Although cybersecurity has been named a top concern for companies in 2024, third-party risk has not been the top priority for investment. But companies that fail to protect their supply chain risk data breaches, as happened in the SolarWinds attack of 2020. SolarWinds was a vendor for 14% of Fortune500 organizations, so this attack affected the security of countless partners. Vendor management systems help businesses control the risks, and improve their Procure-to-Pay efficiency. Read on to learn more about VMS and how to choose between all existing solutions.
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Vendor management systems in a few words
Vendor management systems enable companies to create a one-stop shop for all of their suppliers. They are typically presented as online software platforms. A vendor management system (VMS) facilitates relationships with new merchants and empowers businesses to maintain these partnerships.
Here are some examples of the capabilities of good vendor management systems:
- Record-keeping: VMS’ should hold documents on the contact details of the company and individual staff members you deal with, bank details, company address, and more
- Contract negotiations and storage: Keep your contract negotiations within the system, improve relationships and store signed contracts under encrypted, secure conditions
- Supplier comparison and selection: Select suppliers based on a dashboard of comparative features, such as risk, cost, and capabilities
- Risk assessment and mitigation: Onboard your vendors with ease when the risk assessment is contingent on, and integrated into your vendor management system
- Performance management: Access statistics based on your workforce performance, spend,ing and service goals, and read vendors in so that they can build towards your cause, with you
- Invoice processing and payment: Enable suppliers to send their invoices through the software, and manage automated payments to business partners
Vendor management systems are not all made equal. They vary in features, user-friendliness, and cost, to name a few. Therefore, choosing a vendor management system that works for your unique business needs is the most important. It all depends on the size, structure, and process specificities of your company.
Why is it important to have a vendor management system?
Good vendors and management systems can be the difference between making – and breaking – a company’s operational efficiency.
Reduce the risk of fraud
A good VMS can ensure your overall business security, because you’ll get access to real-time data management that can be verified instantaneously, and automatically. Coupling this with the ability to see and assess risks enables organizations to better protect their services from attackers.
For every supplier that a business partners with, at least one potential weak point can be found. However, vendor management systems plug these vulnerabilities through automated third-party controls. Moreover, businesses must follow security regulations for compliance purposes – and VMS’ can support this process. Learn more about supplier compliance in this article.
Optimize your p2p cycle
A VMS enables companies to optimize their procurement cycles. Know exactly when your inventory is running low, and take advantage of automated notifications when new orders are required. Use the vendor tools to purchase products quickly and on time, and take advantage of invoice services within the system.
Moreover, vendor management systems enable businesses to measure the performances of their third parties, such as delivery timelines. This can inform the strategy for any improvements, and help companies to shorten their P2P cycle.
Maximize your resources
One of the major benefits of a VMS is reduced waste of resources. Although you can negotiate prices without a VMS, the system makes it easy to display the negotiated prices and compare approved vendors. By choosing a supplier straight from the dashboard, your money can be invested into the lowest-cost goods without employees having to check back and forth on email threads.
Additionally, your employees can focus their time and energy elsewhere, and management can rest easy knowing that they’re not paying people to rehash old deals. Using a vendor management system can therefore reduce maverick spending too, since colleagues’ communications are traceable, holding them accountable.
What features should you look for in a VMS?
When comparing different vendor management software, it’s important to consider the following features:
- Support and training
- Metric tracking and reporting
- Integration capabilities
- Onboarding flows
Support and training
As with any new software, it’s imperative to get up and running quickly so that you can make the first order. But vendor management systems can be nuanced and complicated – largely due to the numerous customization features available. While this is a positive, it can lead to a longer training period to become acquainted with the software.
When choosing a VMS, consider the support offered by the software provider. Some offer one-to-one training sessions, 24/7 support, and even in-house visits to train your staff. Alternatively, if you have a smaller procurement function, perhaps this level of training isn’t so valuable for you.
Metric tracking and reporting
One of the most impactful benefits of a VMS is the ability to track specific metrics. In particular, vendor performance measures including order processing time, delivery time, and number of errors are important.
When evaluating vendor management systems, check the capabilities and processes available. It could be a good idea to see if the salesperson can walk you through setting up metric tracking during your product demo, too.
Integration capabilities
Integrations are often a highly overlooked feature for vendor management systems but play a huge role in vendor security. For example, Trustpair integrates with VMS like JAGGAER, Ivuala, SAP, and more to add an extra layer of security in payment fraud prevention to these solutions. Our platform automatically monitors vendor data throughout the supplier lifecycle and detects any anomaly or suspicious change. We ensure you’re always paying the right supplier, safeguarding business relationships, and improving supplier management.
However, integrations are not just possible for security reasons, they can also increase the functionality of your software, such as:
- Increased data points for more accurate forecasting
- AI capabilities to increase automation
- Third-party onboarding of customers via marketplaces
- Contract integration to sign and store in-platform
At the start of a VMS journey, many organizations are unclear on the potential of their expansion. Therefore, it’s worth covering all bases by opting for a system that can integrate with a wide range of secondary platforms to save on investing in a VMS that doesn’t fit your company later down the line.
Onboarding flows
Vendor management systems should make it easy to onboard new merchants into your supply chain and adapt to the specific needs and processes of your business. After all, that’s the whole point!
But the process is not quite so easy. In particular, different VMSs have varying due diligence practices, which can cause havoc for compliance teams. Therefore, it’s important to check that vendor management systems fulfill the regulatory requirements that your company must comply with. Moreover, learn how to get the most out of the software for your particular business scenario.
Learn more about modern vendor risks and best practices for vendor onboarding in our latest white paper!
Here’s a recap:
Vendor management systems help companies control third-party risks and improve efficiency. Consider onboarding flows, integration capabilities, metrics, and support before you sign up for a VMS. Improve supply chain security by integrating your VMS with the Trustpair solution, to prevent payment fraud and know your supplier. Our best-in-class platform secures all stages of the supplier lifecycle – from sourcing to onboarding and invoice payments – thanks to features like ongoing vendor data verification.
