Supplier Onboarding — The Ultimate Guide

What is SupplierOnboarding?

Supplier onboarding is the process of collecting and analyzing the supplier or vendor’s information to register them in the company’s system. 

To put it simply, supplier onboarding is about establishing a streamlined and efficient process to build stronger buyer-seller relationships that improve the business outcomes of both parties.

The procedures of onboarding help the company to conduct business, buy goods or services, and pay the supplier efficiently. It also requires validation and vetting in ensuring that the potential supplier complies with applicable laws, rules, regulations, and corporate standards.

I have created a free-to-download, supplier questionnaire template. It includes a PDF file that contains the questions that you can ask your suppliers to assess them effectively if they are the best partners for your procurement process. 

Supplier Onboarding Best Practices

Below are the best practices for supplier onboarding:

1. Assign a key person in managing onboarding checklists

Due to multiple requirements and steps in the process, it is normal for things to get lost on the track. To avoid mistakes and miscommunications, you can try to designate one person to be responsible for verifying each item on your checklist.

2. Use automation 

Onboarding new suppliers or vendors can be tedious. You can try to look for opportunities to automate tasks to improve efficiency and decrease errors in manual tasks.

3. Utilize the onboarding process as a guideline

Each supplier that may want to work with you is different. You can use the onboarding plan as a guideline in dealing with potential suppliers.

4. Make a plan for each vendor and follow up

In the onboarding process, you should try to establish a plan for each vendor or supplier that outlines your strategy for growth and the steps to achieve it. After that, you can follow up on the plans to ensure that you are getting value from that relationship.

5. Set expectations

In the onboarding process, you should ensure that suppliers understand the expectations for pricing, lead times, payment, product quality, and other factors regarding the procurement process. 

Establishing a Supplier Onboarding Process

Establishing an effective supplier onboarding process is paramount for businesses seeking to streamline operations, enhance relationships with vendors, and ensure compliance with standards and regulations.

Below are the steps to establish your onboarding process:

1. Establish an evaluation and approval process

When you are starting to build your own onboarding program, you will need to start with creating supplier evaluation and approval policies. This will allow you to be guided by who you want to work with and know the steps your team and the potential suppliers must take to move through the approval process.

2. Set requirements and expectations

After you have established your guiding parameters, you should set business requirements and expectations for the working relationship. 

Establishing clear policies and supplier requirements will help your business managers and other stakeholders quickly source suppliers. Thus, it ensures that the parties involved understand what is expected. 

Clear policies and expectations increase efficiency and decrease the confusion and potential friction that may arise from misunderstanding.

3. Build a supplier portal for registration and information collection

If you do not have one, then this is the time you should set up a supplier or vendor portal for potential suppliers to register and send their proposals in hopes of working with you. 

The procurement portal should have a form where suppliers will fill out their contact details and other information that will help your team to quickly assess the proposals. This improves the accuracy of your data and streamlines the information-gathering process. 

4. Create a process for strategic supplier partnerships

Strategic suppliers or vendors are those who have more impact on the business. Commonly, they represent a huge proportion of spend compared to other suppliers. They may also have other strategic value that can benefit the business. 

Due to their significant impact and value to the business, it makes sense to have a separate onboarding process for these suppliers.

5. Build a culture of communication

The last step is to build a culture of communication which is a crucial step in the onboarding process. 

While developing your onboarding process, you must keep communication in mind. The process must be easy for different departments and stakeholders when sharing and assessing supplier data so that all parties are well-informed. 

Thus, this step will enhance efficiency across the onboarding process, mitigate risks of delays or mistakes, and promote a good relationship with your suppliers.

Challenges in the Supplier Onboarding Process

Here are some challenges you may encounter during the onboarding process:

1. Employees have no idea which suppliers are already working with the company. 

Many huge companies often have way too many onboarded suppliers for the same service or good. Having duplicated vendors not only wastes time but could end up causing the company to pay more. 

Additionally, employees will be confused about which suppliers they should talk with as the company has many suppliers. 

Another reason that companies have no idea which supplier to go to is due to the fact that the ERP system of the company is not accessible to everyone. Thus, employees do not know where to turn to get updated supplier information.

2. The line of communication with the suppliers

When only one person or department has a direct line of communication, it can also cause problems because they may get bombarded with emails relating to questions from suppliers.

The communication chain is highly efficient when the important key persons or departments can communicate directly with the supplier and not just the procurement manager. 

3. Lacks transparency

Supplier onboarding is a crucial process for companies to manage to continue their operations. However, many companies are using an outdated approach to supplier onboarding which includes broken communication chains, error-prone manual tasks, and unnecessary delays. 

The lack of transparency in the onboarding procedure makes many parties involved in the process blind to the context in which the need for the vendor arose, leading to more inefficiencies. 

Benefits of Having a Self-Serve Portal in the Supplier Onboarding Process

Having a portal for the onboarding process helps the company to acquire accurate information about the suppliers. It also allows the company to compare proposals of each supplier quickly. 

Having a portal will make every process transparent and accessible to all employees to know the status of the acquisition of goods and services.

Other benefits include the following:

• More accurate data entry and management
• Pay the suppliers faster
• Avoid redundancies and duplicates
• Avoid payment errors
• Suppliers can access the portal anytime, anywhere. 
• Transparency in payment and order processing
• Automates repetitive tasks
• Many portals have built-in procurement fraud protection

Conclusion

Supplier onboarding is a vital aspect of business operations, impacting efficiency, cost management, and overall vendor relationships.

Establishing clear processes, utilizing technology, and emphasizing communication are key elements in ensuring a successful onboarding experience.

Overcoming challenges and adopting best practices contribute to a streamlined and transparent onboarding process, ultimately benefiting both the company and its suppliers.