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Onboard New Suppliers Faster and with Less Risk with These Five Supplier Onboarding Tips

Leanne Strickler
Published August 08, 2022
supplier onboarding best practices

Without vendors and suppliers, most businesses wouldn’t be able to function from day to day. Whether suppliers are responsible for raw materials needed to produce finished goods or supplying essential services necessary for company operations, the importance of suppliers necessitates building strong and secure relationships. 

Minimizing vendor and supplier risk and ensuring long, strong relationships is more than just finding the best suppliers. According to Deloitte, 60% of CPOs cite poor data quality, standardization of practices, and governance as the largest procurement problem they face. Having a standardized supplier onboarding process helps increase accurate supplier data capture and quality. Inefficient onboarding processes not only slow your company’s time to market and increase your company’s exposure to undue risk, but also reinforce lack of transparency as a norm for your suppliers. 

Your company’s onboarding process sets the stage for all of your supplier relationships. Efficient and accurate onboarding processes ensure suppliers are aware of and agree to your transparency and communications expectations. Standardized onboarding practices allow suppliers to become partners in data security and transparency. Efficient and transparent onboarding enables positive supplier relationships and helps reduce your company’s exposure to risk.

While risk reduction is a top priority for over 90% of CPOs, poor supply chain transparency leaves a significant number of procurement officers with little to no knowledge of risk beyond their tier 1 suppliers. Lack of supply chain transparency also affects the end customer as well. Over 60% of consumers will not purchase from a company that they do not trust. If your supply chain has low levels of transparency, there are few tools available to use to gain consumer trust.

Adopting best practices for vendor and supplier onboarding will help you create a process that lays a strong foundation for your supplier relationships and ultimately increase profitability while reducing risk for your company. 

What is Supplier Onboarding?

Supplier onboarding, or vendor onboarding, which is part of supplier relationship management, is a process that allows organizations to efficiently vet, qualify, approve, and contract vendors so that goods or services can be purchased, and make timely payments to current and new supply partners. 

While many onboarding processes are similar, organizations may go about them in different ways. The process can either be paper-based or digital, managed via the buyer or self-directed by the supplier. Supplier onboarding isn’t that different from new employee onboarding. 

A well-designed supplier onboarding process helps your company avoid potentially expensive mistakes, including avoiding risks that could put your organization in legal, reputational, or compliance trouble. 

The Supplier Onboarding Process

In this article, supplier onboarding is broken down into five steps:

  1. Identify the need for a new supplier according to procurement requirements. Any new supplier onboarding exercise is triggered by a need identified by procurement.
  2. Identify potential suppliers and evaluate them. During this process, your organization should gather data pertaining to service record, reputation, credit history, and regulatory, financial, and legal compliance.
  3. Qualify suppliers. Once a supplier has been evaluated, your company should use a predetermined qualification process to qualify (or disqualify) a potential supplier. The qualification process should reflect your company’s policies regarding lead times, pricing, ESG credentials, and terms and conditions. Suppliers that do not pass your company’s qualification process should be removed from consideration while those that pass the qualification process can be approved.
  4. Collect supplier information. Your organization should collect supplier information either via a buyer-led process or through a self-service portal. Using self-service portals is considered best practice and saves buyers and suppliers a considerable amount of time. Your company will need to collect different types of information, including payment details. You’ll also want to ensure that suppliers have access to any necessary systems, and that internal stakeholders have access to supplier information.
  5. Regularly review supplier performance. Supplier performance should be assessed on a regular basis after onboarding. This ensures the onboarding process has been completed and ensures that suppliers are always meeting company procurement standards and requirements in the future. 

Supplier Onboarding Best Practices

In practice, supplier onboarding is often an inefficient, time-consuming process that can often take months to complete. Luckily, there are many steps your organization can take to optimize the onboarding process. By adopting best practices, you can streamline vendor selection, speed up the onboarding process itself, and ensure new relationships with vendors have the best chance at success. 

  1. Take due diligence seriously. Spending additional time on the supplier selection process can ultimately save you time by removing unfit suppliers sooner rather than later. Pay particular attention to reputational risk, financial information and risk, insurance information, and the supplier’s information/data security measures.
  2. Prioritize data security. Keeping supplier data safe is crucial, so it’s important to invest in systems that keep your supplier information and data protected from threats. A paperless supplier information management system will help you protect this incredibly valuable information.
  3. Get leadership buy-in ASAP. Having leadership buy-in early on is essential when creating a supplier onboarding process. Make sure all necessary stakeholders are involved in the process from the beginning. Getting buy-in from leadership ensures that your entire organization uses and understands the process, thus driving success in onboarding. 
  4. Be consistent in your approach. Make sure that your onboarding process is used company-wide. Consistent use means consistent results, but your care and attention shouldn’t stop after the onboarding process is finished. Ongoing supplier management brings about additional benefits for your business, like better time to market, supplier innovation, and more.
  5. Automate when possible. Traditionally, onboarding processes can be time-intensive, labor-intensive, and costly. According to Informatica, businesses who automate part or most of their supplier onboarding processes spend up to 80% less time onboarding new suppliers. Using automation tools whenever possible allows for greater accuracy and efficiency when obtaining necessary information. You can maximize onboarding efficiency by establishing a self-service portal where suppliers can enter in their own data.

Key Benefits of Strategic Supplier Onboarding 

Developing a strong and well-managed supplier onboarding process helps your organization create an efficient and effective supplier relationship management program. A clear, efficient, and easy-to-understand supplier onboarding process creates a strong foundation for relationships that focus on mutual success. 

Alongside relationship benefits with suppliers, your organization will also see these additional benefits when best practice supplier onboarding is instituted:

Supplier Risk Management Solutions from SupplierGATEWAY

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We’ve launched over 2,500 self-service supplier onboarding portals and work with some of the world’s top brands and companies like Nike, The NBA, Vizient and LVMH.

Efficient and accurate supplier onboarding is just the beginning of effective supplier risk management—discover how our Supplier Risk Management software saves you time and money while creating more transparent supply chains and helping your organization mitigate risk.