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Vendor Management Software
81 Softwares | Last updated: Oct 22, 2021

Vendor Management Software

Businesses need to deal with several vendors that can include raw material providers, transportation & shipping service providers. Finding the right vendors that can provide quality products and services, and maintaining the best relationship with them is extremely important for the business's growth. In that case, having a streamlined vendor management process is required, and several companies these days use vendor management software.

What Is Vendor Management Software?

A vendor management system can help you streamline the vendor acquisition process, communicate and collaborate with the vendors, evaluate their performance, and manage relationships with them. Some key features of vendor management tools include vendor database management, activity and communication log manager, payment integration, a self-service portal, and performance metrics.

How to Select the Best Vendor Management Software?

Finding the vendor management tool that suits your business can be a challenging task. GoodFirms has come up with an intricately curated list of vendor management software with their detailed information and authentic customer reviews, that can help you pick the best vendor management solution.

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Buyer’s Guide

Table of Content

Introduction to buyer’s guide for Vendor Management Software
What is Vendor Management?
What are the benefits of Vendor Management?
How has Vendor Management evolved?
What are the different types of Vendor Management?
What are the processes involved in Vendor Management?
What are the risks associated with poor Vendor Management?
What are the key factors that can help reduce vendor risk?
What are the common challenges in managing vendors manually?
Can technology help in creating and implementing a Vendor Management Program effectively?
What is Vendor Management Software?
How can Vendor Management Software assist companies to work better?
What are the essential features to look for in a Vendor Management Software?
How will technology augment Vendor Management Software in the future?
What is the average cost of buying a Vendor Management Software system?
Why refer to GoodFirms’ list of top Vendor Management Software?

Introduction to buyer’s guide for Vendor Management Software

A successful business relies on how efficiently the business owner is managing the enterprise resources. It is a key factor in deciding the business strategies and reducing the operational cost. These resources could belong to the organization itself or drawn from the third-party service provider. If the resources are used through a third party vendor, then it requires due diligence. It is imperative to have a positive relationship with your vendors as this can be beneficial both for your company and your customers.

An efficient vendor management starts right from identifying the best suitable vendors, obtaining pricing information, managing relationships, gauging the quality of work, evaluating performance, and ensuring that the payments are always made on time.

The only way to achieve these goals while working with third-party vendors is to equip the organization with reliable and secure third-party vendor management services or programs.

In this buyer guide, the readers will identify the important attributes for a vendor-client smooth transition and learn the best approach to mitigate their vendor management issues.

What is Vendor Management?

The vendor management is the process where an organization takes appropriate measures for controlling cost, ensuring excellent service deliverability, reducing potential risks related to vendors, and deriving value from vendors in the long-run. Vendor management is the system of coordinating the entire vendor relationship. It plays a significant role when it comes to selecting the right vendor for a particular business need.

What are the benefits of Vendor Management?

Better contract management: Vendor management involves drafting the contract terms and agreement with all the details like who is authorized to sign, how customer information is protected, how the contract gets terminated, etc.
Cost-saving: The vendor manager can negotiate with third-party vendors and saves the cost of various services.
Better vendor relationship: Vendor managers ensure that there is no conflict between the organization and vendors.
Improves vendor performance: Vendor managers ensure that vendors deliver high-quality and cost-effective service.
Reduce the risk of business disruption: Identifying third-party risks and meeting regulatory compliance.

How has Vendor Management evolved?

In the early ’90s, when companies were outsourcing the jobs and expanding their business worldwide, a Ford subsidiary called Geometric Results, Inc. (GRI) realized the opportunity for a vendor management system. As a result, GRI developed a manual vendor management system called PeopleNet, and it was only in 1995 it got automated. GRI developed one of the first significant VMS applications in the industry.

Later in 1997, the GRI was bought by MSXI. MSXI launched the Internet-based software b2bBuyer. MSXI created a web app called TechCentral for the Delphi Corp. In 2006, the Bartech Corp. began operating the Delphi VMS and continues to do so, now using SAP’s Fieldglass VMS tools. With the rise in the demand for VMS tools, more companies entered the vendor management market.

What are the different types of Vendor Management?

Procurement management
Relationship management
Vendor risk management
Performance management
Contract management
Compliance management

What are the processes involved in Vendor Management?

Step 1) Define needs or goals: Define your goals and expectations from vendors for the business process.

Step 2) Rules of engagement for vendors: Create ethics/rules of engagement for all vendors. The rules of engagement are a set of rules and obligations for how a given vendor shall engage with a business organization. It mentions what is permissible and what is not, specific actions the supplier shall carry out, and things they will refrain from doing.

