Why Your Business Needs  A Vendor Management System

Content

• What is a vendor management system?
• What are vendor management system requirements?
• Vendor Portal
• Vendor Questionnaire
• Vendor Scorecard
• Vendor Contract Management
• What are the benefits of a vendor management system?
• Vendor Compliance Management
• Vendor Risk Management
• Vendor Relationship Management
• Conclusion

Suppliers and vendors undoubtedly play a significant role in your company. As demand for goods, services, and contract workers rises, more and more businesses are beginning to rely on an outside workforce. These vendors and suppliers span across geographies, spreadsheets, folders, and multiple platforms. Locating vendors, onboarding them, and keeping track of their deliverables, performance, and compliance can be an uphill battle for any scaling organization.

It may result in poor vendor performance, missed opportunities, hampered daily operations, and lack of visibility. Organizations, therefore, require a comprehensive and organized approach to vendors or suppliers.  That’s where vendor management systems come in. They serve as the central point of optimization for all vendor-related tasks and data in an enterprise.  

What is a vendor management system?

A vendor management system or software centralizes and automates all the activities related to external suppliers, vendors, and service providers. It manages all aspects of an external workforce, from supplier selection to onboarding to performance tracking. It makes it easier for stakeholders to access pertinent information with a single view of supplier data, documents, finances, payments, and obligations.

Any organization that works closely with suppliers or employees from the outside, such as freight, healthcare, transportation, and retail industries, must have a vendor management system. As businesses, supply chains challenges, and workforces expand, a structured vendor management system ensures that all processes and involved parties stay on track. It enables the procurement teams to guarantee desired results from their vendors and foster long-lasting relationships.

What are vendor management system requirements?

When businesses deal with vendors or external workforce, they have an array of tasks and processes to go through throughout the business relationships. From initial contact to onboarding to reviewing performance and payments, the procurement team must maintain constant visibility and action. While the specifics of a vendor management system should reflect the unique needs of the industry, here are a few requirements for every business needs: 

• Vendor Portal

A vendor portal is an interface available through a vendor management system that allows a company to communicate and collaborate with its vendors or suppliers. It acts as a centralized hub for vendors to access relevant information, submit required documentation, and conduct various transactions with the company. It enables the procurement team and vendors to remain on the same page regarding pertinent data and tasks. Vendor portals help the supply chain operate more effectively, transparently, and collaboratively. This real-time collaboration reduces delays and enhances collaboration on projects, orders, and other activities.

It allows suppliers or vendors to sign up for an account on the portal, add their details, and upload any required paperwork. Self-service portals provide companies respite from manual data entry and human errors. It enables vendors to keep track of their business relationships, order history, and payment details. On the other hand, the organization operating the portal can track the same data across multiple suppliers, finding opportunities and improvements in the supply chain. 

• Vendor Questionnaire

Questionnaires are used in a vendor management system to conduct surveys and polls. It can gather statistical information or additional documents from vendors, suppliers, and external workforce associated with the company. Businesses can obtain feedback and opinions from a range of parties by sharing a well-crafted questionnaire with them. It promotes efficiency and accuracy in the procurement process.

It also helps businesses manage risks associated with suppliers by gathering data on their financial stability, security measures, compliance strategies, and quality standards. Thus, the procurement team can make well-informed and data-driven decisions while choosing viable suppliers. Most vendor management systems offer questionnaires with customizability and due date options. As a result, companies can guarantee prospective parties answer questions they want within their set deadline. It standardizes vendor selection across the organization. All the collected data is safe and accessible within a centralized platform. So, there’s no scope for missing pertinent information or files during the process.

• Vendor Scorecard

Vendor management systems offer scorecards to assess and gauge the performance of their suppliers, vendors, or service providers. These scorecards provide a systematic and structured way to evaluate various aspects of a vendor's performance. The users can create scorecards by including parameters relevant to their business and assigning scores to parties. 

