Supplier Onboarding – What it is and How Workflow Automation Simplifies Vendor Onboarding

What is Supplier Onboarding?

Suppliers are critical to successful internal operations. Their importance extends beyond just the supply of goods/services and extends to being a great source of information regarding price changes, regulations, and others. To leverage this supplier information, you need to have a good supplier management framework.

This framework helps procurement teams navigate supplier relationships efficiently. Supplier onboarding is the most important step in the supplier management framework. Onboarding suppliers in a proper manner even before you start working together helps both parties set off on the right foot. 

What is supplier onboarding? In simple terms, supplier or vendor onboarding is the process of gathering prospective vendor information, assessing vendor compliance and risks, and integrating them into your platform and supply chain. The supplier onboarding process is all about creating streamlined processes that strengthen buyer-vendor relationships for improved business outcomes for both parties. Strong relationships are essential for building successful businesses.

New vendor onboarding process makes vendors feel valued, which in turn ensures that quality products and services are delivered. The vendor onboarding process that is built on a robust onboarding process strengthens buyer-vendor ties. 

Having a dedicated person or team that works on onboarding new vendors and suppliers is the best way to manage vendor onboarding. Today’s fast-paced business environment is curtailed by resource crunch, which makes it difficult to allocate dedicated resources for vendor onboarding.

So, what does a new vendor onboarding process entail? Whenever a purchase requisition is raised in the organization, the procurement team sends out requests for proposals (RFPs) to prospective vendors. The quotes received from vendors are compared based on price, quality, and time of delivery. Once the vendor is chosen, a contract is signed with the vendor. All these steps involve a flurry of emails exchanged between both parties. Keeping track of email exchanges manually is an inefficient process that often results in deals falling through the cracks. 

Businesses stand to lose by using a manual system to track RFPs or purchase orders, as the cash flow is stuck in limbo. To build lasting success for the business, you need an effective and strategic supply chain. A streamlined supplier onboarding brings new suppliers into the supply chain by combining risk assessment, due diligence, and business relationship management. 

The supplier onboarding process gives businesses and other organizations a channel to gather the information they need to evaluate, approve, and add new suppliers to the system. Some vendor onboarding processes provide a platform for buying goods and services and making payments to some vendors. This system can be used for direct and indirect spending. Supplier onboarding involves bringing an external party into the organization’s closed system and making them part of the internal team. 

Adding suppliers to the system must be preceded by due diligence on the supplier’s reputation and performance and educating the vendor about the company’s business practices, regulatory essentials, and internal processes. The expectations for the business relationships that you hope to build with the vendor must be clearly set before getting into contract with the vendor. Thorough evaluation of vendors helps minimize miscommunications and unmet expectations and also maximizes the potential for shared success. 

Key Challenges in Manual Supplier Onboarding

Insufficient knowledge of supplier’s past data – Not knowing the supplier’s past data poses a significant risk to the business. This might result in disrupted operations, non-compliance, product recalls or cancellations, inability to fulfill financial and labor obligations, and adverse publicity. 

Communication gap

Manual processes are ridden with wide communication gaps with vendors. Transparent and seamless communication is a must for data-driven decision-making in supplier onboarding. Effective communication between both parties results in improved decisions and alliances that leverage their energies on new prospects rather than administrative difficulties—lack of proper communication results in more time and effort consumption. 

Lack of visibility

Businesses following manual vendor onboarding have limited visibility into existing vendors or suppliers, and have their processes run in isolated systems. The procurement teams cannot gain useful insights from vendor data in a manual system. Employees are also unable to plan, which results in a lack of task prioritization. 

Need for Supplier Onboarding Process

Successful businesses are built on good relationships. Relationships do not apply to clients and customers alone, businesses need to nurture good relationships with vendors, regulatory authorities, and financial institutions too. A supplier onboarding process is the basis for strong supplier management and is the first step towards building crucial partnerships with suppliers. Not only does vendor onboarding strengthen business relationships, it also helps organizations in the following ways – 

• Mitigate risks
• Streamlines processes and increases efficiencies
• Ensures compliance with policies and regulations
• Increases return on investment
• Minimizes process redundancies
• Builds a positive reputation in the industry
• Tracks data and workflow
• Minimizes the time needed to approve and activate new suppliers
• Automates basic tasks
• Eliminates the middlemen and reduces human error

Without organized supplier onboarding, businesses may face reduced productivity and efficiency, and lose valuable business opportunities due to lack of training, management, and partner nurturing. 

Creating the Supplier Onboarding Workflow

The supplier onboarding process is designed to bring together several disparate but interrelated processes, by moving suppliers seamlessly through each of the stages. Although policies and regulations vary in different organizations across industries, supplier onboarding processes are made up of certain common steps – 

1- Establish evaluation and approval parameters –

Before bringing new vendors on board, you need to know what your requirements are in terms of performance, reliability, pricing, compliance, and reputation. Vendor onboarding checklists help procurement teams create an efficient method for collecting and verifying contact information and detailed supplier information. A checklist helps teams in determining whether a supplier is a “go” or “no-go”. 

