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What is Supplier Onboarding?

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What is Supplier Onboarding?

Sometimes, vendor or supplier onboarding can be slow. It can be challenging to capture payment information and tax details while getting new vendors up-to-speed on your systems and policies. It could cause delays in payment processing and slow down your day-to-day business operations.

This article explains what supplier onboarding is and how you can improve your supplier-onboarding process.

What is Supplier Onboarding?

Supplier Onboarding (or vendors) is the process by which you collect information from them to make them approved sellers for your company. This process helps you do business together, purchase goods and services, and make payments to vendors.

Your company can use supplier onboarding to conduct business efficiently, buy goods and services, and make payments to the supplier. Supplier onboarding requires validation and vetting to ensure compliance with your corporate standards and laws.

The Importance and Impact of a Successful Supplier Onboarding Process

Although the vendor or supplier onboarding process may seem overwhelming initially, it can be very simple if managed well. Although the entire process can take between 3 and 4 weeks, it can be significantly reduced if you have the right tools and software. Even though it can seem complicated, an effective supplier management program requires a well-designed onboarding strategy.

Supplier onboarding is an essential component of supply base management programs. However, corporations are often in reactive situations and unable to use actionable supplier information efficiently. Important to remember that not only the most profitable suppliers need attention, but also large ones. It could be challenging to increase efficiency, reduce costs and capture discounts with all of your suppliers, which can lead to a lower ROI.

Organizations can avoid disruptions that may occur downstream or due to poor supplier governance throughout a supplier’s lifecycle. Supplier onboarding is a transactional process. It is essential to understand all requirements of suppliers to operate downstream systems effectively and drive other strategic supplier processes, such as:

  • Strategic sourcing
  • Procurement
  • Accounts payable
  • supplier risk management
  • supplier performance
  • Spend analytics
  • Compliance management for suppliers, including global and local requirements

Too often, an organization’s success and growth, combined with the expansion of global supply bases, product line lines, and ERP systems, can make it difficult for suppliers to be onboarded, especially if the process takes several weeks. A merger, acquisition or another simple event can rapidly change the requirements for the supplier onboarding process. Companies can become hesitant to automate as they grow and change. This can lead to inefficient processes.

This can lead to organizations spending their time and resources trying to keep up with ever-changing workflows, information requirements, and verifications. Understanding the inefficiencies and roadblocks in supplier onboarding can help establish a baseline for improving supplier relations and creating “value” for all parties involved in the broader supplier-related processes.

How to make an effective supplier onboarding process?

A complete supplier onboarding process will involve several “micro-processes”, which run in parallel, which speed up the process and get the supplier fully integrated into your systems as soon as possible.

You can implement these five strategies immediately to help bulletproof your supplier-onboarding process. They cover everything from sourcing and evaluating potential suppliers to daily procurement and top-line growth.

1. Approval and evaluation process

Surprisingly, very few supplier onboardings start with established policies and protocols for evaluation and approval. It’s the first and most crucial step on our checklist.

At a minimum, establish internal guidelines for the supplier you will work with. Next, determine your team’s steps to help potential suppliers move through an evaluation. This could include creating a company profile, assessing global capability, reviewing operations management, and assessing customer satisfaction.

2. Communicate your needs

You must establish clear expectations and requirements for suppliers to get the best out of your vendor relationships. These must be communicated clearly and effectively. You also need to create a system to maintain compliance. This could include defining expectations, lead times, support queries response times, return conditions, and other details.

These requirements should be established and defined in the vendor SLAs. This will set you up for a prosperous business future that is transparent and meets your expectations. Clear, clearly visible and easily accessible policies will improve trust and decrease the risk of confusion and friction later.

3. Supplier Registration

Vendors won’t be interested in becoming “expert users” for your doorway. They will likely prefer to work with another portal with more login information and functions to learn.

A vendor portal isn’t necessarily a bad thing. However, it will not make the vendor onboarding process easier for you or your vendors. It is more likely that the reverse.

Instead, focus on making vendor registration as simple as possible. You should ensure that you capture all vendor information quickly and consistently as part of your supplier onboarding process.

You can create an embedded digital survey or form for the vendor that they fill out and submit. This includes contact information to help your team assess the submission quickly and register the vendor. You can also digitize NDAs and other binding documents that need to be signed.

4. Customizations and localized modifications

Supply chain strategies may emphasize the importance of dealing with high-priority suppliers “strategically” differently from other lower-impact vendors. While certain suppliers may significantly impact your business more than others, we recommend that you handle all suppliers with a basic supplier onboarding process that can be customized or localized to meet specific vendor conditions.

This will ensure that vendors are evaluated using the same criteria regardless of whether expectations or handling differ from higher-priority suppliers. This will ensure that your team can handle any new supplier easily and that each relationship begins on the right track, regardless of location, strategic priority or other requirements.

5. Data structure and integration

When building your supplier onboarding process, ensure seamless data exchange is included at all stages. Correlated data can be used in both buyer and vendor systems. Automating this exchange is possible, if necessary.

This is where your process’s ability to integrate seamlessly with supplier and buyer systems is crucial. Learn more about the integration stage of a digital strategy.

Integrate your process with your ERP, data management software, procurement database, and negotiation sheets. This will make both sides more efficient and improve transparency.

You can also add a data integration layer into your process to eliminate the need for manual coordination and data entry. This allows you to spend your time focusing on building stronger relationships with your suppliers.

How to make a smooth supplier onboarding process 

Although each business and every supplier partnership is unique, it is recommended to have an essential checklist. Digitization is even better, so you can benefit from checklist completion statistics and notifications.

Businesses who want to speed up their supplier onboarding processes can use this template. The template includes all the communication and integration components needed to quickly onboard new suppliers.

Onboarding suppliers can be complicated and time-consuming. It may involve complex tasks that require input from many stakeholders. A digital process can be built in three steps to help you quickly meet your business’s needs and maximize your vendor relationships. This will reduce frustration and manual coordination.

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