Y ou’ve heard it before: time is money. This has never been truer for contingent workforce programs. In the first installment of our “VMS 101” series (Connecting Business to Temporary Labor), we identified seven primary benefits of managing your temporary labor program by leveraging a VMS. Today, let’s focus on cost savings. Looking at your enterprise goals for 2015, chances are, cost savings made the list in one form or another.
Have you thought about where to begin? I’m not talking about reducing headcount, rather, how do you plan to effectively reduce overall expenditures without reducing headcount? And how do you do it if your demand for temporary labor increases?
Faced with growth, enterprise HR and procurement organizations are spending more time, money, and resources on sourcing and procuring services. At the same time, companies facing a decline in revenues (think oil and gas today) are forced to cut spend and reduce costs. This is why more and more procurement organizations are tasked with identifying ways to control their services spend. It’s vital to connect the business to temporary labor—through understanding, identifying and appropriately controlling and reducing spend.
Some things to consider: How do you know you’re paying the most competitive temporary labor rates for your industry, geography, and company? Are you maximizing your buying power from suppliers? What is the true cost in reducing your time to fill a particular position or project? What procedures do you have in place to mitigate risk? How is your company currently managing budgets and processing invoices? If your answer is a manual spreadsheet or a complicated system, then you’re already behind.
Today’s competitive talent landscape, lack of labor category management, and growing contingent labor volume can result in you overpaying for your non-employee workers. And overall, without the right strategy and tools in place for managing this workforce globally, it’s almost guaranteed you’re spending more than you need to on these resources.
The average savings to an organization when implementing a VMS program to control spend is around 10% to 15%. Many companies begin to see this savings in the first year of implementing a VMS, even as soon as 6 months. So what does this amount to? Let’s say your average annual contingent labor spend is $100M. That would equate to $10M to $15M in annual savings! Does that get you to achieving your goal of cost savings for the year? Probably so.
The cost of not properly managing your contingent labor program could present vast consequences to your organization…many you may not even be aware of. With so many opportunities for savings, consider exploring how a VMS could positively impact your organization, like reducing your spend to the tune of $1M per month.