Vendor Management System: Software to Manage External Workforce and Suppliers

Vendor Management System - ScienceSoft

Since 2005, ScienceSoft helps businesses optimize their vendor management processes with vendor portals.

Vendor management system: key facts

A vendor management system (VMS) helps businesses onboard, interact and transact with their external workforce, such as materials’ vendors (suppliers), wholesalers, service contractors, freelancers, and more. Putting a VMS in place, companies develop a consistent and well-regulated approach to vendor selection, collaboration and assessment. The implementation of a vendor management system pays off as:

  • Time savings due to vendor self-onboarding and elimination of in-person negotiations and email-based document exchange.
  • Cost savings due to transparent price bidding and low-risk vendor contracts.

Functionality needed for effective vendor management

The following functional capabilities will form the core of your vendor management solution.

Vendor self-registration workflow

You can define what information you need from your vendors to work with them productively ever after and include relevant steps/fill-in fields/document requirements in the registration process.

Vendor onboarding workflow

By setting a vendor assessment framework, you can have a VMS to automatically score registered vendors against needed criteria. Such a pre-onboarding step helps create a low-risk vendor portfolio.

Vendor profile management

In a VMS, vendors are offered to manage their business information independently. This helps maintain vendor profile information up-to-date and doesn’t require direct control from your team.

Vendor segmentation

You can plan and implement the best-suited segmentation model for your supplier base, for example you can give the highest strategic priority to suppliers of high-volume or high-value products.

A purchase requisition form

A document that describes required products/services. You can create as many requisition templates as needed for different department and procurement purposes.

Requisition approval

A VMS routes a requisition through the approval process and sends automated notifications to responsible employees according to the rules you have set in the system. Approval mechanisms can be multi-level and span different departments.

Request for quote (also called Invitation for bid)

Suppliers are notified when they are invited to participate in a bidding process. They can further submit their offering for price competition.

Processing bid responses

Upon the expiry of the bid submission period, you evaluate the bids and decide for a vendor of choice. No need for manual tracking of emails from vendors and no risk to miss a price quote.

Automated purchase order creation from a requisition

If you are not interested in price bidding, you can set to have purchase orders created automatically from approved requisitions and sent to a vendor of choice. Thus, you avoid one manual step and prevent procurement delays.

Invoicing

An invoice is created automatically from an approved purchase order or for a part of an order. Taxes are applied based on origin- and destination-based tax rules. The invoice is immediately available for you to pay.

Order management

Via a VMS, you gain full visibility into all your procurement orders. You can track order progress, contact vendors for explanation of delivery delays, and access shipment documents.

Business intelligence

An in-built tool to analyze vendor performance data and uncover opportunities for cost savings and risk mitigation.

3 types of vendor management systems and their specific features

A vendor management system may be helpful for the three different business processes.

VMS for staffing needs

Helps create a talent pool to manage contingent workers and service providers. When a job position is opened in a VMS, relevant candidates from a talent pool are immediately notified and can apply for it, which makes the hiring process really fast.

Check out helpful features

  • Full visibility into available external workforce: experience, certifications, work expectations, contacts.
  • Automated onboarding processes.
  • Digital document exchange allowing for space and time savings.

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VMS for direct procurement (to manufacture products)

Helps create a supplier base for raw materials and ingredients, and make procurement requests online. Less reliance on in-person supplier communication and email messaging helps not be late with raw materials or ingredients supply and allows for uninterrupted manufacturing processes.

Check out helpful features

  • Faster requisition flow: online creation of purchase requisition, approval notifications, automated creation of purchase order from an approved requisition.
  • Volume-based price bidding.
  • Online billing and payment.

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VMS for indirect procurement (for non-production-related needs)

Helps create a unified base of all suppliers of goods and services needed to maintain your organization’s life. In this case, the system targets to support internal processes and contributes to staff satisfaction, comfortable working conditions, timely facility maintenance, and more.

Check out helpful features

  • The list of suppliers for each provision need and supplier rating.
  • Scheduled reorders for recurrent supplies.
  • Role-based access and approval permissions.
  • Importing of spreadsheets with supply requests to a VMS.

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Useful integrations for different vendor management systems

As far as the processes assisted by a vendor management system are from different business areas (human resources, manufacturing, office administration), various business systems may be involved. We have thought of the most important system integrations for a VMS, yet your particular situation may require a different integration map.

Useful integrations for different vendor management systems - ScienceSoft

VMS + accounting software

  • To deliver invoices directly to the responsible team, thus eliminating protractions usually caused by manual transfers.
  • To pay contractors.

VMS + ERP

  • To rely on manufacturing capacity plans for raw material procurement, avoiding understocks and overstocks.
  • To provide visibility into procurement order statuses for the staff without access to a VMS (e.g., a procurement planning team).

