Why vendor management systems are important
The thought of choosing a vendor management system might make your skin crawl. (When would you even find the time?) But if you don’t do it now, you’ll be kicking yourself when your job gets even busier.
Vendor management systems have a profound impact on your business’s day-to-day operations. These solutions centralize all components of purchasing, from budgeting to choosing suppliers, placing orders, tracking deliveries, invoicing, and reporting.
In fact, 9 of the top 20 companies on the Fortune 500 told their shareholders that “digital technologies are crucial for their procurement operations,” according to a report from BCG.
Be strategic with your vendor management system decision-making.
But how do you choose the right one? You need a solution within your budget that will address your unique day-to-day challenges. And if you make the wrong choice the first time, you’ll jeopardize both your time and your company’s money.
These are valid concerns. But choosing a vendor management system doesn’t really need to be that complicated if you are pragmatic in your approach.
The right vendor management system should solve your immediate purchasing pain points while also supporting your long-term procurement strategy. This road map will make it easier for you to track the information you need to make a confident decision.
What is your goal for implementing a vendor management system?
It may sound obvious, but the first step to choosing a vendor management system is to understand why you need one. If you identify the pain points you want to solve before you kick off your search, you’ll bring direction to your research, which will enable you to measure each solution by its ability to meet your objectives. Think about this in both the short and the long term.
Vendor Management Goals In the Short Term
Ask yourself: what are the most pressing problems my team faces day-to-day? At Order, we often hear complaints about the time it takes to find a vendor, receive the necessary approvals, and make a purchase.
Another common problem is inefficient bookkeeping. Manually collecting financial documents wastes time. It also creates a lack of transparency in the purchasing process and can make it more difficult to adhere to budgets.
Vendor Management Goals In the Long Term
Consider your business’s procurement strategy. What does a vendor management system need to do for your business to reduce both costs and risks a year or two down the line? And how can a vendor management system streamline your business’s purchasing process if you expand to new locations?
Maybe you don’t have a dedicated finance or operations team right now, for example. When your business grows large enough to establish one, your vendor management system will need to help foster transparency and accountability across departments.
Mapping out these pain points and goals will help bring focus to your search for a vendor management system. You want to make sure all your needs are accounted for, without spending more on bells and whistles that don’t really achieve your goals.
How will your vendor management system integrate with your existing tech stack?
The vendor management system you select should be compatible with your business’s existing tech stack, without jeopardizing your company’s data. Consult with your IT and compliance teams to ensure that the solutions you’re evaluating work well with the technology you already use, and that you trust each vendor to protect your data.
Start by setting up a quick call with someone on your IT team. Let them know you are considering a few software solutions, and ask whether there’s anything, in particular, you should ask the vendors about APIs, or application programming interfaces, which essentially just allow two different applications to communicate and work together. These questions will help you determine whether the vendor management software is optimized to work with the software solutions your organization is already using, which can bring additional time savings to you and your team.
Then, reach out to your compliance department. They can advise you on how to find out whether vendors are housing company data safely, and they may even have established criteria that all vendors must meet. Taking this final step in your due diligence may feel tedious, but resist the urge to skip it. Getting it right offers little reward in your day-to-day. But getting it wrong can jeopardize your business’s reputation.
Prepare for vendor management software product demos
Once you’ve identified the vendors you want to consider, set up a demo with each. During these demos, control the narrative by focusing on what you need from a vendor management system to succeed.
Before the demo, prepare a list of questions you’ll need to be answered to feel confident enough to make a decision. Have a sense of your budget, and estimate how much you hope to save on purchases by investing in vendor management software. You can also ask a member of your IT team to join the demo if it will make you feel more confident.
At the beginning of the demo, remind the sales representative of your pain points and goals. This will help ensure that he or she focuses on your unique needs, and it will set up the conversation to address your specific questions.
How to choose the right vendor management system
Use this matrix to score each vendor management system and choose the best solution
You may find that you like multiple vendors after going through a handful of demos. That’s a good problem to have! But, if the decision isn’t an obvious one, you can use a decision matrix to quantify the process. Below is a downloadable matrix that covers the considerations we’ve discussed in this article.
You can add or remove questions as they apply to your specific needs and goals, but these should cover both long- and short-term goals.
To use the matrix, answer each question on the left on a scale of 1-5, which you’ll note in the right column of the table. A rating of 1 signifies that you strongly disagree, 2 that you disagree, 3 that you sort of agree, 4 that you agree, and 5 that you strongly agree. Tally up your responses for a final score. Do this for each vendor, and then select the vendor with the highest score.
Or, you can take this quick and easy assessment!
1: Strongly disagree
3: Sort of agree
5: Strongly agree
|Is the VMS within my budget?|
|Will the VMS recommend alternative brands and products that may save my business money?|
|Is the VMS likely to bring savings of at least 8% to my business’s purchasing?|
|Will the VMS reduce the number of people needed to complete a purchase?|
|Will the VMS make the purchasing process faster?|
|Do I trust the VMS to house my company’s data?|
|Will the VMS make it easier to set and enforce budgets?|
|Will the VMS help to integrate the finance, operations, and purchasing teams in one platform?|
|Will the VMS enable my business to make purchases for multiple locations in one order?|
|Will the VMS allow my business to streamline approvals?|
|Do I trust the business behind the VMS to onboard my team and troubleshoot any issues we may have using the software?|
|Does the VMS provide invoicing data and purchasing reports?|
|Does the VMS integrate with other software solutions in my company’s existing tech stack?|
Feel Confident About Your Vendor Management System Decision
Keep in mind that it may take a few weeks to reorganize yourself and onboard members of your team once you find the right solution. That’s normal. But from there, your job only gets easier.
If you’re ready to start your search for a vendor management system today, request a demo with Order.