Automation for Better Vendor Management

There are various processes and systems that come into play when you have to manage vendor relationships.Firstly, vendors have to be put through a selection process. Then they have to be onboarded before they can actually start doing meaningful work for your company.

When someone in the company creates a purchase requisition, a purchasing order is sent to the vendor. Once this order has been confirmed, the vendor starts on the process of delivering on the order. During this process, the company will monitor the vendor's performance to ensure that everything stays on track.

All of these processes are made up of a series of tasks. How effective these tasks are carried out will have a huge impact on your day-to-day operations as a company. If you allow any of these tasks to fall behind or be mismanaged, your business functions will definitely be impacted in a negative way. Your vendor relationships will also suffer.

Managing a whole stable of vendors without dropping the ball isn't easy. That's why it makes a lot of sense to automate the most important vendor management tasks. Technology tools that are able to automate your vendor relationships are commonly called vendor management systems (VMS for short).

By using a vendor management system (VMS) to automate your vendor management workflow, you will increase the efficiency of your organisation. This translates into  a lot more work done in a much shorter time frame, with fewer  resources, and to a higher level of consistency and excellence.

In this article we will look at vendor management automation. We will look at all the different tasks that can be automated in a VMS, and how it can benefit your organisation.

But first, we have to look at why it's worthwhile digitising and automating the vendor management process.

Why automate vendor management?

Most businesses need some kind of system to manage their vendors. This is because effective vendor management requires a lot of administrative work.

Every step of the vendor relationship has to be managed to ensure that the work gets done adequately, everyone gets paid the right amount and on time, and all compliance requirements are met.

When a company starts out, usually these tasks are done manually. But there comes a time when a simple, paper-based approach just isn't effective anymore. When you automate your vendor management, you will be able to:

• equip vendors to take ownership of their own information resources so that everyone has access to the latest data
• reduce turnover time by increasing the efficiency of your vendor onboarding, qualification and procurement processes
• identify and prioritise a set of preferred vendors so that you can drive spending to them over the other, substandard vendors
• automatically identify and mitigate risk factors that might cause disruptions to your supply chain
• evaluate vendor performance on an ongoing basis and identify those which consistently provide high-quality service and goods.

In the end, you want to create a vendor management process that is both effective and efficient.

The benefits of automating your vendor management

When you automate your vendor management, the different tasks involved  in the management process are processed electronically—which means they execute faster and with more accuracy. There are several areas of  vendor management that can benefit from automation:

1. Vendor onboarding

The benefits of vendor management automation start the moment a new vendor is brought into the system.

With a VMS, vendors can be registered automatically, which means the onboarding process is a lot quicker and simpler. The end result is that vendor data is instantly available which eases the whole vendor relationship. A VMS can assist the onboarding of new vendors in several ways. Firstly, it ensures that all vendors go through proper background checks and screening.

The system will also automate several of the processes involved in inducting new vendors—for example, giving them the proper badging, provisioning the correct equipment for their use, and also giving them the appropriate training. In this way, vendors are ready to operate at full capacity from day one.

2. Vendor rating

The system will automatically track vendor performance and rate them based on specific performance criteria, for example their compliance to legislation and company policy, the quality of their delivered goods and services, their track record with regards to keeping to set time schedules, and so forth.

3. Vendor self-service

With a VMS, you can make a portal available to vendors where they can upload and update their data as needed. Through this portal they will also receive alerts when you post  order requests or require information from them such as payment details.

In this way, suppliers will be able to manage their own catalogues on your system, saving you time and money in the process.

4. Efficient vendor screening

An automated system will allow you to screen vendors based on hard data. A VMS will allow you to retrieve and then verify their data and then screen their viability based on financial reports, credit risk data, and business reports.

5. Correcting sub-par  performance

The system will instantly pick up if a vendor is underperforming and issue the necessary alerts that will allow you to perform corrective actions.

When the system notices sub-par performance from a vendor, it can automatically put a corrective action plan (SCAR) into action. This might even include automatically offboarding that vendor.

6. Minimising supplier risk

There is always the risk that your organisation could run into problems from a vendor underperforming or not keeping their part of the agreement.

Usually in a manual system, you have to learn through experience and repeated failure which vendors are less reliable. But with an automated system it isn't necessary to go through repeated cycles of failure before the bad apples are identified.

In an automated system, the computer will automatically flag vendors that repeatedly fail to honour the full terms of their agreements. In this way it becomes easy to identify vendors with a track record of underperforming on their work orders. This is made possible because a VMS monitors vendor performance on a continuous basis. This information is stored and available in instant reports for review.

