What is Supplier Onboarding?
Supplier onboarding is the process of collecting the documentation and data needed to set up a company as an approved vendor or supplier and to enable your organization to efficiently conduct business, purchase goods and services, and make payments to that company. Supplier on-boarding also requires vetting and validation to insure the prospective supplier is compliant with laws, regulations and your corporate standards.
Below you can find further information on why Supplier Onboarding is important and also a high-level example of the typical supplier onboarding process steps.
Why is Supplier Onboarding important?
Supplier onboarding is the backbone of effective supply base management programs, yet corporations often find themselves in reactive positions, unable to efficiently and proactively capitalize on actionable supplier information. A successful supplier information management program starts with the right supplier onboarding process.
Furthermore, it’s not only your biggest suppliers that matter. If all your suppliers don’t participate, it’s difficult to increase your efficiency, reduce costs, capture discounts, and get a high ROI.
By establishing best-in-class supplier onboarding processes, organizations can avoid many of the concerns that happen downstream or happen as a result of poor supplier governance during a supplier lifecycle. Since supplier onboarding 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:
- strategic sourcing
- accounts payable
- 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, can complicate the supplier onboarding. For instance, a merger or simple acquisition can quickly change the demands on the onboarding environment. As companies evolve, they can also 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. Better understanding the current inefficiencies, and roadblocks, of the supplier onboarding processes can provide that baseline for improving supplier relationships and establishing that “value” for all stakeholders involved in wider supplier related processes downstream
Supplier Onboarding Process Example
The diagram illustrates the typical steps for a Supplier Onboarding process. It should be noted that a good onboarding system will tailor the data and information requirements to the supplier based on supplier type, spend amount, category, country, business unit, risk and other factors if required.
Number of Suppliers Onboarded in 2017
Key Features of the Supplier Onboarding Process Flow
When you’re putting a new vendor onboarding process in place, there are certain things you should include as part of this process in order to overcome any supplier onboarding challenges that could risk derailing the initiative. These include:
- establishing approval policies to make it easier for your procurement team to understand what is and isn’t required when onboarding a supplier
- making it clear what your expectations are for the working relationship with the supplier
- setting up a dedicated supplier portal and using supplier onboarding software such as HICX to make the process as straightforward as possible
- gaining an understanding of who your strategic suppliers are (e.g. those who have the greatest amount of spend attributed and have the greatest amount of value to your organisation). However, you should always aim to have clear visibility over all of your suppliers in any case
- opening up efficient lines of communication between your procurement team and your suppliers.