6 Features Every Vendor Management Software Solution Should Have
Selecting a vendor management software solution can be overwhelming. A simple search on Google for “vendor management software” yields more than 334 million results alone. With this vast information about vendor management, where do you begin? Through this blog, you’ll learn about vendor management software, different types of solutions on the market, and important features to look for when choosing your vendor management software solution.
But before we go to the software, let’s talk first about vendor management. Vendor management is a process that enables an organization to take appropriate measures for controlling costs, reducing potential vendor risks, ensuring excellent service deliverability, and deriving long-term value from vendors. It entails researching the best suitable vendors, sourcing and obtaining pricing information, gauging the quality of work, managing relationships in the case of multiple vendors, and evaluating performance by setting organizational goals.
As you notice, vendor management is a labor-intensive task. This is exactly the reason why a vendor management system or VMS is essential to a company or organization.
What is Vendor Management Software?
A vendor management software works as a central hub for the company’s vendor information and streamlines communication and collaboration, as well as monitors and manages vendor performance, compliance, and risk. In a vendor management system, vendors and their activities are managed through a web-based tool that provides improved efficiency and long-term growth to any organization.
Any organization that wants to take a systematic, risk-based approach to managing suppliers and other third parties needs vendor management software. These tools help you manage risks, increase performance, and assure vendor compliance by centralizing information, automating workflow, and providing actionable data.
Types of Vendor Management Software
While there is a wide variety of vendor management software, here are three types of vendor management solutions that every organization should employ:
1. Vendor engagement tools
Vendor engagement software solutions are meant to manage vendor relationships from first contact to ultimate closure throughout active procurement cycles. In addition to defining action plans, assigning stakeholders, and setting up effective vendor engagement models, these tools enable organizations to actively integrate and collaborate with their suppliers in a transparent and structured manner.
Effective vendor relationship management technologies proactively strengthen relationships by providing a range of critical advantages, including higher quality, lower total cost of ownership (TCO), and more transparency.
2. Vendor performance management
Keeping track of a vendor's performance during the contract time allows companies to identify flaws at the supplier and supply chain levels. Vendor performance management software aids in the qualitative management of supplier performance. This is accomplished by allowing users to grade vendors based on key performance indicators such as policy compliance, delivery quality, efficiency, and other factors. Businesses may use this to track, monitor, and identify underperforming suppliers. This way, supplier risk is reduced before it becomes a problem because the company will be able to let go of under performers.
3. All-in-One Vendor Management Systems
As shown above, vendor management involves two core areas:
Vendor engagement for establishing a relationship with suppliers
Vendor performance management for analyzing vendor performance in order to mitigate potential risk proactively by making the right choice of vendor
But if you want to manage your vendor relationship across its entire lifespan, the all-in-one vendor management system is the solution you need. All operations such as procurement, contract administration, risk assessment, and due diligence are tied back to the primary vendor record, which acts as the system's 'hub.' These might be a viable alternative if the company needs a system that provides fundamental functionality for all phases of the vendor management lifecycle.
Features to consider in vendor management software:
Manages the entire vendor management lifecycle
Efficient vendor management software helps the company manage the end-to-end vendor relationship. Vendor management isn't a one-time event that concludes with the expiry of a contract. It's a method of assessing the risks posed by a third-party vendor and its subcontractors to a financial institution on a regular basis and providing instruments to monitor and manage such risks. It guarantees that a company's vendor risk exposure is in line with its risk appetite. It oversees the whole vendor management life cycle.
Reviews critical information at every level
Vendor management is essentially about identifying, analyzing, monitoring, and reducing third-party vendor risk via the use of proper rules, processes, and documentation. Each of these areas will benefit from the oversight and insights provided by a good vendor management software system. Among the main tasks under this feature includes keeping all contracts together, assessing key points in contracts, and generating email reminders to ensure essential tasks are addressed promptly.
Collaboration is embedded
Vendor management that is well-organized and thorough allows multiple departments to work together to keep track of vendors. Departments should be able to collaborate, communicate information and examine what work has previously been completed using the program. It saves time and minimizes duplication of effort when information is transparent and centrally available for all. It also lowers third-party risk by guaranteeing that everyone is on the same page.
Automation of Risk-Based Classification
A good vendor management software solution should enable you to examine your internal processes to see if there are any parts of your assessment workflow that are vulnerable to risks. Auto-flagging risks, assigning risk owners, and initiating reassessments based on a newly recognized risk or an expired contract are all examples of automation that a vendor management software can do.
Tracking of Residual Risks and Overall Risk Register
Vendor management software helps with risk assessment by giving a quantitative way to assess both inherent and residual risk. When it comes to risk assessment, a company should never make guesswork. It's all about taking into account all of the variables that influence vendor risk. Vendor management software should be able to process and identify the likelihood of possible risks and the effects on operations, finances, reputation, and other important factors.
A vendor management software solution makes it easy to generate extensive reporting documents. The management and employees should be able to quickly access up-to-date information about an institution’s vendor management decisions and the process it is following.
A vendor management software should be simple and easy to integrate into the current workflows. It is understandable that companies use different software in their operations. Thus, vendor management software should not push companies to abandon these procedures and processes. Rather, the new software should allow the company to continue utilizing its own established procedures and adapt to needs. It should be simple to set up and adjust.
When it comes to vendor management, there is no such thing as a one-size-fits-all approach. However, effective vendor management saves time and money since it eliminates the need to handle various suppliers, timesheets, payments, and other labor-intensive tasks. Vendor management software must be scalable depending on the size of the company.
You should start using vendor management solutions right now if you haven't already. Privva offers a complete vendor management system with capabilities that span the whole vendor management process. Your company can have a thorough vendor management process by using Privva’s flexible and powerful cloud-based procurement software options.