VMS and ERP System Integration

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The Importance of Strong Integration between VMS and ERP Systems for Human
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VMS and ERP System Integration

  1. 1. ® The Importance of Strong Integration between VMS and ERP Systems for Human Capital Management Co-Authored by ProcureStaff Technologies and Crescendo Consulting Solutions Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. PS-WP314-062810
  2. 2. Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. PS-WP314-062810
  3. 3. All services procurement Vendor Management System (VMS) suppliers promise smooth and comprehensive integration with prospective clients’ Enterprise Resource Planning (ERP) platforms. Yet too often, an organization implements a VMS solution only to discover significant shortcomings in the integration, yielding exposure to risks in such areas as regulatory compliance, cost avoidance, governance and overall program performance. While all mainstream VMS solutions job descriptions, locations, cost can legitimately claim some measure centers/GL codes, etc., users of integration capacity, organizations gain a more streamlined human come to the purchasing process capital management approach. lacking a clear understanding of 2. Compliance: Entering what integration means for their information, especially particular ERP platform and its corrections, in one system with unique configuration. This paper automated data flow vs. entering will look beyond the generalizations into multiple systems ensures typically discussed during the VMS data integrity and consistency. selection process to illustrate the This creates a tighter, more detailed integration considerations compliant environment. organizations must entertain 3. Ease of use/Increase in user when soliciting information from adoption rates: Having a prospective VMS providers. We single user friendly interface will identify the most important or dashboard that addresses considerations regarding integration all aspects of the process for followed by a practical example acquiring and managing human of one very risky, avoidable and capital encourages compliance commonly occurring gap in the with the procurement program. traditional integration process. The greater the program adoption rate, the greater the Benefits of Integration savings. 4. Cost savings: More spend run These are the minimum benefits through one centralized tool an organization should realize from creates greater visibility into successful integration: all spend, and enables better 1. Efficiency: By limiting business decisions. redundancy of information entry such as timecard information, Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 1 PS-WP314-062810
  4. 4. Minimum Touch Points for have a report-to hierarchy. This Successful Integration is often derived from the same set of user data. Integrating both Custom integration between systems systems ensures only one entry should span the following areas: point so, as data relationships 1. On-boarding & Off-boarding: With change, they change in both appropriate integration, the VMS systems. should connect with systems 5. Accounting Codes & Customer that initiate and/or extinguish Specified Fields (CSFs): As security clearance and badge accounting codes are created access, track certifications, and changed, the information initiate equipment distribution should be fully integrated to and collection, and immediately eliminate mistakes and keep disable access to computer and spend records across divisions security systems from terminated accurate. CSFs are most contractors. Additionally, the commonly used for any field best VMS tools integrate with upon which billing, timecards, multiple (disparate) security and or reporting can be distributed. notification systems without Accounting Codes typically flow manual intervention. from either an AP system or from 2. Users: User information should a project tracking system as flow from HR & ERP systems project codes. eliminating inconsistencies and 6. Purchase Order (PO) number manual entry. assignments and approvals: A 3. Locations: Work locations should punch out to the ERP can assign, flow from system to system route, and approve POs, making keeping information current and it easier for hiring managers to nomenclature consistent. assign PO numbers and maintain 4. Approval Workflow (Groups): consistency between systems. Typically HR or Procurement 7. Timekeeping: Eliminating systems in most organizations double manual entry will Various Client ERP Systems VMS Order Users Process Client PO Request Procurement Purchase PO System Locations Order Processing On/Off Client HR Boarding System Approval Timekeeping Project Workflows & Service Timecards Tracking/ Entry Process Timecards Timekeeping Reporting Accounting Invoicing Invoice Client AP Codes Process Remittance System Figure A © ProcureStaff Technologies Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 2 PS-WP314-062810
  5. 5. create efficiencies and ensure security practices are addressed corrections are made throughout up front all systems. 6. Strict adherence to existing 8. Invoicing: Integrating systems process steps to avoid disrupting will ensure invoices are correct status quo, even when an and allow for automated multi- existing process may not be system corrections improving optimal compliance. 7. Rigid integration requirements on the part of VMS provider Figure A illustrates the typical which require a “one size fits all” touchpoints for a well integrated approach to data integration solution. Responsibility for Integration What Makes Integration Challenging? Things to look Who is responsible for shepherding out for. the integration process? VMS and ERP systems were created Integrations between existing ERP separately to handle disparate but systems and a VMS are challenging interdependent functions: VMS for for several reasons: services procurement and ERP for 1. Multiple existing ERPs in a client overall supply chain management. organization across business These two types of applications are units and/or countries (or most productive when tightly joined. multiple/different instances of the Yet, the individual applications same ERP) were not designed to do so. In 2. Existing fields in the ERP that do some instances, the ERP provider not exist in the VMS require data has a services procurement mapping enabling successful module that limits their interest in process flow accommodating VMS platforms. 