2- Define requirements and expectations –

The basis of strong vendor relationships is clear and comprehensive 2-way communication. Communicating expectations, business policies, and other requirements clearly to vendors is a must during supplier onboarding. Establishing clear expectations, not only saves time but also streamlines the overall evaluation process. The absence of a clear communication policy results in more time being spent on clearing up misunderstandings. Supplier onboarding establishes clear communication paths, helps in quickly identifying vendors that could be strategic suppliers for your business, and weeds out those that are a poor fit for your team/business. 

3- Save time and effort with vendor portals –

Creating a vendor portal for dedicated data collection from prospective suppliers is a good way to streamline supplier onboarding. Such portals provide self-service access for registration, which enables efficient evaluation from the buyer’s end. Vendor portals not only help familiarize new vendors with the system but also free the procurement teams from low-value data entry tasks and bring down the average time needed for vendor onboarding. All the requirements and expectations developed in previous steps should be included in the vendor portal, which improves the speed and accuracy of the data collection and evaluation process. 

4- Identify and prioritize strategic supplier relationships –

Not all vendors have the same impact on the business bottom line, some of them have a larger impact on the company’s performance and bottom line than other vendors. Their importance could be due to larger spend, or strategic value they provide through superior performance, or access to specific resources at exceptional pricing. Vendors that are identified as strategic partner during the onboarding process require a separate, dedicated process for onboarding them. The onboarding process for strategic vendors comes with additional options with respect to evaluation and approval, without disrupting or delaying the overall onboarding process. 

5- Shift the focus of processes on communication and clarity –

Lack of communication is the single largest reason for lost opportunities, disrupted relationships, and inordinate delays. Having everyone on the same page is much easier to ensure a smooth onboarding process. Clear communication also helps in risk assessment, and effective data management, and accelerates vendor onboarding. 

6- Implement technological solutions –

Even the best business processes will never achieve optimal performance when done on paper by human minds. Technological solutions based on artificial intelligence and automation are the cornerstones of the continuous improvement of business processes. Automating the supplier onboarding process makes it more efficient, eliminates human error, and frees your staff from repetitive tasks so they can focus on high-value tasks that require human touch. Cloud-based workflow automation solutions like Cflow can streamline supplier onboarding by moving all the data to a secure and shared space in the cloud, with real-time, complete, and transparent access to all stakeholders. Automation solutions can be easily integrated with existing purchasing and accounting systems, which makes it easy to incorporate new suppliers and ensure that buyers are getting the best payment terms from sellers. 

10 Tips for Successful Supplier Onboarding 

Here are the top 10 ways to build a supplier onboarding process:

1- Define the approval process clearly.

The supplier onboarding process involves approvals at various stages. A clear definition of who in the organization is responsible for evaluating and approving suppliers. Assigning roles clears any confusion and avoids duplication, which leads to smoother vendor onboarding. The decision on how many people or teams should be involved is based on the size of the organization and the complexity of the supply chain. 

For example, in a small organization with a limited number of suppliers, one person may be sufficient to review and approve vendors. However, for larger organizations with a more extensive supply chain, it may be necessary to involve multiple teams or departments in vendor onboarding. The supplier onboarding process in large organizations involves procurement, finance, and legal departments, sometimes even the IT department. 

2- Set specific requirements –

The team involved in the supplier onboarding process must clearly understand the factors to consider when evaluating and approving new suppliers. In order for the team to understand the conditions clearly, the criteria for vendor evaluation must be determined. This helps avoid unnecessary risks and wasted time working with suppliers that cannot satisfy the company’s needs. Setting requirements clearly improves transparency while communicating with potential suppliers and helps set expectations early on. These requirements will depend on the company’s goals and policies, industry, and type of products and services being purchased. 

The set requirements may be prioritizing quality standards, compliance with regulations and specific ethical and social responsibility standards, delivery and lead time, pricing and payment terms, confidentiality, and data security. Although it may take a lot of time to think of all the criteria, it is a good practice to write them down and create a clear-cut policy to share on the company’s website and guidelines. The advantage of having a clear-cut policy that establishes a standardized set of requirements and evaluation conditions is that you don’t need to reinvent the wheel with each new onboarding. 

3- Set Clear Communication Channels –

The vendor onboarding process involves the exchange of a wide range of information between both parties in the form of policies, documents, questionnaires, and messages. This requires a single communication channel where potential suppliers are allowed to keep information centralized and resolve issues in a timely manner. The supplier onboarding tools must enable seamless communication. Most businesses use email communication by default, which allows attachments that can be accessed anywhere. This is not a viable option, as it may get complicated to surf through email threads to locate the required information. Using specialized supplier onboarding tools helps suppliers fill in their details and attach necessary documents. Another advantage of using supplier onboarding tools is that it lets companies onboard suppliers via the platform for clearer communication. 

