regulations.
• Gain better workforce insights with HR teams tracking workforce trends and vendor performance.

Read more: Achieving visibility and compliance for IMG

3. Enhanced compliance and risk management

Compliance issues are a major concern for organisations using a contingent workforce. Misclassifying workers, failing to adhere to labour laws, and overlooking contract terms can result in hefty fines and legal challenges.

Consider a tech company hiring software developers across multiple countries, each with different labour laws. Without proper classification and legal compliance, the company risks violating employment laws, which can lead to lawsuits and financial penalties. A VMS helps mitigate these risks by ensuring that contingent workers are properly classified, contract terms are legally sound, and regulatory requirements are met. It also enables companies to store compliance documentation securely, making audits and inspections more manageable.

4. Cost optimisation

Companies sometimes have to deal with unnecessary spending due to inefficient vendor management or lack of oversight on contingent workers. Costs can quickly escalate due to scope creep, where project requirements expand beyond the original agreement, leading to higher expenses than planned.

For instance, a fintech company hiring consultants for a project may see costs balloon if additional labour hours are required but not properly documented. Without a VMS, tracking these extra costs and renegotiating contracts can become challenging. A VMS centralises vendor management and automates expense tracking, helping organisations monitor spending, negotiate better vendor contracts, and eliminate inefficiencies.

5. Scalability and adaptability

As businesses expand, their workforce needs may fluctuate. Organisations hiring contingent workers must be able to scale their workforce up or down quickly, depending on project demands. However, managing large-scale workforce adjustments without a structured system can lead to disruptions and inefficiencies.

A VMS supports scalability by providing automated workforce tracking, allowing businesses to seamlessly adjust their workforce size without losing operational efficiency. Whether a company needs to add temporary staff for a specific project or downsize after seasonal demand, a VMS ensures smooth transitions and workforce adaptability.

Selecting the right VMS is crucial for businesses managing a contingent workforce. A well-chosen VMS enhances efficiency, ensures compliance, and provides valuable workforce insights. Here are some factors to consider:

1. Integration capabilities

A VMS should seamlessly integrate with your existing systems, including payroll and workforce management tools. This ensures smooth data flow and prevents operational disruptions. A well-integrated VMS reduces manual data entry and minimises errors, making workforce management more efficient.

2. User experience

A system that is difficult to navigate can slow down adoption and productivity. A user-friendly interface ensures HR, procurement, and vendor management teams can easily access and utilise the platform. Look for a VMS with intuitive dashboards, simple navigation, and minimal training requirements to get your team up to speed quickly.

3. Security and compliance

Handling sensitive worker and vendor data comes with security risks. Choose a VMS with robust data security features, including encryption, role-based access controls, and compliance tracking. Ensuring that the system meets regulatory requirements helps businesses avoid legal complications and protect workforce data from breaches.

4. Scalability

As your business grows, your workforce needs will evolve. A scalable VMS should be able to accommodate an increasing number of vendors, contracts, and workforce data. Whether you’re expanding into new markets or increasing your reliance on contingent workers, the system should adapt to your changing needs without requiring a complete overhaul.

5. Customer support and training

Even the most advanced VMS can present challenges during implementation and day-to-day use. Look for a provider that offers reliable customer support, detailed training materials, and ongoing system updates. A responsive support team ensures that issues are resolved quickly, minimising downtime and disruptions.

Integrating a managed service provider (MSP) and a vendor management system (VMS) can significantly enhance your company’s workforce management strategy. Whether you’re looking to simplify vendor coordination, improve compliance, or create a more structured approach to engaging contingent workers, a tailored MSP solution can offer the flexibility and control your organisation needs.

With CXC’s customisable MSP solution, you can select the level of support that best aligns with your operational needs—from sourcing and engagement to payment, supply chain management, and compliance. This way, you only pay for the services you need, ensuring a cost-effective and scalable workforce management solution.