Vendor management software is a tool that help eCommerce business owners manage vendors. Nearly all businesses engage with suppliers, and if you're handling orders, invoices, contracts, delivery, and payments, having a vendor management system can make your life easier.
Key Takeaway: By automating tasks and providing real-time dashboards, vendor management software can help you enhance productivity, cut down on errors, and optimize business process flows. Staying on top of your vendor management best practices is only possible with a robust vendor management system.
There are numerous vendor management software solutions available. So, how do you choose the right one? This article examines the features to look out for when selecting the best vendor management system.
Let's get the ball rolling with the basics before diving into the specifics of a vendor management system, its features, and its advantages.
What is Vendor Management Software?
A vendor management system is a software platform created to assist companies in establishing relationships with suppliers, acquiring supplies, and processing payments. The tool is also used to facilitate vendor or supplier communication and manage the entire vendor process and relationships smoothly - all from a single application.
This often begins with the screening process, which involves signing contracts and NDAs, doing drug tests, and procurement of the goods or services. It also entails working together and communicating throughout the vendor lifecycle, creating invoice templates, invoice processing, invoice management, and finishing with the payment process.
In order to ensure transparency in the interactions between businesses and their vendors,vendor management software aids businesses in planning and communicating with them. A vendor management system (VMS) is a software program that streamlines the process of managing vendor relationships from the beginning of a contract through its completion.
5 Features to Look for in a Vendor Management Solution
What should you look for when selecting a vendor management system? Let’s find out.
- Vendor Onboarding
A vendor management software makes it easy to onboard vendors. You only need to link invoice vs purchase orders to an existing vendor if your software has address book functionality. The system can also store all payment details and records of prior transactions.
When all the information is available (including any potential automated payments in the future), tracing payments to a single vendor is no longer difficult. This expands the vendor network for cost-benefit analyses as well.
- Vendor Lifecycle Management
Vendor management is a process that continuously evaluates the risks that a third-party vendor and its subcontractors provide to a business and offers tools to monitor and reduce such risks. It guarantees that vendor risk exposure is in line with the risk tolerance of an organization. Every stage of the vendor management life cycle is managed by it.
A vendor management software program should:
- Filter vendors: Vendor management tools should help you determine which ones offer the greatest risk to your business. After that, categorizing merchants should be made easier.
- Manage risks: Vendor management software should assist in risk assessments by offering a quantitative method of quantifying both inherent and residual risk.
- Review policies and procedures: Vendor management software should offer tools to make sure no step is missed. Processes for guaranteeing the reliability of risk controls are part of the vendor management lifecycle.
- Prepare for audits: Every step of the vendor management process should be simple to follow using vendor management software, from strategic discussions about outsourcing to signed contracts to ongoing due diligence.
There is a considerable difference between being comprehensive and being redundant when it comes to vendor management. In order to effectively monitor vendors, many departments must work together.
The process of collaborating with other systems and vendors is improved and promoted through a cloud-based vendor management platform. Monitoring and analyzing the performance of vendors is made simple by the ease of collaboration with other departments.
- Vendor Assessment
Choose a vendor management software solution that will enable your business to monitor vendors with little effort. The software should be able to do the following:
- Gather documentation: One of the most time-consuming aspects of vendor management is document management. A solution that will collect and store this influx of documents is necessary for an ecommerce business with numerous vendors.
- Examine reports: Vendor reports are not documents gathered merely for presentation. When conducting vendor management due diligence, a vendor management software can help to examine reports.
- Provide ongoing monitoring and risk assessment: A vendor management software system must offer continual monitoring, whether it's through vendor reports or legal actions, to make sure your due diligence activities are informed.
- Offers Simple Execution
Vendor management software should not increase the workload of an already overworked team; rather, it should simplify and streamline vendor management. Look for a vendor management system that can assist with:
- Simple integration into current processes: Your chosen vendor management system should be compatible with your current infrastructure. It should be simple to configure and personalize.
- Training and support: There will always be a learning curve during adoption, regardless of how fantastic a vendor management software system is.
Types of Vendor Management Systems
There are various types of vendor management systems, and each has pluses and minuses. The most typical varieties are listed below:
- Supplier Onboarding: The process of getting vendors incorporated into your business operations and basic business process flow chart.
- Relationship Management: Establishing and sustaining positive vendor relationships.
- Vendor Risk Management: Identifying, preventing, and controlling risks related to vendors.
- Financial Manageement: Managing vendor billings, invoice management, and payment processing.
