Vendor onboarding is the process of integrating a new supplier or service provider into your business operations, systems, and culture. It is a critical step to ensure a smooth and productive relationship with your vendors, as well as to avoid potential risks and costs. In this article, you will learn what a successful vendor onboarding process entails, and how to implement it effectively.
Before you onboard a vendor, you need to have a clear vision of what you want to achieve with them, and what you expect from them. This includes defining the scope, deliverables, timelines, quality standards, communication methods, and performance indicators of the project or contract. You also need to establish the roles and responsibilities of both parties, and the escalation and resolution procedures for any issues or conflicts. Having a well-defined and documented agreement will help you align your expectations, avoid misunderstandings, and set the foundation for a successful collaboration.
Before you start with the onboarding process, both of you must have trust in each other. The vendor selection process must have included due diligence and the regular assessment criteria predefined in your organisation. So, while onboarding, there should be minimal room for doubt and mistrust. Vendors are the partners on your growth journey and it is important that you make your vendor understand your strategic priorities and vice versa. And this must be followed in practice and not only in pen and paper. During COVID, the Indian automaker Maruti Suzuki offered a lot of hand-holding and capital support for its tier-1 suppliers. The vendors, in turn , were ready to walk extra miles to adapt their production based on market scenarios.
Good vendor management onboarding process would involve checking the following: -- assessing the current capabilities of the vendor in terms of resources/clients they serve/domain they serve/resources on bench --- assessing the vendor's future plans in terms of domain/clients/channels and whether its aligned with your BU's plans/ Organization's plans for the same time frame -- Current tools /processes used by vendor and whether it makes your Resourcing/Options easier -- Industry feedback
The process should take scalability, flexibility, and technology integration into consideration, allowing for agility and the ability to evolve along with the company's growth and changing priorities. The technology and systems from the vendor should also be reviewed to ensure seamless integration and compatibility with the organization's IT system policies, such as data sharing and security measures. Establishing performance metrics at this stage is critical to ensure alignment in performance review expectations from both parties. This will allow for a stronger and more sustainable partnership formation. Fostering a sense of collaboration is essential to ensure a rewarding experience for both parties.
Do not just accept a contract without a serious evaluation of all of its terms. Even if the vendor has the best of intentions, clauses have a habit of sneaking in that can come back to bite one or both parties.
For me a goal is something you wish to achieve but need to direct effort, time, and resources to attain it. The goal also could be a thing you can see, touch, feel, or experience. A goal-setting is a progressive way to live. Goals are practical and attainable and can be predicted with a greater degree of certainty. Meanwhile an expectation is a strong belief that something will occur or manifest in the future, in the exact way that you perceive it. I believe expectations are not certain and can often trigger resentment whenever they don't match up to your reality. It’s great to have high expectations of yourself and others, but there is an inherently greater risk to doing so. We'll need both to make sure there's a push and pull wave line.
Another important step in vendor onboarding is to conduct due diligence and compliance checks on your potential vendor. This means verifying their credentials, references, reputation, financial stability, and legal status. You also need to ensure that they comply with your industry regulations, ethical standards, data security policies, and environmental and social responsibility practices. Conducting due diligence and compliance checks will help you mitigate any risks and liabilities associated with working with a vendor, and protect your reputation and assets.
Absolutely check references. If possible, find customers the vendor doesn't tell you about - they may be the ones with the best insights into the vendor's performance
Once you have selected and verified your vendor, you need to provide them with the necessary training and support to enable them to perform their tasks effectively. This includes providing them with access to your systems, tools, processes, and documentation. You also need to orient them to your organizational culture, values, and expectations. Providing training and support will help you foster a positive and productive relationship with your vendor, and ensure that they understand and follow your requirements and standards.
Also put in place a way to monitor their progress and include mechanisms to correct shortcomings and address misunderstandings
The final step in vendor onboarding is to monitor and evaluate their performance throughout the project or contract. This means tracking their progress, deliverables, quality, and satisfaction levels. You also need to provide them with regular feedback, recognition, and guidance. Monitoring and evaluating performance will help you identify any issues or gaps, and take corrective actions if needed. It will also help you measure the value and impact of your vendor relationship, and identify areas for improvement or optimization.
Get feedback from every area the vendor interacts with - complaints could be real, or could be merely personality conflicts.
Vendor onboarding is not a one-time event, but an ongoing process that requires constant review and renewal. This means that you need to periodically assess the status and health of your vendor relationship, and determine whether it is meeting your goals and expectations. You also need to update your agreement, scope, deliverables, and terms as needed, to reflect any changes in your business needs or environment. Reviewing and renewing the relationship will help you maintain a long-term and mutually beneficial partnership with your vendor, and leverage their expertise and capabilities.
Be sure to assert ownership over deliverables, and ensure software source code, etc, is safely in escrow. I recall a situation where a long-time contractor just packed up and disappeared, and the company had no idea where the source code was, or how to maintain the application the contractor had created and was running for them. It cost a LOT to fix!
The vendor onboarding process, while often smooth, requires additional measures, particularly for technically complex solutions. Implementing an exhaustive risk register and continuous audits becomes essential. Setting targets for "Fire Breaks," especially for legacy technology with inherent complexity, is highly advisable. Just as a firefighting team manages a forest fire by creating firebreaks, areas devoid of combustible materials, enterprise architecture can benefit from this approach. Complex, tightly integrated systems become more manageable when segmented into smaller, more comprehensible blocks. These agreements should be integrated into the vendor onboarding process, establishing defined quarterly targets.