Part 25: MSP/VMS – How Small & Mid Sized Companies Become Large

In this discussion of: “How Small and Mid Sized Firms Grow” we will discuss the MSP/VMS programs.

Whether you are a user of staffing company labor or a staffing company you should become familiar with MSP/VMS labor procurement programs. Almost all large companies use one today. A Master Service Provider and Vendor Management Services agreement provides a value proposition for staffing company clients who doesn’t want to deal with multiple staffing vendors, but rather a single point of contact for all their staffing needs. In addition, there are benefits of standardization, time to fill an order, attendant cost savings and more. Although the majority of staffing is done today using these systems and great efficiencies have been made, not all of the experiences with these systems have been positive. Some clients however are not happy with a commoditized product, want to have a choice of vendors and feel a lack of the personal touch they have become accustomed to.

For staffing companies’ margins have been reduced, particularly the VMS’s. For the MSP who controls the process it provides substantial scalability and enables them to grow much more rapidly. To do this requires a sophisticated software system to track, report and control the entire process. It meant having people not only capable of meeting the client’s needs internally but satisfying those needs by working through third parties who could be counted upon to work in a seamless delivery process. A VMS vendor could reduce their sales costs as the orders came to them, but they often sacrificed margins and the direct interaction with the client. This worked out well when there was a good tradeoff in the incremental volume they received which made up for what they gave up. When their gain in volume was small the arrangement was not very attractive. And some MSP vendors left the business. Only large staffing companies could acquire a MSP/VMS system and were shut out from the game. This has recently changed as a couple of companies have developed homegrown systems and at least one vendor has found it worthwhile to lower the bar to provide the smaller and mid sized staffing companies with the functionality of the large systems. These can be licensed and even private labeled, but one must be able to not only operate such a system, but invest in the infrastructure, demonstrate the benefits to their clients, perform a needs analysis and do a post audit to validate the cost savings proposed.

In our next blog we will discuss not accepting excuses for non performance.

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Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

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