Step 3) Bidding for vendors: Search and send bids for vendors. The business sort vendors and send their requirements. All vendors receive identical copies of bid documents and any subsequent changes.

Step 4) Selecting vendors: Select vendors based on your criteria and budget.

Step 5) Signing contract: Define contract terms and time frame. The signed contract is proof that the vendor has agreed to the terms and policies of the agreement.

Step 6) Monitoring performance: This step involves monitoring the vendor’s performance and relationship.

Step 7) Terminating or Renewing the contract: End of contract or renewal.

What are the risks associated with poor Vendor Management?

Poor vendor selection: A poor vendor management may not give a clear view of vendor service quality, and the organization may face a loss.
Bad Contract: The organization may be at risk when they sign a contract with a vendor without looking into contract agreement and compliance. Poor vendor management often leads to a bad contract.
Cyber attacks: When a third-party has access to your internal process, there is always a risk of a cyber attack. The hackers may find and target the loophole between organization application and vendors’ access points.
Financial loss: The risk of financial loss always remains when a company hires an in-appropriate vendor.
Reputation: If the third-party vendor is a fraud, it may even spoil the organization's reputation where it offers its services.
Poor client-vendor relationship: A poor vendor management has its own bad effects on the growth of the business. A healthy client-vendor relationship is a fundamental requirement for any business.

What are the key factors that can help reduce vendor risk?

Implement vendor risk management maturity model: VRMMM analyzes third-party risk programs against a set of best practices and industry benchmarks.
Thorough Auditing: The vendors should be regularly monitored and audited to ensure regulatory compliance is maintained throughout the term of service. Make sure the contracts mention the "right to audit" and also cross-verify what security controls and requirements the third-party vendor has in place.
Security clearance and regulatory compliance: Verify if the vendors have the security clearance or regulatory compliance to avail their services.
Define monitoring criteria: The company should be clear on their vendor’s monitoring preferences like when to monitor, how reviews and feedback can be conducted and how risk exposures can be detected and mitigated.
Segment vendors as per risk potential: Segment vendors by potential risks and try to mitigate those risks first that are above the organization’s appetite. The client can even prepare a checklist to check the vendor’s authenticity like a financial statement, liability insurance, and so on. This strategy is even helpful in the future to identify potential risks.
Contingency plan: The client should be ready with the contingency plan if data-breach occurs or a third-party vendor violates the guidelines.
Review the contract terms and policies: Review the contract’s terms and policies like renewable requirements or required service levels.

What are the common challenges in managing vendors manually?

Data storage: As the business expands, it becomes difficult to manage vendors agreement documents manually. There is always a risk of misplacing or losing the documents.
Lack of visibility: In manual vendor management, each department may be maintaining the vendor’s information on a single spreadsheet. When the same spreadsheet gets downloaded and saved to individual hard drives, it creates multiple copies with miscellaneous updates instead of one master file. This may lead to confusion and result in client-vendor conflicts.
Vendor’s payment risk: When the vendor manager is dealing with multiple vendors, it leaves room for error, and the chances are that it may post the wrong payment for the vendor’s service.
Painstaking manual reporting: Manual reporting could be a waste of time when it involves collecting countless spreadsheets, emails, and files and then converting it into a pleasing graphic. Besides that, there is no log to track the activities to see what changes were made.
No accurate risk analysis: There is no centralized system in manual vendor management, which may not be efficient in identifying risks accurately.

Can technology help in creating and implementing a Vendor Management Program effectively?

Yes, technology can be helpful in creating and implementing a vendor management program effectively.

Long term commitment between vendor and client allows both to invest time and money required for the smooth transition of services. By using technology, they ensure that they don’t waste time or money that they are investing in and get the desired outcome. Vendor management programs involve strong quality controls, monitoring systems, audit infrastructure, and performance improvement plans in order to resolve issues and promote industry best practices.

Automating information exchange between vendors and companies: One of the important tasks in creating and implementing a vendor management program is to retrieve vendor information from existing databases or from new sources. A company supported by the right technology can speed up the implementation of a vendor management program. The company can use automation to collect the vendor’s information from various sources or any information that could prove valuable for establishing VMS systems.
Convert legacy contracts into digital records using AI: There are still businesses that adhere to the legacy system for managing vendor’s document or drafting agreement copies. They often face difficulties while converting those spreadsheets into digital records. But advanced technology like AI helps to turn fragmented legacy contracts into modern digital records with ease.
Predict early demand visibility: The early analysis of product or service demand can be helpful to draw your expectations from third-party vendors. It can make the boarding of third-party vendors and implementation of their services quite easy. A data scientist can use a large volume of historical data to build logic and predict the product or service demand.
Quality control and audit: The effective vendor management strategy involves stringent quality control measures that focus on minimizing business risk. Technology platforms can gather, analyze, and flag data to ensure that vendor work is performed and completed in accordance with agreed-upon regulatory guidelines.
Analyze vendor risk factors early on: To implement a vendor management program effectively, it is necessary for the client to identify the security threat associated with the third-party vendor. Technology can help in doing this by automatically assessing the vendor’s information. The client can use automation tools to send security questionnaires to the vendor or scan data continuously to check leak credentials.

