As businesses scale their use of contingent labor and staffing vendors, the need for a reliable vendor management system (VMS) becomes more apparent. A VMS is the backbone of a well-functioning workforce program, especially in managed service provider (MSP) environments, streamlining tasks like onboarding, compliance, timesheet tracking and vendor performance management.
But with dozens of platforms available, choosing the right system can be daunting. Rather than focus on specific brands or logos, this blog outlines the key features, functionalities and criteria to help you choose the best-fit VMS for your organization’s workforce strategy.
What Is a Vendor Management System?
A vendor management system (VMS) is a cloud-based platform that centralizes the management of third-party staffing vendors and contingent workforce data. It allows companies to track time, manage rates, onboard talent, ensure compliance and collect data from multiple staffing partners in one place.
Organizations using contingent labor, whether through an MSP or independently, use VMS platforms to maintain visibility and control, automate workflows and reduce operational risk.
1. Ease of Integration
Your VMS should work with, not against, your existing systems. Look for platforms that offer pre-built integrations with:
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Human Capital Management (HCM) systems like Workday or SAP
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Payroll and Employer of Record (EOR) platforms
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Applicant Tracking Systems (ATS)
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Finance systems for billing and invoicing
Why it matters: A VMS that integrates easily reduces manual entry, improves data accuracy and supports smoother workflows across departments.
2. Compliance & Risk Mitigation Tools
One of the most critical features of a VMS is its ability to ensure that your vendors and workers meet internal and external compliance standards. Look for:
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Worker classification safeguards (W-2 vs. 1099)
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Credential and background check tracking
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Insurance and documentation uploads
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Audit trails and version control
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Automated alerts for expiring credentials
According to the U.S. Department of Labor, misclassified workers cost businesses millions annually in penalties and back taxes.
3. Customizable Workflows & Permissions
Every organization has different approval chains and operational needs. Your VMS should allow you to:
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Set up unique workflows for different locations, business units or worker types
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Define user permissions (ex. hiring managers, vendors, finance)
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Customize onboarding steps, rate approvals and offboarding workflows
Why it matters: Flexibility ensures the VMS works for your business, not the other way around.
4. User Experience & Adoption
A clunky system won’t get used, no matter how powerful it is. Ask for demos and look for:
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Clean, intuitive interface for all user types (HR, vendors, approvers)
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Mobile access for on-the-go approvals
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Simple login and navigation
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Training and support resources
Tip: Consider asking current users how long it took to get comfortable using the platform.
5. Robust Reporting & Analytics
Data is power. A good VMS offers real-time analytics to help you:
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Track spend by vendor, job category, or location
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Monitor time-to-fill and fill rates
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Analyze cost-per-hire
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Measure supplier performance
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Benchmark DE&I and compliance metrics
Dashboards should be customizable and exportable to match your leadership reporting needs.
6. Automation Features
A top-performing VMS reduces admin burden by automating:
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Job requisition routing
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Timecard approvals
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Invoice creation and reconciliation
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Compliance alerts
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Renewal or offboarding notices
This allows your internal team to focus on strategic work instead of manual processes.
7. Scalability
Whether you’re operating in one state or across multiple countries, your VMS needs to scale with you. Look for:
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Multi-entity or multi-location support
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Multi-currency and multi-language options
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Role-based permissions for diverse teams
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Ability to support SOW, freelancers, temps and consultants
Why it matters: You shouldn’t have to switch platforms every time your organization expands.
8. Vendor Performance Management
Your VMS should help you evaluate and manage your staffing partners effectively by:
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Tracking vendor response time and fill rate
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Comparing candidate quality across vendors
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Enforcing rate cards and SLAs
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Enabling scorecards or feedback mechanisms
Bonus: Built-in vendor ranking can help you optimize your supply base over time.
9. Client and Candidate Transparency
Especially in a co‑employment or MSP environment, visibility matters. A VMS should offer:
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Transparent requisition status for hiring managers
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Vendor visibility into feedback and submissions
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Candidate communication workflows
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Logs for dispute resolution and compliance reviews
10. Support & Implementation
Last but not least, service. You’ll need help configuring the platform, training users, and optimizing over time. Look for:
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Dedicated implementation teams
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Post-launch optimization support
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Training libraries or help desks
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SLA-backed customer service
Where SWM Fits In
At SWM, we specialize in building flexible, MSP programs powered by best-in-class VMS platforms. We don’t just implement technology, we optimize it to match your business goals.
Whether you already have a VMS in place or need help evaluating options, we bring proven experience across platforms, industries and program sizes. Choosing a vendor management system (VMS) is not just a tech decision, it’s a strategic workforce move. The right VMS can increase compliance, improve supplier relationships, reduce costs and give you the visibility you need to scale confidently.
By focusing on integration, usability, automation, reporting and vendor oversight, your business can unlock the full value of a VMS investment.