Vendor management has become mission-critical for supply chain resilience and sustainability. With global networks growing more complex, businesses now interact with swelling numbers of suppliers, vendors, and partners. Effectively managing relationships, contracts, payments, compliance, and performance across a multi-vendor environment has become extremely challenging. Vendor management software (VMS) solutions are increasingly valuable for overcoming these hurdles.
In this comprehensive blog post, we will explore the key features of vendor management software and the top VMS vendors to watch in 2024. With insights from leading research and decades of industry experience, we aim to provide businesses with an in-depth guide to optimizing vendor management.
The Critical Need for Vendor Management Software
Recent disruptions have underscored the importance of supply chain agility and resilience. According to IBM, 87% of Chief Supply Chain Officers have difficulty proactively managing disruptions with traditional techniques.1 When sustainability and resilience are considered, managing myriad vendors concurrently becomes exponentially more complex.
Supply chains today contend with pressures like:
- Geopolitical Shifts: Trade wars, sanctions, and nearshoring trends disrupt cross-border flows.
- Climate Impacts: Extreme weather affects facilities, transport, and workforce availability.
- Cyber Risks: Digital supply chains face vulnerabilities like ransomware, data breaches, and IP theft.
- Demand Volatility: Pandemic buying swings created shortages, gluts, and stockouts.
These dynamics make supply networks more fragile. For example, over-reliance on single suppliers proved problematic when COVID lockdowns hit China. Such risks highlight the need for supply chain visibility, flexibility, and redundancy in the face of shocks.
Effective vendor management is thus critical for sustainability – the ability to maintain resilience and performance over the long-term. Onboarding diverse, reliable vendors globally provides stability. Adjusting vendor relationships, contracts, and payments with agility aids adaptation.
However, managing a multi-vendor environment also breeds complexity across supplier relationships, performance, compliance, orders, invoices, and more. Digitizing vendor management via software has become essential to overcoming these hurdles.
Figure 1: The vendor management software market is predicted to reach $4.06 billion by 2026. (Source: Technavio)
Let‘s examine the key features for evaluating vendor management solutions.
7 Must-Have Features of Vendor Management Software
1. Comprehensive Audit Trails
Audit trails provide documented evidence of activities, events, and processes across vendors. They enhance transparency by tracking changes and time stamps at each step.
Immutable audit trails are critical for supply chain resilience. They help minimize disruptions by:
- Pinpointing Weak Spots: Detailed records help identify vulnerabilities and bottlenecks.
- Troubleshooting Issues: Audit history aids root cause analysis of problems.
- Deterring Fraud: Tamper-proof logs prevent manipulation and fraud.
- Managing Recalls: Traceability helps isolate affected products and batches.
Blockchain-based systems are gaining popularity for robust and decentralized audit trails. Blockchain enables provenance tracking and consensus-driven processes across fragmented supply networks.
2. Extensive Compliance Management
Compliance management allows tracking and controlling violations of policies, regulations, contracts, and codes of conduct across vendor activities. This is crucial for managing risks holistically across a multi-vendor environment.
Non-compliance can lead to catastrophic outcomes including:
- Penalties: Breaches of regulations like GDPR can incur heavy fines.
- Lawsuits: Non-compliance can result in expensive legal action.
- Reputational Damage: Ethical lapses damage brand image and customer trust.
- Business Disruption: Suspension of non-compliant vendors disrupts operations.
Studies suggest compliance costs amount to 6-10% of revenues for many firms.2 Automated compliance management is thus essential for performance and risk reduction.
3. Seamless Vendor Offboarding
Smooth offboarding is vital when working with numerous vendors. Rigorous offboarding ensures:
- All contracts and payments are completed and closed out.
- Compliance with policies and regulations is verified.
- Security controls like access revocation are enacted.
- Knowledge transfer and transition plans are completed.
Automated notifications and checklists help avoid disputes and disruptions when offboarding vendors.
4. Advanced Performance Metrics
Key Performance Indicators (KPIs) help gauge vendor success factors like cost, quality, delivery, and sustainability. Performance metrics enable data-driven management via:
- Benchmarking – Comparing vendor KPIs against targets and peers
- Trend Analysis – Identifying performance patterns over time
- Data Integration – Combining metrics from systems like ERP, MRP, and TMS
Leading VMS tools provide dashboards to visualize vendor scorecards and metrics across the supply base. This empowers informed, proactive management.
5. Strategic Sourcing Management
Automating and optimizing vendor sourcing improves supply chain resilience by:
- Risk Diversification – Expanding the supplier base globally reduces geographic concentration.
- Financial Alignment – Negotiated contracts balance costs and business needs.
- Fraud Reduction – Automated sourcing cuts manipulation risks like bid rigging.
- Onboarding Efficiency – Digital tools smooth supplier onboarding, training, and setup.
Advanced VMS solutions include e-sourcing modules with RFP automation, auction bidding, scoring, and contract management.
