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4 Benefits of a Closed Loop VMS

Services procurement Feb 04, 2015
When organizations implement a Vendor Management Solution (VMS) that is little more than cobbled together point solutions, they're often left with "islands of automation" that create inefficiencies and confusion. On the other hand, a closed loop VMS is one where all functionality is fully integrated and where the process, transactions, and data move seamlessly from one end to the other. What's so advantageous about a closed loop VMS? Here are the top four benefits of this approach:

  1. Automates the entire process: A closed loop VMS links together all aspects of the process from vendor management and sourcing all the way through payments distribution. This greatly speeds up the entire process; the fewer manual touch points, the fewer potential bottlenecks.
  2. Eliminates the resource drain: An VMS that has separate modules for sourcing, contract management, time and expense billing, and invoicing requires additional inefficient processes, such as "three-way matching"; manually matching invoices with purchase orders, payments, and receiving reports. A closed loop VMS saves the organization resources by having all of the key processes automatically flow from one to the next, eliminated manual auditing processes.
  3. Ensures accuracy: A closed loop VMS greatly reduces the margin for error throughout the vendor process by fully integrating the entire process from order to payments. No step in the process allows for extraneous information to be entered (unlike some VMSs that might allow a supplier to input the rate during the invoicing process). Clients benefit from knowing that every nickel on an invoice can be tracked backwards through the process to a fully approved time bill that was entered from a valid contract, that came from a valid and complete proposal, which was in response to an approved requisition or order.
  4. Allows for greater integration: Because a closed loop VMS provides a higher level of transnational and data integrity, it is easier to integrate into other systems such as accounts payables and even banking treasury management systems, further speeding up the process, especially in payments distribution
Perhaps the biggest benefit of a closed loop VMS is that accounting departments love it.It helps them do a better job and improves accuracy of all critical data elements, from when a proposal for work secures the best possible contractor for the position, right down to the verifiable, authorized time and expense invoices, and accurate, approved payments on invoices. Every dollar that's paid can be traced back to the organizational bigger picture - with no extraneous information or unnecessary repetition.By automating critical tasks, a closed loop VMS creates an extendable system that goes as far as possible across the organization. This solution creates consistency, reduces errors, and lets high-value workers spend more of their time on the most important tasks, rather than low-value work.

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