VMS vs. MSP Systems

How and why to use one

Feb 4, 2020

A Managed Service Provider (MSP) in the staffing industry refers to an outsourced agency that manages the contingent worker (temporary staffing) program.  MSPs are typically found at large Fortune 1000 companies like Apple, Coca Cola or Citibank who might have thousands of contractors and hundreds of staffing agencies to manage. Although MSPs are large companies, at the client site, they exist as a small team of a Program Manager and 5-10 Coordinators that manage all the different position requirements and staffing agencies. They ensure the smooth day-to-day operations of pulling requirements from clients, the preferred vendors submitting candidates, onboarding of selected candidates and the ongoing management of temporary workers at the client company for the duration of the contract.

MSPs manage the procurement process, including:  

  • Obtaining the requirements from the client's hiring managers through the VMS
  • Transmitting the requirements to the staffing agencies
  • Ensuring the candidates are selected and onboarded
  • Collecting timesheets, getting approvals, payments and paying the agencies
  • Managing supplier performance with periodical scorecards
  • Some MSPs conduct a joint clarification call with the staffing agencies all listening in to enable the staffing agencies to get the same information from the client.

A Vendor Management System (VMS) on the other hand is merely a software system or website that the client company uses to run the contingent worker program. The VMS enables the contingent hiring-related transactions to happen online. It involves collecting the requisitions from the client's hiring managers, distribution of requirements to staffing agencies, collection of candidate submissions from the agencies, interview scheduling and coordination, job offers, onboarding, billing and timecards, etc.  

Vendor Management Systems (VMS) systems are software systems (mostly cloud based) that allow the MSP to run the client's temporary worker program. It may or may not be owned by the MSP provider. The reason for this is that clients look at these two things differently. MSPs are selected for their Services and the VMS is selected for the software’s features. It is common to see a combination of a different MSP and VMS in companies.  

A VMS system typically performs these tasks:  

  • Interacts with the client’s HR system to pick new requisitions
  • Blasts these requisitions out to the staffing agencies
  • Tracks metrics: How many days staffing agencies take to submit candidates. What their rejection rate is. If selected, do the candidates back out, whether the agency's rates are in the ballpark of the agreed-to rate card, etc.
  • These metrics are reviewed often by the MSP and the badly performing agencies are warned/booted out and new agencies are brought in to replace them.

VMS and MSP programs have shown to increase efficiency, reduce cost, increase compliance and spend visibility. Staffing agency supporters of the MSP/VMS programs argue that the playing field is level and that the most competitive vendors are winning.  The downside to MSP/VMS is for staffing agencies who are on a “do not contact”’ basis, which means the recruiters can’t contact the manager to seek feedback. This relegates staffing agencies to a commodity role of just collecting, screening and submitting resumes which affects the quality and exact placement of candidates.  

About Lofton: Founded in 1979, Lofton Services offers clients the best of all worlds. We provide the responsive, personal service and flexibility of a small local firm while having the technology, resources, and infrastructure to deliver the benefits of the biggest players in our industry. Lofton Staffing can deliver the right people, with the right skills, right when you need them. Contact us today

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