When Should a Procurement Department Start Using a VMS (Vendor Management System)?

More and more procurement departments are wondering whether they should equip themselves with a VMS (Vendor Management System).

When does this type of tool become truly necessary?

The answer isn't tied to a specific threshold of spending, suppliers, or buyers.

Neither the volume of spend nor the number of RFPs alone can determine whether an organization needs a VMS.

The real question lies elsewhere, because it's not a matter of size but of complexity.

VMS is Not Reserved for Large Corporations

Contrary to popular belief, a VMS is not a tool reserved for large enterprises.

A mid-sized procurement department can perfectly well face a high level of complexity, particularly when managing:

services,
freelancers,
consulting firms,
IT service companies.

These are precisely the procurement categories that make management more difficult than standard goods purchasing.

A VMS becomes relevant when this complexity exceeds what can be effectively managed with tools like a generic e-procurement solution or an ERP alone.

When Intellectual Services Become Strategic

The first clear indicator is the increasing volume of intellectual services and services within the procurement scope.

This often translates to:

multiplication of one-off assignments,
variable durations,
great diversity of profiles,
daily rates that are difficult to compare,
direct negotiations,
increased dependency on certain suppliers.

Without a specialized tool, these purchases quickly become difficult to manage in a structured way.

This is precisely when using a Vendor Management System makes perfect sense.

When Business Units Demand More Fluidity

Another strong signal is the growing pressure from business units on procurement processes.

They generally want to:

source service providers more quickly,
easily compare profiles and proposals,
follow up with suppliers without friction,
track assignment progress in real-time.

In the absence of a VMS, this often leads to:

bypassing procurement processes,
multiplication of informal exchanges,
loss of visibility for the procurement department,
fragmentation of information.

A VMS then makes it possible to reconcile two key objectives:

more speed for business units and more control for procurement.

When Risks Become Difficult to Control

As complexity increases, so do the risks.

A VMS becomes essential when procurement departments need to seriously address:

Budget Risks

daily rate drift,
lack of reliable pricing reference,
lack of visibility on overall commitments,
difficulties in consolidating expenses by supplier or assignment.

Legal Risks

heterogeneous contracts,
excessive dependency on certain suppliers,
risks related to subcontracting or freelancers,
lack of clear contractual traceability.

Operational Risks

lack of follow-up on ongoing assignments,
absence of structured history,
knowledge loss during team changes.

What a VMS Concretely Enables

A VMS (Vendor Management System) is not just a supplier management tool.

It's a component of the procurement IS for effectively managing intellectual services and services.

A VMS becomes necessary when you need to:

objectively compare daily rates and proposals,
secure procurement processes from request to invoicing,
track assignments, profiles, durations and costs,
measure supplier performance consistently,
maintain control over the supplier panel,
centralize information in a single tool,
make data reliable for management and decision-making.

In Summary: When Do You Need a VMS?

You need one when:

managing your intellectual services becomes complex,
business units demand more fluidity,
financial, legal, and operational risks increase.

It's not a matter of size.

It's a matter of procurement maturity and operational complexity.