Vendor Management
System (VMS)

A vendor management system (VMS) is an internet-based application that helps procure and then manage staffing services. In some instances, this is temporary, and in others, the system provides permanent placement for candidates. A VMS can also help find subcontractors or contingent workers and is usually capable of helping with the distribution of orders, consolidating billing, and easier reporting than with a manual system.


A contingent workforce refers to workers employed by an organization on a nonpermanent basis.
Types of contingent workers would be freelancers, temporary contract workers, independent contractors, consultants, or independent professionals. A contingent worker is not an official employee of the company but an independent contractor. Their time with the company typically varies according to the needs of the organization.

A vendor sells, or vends, contingent labor.
A vendor can be a person or an organization that finds the people who do the work for a company.
For example, if a company needs to hire thirty people to help launch a new product, it would contact a vendor, who would then locate the workers.

A Managed Service Provider (MSP) organizes and manages vendors while measuring how effective they are at supplying workers. They do not recruit applicants themselves, but they try to find the best vendors for the client’s needs. An MSP is in a position to compare the performance of several vendors using their own metrics or those designed by a company it is servicing.

A Vendor on Premises (VOP) is a vendor situated at the client’s place of business. They either find labor from within their own talent pool or from other suppliers. A VOP often has a strategic advantage due to its proximity with the company and is better able to ascertain the needs of the business and the performance of contractors.

A Contracted Service Management (CSM)
system interfaces with large plants, refineries, and manufacturing facilities in order to coordinate in
real time the scheduling needs of the client and contractors. It involves a timekeeping system coordinated between the CSM and the owner of the facility. A CSM effectively streamlines the process of recording time worked and using it to determine the pay for contingent workers.

An Employer of Record (EOR) helps facilitate all independent contractor management. An EOR handles the classification, compliance reviews,
and auditing involved in facilitating the efficient management of the contractors within the VMS. An EOR helps remove the pressure a company would otherwise experience in attempting to comply with governmental regulations and tax laws.

Early VMS

One of the first developers of a vendor management system was Geometric Results, Inc. (GRI), who introduced a VMS application in 1995. GRI was owned by Ford Motor Company, and the system, called PeopleNet, used both manual and automated operation. A year after its inception, PeopleNet was made into a completely automated VMS application and managed almost $200 million of staffing funds at Ford. GRI was purchased by MSX International (MSXI) in 1997, which continued to develop the system.

MSXI developed its own software called b2bBuyer that expanded along with MSXI’s European VMS services. MSXI’s b2bBuyer was repackaged as TechCentral and designed to provide services to Delphi Corporation, a GM parts supplier. The VMS was incorporated into the Bartech Group’s VMS, Fieldglass, in 2006.

Other notable early VMS innovators include ProcureStaff Technologies and Chimes, which eventually had its VMS bought by MPS Group, Inc.

How VMS Applications Benefit Businesses

A VMS has several benefits for stakeholders.
Some of them include:

  • Less time required to fill needs
  • Streamlined vendor management
  • Simplified requisition approval workflow
  • A better-optimized supplier base
  • Consolidation of invoicing
  • Standardized billing rates and procedures
  • Significant reduction in how much is spent on contingent labor
  • Easily accessible vendor performance metrics
  • More visible systems whose costs are more easily controlled

Trends in VMS

Quick Growth and Maturity

Although VMS’s have only been around a relatively short time, they have achieved high rates of adoption, being implemented by many companies across the United States. During this growth phase, VMS’s have benefitted from limited competition. Yet as they mature and people begin to notice ways they could be improved, competition will likely give birth to improved VMS’s.

The next phase of VMS development may involve more efficient handling of budgets associated with acquiring professional services and the more detailed organization of contractors and their services.

Limiting Cyber Threats

Malicious actors who wish to access the vendor supply system of a company can do so by hacking its VMS. A variety of insights can be obtained and leveraged by corporate “spies” in order to gain a competitive advantage over a company if they have access to its VMS. To combat this kind of intrusion, one of the more recent trends in VMS is implementing measures within a VMS designed to limit cyber threats.

More Careful Scrutiny of Vendors

Agencies in the United States have been turning their attention to those who use VMS’s in order to make sure they are complying with regulations. These include the Consumer Financial Protection Bureau (CFBP), Federal Reserve Board (FRB), and the Federal Financial Institution Examination Council (FFIEC). As a result, organizations are being forced to reexamine how they choose vendors.


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