Supplier Onboarding

How to Create the Ultimate Supplier Onboarding Process

Developing relationships with new suppliers can be challenging. It is possible to lose valuable business and sacrifice profit margins without a clear system in place for onboarding and developing these partnerships.

A smooth start to your partnership can be achieved by onboarding your suppliers before you begin working together. 

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What is supplier onboarding?

As part of supplier onboarding, prospective vendors are collected, evaluated for compliance and risks, and integrated with your platform and supply chain. 
A supplier onboarding process is designed to create simplified processes that result in stronger buyer-vendor relationships, which ultimately benefit both parties.

A process for onboarding suppliers

As the supplier relationship progresses through each stage of the onboarding program, a robust supplier onboarding process will actually consist of several separate processes.

The following steps will guide you in developing an onboarding process from the point at which you consider a supplier to the point at which a partner is approved.

1. Establish a process for evaluating and approving

Establishing supplier evaluation and approval policies is the first step in developing an onboarding program. You should define the guiding parameters for who you will and will not work with, as well as the approval process that will be followed by your team and the prospective vendors.

2. Set clear expectations and requirements

By defining clear policies and vendor requirements, you will be able to expedite the process of vetting and approving suppliers and ensure that both you and the supplier are on the same page. It will be more efficient and less likely to cause friction if policies and expectations are clearly defined.

3. Create a vendor portal for the purpose of collecting vendor information and registering vendors

Make sure that you establish a vendor portal for your prospective suppliers to register and apply to work with you if you do not already have one.

It is recommended that the vendor fill out a form on the portal that will enable your team to quickly vet the proposal by obtaining contact information and other information. Your data will be more accurate, and the process of gathering information will be streamlined as a result.

4. Identify, develop, and implement a strategic supplier partnership process

Vendors considered to be strategic suppliers have a greater impact on the business. As a general rule, they account for a larger proportion of the company’s spend compared to other vendors and may also have other strategic benefits to the company.

Due to the significance and value of these vendors to the business, it is prudent to create a separate vendor onboarding process for them. The onboarding program may benefit from the involvement of a cross-functional committee to nurture these relationships.

5. Develop a communication system and culture

A culture of communication is the foundation of the most successful onboarding programs. 

Be sure to keep communication at the forefront of your onboarding process. To ensure that all parties have access to the best vendor information, your processes should be designed to facilitate the sharing and access of vendor data between departments and stakeholders.

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Supplier Evaluation

Vendor evaluation and risk assessment are the first stages of onboarding:

  • Analyze the track record of the supplier’s service.
  • Ensure that they have a sustainable credential.
  • Obtain financial and credit information about them.
  • Evaluate their compliance with governance and regulations.
  • A code of ethics should be signed by them.

Process For Approving Suppliers

Before proceeding with the approval process, you will want to ensure that all parties understand each other’s objectives. Before finalizing approvals, please clarify the following expectations and requirements:

  • Estimated number of requirements
  • Timeframes for delivery
  • Pricing
  • Payment terms
  • Order process 
  • Delivery process & costs

It is likely that strategic supplier partnerships will require a more deliberate approach to onboarding so that these relationships can be nurtured and developed carefully. A basic checklist is not sufficient for these types of suppliers.

Supplier Information

A vendor application portal, enabling suppliers to enter their own information, is the easiest method of gathering accurate and consistent supplier data.

Your form may require additional verification from the supplier, depending on its depth. For each vendor, you should collect the following information:

  • Name and contact information for the supplier
  • Documentation and accreditations
  • An overview of the primary contacts at the supplier and their responsibilities

Make sure you share all necessary data with all stakeholders once you have gathered all the necessary information. In order to make the supplier onboarding and activation process as seamless as possible, it is imperative that accurate information is communicated clearly.

Onboarding Best Practices

Follow these best practices when developing your onboarding process:

  • The onboarding checklists should be managed by a designated point person. It is easy for things to be lost in the shuffle when there are so many requirements and process steps to follow. Establish a responsibility for verifying each item on your checklist(s) so as to avoid any errors or miscommunications.
  • Whenever possible, automate processes. It can be a laborious and complex process to onboard a new supplier.
  • Develop a plan for each vendor and ensure that it is followed up on. For each vendor partnership, a customized onboarding process should be developed that outlines your growth strategy and steps for success. Ensure you are maximizing the value of the relationship by following up on your plans.
  • Be clear about your expectations. Provide suppliers with a clear understanding of the requirements regarding lead time, pricing, payment, and product quality. 

Why Do Companies Need A Supplier Onboarding Process?

Developing a strong supplier base management program begins with a supplier onboarding process, which is the first step to building those crucial business relationships.

In addition to strengthening your business relationships, a vendor onboarding process will assist your organization in achieving the following:

  • Reduce the risk of loss.
  • Increase efficiency by streamlining processes.
  • Maintain compliance with regulatory requirements.
  • Increasing return on investment.
  • Track data and workflow.
  • Streamline basic tasks by automating them.
  • Reduce the time it takes for new suppliers to be approved and activated.
  • By eliminating middlemen, human error can be reduced.

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