The Keys to Vendor Onboarding

During the course of its operational life, an organisation will typically make arrangements for the acquisition of a wide range of goods and services from dozens to thousands of vendors.

An organisation may have freedom of choice in the selection of a new vendor because there are many candidates, or freedom from choice because there is only one.

Regardless, a certain amount of information about each candidate needs to be collected for due diligence purposes, especially during vendor discovery, evaluation and selection when there is a choice of candidates.

Assessment of the information collected helps to identify a vendor’s ability, capacity, track record, risk profile and other characteristics of interest to the organisation. The outcome should be elimination of unsuitable vendors from consideration, and a move to contract negotiations with the preferred vendor.

Successful execution of the contract triggers its implementation, and the first step in that process is vendor onboarding.

In this article, we’ll cover:

• What vendor onboarding means
• Who is interested in what information from vendor onboarding
• How vendor information can be collected
• Expected benefits of vendor onboarding via a self-service portal

What is vendor onboarding?

Vendor onboarding is the process of setting up a new vendor in various IT systems and aligning them with processes the organisation uses to run its business.

Many of the details needed for onboarding will have been collected during the vendor evaluation process, such as the vendor’s full legal name, address, categories of goods and services provided and so on.

Other details are needed for onboarding that wouldn’t normally be required for evaluating a candidate vendor’s suitability. Examples include the vendor’s bank account details to allow direct payment of invoices, and certificates of currency showing the vendor’s various insurances, coverage levels and policy expiry dates.

Exclusion of such details from the general evaluation stage just trims a little bit of fat from a commonly hefty process and shifts the effort from all candidate vendors to just the selected one.

All such deferred information needs to be collected as the first step in onboarding.

It’s not unknown for some vendors to exhibit recalcitrance in providing elements of this additional information once a contract has been signed. Such action can easily impede the receipt of benefits from the contract. Getting off to a bad start mightn’t bode well for the future of the relationship.

As a precautionary measure to prevent undue delay in the availability of this information, its nature should be revealed to the selected vendor during contract negotiations. Its delivery, quality and timeliness should be included in the contract as a vendor obligation.

As we’ll cover later in the article, the business can also take steps to ensure that the collection of the data is as straightforward for both parties as possible, through the appropriate use of technology.

The contract should also grant the organisation a right to terminate the contract before it even gets started should the vendor exhibit resistance with respect to this obligation and its agreed parameters.

The objectives of onboarding can include:

• Validation that all necessary vendor information has been obtained within specified timelines
• Determination of whether or not the information is current, relevant, sufficient and acceptable
• Distribution of the relevant information to, and integration with, the organisation’s desired back-office systems and associated processes
• Derivation and categorisation of the vendor’s risk profile
• Classification of the vendor’s importance to the organisation.

Overall, the faster a vendor can be onboarded, the faster contract implementation can be completed and the sooner the contract can be used and start to deliver the expected benefits.

Who is interested in what information from vendor onboarding?

A wide range of stakeholders might maintain an interest in certain vendor information that has already been acquired or needs to be obtained during onboarding.

These interests might be contingent on the organisation’s industry and purpose, the applicability of certain regulatory regimes, the nature of the operational software it uses, its requirements on the new vendor, the maturity of its vendor lifecycle management systems and processes for contracts and vendors, and so on.

For instance, IT may, on behalf of itself and other business functions, ensure that any automatic distribution of certain information to certain systems goes according to plan by receiving notice of such information then confirming success of the distribution.

Some of the usual suspects in terms of vendor information and stakeholders who might have an interest in some of it are listed in the following table:

Stakeholders who require vendor information

How vendor information can be collected

Most vendors these days work with electronic documents and information. This simplifies the sending and receiving of such documents and information.

Similarly, many organisations provide a self-service portal for vendors to securely interact with them, with capabilities enabling:

• The organisation to request certain information or documents from vendors at onboarding time or when otherwise necessary, remind them that it’s due or overdue, or advise them of any issues with the received information
• The vendors to complete and lodge electronic forms and documents with the organisation at onboarding time or when otherwise necessary, for instance to notify changes of address or contacts, provide the latest insurance certificates, product catalogues and so on
• Activities to be controlled and managed by a built-in or separate workflow engine that ensures the right people are involved in requesting, supplying, reviewing, approving, forwarding, escalating or saving information, or any other actions pertinent to the onboarding process or other matters, such as integration with internal and external systems or completing checklists of activities.

Gatekeeper's Vendor Portal

Organisations on the other hand can take advantage of the growing ecosystem of independent third parties who provide unbiased information about vendors from public and private sources to get a more rounded view of specific aspects of any particular vendor.

These third parties might offer a different view of vendors being onboarded than those vendors themselves provide. This could lead to interesting conversations to have the differences explained and may lead to a different outcome than expected.

Gatekeeper’s MarketIQ solution integrates this risk-profiling technology directly into its vendor management platform, ensuring that this data is accessible at the exact point it’s of most interest.

Expected benefits of vendor onboarding via a self-serve portal

A wide range of benefits can accrue to an organisation and its vendors from the use of a self-service Vendor Portal for onboarding, particularly when supported by a workflow engine, including:

• Time-savings and productivity boost due to the possibility of standardisation of information requirements by vendor category
• Optimisation and automation of the onboarding process including hand-off from one involved person to the next
• 24x7 access to the portal to suit the working hours of each side
• One-place collection of key vendor master data and all subsequent updates to it
• Instant view of vendor information requested, received and challenged, and performance against delivery deadlines
• Tracking of expiry dates of certificates, insurance policies and the like, with automated reminders to both sides about approaching dates and delivery deadlines, with escalation for non-delivery
• Availability of online forms and checklists to facilitate information provision, enhanced by an option to tailor content to vendor type
• Ability to pass through key information to a range of internal systems used by the organisation, such as Accounts
• Minimum delay in finalising the onboarding, allowing the organisation to place orders with and make payment to a new supplier
• Potentially better pricing, payment terms and service delivery performance accruing to the organisation from being seen to be easier to do business with
• Everybody in the organisation who is involved in some manner in the onboarding process clearly understands what needs to be done, why, how and when, and their performance is normally tracked to help identify bottlenecks and delays.

Final Thoughts

Choosing a new vendor to do business with can be an arduous process for an organisation. A procurement specification must be developed. Candidate vendors must be discovered.

Details about the capabilities and track record of those vendors across a wide range of criteria must be obtained from those vendors and possibly from external independent sources of information. Finally, that information must be assessed to determine if a preferred vendor can be identified.

Providing the information required for assessment is generally easier for the candidate vendors because seeking new business is a core part of what they need to do to stay in business.

If a preferred vendor can be identified by the assessment process, a contract for the provision of goods and services with that vendor is typically negotiated and signed.

With a signed contract in hand, the new vendor needs to be set up in the organisation’s various IT systems and processes to allow the contract to be activated for use. 

Known as vendor onboarding, this process usually requires some final information to be obtained from the new vendor to allow orders to be placed under the contract and paid for.

It may also require completion of mandatory forms for submission to regulators, and receipt of current evidence of compliance with certain vendor obligations like insurance cover, business and other certifications, and risk management approaches.

Automating the onboarding process simplifies and accelerates matters by allowing vendors to use an online portal to receive advice about what information the organisation needs and when, submit that information, track submission versus date status and so on.

The portal can also offer time-saving advantages to the organisation, by using a workflow engine to automatically deliver received information to the necessary people or systems that need it and identify any delays in the processing of that information.

If you would like more information about how Gatekeeper can assist with your vendor management activities, then contact us today.