The Ultimate Supplier Onboarding Process
Supplier onboarding is a key function that any large or small to medium size business needs to approach correctly. The process of establishing new supplier relationships can be complex. Your business may be at risk of losing valuable business if you do not have a clear system in place for onboarding and developing these partnerships.
In order to start working together successfully, you should onboard your suppliers prior to the start of the project.
Table of Contents
What is supplier onboarding?
Onboarding suppliers involves obtaining information about prospective vendors, assessing their compliance and risks, and integrating them into your platform and supply chain. In order to improve buyer-vendor relationships, supplier onboarding involves streamlining processes to create more streamlined processes.
What is a good supplier onboarding process?
1. Establish a system for evaluating and approving proposals
As you build your supplier onboarding program, you will need to establish policies for evaluating and approving suppliers. Make a list of the guidelines that will guide your selection of vendors and determine the steps you and your team must follow to move the approval process forward.
2. Identify the expectations and requirements
The working relationship should be outlined in terms of your business requirements and expectations.
You will be able to vet and approve appropriate suppliers much faster if you create clear policies and vendor requirements, along with ensuring that both you and the supplier are on the same page. By establishing clear policies and expectations, efficiency will increase, confusion will be reduced, and potential friction will be reduced.
3. Establish a process for developing strategic partnerships with suppliers
It is important to identify strategic suppliers as they are those vendors that have a greater impact on the company. As a general rule, they represent the majority of spend as compared to other vendors, and may also be of strategic importance to the organization.
It is appropriate for these vendors to have a separate onboarding process due to their significant impact on the business. Throughout the onboarding program, other internal stakeholders may be able to contribute to nurturing those partnerships.
4. Clear Communication
Communication should be a priority when developing your onboarding processes. In order for everyone to act on the best information, your processes should facilitate the easy exchange and access of vendor data between departments and stakeholders.
The supplier onboarding checklist
It is important to keep in mind that every business and vendor partnership is unique, but a basic checklist can be used to walk through each potential partnership. Here is a checklist you can use as a guide to help you onboard your suppliers.
- Review the track record of the supplier in terms of customer service.
- The sustainability credentials of the company should be checked.
- Assess their financial and credit history to determine if they are a good investment.
- Ensure that the company complies with all relevant regulations and governance guidelines.
- A code of ethical conduct should be requested from them.
Supplier approval and requirements gathering
In order for the approval process to be successful, both parties have to be on the same page from the outset, and this is how you will qualify your suppliers at the beginning of the process. Before you finalize approvals, it is important to clarify the following expectations and requirements:
- An estimate of how much work is expected to be done
- Lead times
- A price plan for the project
- Terms and conditions of payment
- Process of delivering goods and services
- It is necessary to have training requirements in place
It may be necessary to take a more deliberate approach to onboarding strategic supplier partnerships in order to nurture and develop those relationships. A basic checklist is not sufficient for these types of suppliers.
Suppliers shared data
Creating an online vendor application portal where each supplier can input their information on their own is the most effective and efficient way to collect accurate and consistent supplier data.
In some cases, you may have to follow up with the supplier in order to verify additional information provided in your form, depending on how detailed it is. For each supplier, you will need to gather the following data:
- Name of the supplier and contact information for the supplier
- Documentation, credentials and licensing requirements
- Contact information and roles of primary suppliers
As soon as all necessary data has been gathered, it is important to share it with all stakeholders involved. An effective supplier onboarding and activation process requires clear communication of accurate information.
The account manager, the purchasing manager, and the warehouse manager all need to have the information regarding the supplier and the requirements on hand, in order to then share a finalized approval contract with the vendor for review before the account is activated. The result of this will be that all departments and stakeholders will be on the same page and have a clear understanding of what to expect.
Onboarding best practices
- The onboarding checklists should be managed by a point person who will act as a point of contact. When there are so many requirements and steps to be followed, things can easily slip through the cracks if there is not enough time. As a preventative measure, designate one person to verify each item on your checklist(s) in order to avoid mistakes or miscommunications.
- Make use of automation wherever possible in order to streamline processes. Getting a new supplier onboarded can be quite a daunting task (not to mention sometimes extremely frustrating as well). To reduce the chances of human error and to increase efficiency, you should look for opportunities to automate tasks.
- As a guideline, you should follow the steps involved in the onboarding process. There is a difference between each supplier. Adapt your onboarding plan to suit the unique needs of each individual relationship by making it a guideline that is flexible and adaptable.
- Follow up on each vendor’s plan and create a system to monitor it. A plan should be created for each vendor partnership you establish as part of your onboarding process, describing your strategy for growth and indicating the steps you intend to take toward achieving it. Follow up on these plans then to ensure that your relationship is getting the maximum benefit possible from it.
- It is very important to set expectations and make sure that the suppliers understand what’s expected of them in terms of lead time, price, payment, quality, and other factors.
Why is vendor onboarding important?
Relationships play an important role in the success of any business. The same applies to both clients and customers, and it does not only apply to them. In the same manner that you should nurture and support the relationship with your clients, you should also nurture the relationship with your vendors and suppliers.
The first thing you must do is to develop a supplier onboarding process that is the foundation of an effective supplier base management program, as this is what will help you build those crucial relationships with your suppliers.
You will not only strengthen your business relationships with your vendors if you implement a vendor onboarding process, but you will also be able to:
- Reduce the risk of loss.
- Processes can be streamlined and efficiency can be increased.
- Make sure that all regulations are followed.
- Develop a reputation as an industry leader with a positive outlook.
- Increasing the return on investment.
- Redundancies should be reduced.
- It is important to keep track of all the data and the workflow.
- Automation is a great way to make life easier.
- Improve the process of approving and activating new suppliers by reducing the time it takes.
- By eliminating middlemen and reducing human error, we are able to reduce costs.
At best, you will find yourself facing decreased productivity and efficiency due to a poor onboarding process, and at worst, you will find yourself losing valuable business due to poor training, poor management, or a lack of nurturing of partners.