Supplier-Funded Pricing Model for Vendor Management Systems (VMS)
The Supplier-Funded Pricing Model
In a supplier-funded model, which is the industry standard, buyers of staffing services do not pay any upfront or ongoing VMS usage fees. Instead, 100% of the transaction fees will be charged to staffing suppliers who are a part of your contingent workforce program, which completely eliminates the cost of setting up, managing, and optimizing your VMS.
Companies like the supplier-funded model as it is easy to receive quick buy-in as there is no out-of-pocket cost and there’s no need to hunt for company budget each year as the program is 100% funded by suppliers. Companies do hesitate sometimes with this model as they have a fear of losing suppliers who may not want to pay the fees associated with implementing the VMS solution.
The reality is that the overwhelming majority of staffing suppliers (99%) have already adopted this pricing model as they realize the technology creates value for them in the form of lowering their costs of doing business and driving deeper engagement with their clients.
Ultimately, a supplier-funded model results in having alignment and accountability across your talent supply chain; the supplier finds the right talent, and the VMS ensures that talent is part of the program in an optimized fashion, resulting in greater value for the client.
Depicted in the above model, talent provided by staffing suppliers enters into the contingent workforce program, which consists of a VMS and may/may not include a Managed Services Provider (MSP), and ultimately ends up servicing the client. The VMS, on the other hand, consolidates invoices for the entire supplier base and invoices them based on an agreed-upon percentage of spend of the entire contingent workforce program.