What is Vendor Management Software?

Vendor management software addresses common issues of companies to find, engage, and manage their external workforce or vendors. A vendor can be a contractor, manufacturer, supplier, or any third party who fulfills the need that your company doesn’t create or provide in house. By centralizing all elements of vendor management in one system, the company can facilitate efficient vendor communication.

How can Vendor Management Software assist companies to work better?

Better Security: A supplier management software enables organizations to integrate their vendor management system with a risk management system and compliance management system.
Improves client-vendor relationship: With an effective vendor management platform, the organization can have a smooth transition of the vendor services, which eventually helps to improve the vendor-client relationship.
Better Service: The vendor management process allows companies to avail of better services from the existing vendors. The organization can pinpoint the issues and then work with the suppliers to eliminate the root cause of the problems being faced.
Reduce costs and better ROI: The organization can save the costs incurred due to administrative labor costs and rectifying errors. The company can act quickly in making adjustments, thereby increasing profitability and saving money.
Optimize performance: The supplier management tools allow tracking performance against the contract to ensure that the vendor is meeting organization needs and complying with the requirements. It provides insight into the vendor’s budgeting, expenses, and profits throughout the supply chain.
Easy to manage multiple vendors: With a robust supplier management system, it becomes easy for the company to manage multiple vendors, and there won’t be any error in payment processing or monitoring their performance.
Data Storage: The biggest issue with vendor management is to deal with a huge number of documents and storing them securely. With the vendor management tools, it becomes quite easy to handle any size of the document.

What are the essential features to look for in a Vendor Management Software?

The vendor management requirements differ as per the industry; the manufacturing industry may have different vendor requirements than a retailer. The selection of vendor management software largely depends on the type of operations and the user's preferences. General features include;

Accounting integration
Purchase order management
Tracking and visibility
Financial management
Supply chain management
Customer Management
Distribution management
HR management
Project management
Asset management
Inventory management
Automatic backup
Reporting & analytics
Third-party tools easy integrations
Record Audit
Email Management
Offline mobile access
Real-time budget tracking
Report and analytics
Audit logs
Expense management
Mobile request, approve and receive
Automated reminders

How will technology augment Vendor Management Software in the future?

ML and AI: In the future, artificial intelligence and machine learning with their smart algorithm would allow organizations to choose the right vendor and assign the right work model. It will further help to create customized dashboards to view and manage vendor data as required.
Mobile apps: The modern mobile app for vendor management software would be focussed on improving the user experience in handling the multiple vendors on-the-go.
Predictive Analytics: There is more scope of predictive analytics in the future, which may be used by companies to provide real-time recommendations on rates and labor demand modeling.

What is the average cost of buying a Vendor Management Software system?

The vendor management software covers various sectors from manufacturing, retailer, IT and corporate, and so on. The selection of the VMS system is made on the company's requirements and its budget. The price of these software varies depending on the number of users, features list, customer support, etc. The entry-level VMS tools like Dolibarr and Zoho creator charge $9/ month and $15/month. While those organizations focused on slightly higher features can pick software solutions like Precoro that charge $29/month, followed by ProfileGorilla and Windle, that charge about $25/month and $49/month, respectively. For a large enterprise, where price has no bar, then a tool like a Gatekeeper would be an ideal choice.

But if the organization has the curiosity to explore software capabilities and develop new features, then they should tap on free and open-source vendor management software.

Why refer to GoodFirms’ list of top Vendor Management Software?

GoodFirms has quickly established as the best review and rating site for IT solutions spanning various sectors. It rates software solutions based on quality, reliability, and ability. The platform collects all the vital information critical for any individual or business to decide on software selection. The list of software features and authentic feedback of consumers together gives a broad perspective on software usability. Besides that, the software seeker can sort service providers based on location, hourly rate, and the number of employees.

Goodfirms has a growing list of software solutions to address the core issues of the business process. Vendor management is an inevitable segment of any well-planned business structure, trying to achieve exponential growth. In order to orient well between all the components of a vendor's operation, a holistic vendor management software is a must. The vendor management solutions may not fall in the one-size-fit-all category, and different businesses may have different needs. Do not fail to check GoodFirms list of best vendor management software that could justify your vendor management requirements all in one place.