Before delving into the complexities of vendor management systems, let’s begin with the fundamentals: What constitutes a vendor management system, its key features, and the advantages it offers.

What is a Vendor Management System?

A vendor management system is a software solution designed to assist businesses in effectively managing and collaborating with suppliers. It serves as a centralized platform for storing all supplier-related data and offers tools for supplier onboarding, performance monitoring, and compliance assurance.

Why do you need a Vendor Management System?

While it’s possible to attempt supplier management using spreadsheets and emails, this approach typically proves unsustainable within a short period. The manual workload becomes overwhelming, with tasks, stakeholder communications, and product tracking quickly spiraling out of control.

To avoid this scenario, a vendor management system is essential. This specialized software automates and streamlines processes, reducing manual efforts significantly. Here’s a breakdown of what a vendor management system entails and how it benefits your operations:

A vendor management system is purposefully designed to handle supplier relationships efficiently, facilitating procurement processes to ensure optimal quality and quantity within budget constraints.

Centralized Vendor Information

A vendor management system (VMS) offers a centralized repository for storing and managing vendor data, encompassing contact details, contracts, certifications, and performance records. This facilitates easy access and updates to supplier information.

Supplier Onboarding and Qualification

The VMS streamlines the onboarding process for new vendors through automated tasks such as document collection, compliance assessments, and approval workflows. This ensures that vendors meet all necessary criteria before commencing the provision of goods or services.

Supplier Performance Evaluation

With a VMS, tracking and evaluating vendor performance becomes seamless. Key performance indicators (KPIs) like delivery punctuality, quality of goods or services, and adherence to contract terms can be monitored and assessed effectively.

Compliance and Risk Management

A vendor management system (VMS) monitors vendor adherence to legal, regulatory, and internal requirements, as well as industry standards. It aids in identifying and mitigating risks associated with specific vendors.

Sourcing and Supplier Selection

The VMS streamlines the identification, evaluation, and selection of potential suppliers based on criteria such as cost, quality, and reliability.

Order and Delivery Tracking

It offers visibility into order status, including expected delivery dates and tracking details, aiding in inventory management and receipt planning.

Reporting and Analytics

Many VMS platforms include reporting tools for analyzing vendor performance, spending trends, and other essential metrics. This data informs strategic decision-making processes.

Cost Savings and Efficiency

By automating procurement processes, reducing manual tasks, and ensuring compliance, a VMS contributes to cost savings and enhanced operational efficiency.

Supplier Collaboration

Some VMS solutions facilitate communication and collaboration between organizations and their suppliers, fostering stronger relationships and alignment of objectives.

Top features every vendor management system should have

Let’s look at some profound features of a vendor management system and how they can improve your supplier relationships:

Centralized information management

At its core, a vendor management system serves as a comprehensive database where enterprises can consolidate various types of supplier information, including:

1. Supplier details such as names, addresses, and contact information (e.g., phone numbers, website URLs, email addresses).

2. Pricing structures, including any volume discounts or special offers applicable to the procurement.

3. Contract specifics, encompassing service level agreements (SLAs), limitations of liability, data ownership and security provisions, customer support arrangements, and terms related to renewal and termination.

By centralizing this disparate data into a unified hub, a vendor management system facilitates collaboration between the procurement team and suppliers. It provides visibility into how different data points interconnect, enabling better-informed decision-making and streamlined communication processes.

Enhanced collaboration and communication

In the absence of a vendor management platform, procurement executives often resort to sharing RFQs, RFPs, and RFIs via email, engaging in numerous supplier meetings, exchanging documents manually, and grappling with the ensuing chaos.

A vendor management system transforms this process by providing a centralized hub where procurement executives can collaborate effectively, vet suppliers, reallocate tasks, and expedite decision-making. Platforms like Zapro Procurement leverage automated notifications, mentions, and task assignments to keep stakeholders informed, eliminating the need for manual follow-ups via email.

Supplier performance evaluation

A vendor management system maintains a comprehensive record of historical performance metrics for supplier interactions, covering aspects such as pricing, service quality, delivery timeliness, and customer service standards. This data enables organizations to assess the risk posed by each vendor and determine if they meet established supplier performance benchmarks.

By leveraging these performance metrics, organizations can make informed decisions regarding contingency plans or the discontinuation of partnerships with specific vendors.

Supplier onboarding

Supplier due diligence can be a time-consuming process, involving the evaluation of potential vendors, internal approval logging, collection of product/service information, and establishment of expectations before placing an order. This process can range from a minimum of 37 days to up to six months, as reported by the Institute of Supply Chain Management.

