Nowadays, outsourcing is not just about getting goods and services from third-party suppliers, it is in many ways an innovation enabler. As businesses enter into complex contracts with global suppliers across geographies, multi-vendor ecosystems need to be managed efficiently to handle different contracting and commercial models. In fact, according to an estimate, ineffective contract and vendor management can result in value leakage of about 5 to 8% of the contract value during the lifecycle.
This presents an opportunity for an integrated vendor portal or a vendor management system that improves supplier relationship management, increases visibility, and ensures effective risk and compliance management. However, it all starts with a robust supplier onboarding process.
So, let us discuss how you can develop a successful supplier onboarding process and how e-procurement platforms can prove useful.
Why Have a Vendor Onboarding Process
Developing lasting relationships with suppliers is critical for an effective supply chain. However, it is not as easy as it may sound. You have to identify, connect with, and integrate new suppliers to fulfill your unique business needs and this requires a comprehensive appraisal, risk assessment, and business relationship management from your side.
Supplier onboarding or supplier relationship management helps you collect the relevant information that you need to assess, approve, and add the new supplier to your system, platform, or supply chain. Interestingly, many experts believe that vendor onboarding is no different from employee onboarding!
Having a vendor onboarding process helps a procurement team in the following ways:
- Evaluate or qualify vendors based on their reputation, performance, past deliverables, industry standing or expertise, etc.
- Apprise vendors about the business, internal policies and processes, regulatory requirements, as well as expectations in terms of deliverables.
- Strengthen business relationships and strategic supplier relationship
- Improve business outcomes for both the vendor and the buyer
- Reduce time to approve and activate new suppliers
- Avoid unnecessary intermediaries that delay the process
- Automate repetitive, basic tasks
- Avoid redundancies, invoice fraud, and unnecessary (maverick) spends
- Build a healthy reputation in the market/industry as a buyer
- Monitor all data and workflow
- Ensure regulatory, governance, and legal compliance
Developing a Successful Supplier Onboarding Process
For building a robust supplier onboarding process, a number of steps are involved. Here are some of the important ones.
Step 1: Determine an evaluation and approval process
Before onboarding vendors, you need to determine the parameters to assess which vendors you will work with. These parameters can be varied but may include pricing, reputation, performance, past experiences, compliance, reliability, etc. In this step, ensure you have a foolproof method of collecting all the required details against your parameters in a centralized accessible system or platform.
Step 2: Outline your needs and expectations
It is required that you keep open and clear communication with vendors on your requirements, business policies and expectations in terms of deliverables. A clear understanding between you and the vendors during the onboarding process will ensure that you do not waste time later on. Clear expectations will also help you expedite the vendor selection process, reduce any potential friction, improve efficiency, and most importantly streamline the entire process.
Step 3: Use a vendor portal or an all-inclusive e-procurement solution to collect data
Utilizing the right technology and tools during your supplier onboarding process can help you save time and costs. Such tools can help avoid manual, time-consuming data entry that is also prone to human errors and bias. This will help reduce your onboarding time, streamline your data entry process, improve access, and also increase the speed and accuracy of data collection to expedite the vendor evaluation step. Modern and affordable e-procurement solutions like Induzbuy can very well support and expedite your vendor onboarding process and also automate critical aspects of the entire procurement process including vendor management, contract management, pricing comparison, vendor and invoice-level reconciliation, and much more!
Step 4: Create a process for building and prioritizing strategic supplier relationships
Strategic suppliers or vendors make a significant impact on your business. It can be that they have the major share of your spending, give you access to specific resources, or offer a very competitive price for superior performance. Because of the value they bring to your business, it is important to identify and prioritize partnerships with them during the onboarding process. Businesses may also create a separate, dedicated onboarding process for such vendors without disturbing their overall onboarding process.
Step 5: Establish a process for clear communication
Ineffective communication can lead to missed opportunities, costly delays, and mismanaged relationships. When internal and external stakeholders are on the same page, the onboarding process including risk assessment or data collection and management becomes swift and efficient. When different departments have access to accurate vendor data, the best decisions can be made to promote positive vendor-buyer relationships.
Please make a flow chart of these steps to add as an image
Your Vendor Onboarding Checklist
This checklist will help you check out all the essential tasks that you need for developing a successful supplier onboarding process.
1. Vendor evaluation
- Collect and organize the vendor information including name, contact number, address, key contacts, required licenses, etc.
- Review their past track record
- Assess their financial or credit history
- Assess their compliance with regulations/legal/governance
- Get a sign-off on the ethical code of conduct
2. Vendor approval
Communicate and clarify your requirements and expectations in terms of
- Expected volume
- Pricing
- Lead times
- Payment terms and other T&C
- Delivery
- Training requirements if any (internal accounting or procurement platform training for data sharing, invoicing, etc.)
3. Data sharing and management
- Review data to ensure accuracy and completeness
- Give access to relevant information to key stakeholders and departments
- Review if the supplier is a strategic supplier
- Add supplier to the system and update all the required information for effective vendor management
4. Vendor review
- Assess or review vendor on performance, compliance etc. regularly
- Track vendor data for new opportunities, improvements, innovation, etc.
- Streamline the supply chain and maintain contingencies
Best Practices for Vendor Onboarding Process
Here are some best practices to help you ace your supplier onboarding process!
- Get key stakeholders on board with the idea of the development of a supplier onboarding process. Since it may require collaboration and data exchange from different departments and implementation of technology or automation of tasks, don’t miss out on getting the buy-in of C-suite executives.
- Get effective supplier risk management in place to know how to respond to unforeseen situations.
- Protect and secure all your data including supplier information, product data, customer data etc. to avoid any breaches.
- Adopt technology and automation for better control and visibility over your supply chain as well as increased efficiency and profitability.
- Continually monitor your processes and systems for improvements and mitigating risks in managing supplier relationships.
Why Invest in Technology for Vendor Management
Digital procurement transformation has been bringing continuous improvements in business processes and management. Automation has driven processes, reduced bias and error, and freed time and resources to focus on driving strategic growth. This is exactly what an e-procurement management solution can do for your business. By taking away the stress and hurdles from your procurement process including supplier onboarding, e-procurement software such as Induzbuy can streamline all the critical tasks—be it vendor management, contract management, accounting and reconciliation, or inventory management.
Additionally, advanced analytics tools can help extract insights from data to explore new opportunities for saving costs, removing under performing vendors, meeting sustainability goals, bringing innovation into your product line, and much more!
To know more about how Induzbuy can be the right digital transformation partner in your procurement process, get in touch with us today!
