How Much Volume Do You Need to Make a VMS Worthwhile?

When it comes to managing a contingent workforce, efficiency and cost-effectiveness are crucial. This is where a Vendor Management System (VMS) comes into play. But the question that often arises is: How much volume do you need to justify the investment (Setup costs, annual fees and ongoing resource allocation) in a VMS? Let’s delve into this to help you make an informed decision.

Understanding the Basics of a VMS

A VMS  is a software solution that facilitates the end-to-end management of a contingent workforce. From requisition and procurement to onboarding, time tracking, and offboarding, a VMS streamlines these processes, reducing administrative burden and increasing visibility. A VMS is widely becoming a minimum standard in some areas.

Key Factors to Consider

• Number of Contingent Workers: The primary factor in determining the need for a VMS is the number of contingent workers your organization manages. If you are dealing with a small number, manual processes might suffice. However, once you start managing dozens, hundreds, or even thousands of workers, the complexity increases exponentially.
• Volume of Transactions: The frequency and volume of transactions such as requisitions, timesheet submissions, and invoice processing can overwhelm manual systems. A VMS automates these processes, ensuring accuracy and compliance. Volume of dollars spent is also a consideration, as VMS providers often charge by the amount of dollars running through the system.
• Geographical Spread: Managing a workforce spread across multiple locations or even countries add layers of complexity, including different regulations and compliance requirements. A VMS centralizes management, ensuring consistency and adherence to local laws.
• Administrative Costs: Consider the cost of manual administration versus the cost of implementing a VMS. If the administrative costs are high due to the volume of transactions and the number of workers, a VMS can provide significant savings by reducing errors and improving efficiency. Processing timesheets manually for a warehouse full of workers for example, can be very time consuming and costly.

Determining Your Volume Threshold

There isn’t a one-size-fits-all answer to how much volume justifies a VMS, but here are some general guidelines:

1. Small-Scale Operations (Up to 50 Workers):
   • Manual processes might still be manageable.
   • Consider a VMS if your growth projections indicate a significant increase in the contingent workforce.
   • A VMS for certain workforce populations can become extremely valuable even at smaller volumes – light industrial for manual processes, credentialing and compliance tracking for Healthcare workers or tenure management of IT resources are just some examples.
2. Medium-Scale Operations (50 to 200 Workers):
   • This is typically where the benefits of a VMS start to outweigh the costs.
   • The administrative burden and potential for errors increase, making a VMS a worthwhile investment.
   • Visibility and cost savings opportunities become significant.
3. Medium to Large-Scale Operations (200+ Workers):
   • A VMS becomes essential.
   • The complexity of managing a large workforce across various departments and locations makes manual processes inefficient and error prone.
   • Streamlining, vendor management, performance tracking, savings on invoicing processing, risk, quality, and compliance are all areas to tackle at the program becomes larger.

The ROI of a VMS

The return on investment (ROI) of a VMS can be substantial, especially when considering the following benefits:

• Efficiency Gains: Automating time-consuming tasks frees up your HR and procurement teams to focus on strategic initiatives.
• Cost Savings: Reducing administrative errors and improving compliance can lead to significant cost reductions.
• Improved Visibility: A VMS provides real-time data and analytics, enabling better decision-making and strategic planning.
• Compliance and Risk Management: Ensuring adherence to local and international labor laws reduces the risk of fines and legal issues.

Conclusion

Determining whether a VMS is worthwhile for your organization depends on a number of factors, including the size of your contingent workforce, the volume of transactions, and your administrative costs. As a general rule, once you start managing more than fifty contingent workers, the benefits of a VMS start to become evident. For larger operations, a VMS is not just beneficial but essential.

Investing in a VMS like Conexis VMS can transform your workforce management, driving efficiency, reducing costs, and providing the visibility you need to make informed decisions. Evaluate your current processes, project your future needs, and consider the long-term benefits to determine if a VMS is the right choice for your organization.

• Read More about VMS Costs and ROI

  ➡️ LinkedIn Article: What's the Cost and ROI of a VMS?

  ➡️ 5 Vendor Management Best Practices to Maximize ROI

  ➡️ Vendor Management Software: What's the Cost & ROI?➡️ How Much Does a Vendor Management System (VMS) Cost?

  ➡️ How a VMS Lowers Contingent Workforce Cost➡️ The Top 10 Questions to ask a VMS Provider about Pricing: VMS Buyers Guide Checklist➡️ Save Money with Conexis VMS' Unique Pricing
  
  

Interested in learning more about the ROI of a Vendor Management System? 

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