In this way, the system can assign specific performance ratings to all your vendors— which will inform your future purchasing decisions. The VMS will be able to steer you away from vendors that consistently underperform.

When your vendor management is automated, you will also be able to identify problems in your supply chain before they grow into catastrophes and initiate corrective action.

7. Faster fulfilment times

If there's a truism about business that still holds true, it is that time is money. In business, speedy execution is key. The player who is able to move faster will soon become a major contender in the market. The advantage goes to the company being able to run supplies faster, produce goods faster, get their goods to market faster, and so on.

Speed is one of the major benefits of vendor management automation. Computers are able to process information and perform tasks infinitely faster than people. When you automate all the manual, error prone tasks involved in managing your vendors, you speed up your entire process.

When you remove human influence on your management systems, you will automatically waste less time and gain more speed. The result is business processes that move infinitely faster.

8. Accurate information processing

Another benefit of automating your systems is that you can take advantage of the incredible ability of computers to process information.

When an automated system handles information, it follows a series of predetermined steps and commands. It doesn't handle information like humans, who are prone to handle information based on external considerations. This eliminates human error and causes a marked improvement in data accuracy.

With a VMS,you can specify certain standards which the system must use when managing information. So there is very little chance of major data snafus.

The computer simply follows a clearly defined processing pattern. Should anything go wrong, the system will give a clear alert—allowing you to take the necessary corrective measures.

9. Data visibility and transparency

A VMS will keep track of all the data it generates. Which means it becomes a piece of cake to track all your vendor relationships and figure out what isn't working, and what steps to take to course correct.

An automated system differs wildly from a manual system. When you have to manage your vendors by hand, procurement staff have to go through reams of documents to generate any meaningful data.

This is in sharp contrast to an automated system that can track specific data points from the get go. The system can also automatically generate reports on those data points which can then be analysed to detect trends.

10. Accurate supply forecasting

When your vendor management processes are automated, the system generates a large amount of data. The system will also be able to analyse this data to discover trends. In this way, your business will be able to anticipate supply shortages and take the necessary steps to keep your operations stable.

A VMS is able to automatically keep track of the supply records of all your vendors. Which means you will be able to detect or even predict complications in your supply.

This allows you to stock up on operationally critical goods before they run out.  You will be able to anticipate shortages in the market and source alternative vendors to pick up the slack.

11. Vendors get paid quicker

Automating your vendor management tasks has a huge impact on the speed with which you are able to generate and settle invoices. Since most of the tasks in your vendor relationships are automated, the timeframes to calculate billing amounts and generate invoices are much shorter.

Which means you will be able to pay your vendors a lot quicker. This is a tremendous boost to your vendor relationships and ensure that you will always be top priority in your suppliers' work allocation schedules. A further bonus is that it will improve your credit scores and reputation in the market.

12. Teamwork

When vendors are properly managed, you will be able to work with them as a team.

Firstly, you will ensure that all vendor contracts are mutually beneficial and strengthen both partners. Then as you do business with your vendors, their activity and performance is actively monitored—giving you the ability to course correct when necessary.

In this way, vendor relationships are developed and nurtured. You will be able to give priority to long-term goals over short-term gains. In other words, vendor management automation is an important key to successfully do handle a large network of vendors.

Conclusion

Vendor management is a complex affair, especially when you have to deal with several vendors at once. Relying on manual systems to take care of your vendor relationships will only complicate matters even further.

There are several reasons to automate your vendor management processes. When you have the right automation tools to handle most of your vendor management tasks, you can introduce structure in your vendor relationships processes.

A VMS will bring all your vendor management functions into a centralized hub.  Within this hub, you will be able to define management processes that will automate your vendor tasks in an intelligent fashion. It will also continuously monitor vendor performance against key indicators, so that you're able to take corrective steps before your business operations are disrupted.

At the same time, the VMS will be able to generate customizable and detailed reports to give you clear insight into the performance of your vendors. The end result is that you will be able to keep a tight control on costs while keeping quality standards high and reducing risk.

The system will end up supercharging your vendor management, so that you can  get the most benefits out of your vendor relationships and accomplish a whole lot more with a lot fewer resources. In short, vendor management automation will allow you to build better vendor relationships while lowering costs, increasing productivity, and raising data accuracy and transparency.

This is why you need to look into getting the right VMS for your business—one that will be able to automate your vendor management tasks in an intelligent fashion.