Organizations can evaluate a host of factors to assess vendor performance, including pricing, dependability, and the quality of the products and services. While this is possible through spreadsheets, vendor management systems can help automate the gathering and analysis of the results. Expanding businesses with complex vendor relationships can make use of scorecards to keep track of suppliers and the external workforce. It provides actionable insight into the selection process and identifies areas of improvement. As a result, businesses will not have to select or renew expensive vendor contracts. 

• Vendor Contract Management

Another significant aspect of the vendor management process is contracts.  Companies need valuable and capable legal agreements before they can onboard vendors. Drafting, negotiating, approving, and delivering contracts to vendors or suppliers can be challenging when vendor and contract management takes place across multiple departments and platforms. That’s why every company can benefit from having a vendor management system that can handle contracts. 

All of this is made possible by Dock 365's vendor add-on for their contract management software. It offers a centralized platform to store vendor and contract data. Businesses can access vendor contracts, questionnaires, portals, and scorecards all within one system. It enables users to utilize contractual agreements and data to assess vendor performance. As a result, companies can easily onboard viable vendors and external workforce without switching platforms.

What are the benefits of a vendor management system?

Implementing a vendor management system can streamline the entire procurement process for businesses. They can centralize all the vendor-related activities and data to ensure consistency and accuracy across the organization. It improves their chances of making the most out of vendor relationships. They can instill a standardized process for selecting, onboarding, and managing vendors and suppliers across the organization. Here are some of the advantages of the vendor management system: 

• Vendor Compliance Management

Securing their adherence to contractual, legal, and industrial standards is a top priority when businesses work with external employees and vendors.  The vendor management system culminates the whole vendor data in a single place to make it easy for organizations to establish compliance. It helps users to ensure that vendors and suppliers meet performance metrics, delivery schedules, and other contractual obligations.

Organizations often have internal policies and guidelines that vendors must follow. Vendor scorecards and questionnaires help enforce adherence to these policies, covering data security, ethical practices, and corporate social responsibility. Vendor compliance management also includes certificates, licenses, and audit reports. The vendor portal enables organizations to ensure timely submission of necessary documents and facilitates easy access during audits or inspections.

• Vendor Risk Management

Over forty percent of an organization's personnel, suppliers, and service providers are outside parties. Businesses must take extra precautions to manage the risk involved with their extreme dependence on third parties. A vendor management system offers an array of tools and techniques to mitigate vendor risks. Organizations can quickly identify operational challenges, compliance problems, and financial instability using comprehensive scorecards.

 By identifying risks early in the vendor relationship, organizations can take proactive measures to mitigate them and prevent potential disruptions to their operations. VRM provides organizations with valuable insights into the risks associated with different vendors. This information informs strategic decision-making, helping organizations choose vendors that align with their risk tolerance and business objectives.

• Vendor Relationship Management

Vendor management systems contribute to the overall efficiency and success of an organization's interactions with its external suppliers, vendors, and service providers. They provide a centralized platform for the companies to communicate and collaborate with their parties. By automating documentation collection, verification, and compliance checks through VMS, organizations can accelerate the time it takes to bring in new vendors. 

The system automates various vendor-related workflows, including invoicing, payment processing, and contract management. This automation reduces manual effort, minimizes errors, and enhances overall operational efficiency. The self-service portal enables suppliers and external employees to participate in the vendor management process. They can oversee the lifecycle, order history, payment status, and obligation management. It empowers parties to cultivate a relationship that benefits them both. 

Conclusion

A Vendor Management System is a pivotal tool for organizations seeking to optimize their relationships with external suppliers, vendors, and service providers. The multifaceted benefits of a well-implemented VMS extend across various facets of procurement, vendor contract management, and vendor collaboration. As businesses evolve, the scalability of VMS solutions ensures adaptability to changing needs and the efficient management of an expanding network of vendors.

The centralization of vendor-related information, the automation of workflows, and constant performance monitoring can go a long way in streamlining your vendor management process. Schedule a live demo today to learn how Dock 365 contract management software with the added benefit of a vendor management system can transform your business.