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What is Vendor Management System?

If you are planning on starting a business or developing a new system for your established company, you would need to know all the effective management tools in order to move forward. Good thing nothing could match the efficiency of a vendor management system.

A vendor management system or VMS is an online web-based tool that acts as a single node to manage all vendor related activities in any organization or business while ensuring improved efficiency and long-term growth in a cost-effective manner.

If your company has a proper vendor management in place, you can avail the following benefits:

Vendor Management

Benefits of Vendor Management

1. Better Selection

Implementing an appropriate vendor management will lead to a larger selection of vendors, resulting in more choices and ultimately better costs.

Your business can also benefit from a bidding war between vendors while ensuring that you get your money’s worth.

2. Better Contract Management

The lack of vendor management system will create issues on your company’s contract management, documentation, and even all of your personal data and vital information.

By implementing a proper VMS, your organization can benefit from a centralized view of the current status of all contracts and other useful information that will eventually lead to better decision-making and time management.

3. Better Performance Management

If you want an integrated view of the performance of all the vendors, you will need to implement a comprehensive vendor management system.

Developing a comprehensive VMS will help you get a clear understanding of what is working and what needs to be fixed. This ultimately leads to a huge improvement on your organization’s efficiency and overall performance.

4. Better Vendor Relationship

Managing multiple vendors at the same time is definitely not an easy task. While some vendors may prove to be much more efficient, others may not have the same set of skills. Regardless of quality, it is important to manage good rapport among to achieve a successful project completion.

By obtaining all vendor related information in a single place, you can simplify your decision-making process.

5. Better Value

The goal of a vendor management system is to get the most value for your investment. This is why developing a full-scale implementation of a vendor management system can result in long-term savings as well as improved earnings over a period of time.

Vendor Management Process

At this point, we can put on record that having an effective vendor management is not an easy process to achieve. In order to get the most efficient VMS, an organization must carefully plan and execute a process to guide how they will engage with their vendors until they come up with an efficient plan.

Although it is not possible to have only one specific vendor management process that covers every vendor, we can gather all the basic steps that underlie an organization’s crucial relationship with its vendors:

• Identification and Establishment of Business Goals

Before the vendor management process starts, the first thing that needs to be accomplished is the proper identification and establishment of business goals that will surely lead to vendor participation.

With this strategy, we can better understand the requirements of every business unit and avoid duplication of efforts and wastage of resources in terms of selecting and contracting with vendors. It also aids in the later stages of measuring and evaluating vendor performance as these goals establish appropriate metrics.

• Establishment of a Vendor Management Team

Now that you have all your business goals are recognized, the next step should be the establishment of a dedicated vendor management team. This centralized team should have all the necessary skills in identifying business goals and KPIs for vendor management, selecting vital vendors, overseeing all the contracting process, regularly assessing the performance of the vendors and monitoring transactions activities. This team is important in the process as they will act as the mediator between business units and the vendors and ensure that they will have a healthy relationship.

Keep in mind that when vendor management is decentralized to the business units, it results in a large number of contracts with the same vendor or disparate transactions with multiple vendors. This hampers tracking and evaluation of vendor performance and exposes the organization to vendor risk.

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