What is a VMS?

July 11, 2024

What is a vendor management system (VMS)?

A vendor management system (VMS) is a web-based solution designed to facilitate the procurement, management, and administration of temporary and contract labor. It is a centralized platform that automates and streamlines the entire lifecycle of contingent workforce management, from sourcing and onboarding to performance tracking and offboarding.

The ABCs of VMS

In today's dynamic business environment, the workforce landscape is rapidly evolving. Companies increasingly rely on contingent workers — temporary staff, independent contractors (ICs), consultants, and outsourced service providers — to increase flexibility, reduce costs, and tap into specialized skills. Managing this external, non-permanent workforce efficiently and effectively poses unique challenges, which is where a vendor management system (VMS) adds so much value.

Essential functions of a VMS

  1. Sourcing and procurement

    A primary function of a VMS is to streamline the process of finding and hiring contingent workers. It connects companies with staffing agencies, freelance marketplaces, and other talent sources, making it easier to post job requisitions, evaluate candidates, and make hiring decisions.
  1. Onboarding and compliance

    Once candidates are selected, a VMS assists in the onboarding process, ensuring that all necessary documentation, training, and compliance requirements are met. This includes verifying certifications, conducting background checks, and ensuring contingent workers comply with company policies and procedures. Automating these processes reduces the risk of non-compliance and legal issues.
  1. Time and expense tracking

    A VMS typically includes tools for tracking contingent workers' time and expenses. This ensures accurate billing and payment, reduces administrative overhead, and provides transparency into labor costs. Workers can log their hours and expenses directly into the system, which can then be reviewed and approved by managers.
  1. Milestones and deliverables

    For outsourced service contracts, a VMS tracks project milestones and deliverables. It ensures payments are made only after deliverables are accepted and milestones are met.
  1. Performance management

    Managing the performance of contingent workers is crucial for ensuring productivity and achieving business objectives. A VMS enables performance tracking through regular evaluations, feedback mechanisms, and key performance indicators (KPIs). This helps companies identify high-performing individuals, address issues proactively, and make informed decisions about contract renewals or terminations.
  1. Reporting and analytics

    Data-driven decision-making is a cornerstone of modern business strategy. A VMS offers robust reporting and analytics capabilities, providing insights into workforce utilization, supplier performance, cost management, and more. These insights help organizations optimize their contingent workforce strategies, negotiate better rates with vendors, and improve overall efficiency.

Benefits of using a VMS

Implementing a VMS offers several significant benefits to organizations:

  1. Enhanced visibility and control

    A VMS provides a centralized platform for managing all aspects of the contingent workforce, offering unparalleled visibility and control. This centralized approach ensures managers have real-time access to critical information, facilitating better decision-making and resource allocation.
  1. Cost savings

    By automating administrative tasks and improving process efficiency, a VMS helps reduce the costs associated with managing contingent workers. Additionally, the system's reporting capabilities allow companies to identify cost-saving opportunities and optimize their spending on temporary labor.
  1. Improved compliance and risk management

    Ensuring compliance with labor laws and regulations is a complex task, especially when dealing with a diverse contingent workforce. A VMS automates compliance checks and maintains detailed records, reducing the risk of legal issues and fines. This is particularly important for companies operating in multiple jurisdictions with varying regulatory requirements.
  1. Better talent quality

    By providing access to a broader talent pool and enabling efficient candidate evaluation, a VMS helps organizations find talent that is the best fit for their needs. Performance management tools help to track and measure the quality of talent suppliers and workers. The VMS can advise hiring managers on which contractors to rehire and which staffing agencies consistently deliver the best talent at the best prices.
  1. Scalability and flexibility

    As business needs change, the ability to scale the workforce up or down quickly becomes crucial. A VMS offers the flexibility to adapt to these changes seamlessly, ensuring that organizations can quickly respond to market challenges and opportunities.

The indispensable tool for contingent workforce management

Over the last 20 years, a vendor management system (VMS) has become indispensable for organizations that rely on contingent workers. A VMS enhances visibility, control, and efficiency by automating and streamlining the procurement, management, and administration of external talent. It helps companies achieve cost savings, improve compliance, and ensure the quality of hires, ultimately enabling them to build a more agile and responsive workforce. As the nature of work continues to evolve, robust VMS solutions will become ever more important components of modern workforce management strategies.

For more information about vendor management systems and how they can automate and enhance how you source and manage your contingent workforce, visit Or to schedule a VMS demonstration, contact Beeline today.