What is a Vendor Management System? (VMS)

Effective vendor management is the cornerstone of successful procurement.

Its purpose is to help businesses maintain cost efficiency, improve quality control, build strong relationships with vendors and minimise any risks they introduce.

And as supply chains begin to sprawl, regulations increase and businesses face more ethical expectations from customers, the way vendor management is done needs to change.

Businesses need to use a vendor management system (VMS) rather than manual processes to get ahead. Let's get into:

• What is a vendor management system?
• Why businesses need a vendor management system
• Must-have vendor management system features
• Vendor management case study: How Funding Circle saved circa £1 million

What is a vendor management system (VMS)?

A vendor management system, or vendor management software, is a digital platform designed to centralise data, streamline onboarding processes and improve interactions between businesses and vendors.

A cloud-based vendor management system also serves as a strategic hub that improves collaboration between procurement, finance, and legal teams.

They can use their holistic view of vendor risk, performance, and overall data to drive strategic decision-making, whilst safeguarding the business and its objectives.

Why Your business needs a cloud-based vendor management system

At Gatekeeper, we often hear from procurement professionals who need to build a better understanding of their vendor base.

They often cite issues such as not knowing how many vendors they have, when vendor contracts are due for renewal, how much is being spent, and where the risks are.

More often than not, these issues are caused by manual and fragmented vendor management processes. Procurement teams are working in a silo away from other teams and their objectives, data is stored all over the place, and vendors aren’t given a standardised experience.

Implementing and using a VMS will resolve some of these common vendor management challenges. Watch our podcast episode with Tom Rogers below to explore how effective vendor management can drive business growth. 

Using a vendor management system helps your business achieve:

• Operational Efficiency: Managing multiple vendors can be complex and time-consuming. A VMS streamlines vendor-related processes such as onboarding, automates tasks like performance evaluations, and centralises data so procurement teams don’t spend hours looking for information.
• Enhanced Vendor Relationships: Building and maintaining strong relationships with vendors is vital for ensuring quality service and product delivery. Effective vendor management facilitates communication, trust, and collaboration, which are key to long-term partnerships.
• Cost Control and Savings: A primary focus for procurement is cost management. A VMS offers tools for tracking spending allowing procurement teams to identify cost-saving and consolidation opportunities.
• Proactive Risk Mitigation: Vendors can pose various risks, from supply chain disruptions to non-compliance with regulations. Effective vendor management involves assessing and mitigating these risks. A vendor management system automates this activity and ensures compliance with industry standards and laws.
• Regulatory Compliance and Easier Auditing: Ensuring that vendors comply with relevant laws and standards is essential. A VMS provides a framework for managing compliance documentation, audit trails, and reporting, simplifying the auditing process.
• Accurate Vendor Performance Management: Monitoring and evaluating vendor performance ensures that contractual obligations are met and identifies areas for improvement. A dedicated platform typically includes tools for setting performance metrics and conducting regular evaluations.

Implementing a VMS can transform how your business interacts with its vendors and the outcomes the procurement team delivers.

To find out more about how vendor management software can transform your business, download the ebook below.

Must-have vendor management system features

Vendor management software offers tools specifically designed to aid procurement teams in managing the vendor lifecycle end-to-end.

Gatekeeper’s vendor and contract lifecycle management platform delivers a holistic approach - allowing you to manage vendors, contracts, and third-parties all within a single platform.

• Vendor Contract Repository: This centralised repository stores all vendor contracts, providing easy access and management. It enables procurement teams to efficiently track key contract details, renewal dates, and compliance requirements.
• Vendor Portal: A customisable portal that vendors can use to submit information and documents, and communicate with procurement teams. This streamlines the onboarding process, simplifies data collection, and enhances vendor engagement.
• Due Diligence Forms: These are essential for initial assessments of potential vendors, ensuring they meet the company's standards in areas like financial stability and compliance. Mandating these forms puts the accountability on vendors to provide data and keep it up-to-date. 
• Custom Data Fields: This feature allows procurement teams to tailor data fields and categories to suit specific business needs, leading to more effective management and analysis of vendor data.
• Automated workflows: Gatekeeper's unique Kanban Workflow Engine automates and streamlines processes such as approvals, onboarding, risk mitigation and other vendor-related workflows. This improves efficiency and ensures consistency across the organisation.
• Employee Portal: This portal enables internal users to request new vendors and compliance reviews securely. It embeds all required vendor data into the request process, improving data quality and reducing time spent on managing new vendor contract requests.
• Risk Module: This tool helps in identifying, assessing, and mitigating risks associated with vendors. It calculates an overall ‘Risk Score’ from variables like 'Probability' and 'Impact', aiding in proactive risk management.
• Market IQ Suite: This integrated third-party risk management suite aggregates data from various financial, cybersecurity, and industry sources, offering comprehensive and actionable risk intelligence. This suite is fully integrated into Gatekeeper's vendor repository and workflow engine, providing real-time updates on vendor risks and automating compliance processes.

NYCM ultimately decided on Gatekeeper because it felt like they were headed in the same direction that we were, growing and on the doorstep of becoming a market leader” - Darin Van Duser, Vendor Management Supervisor, NYCM

How Funding Circle saved over £1 million with Gatekeeper

Funding Circle, a leading UK loan platform for SMEs, faced challenges in managing an increasing number of vendors. They struggled with tracking vendor compliance, had poor visibility and control of contract commitments, and frequently missed renewal deadlines due to a non-digitised contract database.

By working with Gatekeeper’s VCLM platform, featuring a centralised database and automated workflows, Funding Circle has significantly enhanced their vendor management processes. 

Now, Funding Circle proactively manages vendor contracts, leading to improved business decisions, control, and visibility of expenditure. This strategic shift has allowed them to terminate unneeded contracts, resulting in savings of around £1 million. Read more about their vendor management success below. 

 
Wrap Up

The adoption of a vendor management system enhances procurement strategies and vendor relationships.

Your business can streamline its operations, achieve significant cost savings, and mitigate risks more effectively.

If you want to find out how a VMS can improve your current approach and operations, get in touch today.