Financial costs

The information you collect during onboarding is your first line of defense when vetting and assessing suppliers. Onboarding a vendor with the right network, capabilities, and experience can help your business avoid these common cost sinkers:

• Delayed deliveries: Disorganized operations and poor communication during onboarding can impact business profitability by causing suppliers to miss important deadlines, fail to forecast demand accurately, or fail to manage inventory efficiently. 
• Hidden fees: Outlining terms during onboarding helps businesses avoid unexpected spending on costs like last-minute shipping, transaction fees, insurance, or inflated processes. 
• Poor quality goods: Poorly onboarding suppliers are more likely to deliver goods that don’t meet your quality standards, impacting both near-term sales and long-term trust in your brand. A survey of manufacturing leaders found that 39% cited the cost of a product recall as between $10 and $50 million.   
• Non-compliance penalties: You risk exposing your company to costly fines — that can run up to tens and hundreds of millions of dollars — or legal battles that drain your resources and destroy your brand image. 

Operational costs

Imagine this: A company accelerates its onboarding by cutting a few steps. It turns out that they’ve overlooked essential steps like checking a supplier’s delivery capabilities and compliance with safety standards. What could happen in this situation? 

You might end up working with a supplier that promises fast delivery and competitive pricing but lacks the logistical capabilities or quality controls to meet your expectations. From an operational standpoint, you burn through your resources by investing in: 

• Fees for expedited warehousing and shipping
• Replacing defective products 
• Managing spikes in customer support requests 
• Last-minute efforts to track and request missing compliance certificates 

Compliance and risk costs

Non-compliance can impact both short-term business revenue and long-term production timelines. One example of non-compliance is the high-profile Toyota recall that happened in 2010. The automaker was fined $16.4 million for not notifying the Department of Transportation (DOT) of its car defects. 

There’s also the price tag of reputational damage. Not all brands can bounce back like a household name like Toyota. It can take a long time for consumers to build trust with less known companies that have been hit with compliance violations. Barriers to sales, like consumer preferences or misaligned values, can change and adapt over time — but the fear of safety, health, or legal risks is hard to shake off. 

Pre-onboarding preparation

Create a standardized checklist that you can quickly access and duplicate for each supplier you onboard. Alfred Christ, Sales Manager at Robotime, uses this process to establish a strong foundation for supplier communication and operations. “I endorse one of the most important practices: creating an onboarding checklist with all details, including compliance regulations, a clear channel of communication, and defining mutual goals,” he says. 

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A checklist saves time, sets consistent expectations for all suppliers, and ensures the same quality and success for all goods and services. 

Supplier information collection

This is your checkpoint to vet incoming suppliers and ensure their legitimacy and stability as a legal partner for your organization. You’ll want to be extremely detail-oriented when collecting supplier information to avoid the risk of costly oversights stemming from poor transparency and accountability. Remember that your list of supplier documents and information to collect may look different depending on your industry, the nature of your supplier relationship, the geographies you’re operating in, and so on.

Some non-negotiable information to collect include: 

• Banking information: Ensures timely payments and protection against fraud. Delays in getting this information can disrupt cash flow, cause misdirected payments, and increase the risk of banking security vulnerabilities, 
• Tax identification numbers (TIN): Verifies a supplier’s legitimacy to collect payments. Failure to collect TIN can cause legal complications as it interferes with the ability to report payments for tax purposes. 
• Business licenses: Verifies a supplier’s legitimacy to operate their business. Not collecting this document initially puts your business at legal risk of partnering with an unlicensed or fraudulent vendor. 
• Financial statements: Verifies a supplier’s financial stability and capabilities to meet long-term contract obligations. Without this information, organizations won’t be able to identify risky financial patterns that could indicate operational disruptions or bankruptcy.
  
  

Compliance and verification

Compliance laws cover many areas, from environmental regulations to ethical sourcing practices, data privacy requirements, labor and safety standards, and more. These tasks must be delegated and planned effectively to meet all compliance needs before contractual, auditing, or regulatory reporting deadlines. 

Ensure that this responsibility is assigned correctly and organized within your organization. Compliance tasks could fall under a procurement or supply chain manager, legal departments, or teams dedicated solely to supplier compliance and risk management. Compliance management software or customizable supplier portals like Softr will help you centralize task assignments and reviews across different stakeholders, organize compliance documents, track verification statuses, and even send alerts for upcoming deadlines. 

