Key takeaways:

  • Vendor management software helps manage and organize supplier information while automating the entire lifecycle from screening to offboarding.
  • These systems improve vendor collaboration and help mitigate inherent supplier risks. 
  • Features should include a supplier portal, onboarding, screening, performance management, corrective actions, spend management, and API integrations. 

Locating the best suppliers and negotiating a mutually beneficial contract is a good start, but vendor management is so much more than that. To drive procurement excellence, businesses need to search for, assess, and onboard new suppliers. Then they need to maintain up-to-date supplier records, and measure supplier performance on a regular basis.

A vendor management system (VMS) enables businesses to quickly spot and assess new suppliers, onboard them, and gain a 360-degree view of all vendor information — including performance and risk — in a single platform. With a good VMS, businesses can get the most out of vendor relationships. 

However, choosing the right vendor management solution is anything but straightforward. The difficult part isn't assessing the available vendor management software on the market, it's evaluating your own business needs and matching them with the functionalities of each option.

We'll outline everything from what a vendor management system does to how it benefits your company.

What is a vendor management system?

A vendor management system is a technological solution that streamlines every step of the vendor lifecycle management process — from supplier evaluation and onboarding to performance management and offboarding. These VMS platforms help businesses collaborate with their suppliers in real-time and conduct audits effortlessly.

Benefits of vendor management software

In a manual vendor management scenario, businesses face many hurdles — from a bleak onboarding program to irregular and inefficient vendor performance monitoring. Vendor management automation resolves supplier-related problems and offers many other benefits. Here are some of the benefits of implementing a vendor management solution.

1. Streamlined supplier onboarding

A user-friendly vendor management software simplifies the supplier registration process with a self-service supplier portal. With an automated vendor onboarding process, businesses can:

  • Minimize manual follow-up, data entry, and associated errors
  • Decrease time spent evaluating and onboarding new suppliers
  • Offer a consistent onboarding experience to all suppliers
  • Empower suppliers to update their profiles and catalogs on their own

With a vendor management platform, procurement managers don’t have to chase after suppliers to update their profiles and catalogs. All suppliers will receive timely alerts whenever their input is required. Transparent procurement processes help identify and clear up delays in your onboarding workflow.

2. Simplified contract management

A vendor management system automatically collects, stores, and displays all contract-related information in a centralized database, enabling procurement teams to get rid of their spreadsheets and paper files. In addition, since the database is seamlessly integrated with other third-party tools like accounting software, ERP systems, and more, you can eliminate data redundancy.

What’s more, the system will automatically monitor contract closure dates and SaaS renewal dates, and notify appropriate stakeholders so they can take steps to either renew or close the contract.

3. Standardized business processes

In a manual vendor management environment, procurement processes tend to be inconsistent, inaccurate, and at times, even non-compliant. Stakeholders may end up indulging in shadow IT — installing applications and software without the IT team's knowledge — because their purchase order stayed in the approval stage for too long. 

In the case of services procurement, the requisition process may vary from one supplier to another, depending on the gatekeeper. An automated vendor management process will give stakeholders complete visibility into the status of their purchases while ensuring the process stays consistent and compliant. 

What's more, organizations don't have to build a vendor management process from scratch. Most VMS platforms come with ready-to-use templates that can help organizations get their vendor management process up and running in no time at all.

4. Enhanced supplier collaboration

Vendor management system: entrepreneurs happily working together

Nearly all procurement teams realize vendor management is a cornerstone of procurement excellence. However, vendor management is no longer just restricted to data management. It also includes supplier relationship management.

When you converse using outdated communication tools, the thread of conversation quickly gets lost and buried. Vendor management solutions offer a real-time collaboration where conversation threads are tied to procurement documents like purchase requests, invoices, and more.

5. Mitigated supplier risks

Supplier compliance management is always an afterthought in a manual vendor management environment. In a VMS system, the supplier risk management module provides organizations with dynamic, rules-based workflows which help your business acquire goods and services while ensuring policy, regulatory, and legal compliance.

Most procurement solutions offer pre-written questionnaires for supplier due diligence. In addition, businesses can streamline their third-party risk management by integrating with comprehensive supplier screening services like DUNS (Data Universal Numbering System by Duns & Bradstreet). 

Features to look for in a vendor management system

Analyzing the features of each vendor management system is a crucial step for selecting the right software for your business needs. These are the seven features that an ideal vendor management system should have:

1. Self-service portal

This feature empowers suppliers to manage their profiles, update order details, and track payments through a user-friendly collaboration platform. Some platforms offer a vendor marketplace where suppliers can network with other suppliers.

2. Paperless onboarding

You can instantly extract information from your existing or third-party supplier databases and eliminate the bleak reality of onboarding paperwork. What's more, tailored processes ensure that the onboarding experience stays consistent across all suppliers.

3. Supplier screening

Retrieve and verify vendor information and certifications with the click of a button. You can just enter the supplier's DUNS number and retrieve information like business reports, financial data, credit risk reports, and more.

4. Supplier performance management

Visual-rich reports provide a bird’s eye view of supplier performance, including service downtime, regulatory compliance, and more. Businesses can use visual-rich reports to retrieve actionable insights, identify purchase risks, spot opportunities, and negotiate better deals. 

5. Corrective actions 

It's easy to monitor vendor performance metrics and initiate a supplier corrective action plan (SCAR) when performance slips below an acceptable level. In such cases, businesses also have the option to even offboard the supplier and close existing contracts.

6. Spend management

Two people analyzing data

With spend management, organizations can capture and manage all spend categories (across suppliers or services) with rule-based workflows and automated notifications. These workflows will enforce budgetary restrictions, eliminating any risk of maverick spend or dark purchasing.

7. API Integration 

Improve the speed, productivity, and performance of your purchasing process from requisitions to payments with integrations for your ERP, accounting systems, external supplier databases, and more.

Level up your vendor management game

Vendor management systems offer functionality that helps businesses get maximum value out of their supplier relationships. These software solutions also facilitate joint growth and create value through open communication, transparency, and win-win goal orientation. 

When you're on the lookout for a vendor management system, make sure your chosen VMS platform has the indispensable features outlined above, and choose a vendor management system that plays well with your existing third-party tools. 

At Vendr, we're committed to helping you level up your SaaS vendor management game by taking charge of your SaaS buying and renewals. Reach out to Vendr if you need help managing your SaaS buying process.

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