Vendor Management System - History and Evolution of VMS

History and Evolution of VMS

VMS (Vendor Management Services) is a fairly recent advancement in managing contingent labor spend. VMS is an evolution of the Master Service Provider (MSP) / Vendor-On-Premise (VOP) concept, which became more prevalent in the late-1980s to the mid-1990s when larger enterprises began looking for ways to reduce outsourcing costs. An MSP or VOP was essentially a master vendor who is responsible for on-site management of their customer’s temporary help / contract worker needs. In keeping with the BPO (Business Process Outsourcing) concept, the master vendor enters into subcontractor agreements with approved staffing agencies.

It is noteworthy to mention that VMS really started to evolve around the time Michael Hammer and James Champy's Reengineering the Corporation became a bestseller. Large enterprises were looking for ways to compete in the global economy. The main advantage for U.S. businesses during this time period was that their purchasing departments were able to channel new contract personnel requisitions to one source – the VOP – and, in turn, reduce procurement costs by simplifying their payment process. In effect, they only had to write a check to one vendor vis-à-vis hundreds of suppliers.

With the Internet came new ways of doing business, which included electronic payment. According to Staffing Industry Analysts, Inc. the emergence of eBusiness, B2B, E-Procurement et al. was the catalyst that began the VMS industry.

As businesses began to integrate this e-business concept, online auctions began to appear. The value proposition was, they claimed, that they could reduce spend for purchasing office suppliers, industrial suppliers and other commodities by putting these purchase requests out for bid via an online auction.