Supplier performance management software: Key features and best practices

Supplier management software can significantly improve your organization’s supply chain stability, cost efficiency, and overall success. It can lead to higher-quality goods and services, lower costs, and greater innovation—all stemming from stronger supplier relationships.

According to a 2024 report by Gartner, supplier collaboration skyrocketed in priority between 2022 and 2024 for 88 percent of procurement leaders, yet only 35 percent had a working model for identifying their most valuable suppliers. While many procurement teams see the business case for better supplier management, few tap into available technology to create real change.

If you’re looking to benefit from improved supplier partnerships, understanding how supplier management software can solve your pain points and how to find the right solution can be helpful first steps.

What is supplier management software?

Supplier management software is a digital tool that streamlines and automates the vendor relationship management lifecycle. Also called supplier relationship management (SRM) software or vendor management software, these systems:

• Centralize supplier data

• Streamline onboarding new suppliers

• Track supplier performance

• Assess and mitigate supplier risks

• Strengthen supplier partnerships through easier communication and collaboration

When used strategically, a supplier management solution can help you scale and streamline procurement, leading to significant cost savings and improved risk management.

Supplier management challenges and how software can solve them

Supplier management is a complex piece of the procurement process, as organizations have to navigate remaining compliant with regulations, controlling costs, and balancing dynamic relationships.

Common challenges you might face in supplier management include:

Inconsistent supplier performance

Inconsistent or poor performance can lead to quality issues, delivery delays, and increased costs that affect operations. Supplier management software tracks performance over time so you can proactively address problems or drop unreliable partners.

Too many manual processes

Manual processes take more time, lack transparency, and increase the risk of errors. Automating supplier management can improve data accuracy, increase supply chain visibility to help uncover potential disruptions, and free up employees for higher-value work.

Limited visibility into supplier data and risk

Without automated systems, it’s difficult to proactively identify and mitigate potential supplier risks, such as compliance violations or financial instability. A supplier management system automatically tracks supplier information in real time so you can stay ahead of possible problems.

Lack of control

Traditional procurement processes make putting consistent parameters across procurement workflows and ordering channels difficult. Solutions that complement procurement software, like Amazon Business, let you implement spending limits and restrict purchases to preferred suppliers so you have more control over your organization’s purchasing.

Key features to look for in supplier management software

There are a lot of supplier information management solutions out there, each with advantages and drawbacks. While every organization has different needs, there are a few key features to look for when seeking a solution.

Supplier onboarding and offboarding support

Supplier onboarding is tedious. According to the Institute for Supply Management, it’s not uncommon for onboarding a new supplier to take up to six months at large companies since so much data must be transferred.

Look for a supplier management solution that speeds the process by automating data collection and repetitive tasks, verifying information accuracy, and fostering better collaboration.

It should also help with supplier offboarding by automatically removing access to internal systems, archiving supplier data, and ensuring all contractual actions have been met.

Automated risk and performance assessments

Make sure the software solutions you consider come with supplier risk management assessments so you can be proactive instead of reactive. The right software should have tools to evaluate supplier performance, identify potential problems, and ensure compliance with regulations. Bonus points if it can automate due diligence and documentation collection.

Centralized data, analytics, and integration capabilities

One of the biggest benefits of using a cloud-based supplier management solution is that it constantly collects data. Look for a system that will centralize supplier metrics, analyze spending, and integrate with your other data sources. The more information you have, the better decisions you can make for your organization.

Supplier management software evaluation checklist

Beyond the key features mentioned above, evaluating each solution based on your organization’s needs and processes is important.

Here are some questions to consider as you review each contender:

• Alignment with procurement goals: Does the tool support your buying model, complexity, and workflows?

• Functionality: Does it offer the specific features your organization needs (e.g., contract management, a supplier portal with self-service features, spend management)?

• Integration: Is the software compatible with your existing systems, like your ERP or supply chain management software?

• Scalability: Can it support you as you grow? Does it limit the number of users or suppliers?

• Ease of use: Is the software easy to use with minimal training?

• Cost: Is the pricing in line with your budget?

• Customization: Can you customize the solution to adapt to your existing processes?

• Security: Are security measures like data encryption compliant with industry standards and internal policies?

• Customer support: Does the software vendor offer phone, email, or chat support that's easy to access if there’s a problem? Is that support available 24/7 or only during business hours?

• Supplier reputation: Does the supplier have positive customer reviews on third-party sites?

Best practices for supplier management software implementation

All digital transformations need a clear strategy and project plan to ensure a smooth transition. Before implementing the new solution, take time to ensure it's configured the way you want. This can help eliminate employee confusion from changing processes after you go live.

Here are three best practices to consider when setting up your software.

1. Set onboarding criteria and automate approvals

Start by establishing clear and consistent supplier onboarding criteria to ensure all suppliers comply with your internal policies and outside regulations. This may involve setting up a verification process, developing risk assessments, and implementing security measures to protect your data.

You may want to consider automating approvals for suppliers you already work with to speed up the process. This will allow the supplier to register and upload their own documents, taking that work off your plate.

2. Define KPIs and use analytics to improve supplier performance management

Next, consider setting up specific metrics to measure supplier performance. Defined KPIs will help reveal whether vendors are meeting your expectations.

Common examples of supplier management KPIs include:

• On-time delivery rate: How often the products or services are delivered on time according to the expected delivery date

• Defect rate: The percentage of products that fail to meet quality standards

• Order accuracy rate: The percentage of orders that arrive complete and accurate

• Purchase order cycle time: How long it takes to fulfill a purchase order from initial request to final approval

• Purchase price variance: A comparison of actual purchase prices with listed purchase prices

You can also measure supplier performance by lead times, ROI, and overall spend per supplier.

3. Ensure compliance and plan for long-term scalability

Set compliance requirements that the software can use to monitor supplier performance and alert you to any problems. For example, you can create automated workflows that ensure all required documents are received and validated during onboarding or notify you of upcoming license or insurance policy expirations.

These automations make your procurement processes more efficient, allowing you to focus on scaling operations instead of checking off tasks.

Using data to improve supplier management

Collecting and analyzing data about suppliers can help you optimize your supply chain so you can make more informed decisions that benefit your organization.

With the power of data analytics, you can:

• Predict risks: Forecast potential supply chain disruptions, geographical risks, and compliance issues.

• Save money: Identify cost-saving opportunities and negotiate better contract terms with suppliers.

• Improve negotiations: Make data-backed decisions during supplier negotiations.

• Benchmark suppliers: Compare supplier performance against industry standards and best practices.

How Amazon Business makes supplier management easier

Amazon Business isn’t a supplier management software, but it plays a complementary role in the supplier management ecosystem by allowing procurement teams to source, purchase, and solicit bids from a range of certified, vetted suppliers.

Amazon Business integrates with procurement solutions to streamline the supplier management process through features like detailed reporting on suppliers, multi-user approval workflows, Guided Buying policies, and consolidated invoicing. The flexible solution also increases visibility into orders from small and diverse sellers by creating reports filtered by trusted seller certifications.

With the help of Amazon Business, you can identify opportunities for immediate savings and create a long-term plan to reduce spend across all sourcing categories.

Talk to our team to learn how Amazon Business can support your supplier management strategy by streamlining purchasing, enforcing compliance, and integrating with your existing procurement systems.