September 2, 2014

All Aboard! Six steps to supplier onboarding.

As I reflect on my recent family holiday I think of the various steps we undertook to reach our destination.

The search for a holiday destination that could meet the needs of my large family was not simple. It took time to research what was available in the market, narrow the field to a smaller selection for comparison, understand the differences and the relative value they held for us, shortlist, and make a selection.

Having chosen we then embarked on the contracting where information was shared, payment agreed, formalities of administration completed to ensure smooth passage of tickets, transfers, accommodation, parking, et cetera.

Supplier onboarding also encompasses the identification of potential suppliers, inviting them to bid for work, validating credentials, contracting and setting up on company systems. This has typically been the domain of procurement. The variety of tools in this space is bewildering from spend analysis, to eSourcing, to contract authoring, supplier portals, data validation, desktop auditing software, eCatalogues, EDI, eInvoicing, the list goes on and on. The value proposition is to obtain the right goods and services at the right price point. It speaks to efficiency as well as the efficacy of purchasing.

So let’s talk about how to do this the right way.

  1. Allow suppliers to pre-register.
  2. Allow anyone to be a supplier requisitioner.
  3. Ensure controls and governance are in place.
  4. Have a single golden record to connect all databases.
  5. Transfer the responsibility of data maintenance to your suppliers.
  6. Automate, automate, and automate.

 

Allow suppliers to pre-register.

I have heard arguments for and against this practice and am yet to be convinced of the merit of reducing awareness by not being open to the possibility of allowing potential suppliers to find you. This does not remove the need to conduct market analysis and supplier search, however, it may introduce parties to the process that would otherwise be unfound.

The advantage is having a ready pool of potential suppliers that have taken the time and effort to pre-register and meet the minimum criteria for consideration. Pre-screening and classification can be enabled that scores and ranks.

Open your business to the possibility of suppliers that understand and want to work with you.

 

Allow anyone to be a supplier requisitioner.

This tends to go against the tide of limiting and reducing those able to add suppliers. However, requisitioning and adding are two different things and not to be confused.

For lower value purchases the return on time and effort engaging in a procurement process is likely to be limited at best. However, procurement can set the process and criteria for new suppliers to be approved. Where suppliers already exist, users can be redirected to use existing relationships. This brings procurement influence to 100% of new suppliers without the ‘drowning’ effect of having to personally identify, qualify and select each one.

Leverage the collective intelligence of your organisation.

 

Ensure controls and governance are in place.

Opening the organisation to potential suppliers and a broad base of requisitioners is possible through effective controls and governance. These are the filters that will allow the right suppliers to pass swiftly through the onboarding process and inhibit the undesirables.

This is achieved through stage gates, escalation paths, and qualification criteria. Placing gatekeepers at the key decision points is an important, even critical, part of good governance. Gatekeepers essentially have three options. Pass, fail, or enquire. Where all standards and criteria are met, gatekeepers can support the passing of information to the next stage. Where it is not appropriate to bring on a new supplier (there may be enough already, a preferred contract in place, etc) gatekeepers can direct users toward such which in turn supports ongoing supplier rationalisation and reduction of duplication. Where clarity is required, gatekeepers can request and approve/reject where appropriate.

Governance is the establishment of principals, practices and processes that determine your desired outcome.

 

Have a single golden record to connect all databases.

Many organisations struggle due to the number of ERP or other systems that contain supplier information. They are unable to know whether a supplier is already set up in another region and unable to extend the relationship if they wanted to.

Supplier master data management addresses this challenge through establishing a supplier master file that encompasses all other systems, references and syndicates data with them. This approach tackles and removes the fragmented supplier view and unifies all knowledge to a single source for users to interact with.

Whether an organisation has one or twenty one ERP’s, having an overall master file is a must.

 

Transfer the responsibility of data maintenance to your suppliers.

Third party data validation services have a place, however, why go to a third party when you can enable your primary source to maintain data accuracy.

Suppliers know their current addresses, contact points, products. They can be empowered to maintain their data quality through the use of supplier portals whereby they have the opportunity to login, update and interact with the buying organisation.

The benefit to the supplier is speed of communication, ability to showcase their full breadth of capabilities, and connectivity. For the buying organisation these benefits are also true. In the age of interconnectivity the thought of sending letters to outdated addresses asking suppliers to fax certificates over is worthy of ridicule.

Empower your suppliers to provide information.

 

Automate, automate, and automate.

Much of what has been written in this article can be automated. The technology and providers exist to enable each of the elements spoken about. Automation brings fiscal and business benefits including:

  • FTE time reduction: reduce inefficient and redundant transactional processes across sourcing organisations (e.g. creating the same supplier multiple times in each ERP system) through technology.
  • Increase compliance: improve compliance and adherence to sourcing and corporate policies e.g. certificates of insurance, indemnification, tax forms; prior to commencing a business relationship with a supplier.
  • Address data quality: enhance data quality (duplication, outdated records, incorrect classification, missing tax IDs, etc) relating to supplier data affecting the ability to accurately report, manage or leverage the supply base effectively.
  • Global/local harmony: apply consistent supplier master data to reduce business complexity and unlock integration capabilities across the organisation, to empower key procurement and financial business systems and processes.

 

The business case for such an approach can be constructed on the FTE savings alone. But the real business value lies in the reduction of risk, speed of engagement, agility of supply chain, and new opportunities that become apparent when you have a real understanding of your supply base.

Next time I will write about managing suppliers so stay tuned.

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