What are vendor management systems, and how do you choose the best one?

What is a vendor management system?

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A vendor relationship management system, or VMS, is a specialized tool or software solution that conducts a multi-stage process to build and manage relationships with third-party suppliers of products or services for your business. 

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The vendor management system consists of the following - 

• Getting the right supplier, 
• Onboarding them
• Tracking deliveries with invoices
• Making timely payments
• Reconciling them accurately
• Handling document management
• Minimizing risks
• Ensuring shipment delivery

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A unique set of vendors can only fulfill a business's unique needs. For example, a bakery's vendors would be wholesale food suppliers, local farmers, or produce suppliers for fresh herbs. 

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Handling vendors can be a complicated process involving multiple stakeholders. Hence, most businesses use automated business processes and tools like Spendflo to manage vendors easily.

Why do you need a vendor management system?

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As your business grows and expands, so will your list of suppliers. This is because you will have increased production, expansion to new markets, and new product or service lines. Now, handling each of the suppliers manually would be time-consuming. 

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Implementing an enterprise platform like a vendor management system (VMS) is ideal for managing and tracking everything in one place. By using VMS, your business or entire organization can receive advantages like -

• Minimized spending on goods, services, or materials
• Automated accounts payable service
• Better supplier compliance 
• Tracking any order, reorder, or renewal of goods
• Bring all the suppliers to one place and program for better management
• Better and informed decision-making

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Top Benefits of VMS

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The benefits of having a vendor management system include better access to choose, onboard, and manage suppliers that you can depend on. This aids in helping your business operate better and achieve supply chain sustainability as well.

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Here are the top benefits that you can expect for your business -

Automate processes

This is extremely important as automated processes can help manage projects, sourcing, onboarding, and invoicing. Additionally, automated workflows and data validation can help you onboard suppliers faster. A good VMS solution will simplify managing all paperwork, handling expenses, and replying to new opportunities. It also helps gather information on the organization's external talent so that you know whether the certification is valid for the contingent workers. 

Maintain vendor master data

Maintaining accurate and current vendor master data is important for effective vendor management. Vendor master data will contain all information about your suppliers, such as contact details, payment terms, and tax IDs. The best vendor management software allows vendors to manage their information. This can keep your vendor master data current and updated. 

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Have mobility into payment processes

A vendor management solution will help you track time and everything related to payment and expenses from your mobile. These solutions are designed to integrate with current payment processing or time-tracking systems, which means an efficient way to eliminate manual work.

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Compliance is no longer an issue

A company has various obstacles to address every day, sometimes including its compliance issues. A VMS helps mitigate risk by maintaining all information in one place, creating important reminders such as tenure notice or licensing requirements, handling relevant approvals, and much more.

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Optimized onboarding & flexible workforce

High-skilled contingent workers usually choose businesses that are easy to work with and have a reliable onboarding process. A clearly defined process can hugely impact the worker's experience and provide a smooth path for productivity in the future. Additionally, to create a more strategic workforce for the long term, the VMS system can help by assessing the ideal external workers that match the designated role and then sharing the best way to source it. Such an ecosystem of solutions is increasingly essential for the business to flourish. A well-defined vendor management framework can be powerful for driving spending toward your preferred suppliers.

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More visibility

Lack of visibility can be one of the biggest roadblocks to vendor information management. After implementing the vendor management process, the user can easily have a bird' s-eye view of what's happening, resulting in greater visibility into detailed information about the existing vendors. This also provides information about the location of the external workforce and how they're contributing to the business. As a result, this eliminates the need for a single-source dependency while reducing risk and fraudulent activity.
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Important features of VMS
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Tailored and centralized database

When choosing the right vendor management tool, one key feature to keep in your checklist is a customizable vendor database for productive management. This will enable your business to choose the fields in the database that are specific to your requirements. This feature helps businesses eliminate redundant data, speed up data entry, and maintain improved accuracy. 
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Effective contract management

A contract management cycle is essential for any business, and a vendor management system can solve it. The features available help you manage vendor contracts effectively while minimizing overall compliance issues.

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Your vendor management tool's features include the ability to provide e-sign, contract reminders, contract negotiation, and notifications to ensure accuracy. Look out for the capability to use custom and pre-defined templates to make drafting contracts faster. However, you need to ensure they adhere to industry-specific regulations as well. 

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Timely alerts about future renewals, deadlines, or compliance are crucial to stay ahead of time. Effective contract management means having a repository where every contract document is stored safely. 
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Seamless and automated onboarding

Onboarding is an important feature when choosing a vendor management tool. It enables a seamless transition for contingent workers and has an easy-to-use interface that can lessen the learning curve for new users. Also, ensure an automated onboarding option is available for the platform, as it can quickly set up new vendors for success.

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Hence, checking for vendor management systems with intuitive design and minimal training for rapid integration is essential. Some companies will provide you with hands-on webinars or interactive workshops to familiarize independent contractors with the tool. 

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A responsive live chat and email support system during software adoption is also essential. The ideal vendor management system will offer most of these for a great onboarding experience. 

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User-friendly intuitive interface

A visually appealing, intuitive design can make it easier for users to navigate the platform smoothly. Clear and organized layouts in the interface are also encouraged, as these elements are important for user satisfaction and ensure users can access critical day-to-day functionalities without any hassle. Personalized options can also improve overall experience and user efficiency to a greater extent.

