Today, the aim is to consider how Purchase-to-Pay (P2P), Human Resources Information Systems (HRIS), and vendor management systems (VMS) fit together.
First, let's disentangle the spaghetti
If you work on a procurement team, you will be very familiar with P2P systems. With sophisticated management of supplier contracts, direct costs, indirect costs, financials, and more, P2P solutions offer mature, capable, and robust functionality.
The HRIS will be your go-to solution if you work in Human Resources. Whether part of a larger ERP system or a separate application, a modern HRIS encapsulates every aspect of employee management, from advertising for new hires to offboarding retirees.
What is a VMS, and where does it fit?
Large organizations often use contingent workers, typically self-employed contractors or agency staff supplied by service providers. These contingent workers comprise a much larger proportion of the workforce than most people realize and can include temporary workers, consultants, independent contractors (ICs), and outsourced service providers.
A recent article published by Christopher J. Dwyer (Ardent Partners) shows that 49% of the average company's total workforce is already contingent, and 82% of organizations report that skilled contingent workers make up half or more of their contingent labor force.
For full-time employees, the HRIS manages every step of their engagement—training, certification, holidays, insurance, org chart, maternity leave, etc. If a vacancy arises for a qualified professional, the HR team can search and screen internal and external candidates and create onboarding workflows.
However, contractors and agency staff broadly fall outside the HRIS's remit. Instead, individual business units in the company might call on existing agreements with service providers to supply people for specific work at rates fixed by Procurement. The agency sends its invoice to the company each week or month, which the business unit manager and Procurement team review and authorize.
Because of these two very different approaches, it can be difficult to answer personnel questions. How can you find out how many contingent staff are working in the organization, who they are, and which business units have hired them? What are the relative levels of contingent and employed staff? Could the business operate more effectively with a different ratio?
If you work in Procurement, you can report on the cost, possibly the number of people, and perhaps which department placed the order with the service provider. However, in many cases, there is no central record, as each department retains data on isolated systems and spreadsheets.
Additionally, recording what contingent staff actually do and their terms of engagement will be similarly obscured. This lack of central visibility presents a significant financial and operational risk for many enterprises.
The HR team will be in a similar position, with no insight into staff hired from agencies, as the relationship is company-to-company at the Procurement level rather than HR-to-employee. For contingent staff hired directly, such as individual IT contractors working within existing teams, details are not always added to the HRIS, which is primarily intended for regular employees, and any reports are therefore inaccurate.
Revealing process gaps
HRIS and Procurement systems are undoubtedly excellent for their specific tasks. However, asking questions about contingent workers can reveal significant process gaps.
For example, contingent workers are often partially onboarded to the HRIS solution so that security can issue them with access passes or add them to the personnel directory used by IT, accounting, and managers. However, non-employees may not be subject to the standard offboarding process. In one case, we discovered an organization with 15,000 worker IDs accumulated over the years that had not been offboarded, presenting a significant security and compliance risk.
Similarly, in regulated industries, many workers must possess—and be proven to possess—relevant qualifications. For regular employees, the HRIS will capture and manage certifications and training, yet for contingent staff, the process may not be clear. Contingent workers brought in through a contracted agency may bypass the standard HRIS credentials-checking process, creating unrecognized compliance exposure.
Create a unified view
A VMS bridges the process gaps between the HRIS and Procurement systems. It provides complete visibility, such as who works in which location, for which department, and for how long, with traceability of certifications.
In addition, the VMS enables cost management of agency and individual workers, providing the Procurement team with unified data to help negotiate improved contract terms. Given that contingent workers might account for 20-50% of the staff, companies with VMS solutions may see indirect cost savings of between 5-8%.
On a practical level, integrating VMS data with HRIS and Procurement systems will enhance operational workflows. In many HR and Procurement teams, executives find they spend time copying/pasting data from or into systems and spreadsheets, trying to harmonize data and reporting. With a VMS, procurement executives gain complete visibility into spending, and the HR department gains full visibility into staffing—of all types—based on shared, standard, validated data.
Organizations that rely on a mix of HRIS and Procurement systems may overlook a large number of staff, all of whom are essential to company success but not fully managed. A VMS provides the processes and tools to optimize the benefits of a contingent workforce and provide critical management information to HR and Procurement.
Read this e-book to learn more about the benefits of a VMS and how this technology can help you source and manage your contingent workforce more effectively.
