What is Vendor Onboarding?
Vendor onboarding is the process of integrating new vendors into your procurement processes. Generally, this involves 3 steps:
- Collecting information about the vendor
- Assessing and pre-qualifying the vendor
- Helping your vendor learn to work with your company’s workflows, tools, etc.
When done well, this process not only verifies that vendors meet your company’s standards of compliance and governance, but also helps your vendors understand how to best work with your company.
Why is Vendor Onboarding Important?
By implementing a well-planned vendor onboarding process, you are setting yourself up for success from the very first day of your client-vendor relationship.
- Get to Know Your Vendor: By collecting information about potential vendors, you can make better sourcing decisions based on sufficient data. You will also have more information on hand to bring to the negotiating table and segment your vendors.
- Manage Risks: By conducting due diligence with your vendors from the very start, you ensure that your vendors are compliant with legal, financial, and ethical standards. This reduces the risks of associating with vendors who may pose a risk to your company’s reputation or finances.
- Improve Efficiency: By streamlining and automating a process to onboard all your vendors, your procurement team has a standard template they can use to register new vendors. This reduces the chances of mistakes or missing information.
- Strengthen Relationships: By working closely with vendors to guide them on your company’s workflows and tools, your vendors will feel more comfortable working with you. This is particularly important if you have complex sourcing processes that not all vendors will be familiar with.
Mistakes to Avoid During Vendor Onboarding
While most companies should already have some form of vendor onboarding program in place, not all programs are created equal. Here are 4 common mistakes to avoid when designing or reviewing your vendor onboarding processes.
1. Not Documenting or Standardizing Your Onboarding Program
Often, a program is only as good as the person executing it.
No matter how detailed and thorough your vendor onboarding process is, if it’s not well documented and standardized, the entire program can change or collapse when there is a change in personnel.
This can lead to missing information, or vendors slipping through the gaps in the onboarding process. This opens your company up to governance and financial risks.
By mapping out and documenting a standard vendor onboarding program, and leveraging eProcurement platforms with a Vendor Management module in place, you will be more prepared for business continuity.
2. Not Assigning a Person in Charge
While vendors will often work with many team members in your company, failing to have a single point of contact can make working with new vendors a challenge. This is because of new vendors:
- may not know who to contact for various processes such as registration, order verification, payment etc.
- may not even have the contact information for all the relevant personnel in your company
- may not have a single source of truth, and may receive conflicting information from different departments
- may not be able to build a strong relationship with your company
By assigning someone as the point person to lead the onboarding process, there is greater accountability and clarity for the entire process.
You will also be better positioned to build stronger vendor relationships from the very beginning as it is easier to build understanding and camaraderie with a single person instead of several disparate departments.
3. Not Using the Right Tools
A study found that 38% of procurement executives surveyed still rely on manual procurement processes.
This places a heavy burden of time and energy on your procurement team, as every step from requesting information to conducting vendor pre-qualifications must be done manually.
By integrating eProcurement tools into your workflow, routine tasks can be automated so that your procurement team can be freed up to do more strategic work. In particular, ensure that your eProcurement tool includes:
- self-service portal for vendors to directly submit their information and documents
- user-friendly interface with guided tutorials for vendors to easily pick up the technology
- customizable templates for vendor pre-qualification and evaluation
4. Not Communicating Expectations from the Start
According to a 2019 survey, less than 30% of companies send out “How to work with us” information to new vendors, and less than 20% send out “Vendor self-service portal instructions”.
This creates a steep learning curve for new vendors who must muddle through and figure out basic information such as how to create eProcurement accounts, how to submit invoices, what supporting documents are required, and much more.
At the same time, your procurement officers will also be bogged down putting out fires brought up by vendors who have yet to understand how to work with you.
By preparing a standard vendor onboarding communication kit, you can set both your vendors and procurement team up for success. This kit can include information such as vendor training for your eProcurement system, a process diagram of your company’s workflow, service level agreement (SLA) expectations, and more.
Want to learn more about how WeManage Procurement can help you standardize and automate vendor onboarding in your procurement systems? Contact us to arrange for a demo.