Manual workflows, compounded by human involvement, often contribute to delays in supplier onboarding. Tasks such as driving the process forward manually, coordinating with stakeholders, collecting details via email, and reviewing and forwarding information to team members can lead to inefficiencies. As a result, tasks that could be completed in a single afternoon may extend over several weeks.

Vendor management systems streamline this process by automating repetitive tasks and consolidating supplier onboarding into a centralized platform. This eliminates the need to switch between multiple tools like email, Word, Microsoft Teams, and spreadsheets to reach consensus or create various versions of the same document.

Risk mitigation

The vendor management process poses significant risks, particularly concerning privacy, data protection, and the potential for fraudulent activities by unscrupulous suppliers. Without implementing anti-fraud measures such as three-way matching, organizations are vulnerable to exploitation.

As companies expand, managing vendor risk becomes even more challenging. According to a 2016 report by the Ponemon Institute, 60 percent of companies lack the resources to monitor the security and privacy practices of their suppliers. Additionally, 74 percent are unaware of all third parties handling their sensitive data and personally identifiable information.

This lack of oversight represents a substantial attack surface. A report by Deloitte reveals that 87 percent of organizations experienced disruptive incidents involving third-party vendors within the previous three years. Alarmingly, 82 percent lacked confidence in identifying all potential third-party risk factors.

To mitigate these risks, a vendor management system functions as a control hub. It enables organizations to manage sensitive information provided to third-party suppliers and restrict their ability to move data off the platform without proper authorization.

Continuous improvement

A vendor management system functions as a framework for continually enhancing supplier management operations in an automated manner. It systematically monitors every supplier interaction, provides feedback, tracks product quality, and incorporates an internal rating system for evaluating vendor performance.

Two key ways in which vendor management systems facilitate continuous improvement through system thinking are:

Ratings: Depending on the capabilities of the vendor management platform, organizations can rate suppliers after each interaction and provide detailed feedback on aspects such as service quality, delivery timeliness, pricing, and responsiveness. Internal stakeholders can refer to these comments when initiating future orders, while suppliers receive valuable insights on areas for improvement.

Customized reminders: Vendor management platforms automatically prompt suppliers to adhere to deadlines or notify stakeholders in case of delays, eliminating complacency in supplier operations. Throughout the procurement process, these platforms can be programmed to send stakeholders reminders, tips, and notes to ensure adherence to timelines and accurate delivery of orders.

Key considerations when choosing a vendor management system

Scanning through G2 (with 143 products listed) and Gartner reveals numerous SaaS vendor management platforms. This is before considering DIY options like Google Sheets and Air table, where you can create a basic supplier hub for procure-to-pay processes. So, how do you navigate this abundance to find the vendor management system that suits your needs, technical proficiency, and budget?

Here are five pointers to judge each vendor management system on your shortlist by.


The Hackett Group’s research reveals that, on average, organizations maintain relationships with 3,000 suppliers per $1 billion in spend. Even if your operations are not on that scale, a survey indicates that 18 percent of organizations work with at least 1,000 third parties, while another 16 percent handle more than 10,000.

At such volumes, managing vendor operations can quickly become overwhelming without robust controls in place. With hundreds of thousands of SKUs, catalogs, potential product combinations for discounts, active workflows, conversations, and individual mentions, efficient management becomes imperative.

Therefore, an ideal vendor management system should prioritize scalability. It should offer automation capabilities to handle repetitive tasks seamlessly and provide dashboards accessible to every stakeholder, ensuring visibility and oversight across workflows, whether there are ten stakeholders or 10,000.


Ideally, your vendor management platform should offer customizable features such as:

  • Branding and visual elements
  • Workflows and processes, with seamless integration with third-party tools in your procurement and finance stack
  • Policies, contract standards, vendor performance benchmarks, internal regulations, and more.


A vendor management platform should function as a dynamic protocol layer, allowing you to expand and adapt your supplier operations as needed, rather than being a static platform resistant to change.

Integration capabilities

As previously mentioned, regardless of the sophistication of a vendor management platform, it may not align perfectly with your specific workflows and processes. To customize it for your needs, you’ll need to establish integrations with the rest of your finance and procurement tools to share data and automate actions across applications using if/then workflows. For example, you can establish integrations to:

  • Synchronize vendor information, invoices, and general ledger data between your Vendor Management System and accounting platforms such as QuickBooks, Xero, Sage, Tally, Busy, etc.
  • Exchange data with Enterprise Resource Planning (ERP) systems such as Microsoft Dynamics, SAP, Oracle, Odoo.

When considering a new vendor management system, evaluate its integrations library to determine the range of third-party integrations it supports and the functionality available through dedicated connectors like Zapier and Make.

Reporting and analytics

Your vendor management system should include robust reporting and analytics capabilities to assist decision-makers in monitoring key metrics and evaluating vendor performance.