3. Multiple punch out points needed However, these modules often have to successfully accomplish limited functionality to address the PO assignment, routing, and complexities of contingent labor approval in the ERP need to be spend management. For this effectively administered through reason, many ERP manufacturers the VMS are not interested in changing 4. Updates/Upgrades to the ERP their established models to may nullify the integration points accommodate integration with newer with the VMS (i.e., if new fields VMS technology. It falls to the are created, if new approval categorically smaller VMS providers routings require new punch outs, to accommodate integration of their etc.) and/or impact deployment systems and data with legacy ERP schedules due to system “quiet systems. Not all VMS providers periods” invest the same level of time, effort, 5. Lack of allocated resources (e.g., or expertise to help their clients technical and lead resources with the integration process. Client representing ERP, IT, Finance, organizations need to understand HR, and Procurement) – it is vital all the key challenges posed by that all systems and information integrating their new VMS with their existing ERP. Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 3 PS-WP314-062810
  6. 6. Crucial Steps for Working with relevant departments as a standard Your Chosen VMS Provider to procedure within their broader Ensure Effective Integrations integration methodology. The VMS provider must demonstrate flexibility Pre-Engagement – Due Diligence & in their architecture to integrate Transparency and scale with the client’s legacy platform. Integration weaknesses between VMS and ERP begins during the Transparency must exist in order due diligence and selection process. to properly scope integration Some VMS providers are quick to requirements. Sharing details of say “we can integrate with all ERP client processes and systems with platforms”. However, as with most a capable VMS partner will serve organizations, the ERP is customized both parties well. Understandably, to the client’s unique specifications. many organizations are reluctant to Scoping the integration points, share extensive system architecture tables, and fields is critical and one documentation due to intellectual of the primary risk areas during property concerns. However, with implementation. Providers claiming an NDA in effect, clients can greatly to have this capability without benefit by sharing this information to significant participation from the ensure the integration is as efficient customer’s relevant functional as possible. Unfortunately, many areas should be questioned about organizations have been negatively their capability to accommodate impacted by a lack of detailed integration tailored to the unique client systems’ documentation, ERP instance. There is no “one size resulting in slower, less effective fits all” integration methodology implementations leading to general that applies to every customer. dissatisfaction with the solution. Instead, organizations should seek a provider that engages the Program Governance • Set program goals and operating Executive Leadership / Sponsorship principles • Set strategic direction: approve assumptions and overall plan Client Executives • Review overall project status VMS Partner Executives Program Management Office • Resolve issues escalated by the (PMO) PMO • Approve investments • Allocate resources as appropriate Change Planning, Control & Management Reporting Collaborate with PMO to… Execution & Business Units / Facilitation & • Manage business unit work effort Implementation Communication Functional Areas • Develop implementation plans • Review implementation risk and develop mitigation plan • Report status and escalate issues HR Finance • Define resource requirements • Identify systems integration requirements Risk Procurement Management • Execute the plan Security IT Legal AP / AR © Crescendo Consulting Solutions Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 4 PS-WP314-062810
  7. 7. Implementation a strong program management utility to facilitate successful start- Strong governance defines program up, current state assessment, strategy, organizational relationships, future state planning, gap analysis, escalation and decision making implementation planning and processes, communications and execution. Working to achieve change management, performance program success, program measurement and management, and management experts coordinate fosters innovation and value creation. execution across the supplier, consultants, IT, Finance, HR, It defines the appropriate leadership Security, subject matter experts, and stakeholders from the VMS ERP systems staff and program Partner and Client required to sponsors. It is important to effectively oversee the program. It remember – implementing a new ensures appropriate representation system assumes users will change and alignment of business objectives their behavior. Communications through leadership and escalation and change management are critical of critical issues for prompt yet overlooked (or under executed) resolution. More importantly, if components of a successful done well, program governance implementation. continuously monitors program status and identifies opportunities for The best VMS companies improvement. Strong governance provide integration specialists also mandates scheduled data who understand that it is critical quality audits and performance to arm the new customer with assessments including data integrity a framework for understanding between the VMS & ERP. which systems, touch points and It is a leading practice to establish functionalities will be impacted