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Reporting and data analysis

You must consider these two essential features for a vendor management system. These key features will help you access the insights you need to ensure overall managed service providers performance and management. Some of the salient features are - 

• Ability to create timely custom reports that address your business. 
• Predictive analytics utilizes machine learning to predict future contingent labor workforce performance by analyzing the current data sets.
• Access to real-time data enables informed decision-making according to the updated information on the platform.
• Ease of integration with your existing tech stack to make it easier to collect data from everywhere to one place.

Data visualization tools like charts and graphs to understand complicated data patterns.

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Now let's take a look at the numerous benefits -

• A solid reporting and analytics system means having clear visibility into your overall vendor management system. This helps you recognize areas for improvement and streamline the processes accordingly.
• A reporting and analytics system ensures complete visibility into whether vendor management processes comply with the latest standards and regulations.
• Real-time data and predictive analytics enable informed and better decision-making for business.
• The reporting provides detailed information about the inefficiencies and improvement areas that need cost control.

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Supplier performance management

Timely reports will provide insight into your vendors' performance, regulatory compliance requirements, and service downtime. You can also measure performance data against your KPIs (Key performance indicators) to ensure suppliers are meeting expectations. This helps everyone stay aligned while communicating contractual obligations easily.

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How to choose the best VMS

Set goals for the tool

Before selecting a vendor management system, it is crucial to understand why you need one in the first place. After you recognize the pain points you need to address for business, your research for the right tool will be directed in this direction. This knowledge will equip you to measure each VMS solution's capability to meet your objectives.

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Evaluate your existing system

Once you are clear about your objectives or goals, look at what you have currently available for techstack. Knowing this is important as you'll understand what AP automation will fit into the enormous tech stack, expediting the approval process. By this point, you should be asking questions like -

• What approval workflows exist for tasks like invoice approval or vendor payments? 
• What are our go-to methods for accessing, editing, and using invoice data?
• Do we have a system for the procure-to-pay process? If yes, is it aligned with our current operations?

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Integration potential

Your chosen vendor management system should be compatible with your current tech stack to ensure a seamless transition without hampering the organization's data. The first step is to consult with your IT team to look into the solutions you're considering and ensure they are reliable. Ask whether there will be any information regarding the application programming interfaces (APIs) that you need to ask the sellers. Your IT team might help you with questionnaires to use while interviewing the sellers or vendors. The next step is to connect with your compliance department to assess whether these vendors adhere to company data safety and established criteria.

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Based on all this information, shortlist at least three solutions that perfectly align with your business goals. Always look for a solution with a flexible and extended workforce platform, top-notch security to deal with confidential data or payment processing, and many integration options.

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Prepare for VMS demos

After shortlisting the suppliers you want to consider, ensure a demo is set up with each. During the demo, focus on your unique requirements from a VMS and whether that supplier is meeting them. Have a list of questions ready to feel confident enough during the decision-making. You can also request IT and compliance members to join the demo session to ensure every aspect is covered. At the start of the session, remind the sales rep about the business goals and pain points to ensure a productive meeting.

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How Spendflo Vendor Management helps you centralize your contracts and streamline the procurement process
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Still, using a complicated vendor management process? Now, you can simplify the process with Spendflo.

Here's how Spendflo can help you -

• All your vendor data in one place—Consolidate all your contracts centrally. Track all contract-related details for each of your contract labor. Monitor upcoming renewals and get alerted on any changes in their security position.
• Receive timely reminders about your upcoming renewals - Get notifications for all upcoming renewals. Track current usage, estimate license requirements, and get the maximum ROI on your renewal contracts. With timely reminders, ensure none of your renewals slip through the cracks.
• Now AI to turn around contracts faster - Spendflo’s AI-powered contract management enables you to generate contract data and save time by automatically extracting contract data.

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Whether you're starting your own business or already have one, your vendors play a crucial role. Because they ensure you're able to achieve that profit goal. Here, the importance of effectively managing your relationships with them lies. To receive the best value, you must establish a solid vendor management system to manage everything smoothly.

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Want a quick estimate of how much you can save? Get a free cost savings analysis with us today!
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Frequently asked questions about the vendor management system
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What is an example of a vendor management system?

Spendflo is a popular SaaS vendor management system. It enables organizations to optimize vendor onboarding, handle contracts, track performance, and automate timely payments, leading to more efficient and successful vendor relationships.

What are the benefits of utilizing a vendor management system?

A vendor management system helps businesses by initiating process automation, removing any need for manual data entry, timely approvals, reducing risk, improving regulatory compliance, and much more.

How does Spendflo help you manage vendor relations and save time effectively?

We at Spendflo understand the importance of building and maintaining solid vendor relationships. A lot of time and effort goes into this, and that's why our team acts as an extension of your company. We provide the resources you need for efficient contingent workforce management while optimizing expenses. We do all of these by taking the time to understand your business goals, vendor ecosystem truly, and IT roadmap to fully align our efforts. Our expert team also helps you create a strategic VRM framework that addresses your unique business needs.
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Finally, we provide your business with ongoing support in maintaining vendor communication, relationship building, performance evaluation and monitoring, and handling issues.

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Uncomplicate the vendor management with Spendflo now!