Additionally, it should enable you to identify potential cost savings opportunities, such as bulk ordering, supplier switching, and strategic timing of purchases throughout the year. An effective supplier management system should allow you to track metrics such as:

  • Supplier performance scores
  • On-time delivery rate
  • Accuracy rate
  • Responsiveness
  • Risk scoring

Furthermore, it should provide insights into spending and savings, including expense trends, top suppliers, and categorized deliveries.

Support and training

Your preferred vendor management system should offer comprehensive learning and development resources to educate stakeholders and vendors on platform functionality and workflow synchronization.

These resources may include:

  • Knowledge bases, wikis, and self-help articles for self-guided learning.
  • Pre-recorded demos and screencasts demonstrating platform features and workflows.
  • Procurement and finance courses tailored for stakeholder training and supplier onboarding.
  • Guided onboarding experiences to facilitate new vendors through your workflows.
  • Access to a network of third-party technicians, freelancers, and developers who can assist in customizing the vendor management system with bespoke applications and integrations.

Guidelines to choose the most suitable vendor management system for your organization

Now that we have a collection of key considerations to judge potential vendor management platforms by, you still need a mental model for estimating a successful deployment.

Here’s a list of guidelines of ideas to help you:

  • Identify the specific issues that the new vendor management solution should address. Define measurable metrics to gauge the effectiveness of the system, such as improved vendor performance benchmarks, increased order accuracy rates, higher on-time deliveries, enhanced vendor risk ratings, and cost savings.
  • Assign responsibility for monitoring each metric to relevant stakeholders. Determine who will oversee vendor risk profiles, order accuracy, on-time deliveries, etc.
  • Conduct a thorough cost-benefit analysis to assess the return on investment (ROI) of implementing the vendor management system over one, five, and ten-year periods.
  • Compare the cost of our existing vendor management system with the alternatives under consideration.
  • Define the criteria for a successful deployment. Outline how the prospective vendor management system will operate on a daily basis post-implementation.

Why Zapro for Procurement?

Zapro offers a unique perspective on supplier management operations compared to the three systems we evaluated.

Zapro is tailored with a business process management approach, suitable for businesses of any size. With Zapro, you have the flexibility to create customized workflows, seamlessly onboard numerous suppliers weekly, establish pre-set rules to approve or restrict actions, and gain valuable insights into your procurement processes through robust analytics.

Rather than confining you to rigid software structures with outdated user experiences and inadequate documentation, Zapro empowers you to create virtually anything imaginable. All you need is the ability to conceptualize it like a flowchart.

Some of the areas where Zapro beats the competition include:

  • Comprehensive Analytics: Evaluate supplier performance across various metrics such as delivery speed, quality, cost, responsiveness, and innovation. Utilize these insights to make informed decisions about continuing business relationships. Generate detailed reporting dashboards featuring customizable charts, graphs, and reports.
  • Efficient Accounts Payable: Accelerate the approval of purchase invoices securely through three-way matching. Facilitate payments to suppliers worldwide in multiple currencies.
  • Seamless Integrations: Integrate seamlessly with leading platforms such as Xero, SAP, Oracle NetSuite, Salesforce, Microsoft Dynamics CRM, and numerous other applications within your finance and procurement ecosystem.
  • Streamlined Vendor Operations: Simplify supplier enrollment, order creation, and management. Empower vendors to maintain their profiles and product catalogs effortlessly.
  • Transparent Purchase Requests: Gain complete visibility into purchase requests throughout the procure-to-pay process. Implement purchase budget limitations and maintain approved catalogs for employee ordering.
  • Policy Compliance: Facilitate stakeholder involvement in approving various stages of the procure-to-pay process. Access real-time spend analytics conveniently.

Vendor Management Capabilities with Zapro:

  • Supplier Self-Service: Enable suppliers to manage their catalogs and information independently, enhancing efficiency for both parties.
  • Simplified Supplier Registration: Gather registration details from suppliers without requiring access to Zapro’s platform.
  • Efficient Supplier Onboarding: Effortlessly onboard suppliers with comprehensive information such as remittance details, payment terms, shipping terms, certificates, and financials.
  • Robust Supplier Rating System: Rate suppliers based on critical factors including timely delivery and product quality to ensure accountability and transparency.
  • Duplication Prevention: Prevent the duplication of supplier onboarding processes and maintain accurate master data records.
  • Supplier Categorization: Categorize suppliers based on predefined UNSPSC standards, facilitating organization and management.
  • Enhanced Control Mechanisms: Configure granular details such as user access controls, matching types, purchase order transmission methods, invoice limits, and more to ensure effective management of supplier relationships.

Discover how Zapro can revolutionize your vendor management operations with its adaptable procure-to-pay engine tailored to your specific needs.