VMS 101: How to Achieve Contingent Labour Cost Savings

February 2, 2015

Have you thought about where to begin?

I’m not talking about reducing headcount. The real question is, How do you plan to effectively reduce overall expenditures without reducing headcount? And how do you do it if your demand for contingent labour increases?

Faced with a global “War for Talent,” enterprise HR and procurement organisations are spending more time, money, and resources on sourcing and procuring services. At the same time, companies facing a decline in revenues are forced to cut spend and reduce costs. This is why more and more procurement organisations are tasked with identifying ways to control their services spend.

Controlling spend starts with complete visibility of all of the contingent labour your company uses. According to industry analysts, 60 percent or more of companies’ non-employee labour is “not actively accounted for in corporate budgeting, planning, and forecasting.”

If you have complete visibility, you’ll have other questions:

  • Do you know if you’re paying the most competitive temporary labour rates for your industry, geography, and company?
  • Are you maximising your buying power from your 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 to the last question is that you are still using manual spreadsheets or a complicated in-house system, then you’re already behind. In today’s competitive talent landscape, lack of labour category management and growing contingent labour 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 for these resources.

On average, an organisation that implements a vendor management system (VMS) solution to control spend saves around 10 to 15 percent of contingent workforce costs. Many companies begin to see this savings in the first year of implementing a VMS, or even as soon as 6 months.

So what does this amount to? If your average annual contingent labour spend is €100M, that would equate to €10M to €15M in annual savings!

Would that help you achieve your cost savings goal for the year? Probably so.

The cost of not properly managing your contingent labour programme can present vast consequences to your organisation -- including many you may not even be aware of. With so many opportunities for savings, consider exploring how a VMS could positively impact your organisation, like reducing your excess spend by €1M per month.

For more information download our complimentary VMS Fact Sheet.