Program Management Responsibilities Foundation Methodology Change Management Planning, Control & Reporting • Def ine the change • Establish operating principles / f ramework f or program including scope, goals, management plan charter, roles, etc. • Facilitate developing workstream project plans and suite of reporting • Identif y and train change • Identif y and monitor critical path milestones agents • Consolidate cross -f unctional risks / interdependencies, create a mitigation plan and • Perf orm resistance analysis escalate where appropriate and identif y risks / • Identif y business and systems integration requirements opportunities • Surf ace program issues and coordinate resolution across f unctions / workstreams • Monitor perf ormance metrics • Employ best practice • Create program dashboard, executive summary and program reports methods where appropriate • Provide thought leadership Facilitation and Communication and recommendations f or outsourced solutions where appropriate • Provide advisory and f acilitation services to workstreams and business units as directed by leadership • Assist workstream leaders • Provide timely and consistent communication of project status, direction, deliverables, with def ining new processes, process, and timelines policies, etc • Prepare communications f or senior leadership as well as staf f • Def ine methods f or socializing f uture state value Execution and Implementation proposition • Complete current state assessment and f uture state planning • Communicate challenges and • Allocate PMO resources to support workstreams as directed by leadership successes • Monitor resource allocation and distribution • Monitor workstream timing and completion of deliverables © Crescendo Consulting Solutions Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 5 PS-WP314-062810
  8. 8. during the implementation process. environment. This is important to Sharing this information upon capture existing requirements and engagement prepares the new client also understand what process for comprehensive current state and system modifications may be assessment that will ensue. The needed to implement the vendor Integration Specialist should possess management application while deep subject matter expertise and capturing the highest possible levels act as liaison between the customer, of efficiency. Once the customer the Solutions Architect and Project has been sufficiently briefed and Management Team. engaged in the preliminary process, the implementation team should use Integration Assessment a quality methodology (such as Lean Six Sigma) to lead the client through An appropriate Data Sufficiency a thorough analysis of their current Document provides the client state process. an overview of the key elements examined in decision making with Collaboration between the supplier regard to system functionality related and customer is essential when to integrations. An inventory of identifying gaps between current and common touch points, common future state. The future state should source and destination systems, data be predicated on the customer’s relationships and dependencies, overarching business objectives. A and project timing considerations detailed review of the Integration should be included in the Data Assessment phase of the program is Sufficiency Plan. Depending on as follows (see graphic below): size and scope of the engagement, it is recommended clients spend a minimum of 2 – 4 weeks with their chosen VMS provider documenting their current state Integration Assessment Roadmap Initiate Program Determine Current State Processes Create Future State Blueprint • Articulate goals, scope, process, and resources Identify Gaps & • Create the project plan Solutions Develop • Collect and review Workflow Integration Plan & current documentation, • Identify critical Initiate Build process flow maps and touchpoints, workflow • Initiate small group anticipated IT platform planning sessions to • Map current state create the future state • Identify and describe in- • Complete time & task • Identify integration scope functions and analysis • Determine baseline data gaps (current v. future and reporting state) • Create integration systems • Review other areas that requirements plan component of support in-scope • Define build / • Assess current reporting/ larger program plan functions • Agree on performance customization data collection capability • Detail business targets for transition requirements • Initiate builds / • Assess legal, risk and requirements (e.g., period and future state customizations (VMS, compliance • Agree with supplier on services, reports, etc.) ERP, client IT) requirements • Identify VMS & ERP scalable platform and • Gain understanding of requirements (short build across region, • Deploy solutions per • Charter workstreams; prioritization, criticality mid-and longer-term) language, payment calendar as agreed select leaders based on location, processes, etc. by leadership region, etc. • Identify opportunities to • Gather detailed roadmap IT scale the solution (e.g., • Agree on reporting • Document SLA / KPI of client IT architecture spend types, regions, requirements and • Determine current currencies, etc.) create baseline reports • Execute per plan and (HRIS, Finance, technology platform monitor performance Security, etc.) including known and • Gain approval on • Establish performance • Conduct kick-off potential integration blueprint from metrics and service • Produce reporting / meetings touchpoints appropriate leadership standards Executive Dashboard 2 – 3 Months Duration © Crescendo Consulting Solutions Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 6 PS-WP314-062810
