A Guide to Vendor Onboarding
Last updated: December 2, 2022
Establishing and navigating relationships with new vendors can be complicated. If you are in charge of procurement, you need a system for onboarding and developing these partnerships with vendors. Without this system, you risk sacrificing profit margins and losing valuable business. A formal onboarding process can increase the efficiency, profitability and performance of your business. By onboarding your vendors before you begin working together, you can ensure your partnership starts on the right foot.
In this guide, you'll learn what the vendor onboarding process is, why smooth vendor onboarding is important, best practices for vendor onboarding and what to consider when developing supplier onboarding processes. We'll also cover how to create your supplier onboarding system, what to include on your vendor onboarding checklist and how Dryden Group can help with your onboarding.
What Is the Vendor Onboarding Process?
Also referred to as supplier onboarding, vendor onboarding is a procedure in which your organization collects vendor data and documentation efficiently to assess vendor risks and compliance, approve vendors and integrate them into your supply chain and platform. The process also includes purchasing services or goods and making timely payments to current and new suppliers.
Think of vendor onboarding as similar to employee onboarding. During these steps, new team members receive materials and training that help them understand your company's processes, practices, expectations and compliance regulations. Supplier onboarding is essentially about creating a streamlined process to facilitate a strong buyer-vendor relationship that leads to improved business outcomes for your company and vendor.
Why Smooth Vendor Onboarding Is Important
Vendor management starts with vendor onboarding, which is one of the most important business processes to develop. With vendor onboarding, you can increase your efficiency, achieve a greater return on investment (ROI) and reduce your costs and risks. When you develop a vendor onboarding process, you may be able to avoid many of the pitfalls that occur because of poor supplier management.
You should nurture your relationships with both your customers and suppliers, and smooth vendor onboarding enables you to do so. The benefits of developing a seamless vendor onboarding process include:
- Risk management and mitigation: You can mitigate your risks with effortless vendor onboarding that validates your vendors, educates them on your requirements and ensures everyone is in compliance with government and industrial regulations.
- Greater competitiveness: If you spend a large portion of each sales dollar on goods and materials from suppliers, your company's buying performance and vendor management are crucial factors in determining your competitiveness. Better vendor management can lead your company to increase its competitive edge.
- Improved brand reputation: Suppliers that perform poorly can negatively impact both your partnership and brand, damaging your company's reputation. When you implement smooth vendor onboarding processes, you can improve your reputation with customers, employees and shareholders.
- Stronger vendor partnerships: Easy vendor onboarding allows you to establish mutually beneficial partnerships with vendors that include ongoing communication, training, review and approval. With strong relationships, you can avoid disruptions in the supply chain.
- Increased profitability and efficiency: Finally, you can also improve your company's profitability and efficiency by reducing redundancies, clarifying expectations, tracking costs and aligning your purchases with your goals. Streamlining your vendor management can also reduce waste, increase productivity and improve your overall ROI.
A vendor onboarding process can help you:
- Increase efficiency
- Reduce human error
- Automate basic tasks
- Streamline processes
- Eliminate intermediaries
- Track workflows and data
- Increase your return on investment
- Ensure compliance with rules and regulations
- Decrease the time needed to approve and activate new vendors
Regardless of your organization's size, taking a strategic approach to procurement and implementing straightforward vendor onboarding is essential for success.
Best Practices for Vendor Onboarding
Though no two companies are exactly alike and your vendor onboarding processes may differ from other businesses, there are various best practices that any organization can benefit from. When you follow best practices for vendor onboarding, you can avoid costly mistakes that could put your organization at compliance or legal risk.
- Track data: One of the best practices to follow for vendor onboarding is tracking data. You need to track your data to identify where you can make improvements.
- Train vendors: Train vendors on using your platform, and give them the tips they need to be successful.
- Develop a team: Create an internal staffing plan and a team that can oversee the vendor onboarding process.
- Set expectations: Ensure vendors are aware of expectations for pricing, lead time, payment, compliance, certifications and product quality.
- Develop contracts: You may want to develop different contracts for each type of vendor. For strategically important suppliers, you may also want to establish additional governance.
- Prequalify vendors: Use vendor prequalification to reduce risks and fraud from the beginning. Vet potential candidates carefully by evaluating their track record and ability to meet your company's criteria.
- Invest in technology: To efficiently manage your vendor data and keep your sensitive information secure, invest in the appropriate technology.
- Automate processes: Whenever possible, automate your onboarding processes. By automating them, you can reduce human errors and increase the efficiency of your vendor onboarding.
- Create a written policy: Collect crucial information, establish a policy and write down your process.
- Find the right vendors: Figure out how to attract and identify the best vendors, and prioritize potential suppliers by the value they can offer your company. This is the order in which you should onboard your suppliers.
- Take a strategic approach: Take a strategic approach to your vendor management to ensure your process aligns with your financial and business goals.
- Implement training internally: Implement internal training to make sure your team completely understands the onboarding process and the technology involved.
- Organize vendor information: Develop a thorough list of vendors, including their documentation and contact information.
- Protect sensitive information: At every stage, be sure to protect your business intelligence and financial resources by utilizing the latest, most dependable security software.
- Create plans for every supplier: Develop an individualized plan for every vendor partnership in which you detail your growth strategy and the steps you plan to take to achieve this growth. Follow up on your approach to ensure your business is getting the greatest value from your partnership.
- Encourage buy-in from leadership: Your company's leadership buy-in influences the rest of your team and drives success.
