10 Business Benefits of Vendor Management System
Okay, so here’s something to ponder about if you work with the contingent workforce. An average company works with 89 different third-party vendors every week. But of all the companies, only a third of them know about total vendors working with them.
“Times when vendors involve themselves deeply in businesses, it’s important you call them partners.”
So to treat them as partners and manage them as a team, you have two routes from here. Either you:
- perform manual vendor management, or
- use an automated vendor management system that will help your business onboard, interact and transact with its external workforce, such as materials’ vendors (suppliers), wholesalers, service contractors, freelancers.
Risks of manual vendor management
- 60% of companies can’t check the security and privacy practices of vendors.
- 87% of companies had non-secure experiences with third-party vendors.
- An average third-party vendor data breach costs 13$ more than in-house breaches.
The fact vendors have access to your network system without your knowledge calls for VMS.
What is a Vendor Management System?
A vendor management system or VMS is a cloud-based centralized repository or software. VMS manages the external workforce, including contractors, vendors, contingent laborers, and freelancers. Many global enterprises use it to
- choose vendors,
- manage costs,
- mitigate vendor-induced threats,
- negotiate contracts,
- promote service delivery.
Top 5 business benefits of Vendor Management System
Reliable vendor management system helps you build strategic partnerships with service providers. But there’s so much more to it. Let’s find them out:
VMS Business Benefit #1: Your company is safe
VMS increases your visibility power over suppliers. You can:
- keep eyes on the vendors not following the company’s regulations,
- sense unforeseen cost implications and reduce them,
- check out vendor’s progress & track their illegal activities on your network,
- diagnose supplier’s risk to take the prompt decision,
- switch to other suppliers should there be any issues,
- dive into vendor’s financials to have a deeper picture of their motives, and
- verify vendor information based on their qualifications.
VMS Business Benefit #2: Your company has optimal performance
VMS helps track performances once you have verified vendors’ profiles in the system. You can:
- measure supplier’s performance,
- check if vendors’ performance meets the contract needs,
- design new plans if service partners don’t meet your requirements,
- frame new ideas to bring out optimal performances from your vendors,
- track challenges before they become a pain in the neck, and
- determine vendors’ pain points and improvise for better output.
VMS Business Benefit #3: You make yourself more profit
As you get more visibility over vendors, you’ll have a low hidden cost. Vendor unknown activities over your network can cost you big time. But with VMS, you can:
- get insights on otherwise unknown/invisible costs and save them for your business,
- save hiring costs by allowing yourself to have a prolonged relationship with suppliers,
- trust your vendors more and build a negotiable relationship for higher profit margins,
- expect vendors to stay honest at each stage of operations (saving from corruption),
- have access to discounts and incentives for having a healthy relationship, and
- save money caused by data-breach
VMS Business Benefit #4: You drive administrative efficiencies
Vendor Management Software for your business drives administrative productivity as never before. You can:
- have an organized vendor master data to keep a record of all the suppliers,
- enjoy rich vendor data without having to fear data duplication,
- learn about service providers and administrative labor costs,
- know about suppliers’ who have lost contracts,
- know more on vendor-side errors and take necessary steps,
- have a central record keeping of completed work, cleared payments, and applicable reimbursements,
- reap meaningful and strategic relationships that suppliers like.
VMS Business Benefit #5: You do onboarding with blazing speed
Onboarding new suppliers is a slow process. And if you go the manual route, onboarding may consume a lot of time and resources.
It’s also the reason why only 37% of companies extend their onboarding after the first month. But VMS helps you:
- have all the vendor information at the tip of the finger,
- breeze through the relevant vendors suited to your business,
- crack suppliers’ bank details for further transactions,
- gain insights on suppliers’ capacity details,
- identify vendors’ capabilities information to meet your business needs,
- have clinical information on regulatory data,
- have quick vendors onboard,
- input all data into the system without much margin of error
The earlier you do the onboard process, the faster the vendors offer their products and services. You also need fast onboarding as a new alliance takes about eight long months to get productive.
Other business benefits of VMS
- Best for building a loyal relationship with vendors
- Crucial for maintaining brand value
- Necessary for minimizing process lifecycle
- Perfect for decreasing requisition cycle time
- Suitable for corporate compliance
The Final Argument
We don’t notice the value and the risk vendors get for our businesses. Not all vendors are equal. Some have more privileged access than others.
In such a case, it’s essential you know what vendors add value and what bring threats. You might feel tempted to overlook managing the vendors, but it only costs you more than you save.
“A Vendor Culture is only as good as the Vendor Management Software you use.”