- Performance Management: Keeping a vendor scorecard and measuring performance based on pre-set eCommerce KPIs and goals.
- SLA Management: Keeping track of SLAs and violations.
- Vendor Contract Management: Managing vendor contracts, contract amendments and renewal, obligations, and termination of contracts.
- Compliance: Establishing compliance and standards that vendors must follow.
5 Reasons You Need a Vendor Management System
Why, exactly, do you need a vendor management system? It’s only logical that we state the obvious:
- Boost Productivity and Shorten Process Life Cycles
You can track and measure performance against the contractual Service Level Agreements (SLAs) and Key Performance Indicators (KPIs) after setting up your vendor management system and adding your suppliers to make sure your vendors are adhering to your predetermined standards. By doing this, you can make sure that everything is running smoothly and find any irregularities that might need to be fixed.
- Obtain Measurable Results and Advanced Reporting
A vendor management system maintains all vendor transaction data in a single, cloud-based solution. You can use the system’s data analysis feature to convert vendor data into quantifiable results.
Your company can more easily identify future opportunities and demands for contract management. A VMS can help your analytics team uncover new markets, products, and even possible initiatives to expand with your most dependable and valuable suppliers.
- Cut Back on Operational Costs
Your company benefits from using a VMS by cutting operational costs in a variety of ways. For instance, a VMS manages your vendor payment system efficiently and may rapidly identify any inconsistencies with regard to overtime and inflated pay rates. You can easily identify hidden costs that you can reduce or appropriately manage thanks to the additional visibility a VMS provides.
You can also use this system to acquire tools that can assist you avoid paying more for hiring and training. As a result, your firm will be able to make better contract and onboarding decisions.
Manage and track your multiple vendors and streamline the entire procurement process. Download our free easy-to-use Wholesale Vendor Management Spreadsheet Templates.
- Keep Corporate Compliance
Employing the appropriate contracts, insurance, onboarding procedures, and payment structures can help businesses stay in compliance with regional and national laws. A vendor management system improves your company and reduces risks by:
- Keeping all of your data in one system to produce audit trails
- Utilizing significant reminders, such as a requirement for a license course, tenure notices, or legal changes
- Putting mechanisms in place for pertinent approvals
- Formalizing and streamlining a closed system to get rid of rogue spending and invoice fraud
- Including all vendors in your system will improve strategic planning for challenges relating to common compliance.
- Using single-entry points for all of your locations and business units to prevent inaccurate or inconsistent outcomes
- Verifying that all necessary paperwork has been completed, stored, and tracked inside the platform
- Streamline the Onboarding Process for Vendors
In order to better manage the hiring and onboarding of your vendors you need to implement a robust and effective vendor management system that works to benchmark pricing for people with particular skill and experience criteria.
With a supplier management system, you can efficiently gather all pertinent vendor information, such as bank information, capability information, regulatory data, and capacity details to input into the system quickly and accurately for approval. The procurement process moves more quickly when vendors are on board, and you can start establishing a partnership with them sooner.
Frequently Asked Questions About Vendor Management Software
Here are some questions about vendor management software.
What are Vendor Management Techniques?
The following are some vendor management techniques:
- Implement a transparent vendor management policy.
- Select the best suppliers for your company.
- Manage and cultivate your vendor relationships proactively.
- Observe and record vendor spending.
- Check the performance of the vendor.
What are the 7 Stages of Procurement?
The seven stages of procurement are:
- Needs Recognition.
- Purchase Requisition.
- Requisition review.
- Solicitation process.
- Evaluation and contract.
- Order management.
- Invoice approvals and disputes.
- Record Keeping.
What are the Types of Vendor?
The five different categories of vendors include producers, distributors, retailers, service and maintenance companies, independent vendors, and trade show representatives.
Making Things Easier With BlueCart
Vendor payouts are a breeze thanks to BlueCart's payment processing features. The platform can handle a wide range of B2B payment transactions. Your invoices will be more organized if you choose BlueCart's payment automation.
With BlueCart's payment processing software, whether you use ACH payments or accept payments online, recurring payments and automated billing payments to vendors become simpler. You can interact with suppliers who give sizable discounts for on-time payments and invoice closes through the extensive supplier network and B2B wholesale marketplace.
The additional advantage of automation is that all transactions are safe, increasing confidence between the buyer and seller. With all invoice and receipt data digitally combined into a single, transparent database, compliance for both businesses is no longer difficult.
By integrating with Quickbooks, you can maintain all of your data on one platform, saving you time and making your life simpler. The rapid and accurate payments continue to make the vendors pleased.