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Successful Supplier Management and Onboarding in 3 Steps

Evaluate the risks of working with each particular third party vendor and supplier, identify what training new suppliers will need to understand the firm and their role, and give them details of what to do if things go wrong

Once a supplier has been selected, whether by the procurement team or by a line manager that knows what they’re looking for, they need to be properly integrated into whatever team or set of processes they’ll be working with.

As everyone’s work requires far more collaboration across countries, continents, and parts of the company than it did even five years ago, it’s likely that suppliers will also have to navigate a more complex environment to get their work done than they once did.

On top of this, as companies operate in more countries and markets and information flows more quickly and freely than ever, if you don’t have a comprehensive onboarding plan, you could expose your company to risk and you could damage your relationship with the vendor before it’s gotten off the ground.

The Three Steps

So it pays to set up a standardized (but tailored) onboarding process to help teams get off to a strong start with new suppliers. There are three parts to this.

  1. Evaluate risks and classify the supplier to a predefined segment: Start by making a list of risks applicable to your specific circumstances — for instance, quality, data storing, or reputation issues. You can then evaluate how risky working with the supplier would be in the areas that are most important for your company. This will give you an idea of where to target your risk mitigation efforts for this particular vendor.

    Next, figure out how to customize your onboarding plan for the vendor — for instance, if the supplier is going to be critical to your business, you might develop a more in-depth plan than for a supplier with whom your relationship is going to be purely transactional. This will also help you define your expectations for the vendor — for example, how frequently you’ll review performance or what their role in developing new ideas should be.

    Finally, align your priorities for the supplier to your function’s goals. This will help procurement staff or other employees who work with the vendor be clear about what you want out of the relationship, and will help your supplier understand how to support your objectives.

  2. Identify roles, responsibilities, and training needs: If a vendor is unsure about your expectations — or uncertain about how your company works — your partnership could struggle from the outset.

    Be clear from the start what sort of role the supplier will play. Is the vendor a strategic partner or simply a company that provides you with goods and services? Include details like how and when you conduct performance reviews, your confidentiality requirements, and your preferences for how the vendor will work with you on projects that involve coming up with new products or services.

    After that, create a scorecard to evaluate the supplier’s performance. You’ll also need to familiarize the vendor with the way your company operates. Build a training plan to help the supplier understand important details of your relationship, such as your legal and compliance policies.

    Encourage suppliers to get in touch if they have questions by providing contacts for different parts of the onboarding plan. This can be helpful in eliminating confusion early on to make sure the vendor is comfortable working with you.

  3. Help them deal with problems, and evaluate the onboarding process: Finally, you’ll need to provide the supplier with details of what to do if anything happens that could jeopardize the relationship.

    Tell the supplier what to do if any of the risks that you identified in step 1 occur. One way to do so is to list the risks by category and then include the name and contact details of the appropriate person at your company to inform. Make sure to provide examples so the supplier is able to recognize each type of risk. For instance, under “operational risk,” you could list price fluctuations, geopolitical turmoil, or financial insolvency.

    Collate the information from the previous two steps above, and provide those to the vendor as well as to any business partners and procurement staff who will be working with the vendor. And as the relationship develops, ask for feedback from these stakeholders on how well the onboarding plan is working. They may have suggestions for future onboarding plans that could become apparent only later on in the partnership.

    Customization is key to effective onboarding. Most procurement organizations create one-size-fits-all onboarding plans, but relationships with suppliers can vary significantly due to differences in factors like spend, criticality, or risk. Plus, vendors could get frustrated if information in the plan doesn’t apply to them.

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