Vendor management systems have been a part of US commerce for decades, starting with the Ford Motor Company and moving across all other industries. Such systems were not invented with the advent of electronic data managements, but they have evolved to maximize the use of technology.
These vendor mangement systems provide both operational and financial efficiencies unavailable to firms not using them. The most typical need for a master vendor exists when a client has more demand for products or services than a limited number of suppliers can provide. Any product or service that requires a long list of vendors to meet demand can be delivered at more favorable terms and with greater volume through managed vendor systems.
Without a vendor management system in place, the amount of time required to manage, pay, and orchestrate demand with each vendor is multiplied by the number of vendors doing business with the client. This is where the operational strategy of vendor systems can replicate the time for one supplier only, but spreading the leverage of access across multiple suppliers.
The financial leverage comes into play as contract talks can be standardized across all vendors. Standardizing rates simplifies financial planning for the client and spreading demand across multiple vendors provides pricing leverage that can’t be realized working with one supplier at a time.