4- Verify supplier data –

The company’s policies and requirements dictate the supplier data and documents required from potential suppliers. For example, if an organization’s policy prioritizes sustainable procurement, then it may be interested in the sustainability initiatives of the supplier like reports and certifications on environmentally friendly and ethical operations. Details required are –

• Supplier’s business name and contact details of its point persons
• Financial information (such as default currency, tax information, and account details)
• Product/service category
• Security certifications
• Insurance policies
• Supplier diversity certifications
• Non-disclosure agreements
• Sustainable sourcing reports
• Regulatory compliance information
• Case study or other forms of customer success documentation

Organization’s have to conduct risk assessments to ensure that the vendor information is accurate and complete. This assessment needs to be conducted by verifying against public records, government databases, and other sources of information. Independent research also should be conducted through site visits, testing products, and seeking customer references. 

5- Conduct training sessions –

Supplier onboarding should focus on establishing a successful working relationship between the supplier and the company. The success of the supplier onboarding process depends on how well the procurement team receives the onboarding tool. That is why the implementation process must include training sessions about the company’s operations, workflows, and technology stack. Training may not be required when processes are simple and do not involve complicated vendor management, or if the vendor already uses or understands the needed platform. Either way, providing clear documentation and guidelines may be sufficient for the supplier to work on the product/service delivery. 

In large organizations with complex procurement workflows, it is advisable to conduct training or orientation sessions for new vendors. Avoiding this step may result in errors, miscommunication, and a breakdown in the supply chain. Guidance to vendors may be presented in the form of walkthroughs, videos, one-on-one conversations, webinars, and more. 

6- Sign a contract –

Once a supplier has been approved by the organization, a contract must be signed with the vendor. The contract must outline the terms and conditions of the working relationship. The details outlined in the contract are – pricing and payment details, delivery schedules, quality standards, confidentiality, intellectual property rights, and data security. Using specialized supplier onboarding solutions provides management features that let users store and easily track their contracts. The signing of contracts may be done at different stages of the supplier onboarding process based on the policies and procedures followed in the organization. In some companies, the contract may need to be signed even before the supplier can be onboarded, while in others may consider it as a final step in the onboarding process. 

7- Create a plan for each vendor –

Within the vendor onboarding process, an individualized plan must be created for each vendor. This plan must outline your strategy for growth and steps for achieving the goal with each vendor. Follow-up plans must also be created to make sure that maximum value is derived from each vendor. 

8- Set clear expectations –

Suppliers that are onboarded must clearly understand the expectations for lead time, pricing, payment, and product quality. Some advanced supplier onboarding tools allow users to link data to a document and apply conditional formatting to create a dashboard showing whether or not the expectations are met. 

9- Create onboarding checklists –

With so many variables in the supplier onboarding process, it is easy for things to get lost in the shuffle. To ensure that mistakes or miscommunications are avoided in vendor onboarding, you should create a checklist and designate a person to verify if each item is completed. 

10 – Automate where possible –

Vendor onboarding can be a complex process with several data-intensive verification and validation steps. These steps are repetitive, rote tasks that do not require human intelligence. Automating such steps is a great way to improve process efficiency and simplify the supplier onboarding process. Look for opportunities to automate tasks to improve efficiency and productivity. 

How to Develop an Effective Supplier Onboarding Process?

The first step is to analyze and flowchart the supplier onboarding workflow. Then a vendor checklist must be prepared to cover all of the steps in the supplier onboarding process. The following steps in the vendor onboarding process are ripe for automation –

• Gathering vendor contact information
• Remittance information gathering
• Validation of vendor data for fraud prevention
• Risk assessment of prospective suppliers
• Sourcing new vendors
• Payment status notification
• Vendor management metrics

In a typical vendor onboarding process, multiple departments are involved. Each department has its own data requirements to support day-to-day activities. The supplier onboarding workflow must enable collaboration between these departments for the timely response as needed. The as-is supplier onboarding workflow must be mapped to spot redundancies and repetitive steps. Once these are identified, it becomes easy to plan the “to-be” process that overcomes the shortcomings of the existing process. 

The data-intensive steps in the supplier onboarding workflow can be automated to reduce cycle times and effort for the procurement team. 

Vendor Onboarding Checklist

Each business and vendor partnership is unique, but a basic checklist can be created to walk through the steps in every vendor onboarding process. The supplier onboarding process itself centers around the vendor onboarding checklist, which provides a thumbnail sketch you can follow. We have created a basic supplier onboarding checklist that can be applicable to all types of vendors-

Vendor evaluation 

The first step in onboarding is vendor evaluation and risk assessment. 

