Why a Vendor Management System is a MUST-HAVE for Manufacturers!

Why a Vendor Management System is a MUST-HAVE for Manufacturers!

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The automotive industry, known for its cutting-edge technology in vehicles, often lags in embracing similar advancements for internal operations like vendor management. While spreadsheets, emails, and phone calls have served their purpose in the past, they become a bottleneck for efficiency as your vendor network expands.

These traditional methods have limitations and leave you at severe risk of unforeseen delays, overpayments, and costly product recalls. Explore how a vendor management system can help you overcome those limitations and benefit your business.

What Happens When You Manage Vendors Traditionally?

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1. You May End Up Overpaying the Vendors

Imagine paying your vendors more than decided just because one of your team members mistakenly entered a wrong requirement. 

Errors are hard to avoid in manual processes, causing serious issues like legal disputes or incorrect payments.

2. Your Precious Time is Wasted on Routine Tasks

A procurement manager spends hours managing vendor data on spreadsheets or making multiple calls with vendors. This is not just a one-day activity. Hundreds of suppliers and vendors do business with you. 

Spending hours on something that can be easily automated only wastes your team’s precious time, which they could otherwise spend exploring new opportunities or negotiating contracts.

3. You Can Fail to Assess Vendors Properly

Goods and raw materials are essential parts of your business. Any defects or delays in getting them directly impact the finished product and customer service. 

Therefore, you must contract with reliable and reputable partners, which makes vendor assessment the most important stage of the vendor management lifecycle. However, it is not something to do initially and forget. 

You must constantly assess and monitor vendors’ performance even after signing contracts. Traditional methods give you a partial overview of their performance.

4. You May Lose a Vendor or Customer

Do you constantly switch communication channels for discussing product requirements and taking follow-ups? Managing vendor communication through multiple channels can cause misunderstandings. 

This confusion can impact the production and delivery timeline, ultimately unsatisfying your customers. Poor communication will increase the resolution time for any issues. If this happens frequently, you may lose a customer or contract with the vendor. 

Imagine all the struggle you have to do again to acquire new customers or find a reliable vendor. 

Also Read: 5 Tips to Overcome Procurement Challenges in 2024

Overcome These Challenges with a Vendor Management System

Similar to CRM, which manages your customers, a VMS or vendor management software manages your vendors. It works as a single source of truth for all your vendor needs. It integrates with your accounting software, ERP, or CRM to give you everything you need.

a dashboard showing graph and pie chart of vendor performance

It has features and modules to automate the different aspects of vendor management, which are beneficial and important for modern business.

1. Vendor Onboarding and Registration

With a VMS, onboarding new vendors is easy and a one-time process. The software facilitates this process, making it easier for vendors to self-board without assistance.  

2. Centralized Data Management

All vendor information, such as names, onboarding details, etc., is managed in a VMS. Think of it as a library where you can access vendor details anytime. Vendors can also self-update their profiles and information through the platform.

3. Procurement and Sourcing

A vendor management system helps procurement and sourcing, not just onboarding and document management. 

Through its e-sourcing capabilities, you can manage, distribute, and evaluate RFQs, RFPs, and RFIs. The platform also helps in placing bids.

4. Contract Management

Instead of storing and organizing contracts in paper forms or a system folder, manage them on vendor management software. It makes the documents easy to search and access without wasting your time.

Having a contract repository also prevents future loss due to mismanagement. It also helps your team easily approve and renew contracts without getting lost in the email track.

5. Performance Management

A vendor management system helps you make more sales by tracking every move of your vendors. You can track whether delivery requirements are met, which is the high-performing vendor, and other key metrics.

6. Payment Automation

Payment delays can hamper your relationship with vendors. You can ensure vendors always get payment on time through automated invoicing and payment processing. Automating this process also helps in future scenarios where you must audit finance to resolve a financial dispute.

7. Analytics and Reporting

Using a vendor management system, you can also check vendor budget, performance, and compliance in real time. It shows all the analytics on a dashboard for a comprehensive view that is easy to analyze. You can easily share reports with multiple teams, like finance, to allocate budget effectively. 

In addition to these features, a VMS offers the utmost security for your contracts and sensitive business information through role-based access. It reduces the risks and errors that come with traditional methods while improving your communication and relationships with vendor networks.

Need a Software for Managing Vendors? Try Cost It Right

Cost It Right is our proprietary software designed for automotive manufacturers like you. Its features help you get complete control over manufacturing cost estimation.

One of the key features of our software is vendor management and RFQ automation. It lets you

  • Keep track of all your potential suppliers in one place. You can easily access information about each vendor, past interactions, and performance.
  • Create and send standardized quote requests to multiple vendors quickly and efficiently.
  • Compare and analyze RFQs to find the best offer.
  • Negotiate with vendors and secure the best possible price for your needs.

Cost It Right provides a comprehensive framework for vendor oversight, helping you better manage your suppliers/vendors for the smooth operation of your supply chain.

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