- Understand the rules and regulations: One essential best practice to follow is learning about and understanding all the internal, global, and local compliance and legal concerns that apply to your company.
- Remain flexible with onboarding: Remain flexible so you can modify your onboarding process as you learn more about what works and what could be improved.
- Communicate openly with teams and vendors: Be sure that vendors and team members always have up-to-date information by communicating openly. Establish timelines and provide access to complete, relevant data so you can manage your plan. You can also better manage expectations by sharing information with your suppliers.
- Assign someone to manage the vendor onboarding checklist: To ensure effective communication and prevent mistakes, you may want to assign someone as the designated person responsible for verifying all the items on your vendor onboarding checklist.
- Learn more about technical challenges with vendor onboarding: Take a class or read up on the technical challenges regarding vendor onboarding that you may face in your particular industry.
Vendor Onboarding Checklist
If your company is partnering with vendors, you need to know how to develop your supplier onboarding process. There are several stages you'll have to develop. Though every relationship with a vendor is different, it can be helpful to create a vendor onboarding checklist to run through when working with a new supplier. Use the list below as a guideline to develop your own vendor onboarding checklist.
1. Evaluate Vendors
The first step is evaluating the vendor and assessing the risk of partnering with them. You'll need guiding parameters to help you determine who you are willing and not willing to work with. You can do this by:
- Establishing a backup plan.
- Evaluating whether the vendor complies with regulations.
- Reviewing the vendor's financial health and credit history.
- Requesting the vendor's signature on an ethical code of conduct.
- Checking the vendor's track record regarding their service or product.
2. Collect Vendor Information for Approval
The next step is the approval process, in which you qualify a vendor and ensure you are both on the same page before proceeding. Take some time to determine which steps your team and prospective suppliers should take to successfully move forward in the approval process. Before you approve a vendor for partnership, be sure to gather the following information:
- Contact details
- Banking details
- Registered supplier name
- Contact details of supplier representatives
A strategic vendor partnership could require a more deliberate approach to onboarding so you can carefully develop and nurture your business relationship. To onboard certain vendors, you may want to make your checklist more detailed.
3. Gather Product and Logistical Information
Next, gather information about the vendor and their operations by using a vendor portal where they can enter their information. After the vendor supplies you with the necessary information, you may want to follow up to confirm it or request additional information. The product and logistical information you gather should include:
- Lead times
- Pricing plans
- Payment terms
- Orientation sessions
- Supplier training requirements
- Service or product specifications
- Logistics for the delivery process
- Process for returns and account credits
- Order format and placement requirements
- Extras required, such as labels and packaging
- Expected volume, frequency and nature of requirements
4. Establish Expectations and Requirements
Another part of the approval process is clarifying your expectations and requirements for your working partnership. Use this step to establish clear policies and vendor requirements that will help your business managers and stakeholders vet and appropriate the right vendors. Establishing these expectations and requirements will also ensure you and your vendor understand what is expected from your working relationship. With these policies in place, you can increase efficiency and minimize confusion and conflict.
5. Share Information Internally and With Your Supplier
After you collect all the necessary data, share it will every stakeholder involved. Give your vendor and logistical information to the following teams and departments:
- Inventory control and warehousing department
- Purchasing department
- Accounts department
Be sure to also share the following information with your supplier:
- Submit invoicing details.
- Offer necessary orientation and training sessions.
- Record and send all agreed-upon terms for formal approval.
- Provide contact details for essential personnel and representatives.
Clearly communicating accurate information is crucial for ensuring a smooth vendor onboarding process. Make sure your warehouse, purchasing and accounts managers have the details needed and share a final approval contract to review before supplier activation.
How Dryden Group Helps With Your Supplier Onboarding Process
At Dryden, we can help with supplier relationship management, which is the process of effectively compiling and organizing all your vendor data. When you work with us, you can implement effective strategies to decrease the following risks of a vendor partnership:
- Lost revenue
- Increased costs
- Delivery delays
- Missing deadlines
- Reputational damage
- Lengthy production cycles
We understand the challenges your company could face that may hinder your vendor relationships, which is why we offer procurement consulting services. Enjoy the following benefits when you choose our vendor relationship management services:
- Maximize your value: Our vendor management services include assistance on how you can be a more valuable partner in the vendor-purchaser relationship.
- Segment your supply base: Our segmentation approach can minimize waste, improve procurement efficiency and eliminate redundancies that may negatively affect inventory management.
- Increase your opportunities: By helping you establish supplier relationships, we can increase your opportunities and get your products on the market more quickly.
- Lower the costs of labor and materials: We'll help you get the supplies you need at lower costs by comparing product prices from multiple suppliers and identifying the vendor that meets your requirements at the best possible price.
- Implement dependable vendor performance metrics: Our metrics can help you evaluate each of your vendor's performance with greater accuracy. You can also identify which vendors are helping you achieve your operational objectives.
Contact Dryden for More Information About Vendor Management
At Dryden, your bottom line is our top priority. We are a Philadelphia-based cost containment company that services numerous Fortune 500 and large healthcare businesses. We aim to deliver the best-in-market procurement services through several indirect commodity tools and services. We have more than 10 years of experience and are committed to continuous innovation.
With more than $1.5 billion in total savings delivered, we can save you money in indirect commodities. Our hands-on approach to contract creation and renegotiation provides an unparalleled level of knowledge in the specific terms and conditions that are designed to erode client spend programs. We combine our expertise in indirect spend, analytics and market intelligence into a single solution. Contact us at Dryden today for more information about vendor enablement.