Suppliers or vendors are a key part of the manufacturing process. The quality of raw materials and the ready availability in the required quantity and quality go a long way in preventing nonconformance and ensuring the timely delivery of quality and safe products and services. Therefore, identifying the right suppliers and onboarding them correctly becomes crucial.
The onboarding process begins with gathering information about the potential suppliers. This is crucial in understanding the track record of the supplier and ensuring they meet the organization’s requirements.
The second is to assess and prequalify the vendor. This includes assessing the supplier’s quality management systems, production capabilities, team strength, and so on. Risk assessment is also an important exercise to be done at this stage and the supplier given a score based on this. This helps in ranking potential suppliers and onboarding the ones closely aligned with the organization’s quality and production strategies.
The third is to integrate the supplier with the company’s processes, workflows, and tools, etc. This provides insights into the supplier’s governance and compliance levels and also is an opportunity to provide the vendors with an understanding of how to meet with the organization’s policies and standards.
Benefits of Due Diligence of the Suppliers to be Onboarded
This onboarding process is crucial to improve the quality of sourcing decisions as well as negotiate for better terms. By assessing potential risks, suitable controls can be put in place for greater legal, financial, and ethical compliance and minimize risks to the brand’s reputation at a later stage.
Automating and streamlining the vendor onboarding process can be made more effective by using a standard template they can use to register new vendors. This minimizes the potential for errors or gaps in information.
A close integration of workflows and processes also strengthens the relationship with the vendors. This is particularly useful in case the company has complex sourcing processes that may be new for some vendors.
A robust onboarding process and a strong relationship with a vendor whose standards and processes are aligned can minimize risks of non-compliance and non-conformance. This will help improve brand reputation, command a better price, and grow at an accelerated pace.
Mistakes to Avoid During Vendor Onboarding
Even the best of intentions, though, fail because of flaws in processes or errors in implementation. This is often seen in vendor onboarding. The 5 common mistakes when onboarding suppliers include:
- Lack of Documentation: Standardizing the supplier onboarding program is a must to ensure proper implementation and consistency. Proper documentation is necessary to ensure continuity regardless of changes in the personnel, minimizing risks.
- Lack of Ownership and Responsibility: Given the importance of suppliers to an organization’s reputation and product/service quality, it is essential to streamline communication with the vendors. A single point of contact can reduce the confusion about how suppliers can register, verify orders, receive payments etc. Information sharing becomes easier, as also change management and collaboration where required.
- Absence of Right Tools: Manual onboarding processes are hard to maintain and manage. They are a drain on resources and difficult to refer in case of emergencies. There can be time delays and monitoring and tracking can become challenging.
- Not Setting Clear Expectations: Organizations must set clear expectations to enable new suppliers to onboard quickly and align with the company’s policies efficiently. This will speed up the onboarding process and integration of the two company’s workflows. Training suppliers on the purchasing process, signing service level agreements (SLA) etc. are critical for this.
- Lack of Inspections and Audits: As regulations, requirements, and scale change, so will there be a need for changes to processes. Every change comes with a risk. Periodic inspections and audit of the supplier premises is crucial in ensuring they continue to be compliant and conform to the organization’s standards.
Best Practices in Supplier Onboarding
To make the supplier onboarding process robust and effective, businesses must implement the following best practices.
Best Practice 1. Perform Due Diligence: Onboarding only the best-of-breed suppliers is crucial to ensure the product and service quality. It is also essential to be compliant, minimize the risk of nonconformance, increase brand reputation, and grow at an accelerated pace. Therefore, due diligence before onboarding the supplier to assess their capabilities becomes essential and non-negotiable.
Best Practice 2. Maintain ASL: Maintain an approved suppliers’ list. These suppliers must also have passed due diligence and are kept in reserve in case of any challenges with the current suppliers. However, before onboarding them, review their performance.
Best Practice 3. Automate Supplier Management: By automating the supplier management process, businesses can improve efficiency and optimize resource utilization. This will also help with improved communication and collaboration, minimize confusions or missing sharing important information that can affect production, delivery, and compliance.
Best Practice 4. Ensure Documentation: Have a strong documentation process to ensure consistency and continuity of the supplier onboarding process. This is also important to demonstrate compliance in some industries.
Best Practice 5. Training of Suppliers: Training can be provided at any stage of the supplier lifecycle based on need. At the time of onboarding, it can be a program to integrate workflows, set expectations, and empower the suppliers to meet the organization’s quality standards. During the journey too, periodic training will help bring them up to speed in case of changes in technology, market, or the company’s needs.