• Collecting and organizing supplier information
  • Supplier name and contact information
  • Vendor licenses and required documentation
• Review track record and reputation of the vendor
• Review and evaluate credit history
• Obtain vendor sign-off on code of conduct and ethics
• Perform legal and compliance assessment

Vendor qualification and approval

The approval process is the time to qualify your vendors and ensure that both parties are on the same page before moving forward with the contract. The following points need to be clarified before onboarding the vendor-

• Clarify lead times
• Pricing
• Terms and conditions
• Workflow and business process compliance
• Training requirements
• Delivery
• Order process and specifications
• Expected volume of requirements

Strategic vendor relationships need a more deliberate onboarding process to nurture and develop supplier relationships. Such relationships require much more than a basic checklist that must be customized according to the vendor. 

Data management 

The easiest way to gather supplier data accurately and consistently is to create a centralized vendor portal where onboarded vendors can input information themselves. To gather comprehensive vendor information, you need a detailed form for vendors, and you may need to follow up with each vendor to verify the additional information. While onboarding vendors make sure you gather data on supplier name and contact details, licenses and documentation, and a list of primary supplier contacts and their roles. Data management requires –

• Review of all submitted data
• Making sure all stakeholders have real-time access to relevant information
• Review suppliers for their role as strategic partners
• Addition of suppliers to the system

Performance monitoring and reviewing 

The performance of vendors that are onboarded needs to be monitored on a regular basis to ensure that terms and conditions are met and that they are compliant with the company’s policies. Monitoring and reviewing must be done on the following basis –

• Review vendor performance on a regular basis
• Monitor vendor data to identify potential opportunities for new market development, product innovation, or process improvement
• Streamlining the supply chain as required to optimize the vendor database while ensuring all contingencies remain covered

Implementing supplier onboarding software helps the procurement team to tick all the checkboxes in the above list. 

Benefits of Automating Supplier Onboarding

Automating the supplier onboarding process with a self-serve supplier portal has several advantages. The main advantages are listed below –

• Improved accuracy of data entry and data management 
• Get invoices paid faster 
• Get rid of process redundancies or duplication
• Timely payments to vendors
• Gather and update vendor master data
• Anytime, anywhere access data from the self-serve vendor portal
• Improved risk mitigation and management
• Minimized human error, maverick spending, and invoice fraud
• Improved industry, legal, and governmental compliance
• A robust business bottom line supported by optimal ROI
• Set a healthy and positive industry as a buyer
• A sleek, well-tuned supply chain with minimal bloating
• Built-in fraud protection
• Optimized payment systems

Best Practices in The Supplier Onboarding Process

No two businesses are alike, likewise, the supplier onboarding processes in each company also differ. Every organization can benefit from the supplier onboarding best practices while developing and deploying a successful onboarding process. Here are the supplier onboarding best practices to consider for your business- 

Involve the C-Suite –

It is important to get the top-down buy-in from the beginning of the development process so that it becomes easy to bring the rest of the company on board with the changes. When the adoption of the supplier onboarding process gets a buy-in from the C-suite, the rest of the employees are more agreeable to adopting the supplier onboarding process. 

Give importance to due diligence –

Supplier risk management is a must-have criterion in the supplier onboarding process. Consistent and effective due diligence helps shortlist the right vendor. The supplier risk management process should be built on knowing what needs to be done, when, and how it needs to be done. 

Prioritize data safety and security –

Invest in a data management technology that ensures the highest levels of security for your data. Supplier information, payment data, and customer data must be maintained at the highest levels of security with the latest and most reliable data management solution. 

Automate repetitive tasks –

There are several data-intensive tasks in the supplier onboarding process. Automating these tasks not only improves the efficiency of the process but also reduces errors in tasks. Automation provides better control over the supply chain management process flow. 

Stay flexible –

Sustainability in a business can be achieved through continuous improvement. Focusing on continuous improvement instead of hard lines of performance ensures that your system is prepared for current and future supplier relationship challenges. 

Why is Cflow your Preferred Vendor Onboarding Solution?

Building a winning team of suppliers requires a reliable and efficient vendor onboarding solution like Cflow. A no-code BPM workflow automation software like Cflow helps businesses set up key process workflows within minutes. You can set up automated workflows without writing a single line of code by moving visual elements that represent tasks in the process. The dependencies between tasks can also be easily represented with the visual form builder in Cflow. This feature rich workflow automation platform helps procurement teams build a supplier onboarding process that is agile and flexible. Key features of Cflow include – 

• Drag and drop visual form builder
• Automated alerts and notifications
• Exclusive customization as per process requirement
• Real-time reports and analytics
• Intuitive dashboard
• Rules engine
• Auto approval 
• Data encryption and security
• Simplified Kanban framework for task prioritization