6. Comprehensive Transaction Tracking
Maintaining detailed records of transactions such as orders, invoices, and payments provides transparency over vendor relationships. Benefits include:
- Enhanced Reporting – Insights into spending patterns, activity trends, and performance.
- Forensic Auditing – Transaction logs aid fraud and dispute investigation.
- Information Security – Activity monitoring aids cyber risk mitigation.
- Compliance Audits – Transaction history provides evidence for regulatory audits.
Integrated VMS platforms centralize transaction data for analysis while restricting access to sensitive information.
7. Automated Vendor Payments
Automating vendor invoice processing and payment release improves efficiency and relationships. Leading VMS solutions integrate with financial systems to enable:
- Touchless Processing – Invoices matching orders prompty trigger digital payments.
- Term Optimization – Customized payment terms suit vendor needs and cash flow.
- Fraud Prevention – Automation reduces manipulation of invoices and payments.
- Query Resolution – Discrepancies automatically trigger queries and issues resolution.
According to an InvoiceInfo study, over 60% of businesses experience delays in vendor payments. Automation solves these inefficiencies.
Supplemental VMS Selection Criteria
Along with core functionality, the following factors should be considered when choosing VMS:
Deployment Models: Options like cloud-based, on-premise, hybrid, mobile, and desktop models suit different IT environments and business needs.
Configurability: Highly adaptable VMS solutions allow custom fields, workflows, reports, and integrations tailored to each business.
Ease of Use: Intuitive and consistent user interfaces reduce training needs and drive adoption across the organization.
Scalability: Cloud-based tools that easily scale usage, storage, and features support business growth and changing needs.
Implementation Approach: Vendors offering phased rollout, change management, and training smooth the VMS deployment process.
Ideal Business Size: VMS solutions cater to small, medium, and large enterprises with options optimized for each.
Total Cost of Ownership: Consider upfront licensing, maintenance, expansion, services, integrations, and internal costs.
Top 10 VMS Vendors to Watch
Based on independent research and first-hand experience managing global vendors, here are the top VMS solutions to consider in 2024:
1. SAP Ariba
SAP‘s cloud-based Ariba excels in sourcing, contract management, and P2P automation for large enterprises. Tight ERP integration spans sourcing to payments.
2. Coupa
Coupa offers robust P2P automation, risk analysis, and vendor collaboration tools suited to complex business environments.
3. Oracle Fusion Cloud Procurement
Oracle‘s full-suite VMS delivers integrated P2P automation, real-time reporting, and AI-driven insights for the enterprise.
4. Zycus
Zycus specializes in AI-powered sourcing, contract management, risk analysis, and predictive analytics across the procurement process.
5. GEP SMARTTM
GEP Smart‘s unified procurement software offers extensive sourcing, supply base management, P2P, and sustainability capabilities.
6. SAP Fieldglass
SAP Fieldglass excels at services procurement, contingent workforce management, and integrated risk management.
7. Proactis
Proactis‘ VMS focuses on automating tail spend while optimizing procure-to-pay processes and access to savings.
8. Beeline
Beeline VMS emphasizes services procurement, SOW management, and contingent workforce optimization for complex services engagements.
9. Wax Digital
Wax Digital provides a flexible, easy-to-use VMS focused on tail spend, procurement automation, and working capital optimization for SMBs.
10. Fairmarkit
Fairmarkit‘s intelligent sourcing platform leverages AI and ML for improved RFx management, supplier discovery, and contract lifecycle management.
The top vendors highlighted here provide industry-leading capabilities, but businesses should assess vendors specific to their needs and environment. Prioritizing must-have features and defining ideal functionality is key to selection.
Key VMS Trends to Watch in 2024
Vendor management technology and best practices continue advancing rapidly:
- Expect deeper AI integration for tasks like predictive risk analysis, automated contract review, and tailored recommendations.
- Blockchain solutions will proliferate, especially for supply chain transparency, provenance, and auditability.
- Solutions interconnecting procurement, HCM, and FinTech systems will gain traction.
- Supply chain sustainability management will increasingly rely on advanced VMS.
- Mobile flexibility, consumer-grade interfaces, and digital assistants enhance usability.
- Tighter linkages with dynamic discounting, supply chain finance, and cash flow optimization tools will grow.
Conclusion: VMS Critical for Supply Chain Resilience and Sustainability
Volatility has highlighted supply chain fragility and the need for resilience. Vendor management is crucial for navigating complexity and change. Leading organizations are turning to advanced VMS platforms to drive transparency, agility, compliance, and performance across their supply base.
Sophisticated functionalities like AI-based insights, blockchain integration, risk analysis, and real-time tracking provide the digital tools needed for robust vendor management. As the technology and market continue to mature in 2024, purpose-built VMS promises even greater capabilities ahead.
1 “IBM Supply Chain Insights with Watson.” IBM. ↩
2"The High Cost of Compliance." Risk Management Association. ↩