What is vendor onboarding?
Vendor onboarding, put simply, is the collection of information and documents that are required to set up (‘onboard’) a company as a supplier for your business.
How does this benefit you? It makes the purchasing process faster and more efficient, allowing you to secure the goods or services you need and complete payments easily.
More than this, however, onboarding vendors is an important undertaking because it gives you a much clearer understanding of whether or not a prospective supplier is compliant with relevant laws and regulations.
In keeping with vendor onboarding best practices, it’s crucial that you follow a thorough vetting and validation process for your new suppliers to avoid any potential future issues or pitfalls.
Carry on reading to learn more about the vendor onboarding process.
What should be included on your vendor onboarding checklist?
Broadly speaking, the vendor onboarding process should be used to evaluate the following:
As touched on above, taking risk into account is an important part of the entire process given the ever-changing regulatory landscape, coupled with greater public awareness regarding organisations’ ethics and standards.
While it’s true that onboarding suppliers can be time-consuming, establishing a consistent process means you can at least remove potential obstacles. Our advice would be to follow the steps outlined in the chart below.
Why is it important to have a vendor onboarding workflow?
The real benefit of clearly defining your vendor onboarding process is the flexibility it affords you. Rather than relying on fractured manual processes, trying to work with disparate systems or suffering from a lack of communication across departments, you’ll be able to greatly improve and streamline the data capture process. This is particularly beneficial for large multinationals that have even more complicated requirements.
The key to managing your supply base effectively is good onboarding. However, as it is something that requires time and planning from people across the organisation, the truth is that a lot of businesses find themselves in a reactive, rather than proactive, position. Successful vendor management begins with effective vendor onboarding.
Getting buy-in from decision makers and stakeholders across your organisation may not be easy, but it can help you to lay the foundations for a supplier onboarding process that eradicates many of the problems that often spring up downstream.
Gathering the information and requirements you need at the start of your business relationship will have a positive impact on future processes such as:
- managing risk
- evaluating supplier performance
- ensuring compliance with international requirements
However, even though capturing and utilising better vendor data can yield competitive advantages, it is possible for organisations to become victims of their own success, so to speak.
As they grow and expand into new territories, therefore growing their global supplier base and adopting new ERP systems, organisations inevitably find that their vendor onboarding and management becomes more complicated.
To alleviate this risk, it’s essential for data governance and management to remain front and centre of any business’s thinking and planning, because without it vendor onboarding standards can quickly fall by the wayside and become a mere afterthought.