A vendor management system (VMS) helps manage all third-party vendors, their information, and their relationships in a centralized platform. The main purpose of a vendor management system is to extract cost savings and improve the quality of relationships between vendors and an organization while offering visibility and control over how the vendors are managed.

Supplier management software and vendor management are not one and the same. While vendor management focuses on contingent workers and staffing agency management, supplier management may encompass the suppliers who fulfill goods and services as well.

The key elements of a vendor management system are sourcing and onboarding, contract management, vendor performance tracking system, risk assessment and management, invoicing module, payment gateway, and reports and analytics.