VMS + HR management software

  • To provide information on current talent gaps and vacant positions needed for a limited period of time (e.g., for a project).

VMS + Intranet

  • To collect office supply requests from the staff and organize them into requisition lists.

Factors affecting vendor management efficiency

Document management

You need to adopt the best practices of digital transaction management to create, e-sign, and exchange documents with vendors digitally. During your cooperation with vendors, you may use employment contracts for contingent workers, supply contracts, waybills, and more document types.

Vendor rating functionality

It’s not rare that companies deal with thousands and tens of thousands suppliers. Naturally, keeping in mind the experience of dealing with this or that supplier is impossible. Put in place assessment criteria and a scoring system to monitor the performance of suppliers.

Workflow automation

Supplier collaboration, be it for staff employment or procurement, is a step-by-step process involving many of your team members from different departments. Before implementing a vendor management solution, you need to break the process down into a sequence of steps and, where possible, plan automated notifications and triggers for subsequent steps. This works well for all kinds of approvals, payment initiation and reminding, rule-based escalation of challenging situations and delays.

Effective onboarding and offboarding procedures

This factor is particularly important for managing contractors – even hired for a limited time period, they make up part of your team and need to undergo certain procedures according to your corporate rules. Making onboarding and offboarding checklists for different situations (different team roles, company’s subsidiaries, remote or in-office position, etc.) will help you streamline administrative processes and set positive work experience. Essentially, the checklists should cover documentation requirements, work instructions specific for this team role, access to corporate resources (online and on-site), and introduction to the team.

Investment and ROI

For a mid-sized business, a project covering (1) the analysis of your current vendor management practices and collection of software requirements, (2) the implementation of a vendor management system, and (3) its core integrations with related business tools and systems may start at $70,000. A larger company size, growing number of vendors, uniqueness of your vendor management workflows, a vaster integration map are among the factors affecting the VMS solution complexity and, thus, driving the cost up.

The ROI for vendor management software implementation can be measured in:

Time savings

Your team will spend less time managing vendor relationships if the process is standardized and its part is given for vendors’ self-service.

Cost savings 

Naturally, disorganized processes don’t leave a chance to see a big picture and make strategic decisions regarding vendor selection and contract negotiations. Operating in a vendor management system, you can assess vendors against your quality criteria from the start.

Best software for vendor management

SAP Fieldglass

Best for: contingent staff management

Description

  • A cloud VMS intended for contingent workforce management.
  • Built as a multi-tenant SaaS, SAP Fieldglass puts in place reliable information security system certified according to ISO 27001:2005 standard.
  • Leading software for contingent workforce management according to Forrester Research.
  • States to have clients among Global 2000 firms, the Forbes list of the largest public companies in terms of assets, market value, sales, and profits.
  • Supports different labor payment schemes like deliverables-based payments, fixed and recurrent fees, etc.
  • In-built analytics is robust.
  • A parent company, SAP, is a recognized leader in enterprise application software. It offers a suite of business applications powering more than 437,000 companies worldwide.

Pricing

By request to the vendor.

Power Apps

Best for: small-to-midsize company, most likely with <1,000 vendors

Description

  • A development platform for business apps, including apps for external users like vendor management systems.
  • Most commonly used for low-code app development via a user-friendly drag-and-drop functional builder, still deeper customization is also possible.
  • A leading platform for low-code development according to Forrester.
  • Offers 400+ pre-built connectors to Microsoft and third-party data sources, and allows for custom connectors built with REST APIs.
  • Hosted on Microsoft Azure, guarantees service quality and reliability with 99.9% uptime and 90 compliance certifications (including ISO 27001, ISO 27018, SOC 1, SOC 2, SOC3, FedRAMP, and more).

Pricing

Request individual cost estimation of a VMS built with Power Apps

Vendor management solutions by ScienceSoft

ScienceSoft will help you bring time- and cost-saving improvements to vendor management workflows. Choose the best-suited collaboration focus depending on the stage and maturity of your VMS initiative.

Consulting for the project start

  • Analyzing current vendor management practices adopted in your company.
  • Interviewing your stakeholders as for what improvements and transformations in business processes they envisage.
  • Compiling a business requirements specification covering VMS functionality and required integrations.
  • Helping you choose an optimal platform or tech stack for custom development
  • Providing estimates of project cost and time.

Implementation of a vendor management system

  • Compiling a business requirements specification covering VMS functionality and required integrations.
  • For platform-based VMS development – covering maximum possible business requirements by setting proper platform configuration and achieving the rest with coding.
  • For custom VMS development – coding a solution end-to-end.
  • Integrating a VMS with related business apps and tools.
  • Testing the solution: functioning, usability, integrations.
About ScienceSoft

About ScienceSoft

ScienceSoft renders web development services to businesses across 30+ industries. Providing professional web portal solutions, we digitally transform and optimize the cost of daily business transactions and processes.