  9. 9. Checklist: Selecting the Right A Practical Example: Invoice VMS and Timecard Changes Things to look for in a VMS provider Many Vendor Management Systems’ with respect to integration: (VMS) integrations with Enterprise • Is the VMS company ISO Resource Planning (ERP) systems certified? are flawed. This shortcoming can • Are they subject to annual negatively impact the efficiency, audits? savings and regulatory compliance • How can your VMS prove that of an organization’s human capital they are monitoring critical supply chain management. Despite interfaces properly (such as all the advances made to simplify processing financial payments) if the complex field of human not audited regularly? capital supply chain automation, a • Does the VMS provider have commonly occurring event exposes experience with documented this Achilles heel in many solutions. quality processes such as Six This weakness is exposed every Sigma? time last minute invoice or timecard • VMS programs are long term changes are required. With so much commitments: Does your VMS time, effort and technology dedicated provider have a history of to automating and streamlining supporting complex integrations the human capital procurement for long periods of time? process – from requisition to check • As ERP systems are updated/ – it is ironic that such a commonly upgraded, does the VMS have occurring event could have such the capability to update their a negative impact on cost savings integrations? Do they have and regulatory compliance. As with processes in place to properly any challenge, understanding and document interfaces/integrations acknowledging the problem is the so that they can be supported first step towards fixing it. over time (even when turnover in the client organization occurs)? Current VMS architecture has • Can the VMS support multiple grown very efficient at organizing system integrations including the numerous, separate data flows multiple ERPs/different instances associated with the acquisition, and/or disparate systems management and compensation in addition to ERP systems of an external workers and service in different business units/ providers. Accounting codes for countries? Finance, requisition approvals • Can the VMS provider handle for HR and rate approvals for the scale to match the volume Procurement are the three primary going through the client’s ERP data flow processes automated system (i.e. 250,000 users in the by the VMS. Once configured, ERP system, will the VMS be the VMS manages the interplay able to handle that amount of between these data flows and information flow from one system enables the generation of approved to the next on a nightly basis – time & expense documents to be user updates, job descriptions, transmitted to whichever Accounts etc.) Payable / Accounts Receivable (AP/ Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 7 PS-WP314-062810
  10. 10. AR) application the solution uses modified time & expense file in for the generation of consolidated the VMS is supposedly performed billing. It is at this critical step of manually (paper based). Human the process where the numerous capital procurement systems individually approved timecards and are intended to eliminate the expense reports are compiled into a paper based processes they single invoice to be delivered to the replace, specifically to avoid the client’s accounts payable system. errors inherent in non-automated As consolidated billing users know, processes. Individually, each of the single invoice is paid into the these discrepancies represents AP/AR system that then makes the a rather minor sum. But viewed required distribution to each supplier cumulatively, over the course of who ultimately pay the individual a business quarter or fiscal year, contractor. The complex series these discrepancies can add up to of approvals, invoicing and funds significant sums. While the resources transfers is effectively simplified and have been properly compensated streamlined through this automation. and the customer has not been But what happens if, for example, a invoiced for services rendered, the contractor’s approved timecard does spend visibility and financial controls not reflect the actual number of hours promised by the VMS are effectively worked in a given pay cycle? compromised. Over time, the failure of the manual “workaround” for As any HR professional will confirm, addressing last minute changes to contractors and contingent workers timecards can pose serious risks. miss work for several reasons; illness, family emergency etc. In Procurement and Finance rely on the these cases, typically the change VMS to derive accurate spend data. is made to the invoice after it has Using the data collected this way been processed through the VMS is fundamental to an organization’s but before it is processed by the ERP ability to make informed purchasing program. The short term goal of and resource allocation decisions this activity is to amend the invoice going forward. If the underlying so that the absent worker isn’t data is faulty, then even the most compensated for hours or expenses diligent procurement practitioner he/she did not incur and so that will arrive at faulty conclusions. The the consolidated invoice provided costs of such erroneous planning to the customer accurately reflects can be significant. Additionally, billable events. While this practice faulty information frequently results does have the intended effect of in lack of faith for the system and preventing payment for services not ultimately poor user adoption rates. rendered, unless the original time From a regulatory compliance & expense information is amended standpoint, having discrepancies in the VMS system to reflect the between the financial information change, the resulting discrepancy reported through the ERP system frequently goes unnoticed. Since and the information reported through there is not an automated process the VMS can raise issues with SOX in many solutions to address this auditors. The discrepancy may be common occurrence, making the of a benign nature, but to an auditor amendment to the approved but who is accustomed to rooting Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 8 PS-WP314-062810
