You know you can’t just fly supplier management and supplier incorporation processes. All companies, if they have sufficient scale and expect to operate efficiently in the coming years, have a formalized supplier onboarding process to facilitate working relationships with new suppliers and standardize expectations throughout the company.
We all understand the importance of comprehensive and well-thought-out supplier onboarding systems. However, it is less common to leverage next-generation automation and artificial intelligence (ai) tools and platforms to further streamline the process.
Even the best manual supplier onboarding procedures tend to be complicated and cause confusion or friction at key points, much of which is reduced by automating supplier onboarding processes.
What is supplier onboarding and supplier onboarding?
Supplier and vendor onboarding describes the rapid progress after confirmation of a contract or an accepted offer. After due diligence of a bidding process, onboarding requires collecting tons of information and documentation (insurance, NDAs, certifications, etc.) to ensure compliance and manage risk. And that is just the beginning.
You will need to:
- Create a supplier profile within your supplier management platform.
- Guide your supplier through your unique workflows throughout the contract lifecycle, including fulfillment, billingand pay.
- Create a set of shared expectations driven by your company’s goals, mission, and ethical requirements.
Ultimately, the granular onboarding process depends on your specific industry and business. However, in general, supplier onboarding is a permutation of the above, but often encompasses much more depending on their technology platforms, financial positioning, and even geographic location.
Here it is a supplier onboarding checklist, published by hardware giant Lowe’s, that shows how lengthy and nuanced the process is, even when it is well defined and described. Here it is Another, even longer, onboarding checklist from Walmart.
Challenges of onboarding legacy suppliers
The biggest and most common challenge associated with legacy onboarding is the time and effort each integration requires. Depending on your company, you could easily add ten or more new suppliers a year. If each onboarding cycle lasts a week or more, an entire work week is lost. Some companies dedicate a specific team member to onboarding, while others make onboarding within a specific domain an additional task for employees on top of their daily work. In any case, onboarding requires time and effort that you would probably prefer to spend elsewhere.
The worst part is that with manual supplier onboarding, you run the risk of human error or omission, putting your operation at risk. Failing to collect key compliance documentation, shifting focus between typical tasks and onboarding, missing a critical data point – all of these, and more, are very real effects of human error when overloading employees with accompanying vendors across the incorporation several times a year.
Finally, while consistent processes are the gold standard for effective onboarding, the fact is that the human impact of manual onboarding creates divergences from established procedures and can obscure critical information. For example, imagine you have a dedicated employee who manages onboarding. They’re a rock star and can onboard a new vendor in their sleep without consulting the laborious onboarding guide you’ve created. Better yet, through experience, they have created efficiencies and shortcuts within the onboarding process.
Sounds great, right?
It is, until it isn’t. If that employee leaves, he will have lost years of institutional knowledge that is not codified and cannot be replicated by his replacement. Worse yet, they probably weren’t iteratively updating their process manual. You are now years behind schedule, costing your company time and money and possibly straining relationships with current and potential suppliers.
Benefits of streamlining the supplier onboarding process
Even if you stick with traditional onboarding, the benefits of streamlining that process are clear (as demonstrated by the corporate onboarding documentation linked above). When you proactively manage your onboarding to optimize efficiency, you:
- Improve relationships between sellers and suppliers by creating mutual trust, transparency and ease of working together.
- Reduce the risk associated with missing key documentation or skipping integral steps.
- Save money by reducing labor and avoid unexpected expenses that often arise during ad hoc onboarding processes. At the same time, while infrequent and deliberate incorporation may identify supplier fraud before it becomes a problem.
- Generate an effective supply chain, avoiding the bullwhip effect, which often creates excess supply and excess inventory in reaction to a short-term supply shortage.
- Ensure compliance with relevant legal and regulatory requirements while protecting yourself from vendor disputes in the event of a mismanaged manual onboarding.
- Avoid delays and obstacles during invoice routing and invoice processingkeeping suppliers happy and paying on time.
After all, an effective onboarding process is like the final stage of an interview. But in this case, the provider is incorporating it. If the onboarding process is complicated, unclear, or difficult to navigate, you don’t pass the interview. Likewise, having a smooth onboarding process sets the stage for a fruitful business relationship while communicating your commitment to ease of use and communication authority as a well-run business.
How companies automate supplier onboarding
Today, the most efficient companies are optimizing supplier onboarding by leveraging supplier onboarding software or ai-powered and almost fully automated supplier onboarding solutions.
Although your specific supplier onboarding portal o Onboarding software requirements depend on the nature of your work and types of vendors, commonly automated onboarding systems include:
- Data repository: When you automate the initial documentation and data requirements, you build the system once and you’re done. After that, the provider enters all required information and the system automatically updates iteratively according to a pre-programmed schedule or as information changes.
- AP Automation Software: Manually managing your accounts payable is one of the biggest wastes of employee time and can be devastating if human error causes a misplaced digit to slip through the cracks. AP Automation cut your days of outstanding accounts payableimproving your cash flow to create greater predictability and capital forecasting.
- Supplier Self-Service Portals: Your provider won’t have to wait for business hours to answer common questions or complete their part in a required workflow. As we increasingly globalize operations, having a centralized self-service portal reduces inefficiency and waste caused by working across time zones.
- Data monitoring: As the saying goes, you can’t change what you don’t track or measure. Automated onboarding tools create complex data sets that would otherwise take hours to model, and intuitive dashboards display that information in a way that drives decision-making at the highest levels of the company.
- Creating a common language: Suppliers and buyers often use different software or tracking mechanisms. Integrating automated onboarding processes improves communication and long-term viability by bringing disparate workflows, data sets, and more to a mutual, comprehensive understanding.
Conclusion
Onboarding vendors and vendor onboarding software have been latecomers to workforce digitization, but they are quickly gaining traction. Automated onboarding helps even the smallest companies focus their efforts on what matters (operations and value creation), while improving supplier integration faster than before. Better yet, a suite of ai-powered tools within common supplier onboarding software can help executives and managers improve cross-functional efficiency by turning mountains of data into actionable insights.
