The guide to vendor management systems
SaaS Stack Management
- Vendor management systems and software manage and organize supplier information, while automating the entire lifecycle from screening to offboarding.
- These vendor management systems, or VMS, improve collaboration between customers and vendors and mitigate inherent supplier risks.
- Features of a VMS include a supplier portal, onboarding, screening, performance management, corrective actions, spend management, and API integrations.
SaaS vendor management is more than locating the best suppliers and negotiating a mutually beneficial contract. High-performing procurement teams regularly search for, assess, and onboard new suppliers. Then, procurement managers maintain up-to-date supplier records and measure supplier performance on a regular basis.
A vendor management system (VMS) is a software solution that 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.
In this guide, we'll outline everything from what a vendor management system does to how it benefits your company.
What is a vendor management system?
Vendor management systems and software streamline every step of the vendor lifecycle management process. This includes supplier evaluation, onboarding, performance management, and offboarding. VMS platforms help businesses collaborate with suppliers in real-time and conduct audits effortlessly.
Benefits of vendor management software
In a manual vendor management scenario, businesses face many hurdles. Poor onboarding programs mean that software adoption may be fragmented. Irregular and inefficient vendor performance monitoring means that customers don’t know the value of their solution. Vendor management automation resolves supplier-related problems.
Here are some of the benefits of implementing a vendor management solution.
1. Streamlined supplier onboarding
Supplier onboarding is the process of collecting information (e.g. pricing tier, contract type, contact information of account manager, and more) from new suppliers and service providers for internal documentation purposes. This process makes it easy for buyers to conduct business with their suppliers, place new orders, and make payments to them.
A user-friendly vendor management software simplifies the supplier registration process with a self-service onboarding 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 can reduce data duplication and store all supplier-related information in a single place that is easily accessible. Supplier onboarding modules improve the quality of supplier data and improve the visibility of supplier information.
2. Simplified contract management
A vendor management system automatically collects, stores, and displays all contract-related information in a centralized database. This enables procurement teams to get rid of their spreadsheets and paper files. Since the database is seamlessly integrated with third-party tools like accounting software, ERP systems, and more, procurement managers can eliminate data redundancy.
Vendor management systems automatically monitor contract closure dates and SaaS renewal dates, and notify 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 can be inconsistent, inaccurate, and at times, 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.
An automated vendor management process will give stakeholders complete visibility into the status of their SaaS purchases while ensuring the process stays consistent and compliant.
Most VMS platforms come with ready-to-use standardized business templates that can help organizations get their vendor management process up and running in no time at all.
4. Enhanced supplier collaboration
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 with your supplier using email, phone, or a third-party tool, 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
In a VMS, organizations are provided with dynamic, rules-based workflows, which help acquire SaaS solutions while ensuring policy, regulatory, and legal compliance management.
Most procurement solutions offer pre-written questionnaires for supplier due diligence. In addition, businesses can streamline third-party risk management by integrating with comprehensive supplier screening services like DUNS (Data Universal Numbering System), which perform a risk assessment.
6. Automated supply chain
With a vendor management system in place, the entire procurement process from vendor onboarding to adding purchase requisitions or converting PRs to purchase orders becomes simple.
Procurement managers also don’t have to chase after suppliers to update their profiles and catalogs. All suppliers have access to a self-service portal that allows them to make changes to their catalogs or pricing as needed.
Features to look for in a vendor management system
These are the seven features that most businesses looking for a vendor management system should seek out:
1. Self-service portal
A self-service vendor management portal empowers suppliers and customers to manage their profiles, update order details, and track payments through a user-friendly collaboration platform.
2. Paperless onboarding
With paperless VMS onboarding, procurement managers 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. Vendor screening
Retrieve and verify vendor information and certifications with the click of a button. You can enter the supplier's DUNS number and retrieve information like business reports, financial data, credit risk reports, and more, which can help verify the value and veracity of the vendor.
4. Supplier performance management
Visual-rich reports provide a comprehensive 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
A VMS and its embedded dashboards make it 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
With spend management built into your vendor management software, organizations can capture and manage all spend categories 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
If you use several procurement solutions, you’ll likely want to integrate them into your vendor management system. With API integration, you can improve the speed, productivity, and performance of your purchasing process from requisitions to payments with integrations for your ERP, accounting systems, and external supplier databases.
Vendor management systems save procurement teams time and cost
Vendor management systems offer functionality that helps businesses get maximum value out of their vendor 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.
Vendr is 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 processes.