What is Supplier Onboarding?
You have completed extensive research into the significance of allocating resources for putting supplier management processes in place and you have the software ready… What now? You must get your suppliers on board!
Supplier onboarding is the process of collecting the information and data required to set up an organization as an approved supplier, or vendor. The purpose of this procedure is to enable your company to efficiently conduct business, purchase goods and services, and make payments to said supplier. Supplier onboarding also requires vetting and validation to ensure the prospective supplier is compliant with laws, regulations and your corporate standards.
An example of a Supplier Onboarding Process is provided below, which outlines standard steps of the process. Although the information is detailed, it is worth remembering for the process to be effective and yield results, the data and information requirements need to be customized for each supplier, based on their various needs. These include, however, are not limited to supplier type, spend amount, category, country, business unit, risk and other factors.
Importance & Impact of Effective Supplier Onboarding Process
Supplier or vendor onboarding process can seem daunting at first, however, if planned and completed properly it can also be straightforward. The entire end-to-end process can often take from 3 to 4 weeks but, with the right software and tools, this can be significantly reduced. Although it may seem somewhat complex an effective supplier management program includes starting with a suitable onboarding strategy.
Additionally, supplier onboarding is the foundation of effective supply base management programs, yet corporations often find themselves in reactive positions, unable to efficiently and proactively capitalize on actionable supplier information. It is essential to remember, large and most profitable suppliers are not the only ones who require attention. If all your suppliers don’t participate, it could become harder to increase your efficiency, reduce costs, capture discounts, and achieve a higher ROI.
By establishing best-in-class supplier onboarding processes, organizations can avoid many disruptions which occur downstream or as a result of poor supplier governance during a supplier lifecycle. As supplier onboarding can be a highly transactional process, it is therefore vital to capture all supplier requirements up front to effectively operate downstream systems and drive other strategic supplier processes such as:
- strategic sourcing
- accounts payable
- risk management
- supplier performance
- spend analytics
- compliance with global and local requirements.
Regrettably, too often an organization’s own success and growth, combined with the expansion of global operations, global supply bases, product lines and ERP systems, can complicate the supplier onboarding process, especially if it spans over several weeks. For instance, a merger or simple acquisition can quickly change the demands on the onboarding environment. Additionally, as companies evolve and grow, they can also become reluctant to automate which can quickly turn into ineffective processes.
Naturally, this leads to those organizations wasting their resources on manual efforts to account for ever-changing workflows, information needs, and verifications. Better understanding the current inefficiencies, and roadblocks, of the supplier onboarding processes can provide that baseline for improving supplier relationships and establishing “value” for all stakeholders involved in wider supplier related processes downstream.
How To Set Up an Effective Supplier Onboarding Process
When setting up a new supplier onboarding process in place, there are certain actions which should be included as part of this process in order to overcome any challenges which could risk derailing the initiative. These include:
- Establishing approval policies and setting standards to make it easier for the procurement team to understand what is and isn’t required when onboarding a supplier.
- Clarifying and managing expectations of both parties to ensure a good working relationship with the supplier from its’ inception.
- Setting up a dedicated supplier portal and using supplier onboarding software, such as HICX, to make the process as straightforward as possible.
- Gaining an understanding of who are strategic suppliers. Those would be the ones who have the greatest amount of spend attributed and the greatest amount of value to your organization. However, you should always aim to have clear visibility over all the suppliers!
- Last, but not least – setting efficient lines of communication between the procurement team and the suppliers.
Article updated March 2021