The use of Vendor Management System has seen a dramatic increase in the past couple of years. Going by the results of a latest study, about 63 % of the companies surveyed already had a Vendor Management System in place. We expect that number to go higher - about 80 % - which is an astonishing fact considering that the outsourcing industry as a whole is not a lot more than a decade old.

There are various benefits of using a Vendor Management system, but overall we can classify them into 4 broad areas or perspectives:

(a) Transparency or Visibility
(b) Regulatory Compliance towards set Organizational rules
(c) Control of Costs Incurred on Managed Services
(d) Overall improvement in Efficiency of the Outsourcing Engagement

By having a 100% transparency within the specified workforce, the data that is shared is dynamic and correct – thus enabling companies to determine problem areas and mark out changes or improvements that are required. Various metrics that measure time, cost, compliance, quality, and quantity metrics are more meaningful when they are applied company-wide. Of the companies surveyed, one large retailer reported that through their use of their Vendor Management Tool, they were able to reduce resource lead times by 75% and Managed Services Cost by approximately 20%.

Achieving Regulatory Compliance via a Vendor Management Tool is another important advantage. With a VMS, companies can incorporate financial oversight and enforce corporate and governmental policies as it relates to the acquisition and management of contingent workers and outside services.

The biggest Return on Investment, especially in this particular economic environment, is provided by the later 2 benefits.

Companies can enforce strict budgets and, calculate hourly rates, claim volume discounts, regulate markups and overtime, and eliminate off-contract spending to cut costs immediately. Some cost savings are immediate - a large-scale retail customer of a VMS tool expects to realize $2 million in savings during the first year itself.

Lastly but very importantly, with a VMS solution deployed, companies can take quick decisions to help them automate and streamline the requisition process, enhance Vendor Connectivity and Collaboration – thereby reducing resource lead times and improve overall process standardization. The sum of these parts allows the companies to achieve greater efficiency while reducing overall costs.