Finding value in supplier management is akin to the ancient Indian story of the “Blind men and an Elephant”….
For instance, procurement may consider the value supplier management based on an ability to optimize approving product/services from a preferred supplier. Accounts payable may look at it based on how easy it is to identify the right location for paying a supplier. Finance may measure the ability to minimize “cost” overruns with suppliers for maximizing profits and shareholder value. And finally, Legal looks may look at it from cost avoidance due to non-compliance with regulatory requirements.
Due to the number of stakeholders involved in supplier management, there are often different approaches for assessing the “value” of supplier management efforts. Much like the “Blind men and an Elephant” that can’t agree on what an elephant is, stakeholders managing supplier relationships often do not have common understanding of what supplier management should be, and how its value should be measured.
Supplier management is not an isolated set of processes for a particular group of stakeholder, but instead an organizational dynamic of interrelated and interwoven processes that serves the needs of multiple stakeholders, both internally and externally. In this regard, improving the value of supplier management efforts should focusing on the specific functions that impact all the players – and this starts with supplier onboarding.
By establishing best-in-class supplier onboarding and qualification processes, organizations can avoid many of the concerns that happen downstream or happen as a result of poor supplier governance during a supplier lifecycle. And since onboarding and qualifying new suppliers 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 sourcing, procurement, risk management, supplier performance, spend analytics, and compliance with global and local requirements.
But too often an organization’s own success and growth, combined with the expansion of global operations, global supply bases, product lines, and ERP systems, and complicate the supplier onboarding. For instance, a merger or simple acquisition can quickly change the demands on the onboarding environment. Yet, as companies evolve, they can be reluctant to automate what soon become ineffective processes. Such organizations waste resources on manual efforts to account for ever-changing workflows, information needs, and verifications.
Furthermore, traditional views of supplier onboarding started at the point of enabling transactions, but had little to do with understanding the dynamics of complex organizations. In other words, “onboarding” a supplier in traditional e-Procurement terms referred to supplier enablement, or the process of electronically connecting suppliers (or other trading partners) to a company’s supply chain to exchange critical business documents such as purchase orders, invoices and other information.
While critical to the onboarding process for transacting with suppliers, focusing on this definition as part of onboarding does not consider the parent/child relationships of suppliers and the unique requirements that have need to define distinct workflows for compliance or regulatory initiatives from one purchasing business location to the next. For instance, doing business with IBM in the U.S. will have different supplier onboarding requirements than in China.
Based on our experiences here it at HICX Solutions, it is clear that those struggling to get suppliers “on-boarded” lack the harmonized efforts due to incomplete data and lack formal supplier management processes. This provides no consistent means for communicating with those suppliers that are new, most vital or pose the most risk to the organization. Therefore the initial the value proposition of supplier management must start in the establishing all the necessary workflow processes and information requirements for ensuring why the supplier needs to be on-boarded and in identifying all the necessary stakeholders involved for approving them.
If one wants to increase the value of supplier management, they should evaluate the potential savings that begin with the ability to understand certain supplier onboarding metrics for every “geographical organizational unit” that would need to onboard suppliers. Some of these processes include –
- Finding new suppliers / researching suppliers
- Initiating a supplier onboarding request
- Managing supplier approvals
- Collecting supplier information (TIN, COI, Locations)
- Managing supplier information errors upon entry
- Managing supplier information changes
- Initiating compliance requirements
- Obtaining signed documentation
Moreover, to enable and improve supplier onboarding approaches requires software solutions, without which can be a difficult and time-consuming task to harmonize processes and controls across an entire organization. Whether by corporate mandate, regional guidelines, or business-unit-specified needs, what this means is considering solutions that can easily manage the following processes for reducing errors and enhancing supplier management efforts. These include the ability to –
- Automate supplier onboarding to collect information as needed from suppliers, from internal stakeholders, or from third-party data providers
- Deploy with complete flexibility, whether based on languages, regions, or business units
- Ensure all needed content is collected: core supplier attributes, financial and risk profiles, NDAs, contracts, compliance surveys, small/diverse profiles
- Take control of supplier changes: when critical elements such as Tax/VAT and bank account info change, automatic notifications trigger proper review and other actions
- Ensure complete audit controls and field-level security to adhere to corporate security guidelines
- “Manage by exception” versus attempting to manage all suppliers individually, or by reactively managing issues
- Syndicate supplier information to necessary downstream and upstream systems before, during and after supplier onboarding is completed
Ultimately, better understanding the current inefficiencies and roadblocks of the supplier onboarding processes can then provide that baseline for improving supplier relationships and establishing that “value” for all stakeholders involved in wider supplier related processes downstream.