For a large organization, bringing new suppliers onto the roster can be a surprisingly complex series of tasks. Unfortunately, the temptation for some is to evade these steps, but to forgo an onboarding process can expose the company to unnecessary risk.
Most organizations face the problem of excessive supplier numbers. It is not unusual for a major corporation to source from over 100,000 suppliers. With limited resources and busy buyer schedules, individual suppliers will receive little attention.
Despite these constraints, companies are expected to possess a deeper understanding of supplier activities. Governments are legislating for increasingly more stringent laws which expect corporations to police their supply chains for sustainability, corruption, forced labor and many other ethical issues.
The solution to these issues starts with ensuring that the right suppliers are brought onboard to service company needs. That is a supplier onboarding process. The steps to create this process are as follows.
1. Develop an Approval Process
The first step in creating a supplier onboarding process is to create a policy. People within the business have pressing issues and are looking to bring along suppliers quickly to solve these problems. Therefore, a policy needs to be both clearly communicated and unfussy.
For example, mandating that all new suppliers, above a certain monetary threshold, require procurement sign-off is an easily understood notion. New suppliers are subject to further checks and evidence that the pre-existing suppliers upon the preferred vendor list have been consulted before new contracts are drawn up.
2. Develop a Supplier Checklist
From there, buyers need to ensure that suppliers are checked before progressed. This requires an easy-to-use checklist. These are comprised of varied items, but consist of risk-focused checks, such as:
- The supplier is not duplicating the work of a pre-existing vendor.
- The supplier can deliver promised goods or services.
- The supplier is not owned or administered by politically-exposed people.
- The supplier is not on any international sanctions lists.
- The supplier has strong sustainability credentials.
- The supplier is willing to sign the ethical code of conduct.
Providing buyers with a rough-and-ready checklist such as this will streamline the process and reduce risk exposure to the company.
3. Develop Additional Governance for More Strategically Important Suppliers
A simple checklist is insufficient for strategic partners. These companies comprise a large proportion of spend and possess a degree of criticality to the company. Onboarding these suppliers will be slow, but this more cautious approach reflects the impact on the business.
For these suppliers, companies may consider establishing an onboarding council or other more formal mechanisms to check suppliers. These committees are often cross-functional, including staff from procurement, operations, finance or even the CEO.
4. Add the Supplier to a Supplier List
The last step is easy: Add the supplier to the organizational list of suppliers. From there, buyers can feel assured that risks have been mitigated and future sourcing decisions can consider this new supplier as a potential.