  11. 11. out fraud and malfeasance, the in the consolidated invoice delivered appearance of impropriety is often to the customer’s accounts payable enough to justify costly sanctions department. and penalties. On top of these high level concerns, there is the Under this system, the customer is unplanned cost of “rework” which a not billed for the resource in question customer must spend to manually while the error is being corrected. reprocess incorrect time & expense This eliminates the need to expend files. In some cases, organizations time and resources reconciling must maintain a full time resource overcharges on the next cycle’s dedicated to rectifying errors in the invoice. Instead, the improperly automated process as a result of billed line item is reprocessed this loophole. This practice runs through the VMS – revisiting all counter to the purpose of having an relevant approvals – at the corrected automated system and eats into the rate and then pushed through the savings the system is designed to billing process the following bill yield. cycle. As a result, the accurate spend is recorded in the VMS and The solution to this underreported propagated through the entire billing and frequently overlooked problem process correctly. In this way, what lies in establishing a process and was invoiced and paid is clearly systems efficiency best practices, reflected in the VMS and the ERP calling for a regular schedule of system. This process supports the automated audits. Specifically, most accurate record of actual spend automated audits should be volume. It is a best practice that is performed to compare VMS and ERP especially critical as a prerequisite data each and every bill cycle, before to undertaking successful business invoice consolidation is performed. intelligence (BI) activities. If however, ProcureStaff Technologies’ VMS, an incorrect invoice and payment Consol for example, engages a does get processed (notification dozen audits of individual financial from the supplier of the error is not controls per bill cycle. One of these send in a timely manner), Consol audits is performed specifically to also has automated credit and re-bill compare the data entered into the functionality allowing for that same VMS with the data contained in the level of consistency and auditable bill file as it is loaded into the ERP compliance. system for consolidation. Whenever a discrepancy is identified, the Paying additional attention to adjustment is made in one system, the integrity of the billing error Consol, which is then integrated reconciliation process can yield with the ERP, and the change flows significant savings. Successful through so that all systems reflect the execution of this integrated strategy change. Consol also alerts the hiring can also result in significant cost manager so that the discrepancy avoidance derived from the following: can be reviewed and the proper • The ability to avoid poor spend bill information can be reapproved decisions based on erroneous and processed from the beginning. data regarding past spend The remainder of the correct data • Elimination of expenses incurred contained in the bill file is included Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 9 PS-WP314-062810
  12. 12. through forensic accounting to reconcile improperly billed time & expenses • Preventing fines and penalties arising from SOX audits revealing imprecise financial reporting and controls Conclusion Organizations invest significant time and resources into engaging complex solutions to automate and streamline their human capital acquisition and management processes. Ensuring these systems work seamlessly with larger enterprise systems is essential. Failure in this regard is not only counterproductive, but extremely costly. Finding a VMS provider with the expertise, certification, and experience to successfully integrate is critical. More important is finding a provider whose business model includes spending quality time collaborating with the client to identify scope, business and integration requirements. Integration issues that previously undermined the high level of effort required to deploy and manage a human capital solution are now mitigated through VMS providers applying market best practices. VMS technology is ready and able to integrate with the client’s ERP platform. ProcureStaff Technologies and Crescendo Consulting Solutions have chosen to co-author this White Paper to share their collective experiences, challenges and benefits of successfully achieving true integration. Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. Page 10 PS-WP314-062810
  13. 13. ® About ProcureStaff Technologies ProcureStaff Technologies, a subsidiary of Volt Information Sciences, Inc., provides specialized software applications to streamline and manage procurement of temporary staffing, project work, consultants, and other human capital services. ProcureStaff Technologies’ solution improves efficiencies throughout the entire procurement lifecycle, including vendor management, sourcing, spend management, invoicing, reconciliation and payment for enterprise clients. Procurestaff Technologies offers an industry leading supply chain management software (VMS) that can serve as the technical basis for the human capital management programs at Global 1000 organizations. Working in conjunction with any managed service program services a client may engage, the ProcureStaff Technologies VMS solution is essential to liberating Human Resources and procurement professionals from the intensive tasks surrounding contingent workforce management, so they can focus on core business processes. www.procurestaff.com/resources About Crescendo Consulting Solutions Crescendo Consulting Solutions is a boutique professional services firm specializing in program management, outsourcing advisory and human capital solutions. Crescendo’s mission is helping clients optimize and execute business process, technology and governance solutions to achieve significant cost savings and sustainable business results. The firm has successfully implemented global human capital management programs embracing the latest VMS and ERP platforms. www.CrescendoConsult.com Copyright © 2010 ProcureStaff Technologies. All Rights Reserved. Copyright © 2010 Crescendo Consulting Solutions LLC. All Rights Reserved. PS-WP314-062810

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