Contract management

Your supplier contracts should follow a standardized structure that clearly outlines all the terms and conditions governing your partnership and protects your organization from risk. This can include the following: 

• Defining the scope of the contract 
• Specifying all goods and services that will be supplied — including product specifications, technical requirements, delivery schedules, and product quantities
• Pricing, payment terms, and late fees
• Service-level agreements (SLAs) and KPIs that suppliers must meet
• Compliance requirements
• Confidentiality terms — including any need for non-disclosure agreements (NDAs) and intellectual property rights
• Dispute resolution procedures 
• Termination conditions

To draft and finalize this contract, organizations must involve multiple stakeholders across departments to ensure information accuracy and completeness. “It's beneficial to involve multiple departments, such as procurement, quality control, and logistics, during these discussions to cover all relevant aspects of the supplier relationship,” says  Rain Yang, CEO of wood veneer supplier WoodenAve. 

Supplier onboarding

In this phase, you’re fully introducing your new vendors to your company’s procurement or supply chain system. This can only be done after you’ve verified this supplier as a partner who can help your business reach its goals without putting any operations at risk. A typical task list during a new supplier’s first week of onboarding can include the following: 

• Introductions between suppliers and key stakeholders within your organization
• Access provisions for any new tools — like communication and procurement tools 
• Walking through new processes 
• Scheduling training sessions
• Scheduling check-in calls with suppliers
  
  

System integration

The supplier ecosystem of tools can be complex depending on the size of your vendor network or the volume of transactions and documentation you need to manage. Many organizations have software explicitly used to store documents, manage contracts, ensure compliance, and streamline supplier interactions. These disparate systems typically feed into an enterprise resource planning (ERP) system that bridges supplier data to the rest of your organization’s operational data. 

When onboarding a supplier, both your supplier management and IT team must work together to ensure that all existing systems are updated and ready to support new data. You can start approaching this step by looking at a few key responsibilities: 

• Data management: Add your new supplier data into all existing systems and ensure they’re set up accurately so you can attribute all interactions to the proper parties. 
• Data security: Set up access controls and conduct vulnerability checks to ensure new suppliers don’t become an entry point for breaches. 
• Integration quality: Map out data flows between different systems and test them to ensure the timeliness and accuracy of data.  
• Troubleshooting: Define troubleshooting protocol that can help you and your suppliers address integration issues without interrupting work.
  
  

Training and support

Michael Nemeroff, Co-founder & CEO of Rush Hour Tees, shares how training suppliers on internal custom-built systems is a crucial best practice for his organization. It’s not just about showing them where to click but “helping them understand why we do things a certain way.” he says. “When suppliers understand our process, we avoid a lot of back-and-forth headaches and keep everything moving smoothly,” he adds. 

Training materials can include process walkthroughs, compliance reviews, and software tutorials. Beyond one-time training sessions that you might hold during their first week, you’ll want to make training resources available and accessible whenever a supplier needs the support. Self-help help centers and interactive online training content is one way to provide 24/7 support without relying on the availability of your support team. 

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Data inconsistencies

Data management and hygiene can become a bottleneck as you collect and organize data and documents from different sources. Defining data management workflows and standard operating procedures will help avoid missing or inaccurate data in your vendor management systems. Your procurement deadlines can be derailed entirely if orders are stalled due to incorrect banking information, procurement details, or missing legal and compliance documentation. You’re more likely to get inaccurate orders, experience delayed payments, or waste time fixing errors and miscommunication. 

Manual errors

With so many details to take stock of, it’s inevitable for mistakes to slip through the cracks — especially if your team members and vendors are under tight deadlines or lack proficiency in core systems. But a mistake as simple as a spelling error in a product order or a missing number in an invoice can lead to significant issues like shipment delays and payment complications. 

Compliance risks

A majority of organizations are aware of the financial and reputational risks associated with vendor non-compliance. However, compliance can often remain a shortcoming for many teams because of the scale of tasks and documentation associated with evaluating, onboarding, and training new vendors. Even with an onboarding process in place, the right stakeholders must be brought in to do their due diligence on industry compliance needs and vendor documentation. Centralizing and automating this vetting process into a vendor management portal or compliance management software is one way to ensure your compliance needs are not compromised by limited bandwidth, team oversight, or unorganized workflows. 

Communication gaps

The simplest challenges can be the most detrimental to your organization and supply chain. Miscommunication in the workplace costs businesses in the US almost $1.2 trillion every year. When managing vendors, poor communication causes misalignment on timelines, expectations, and overall processes. These issues typically stem from fragmented documentation, poorly defined communication protocol, and unorganized workflows that lead to confusion and inconsistencies. A centralized platform for sharing and receiving vendor updates and resources makes it easier for teams to prevent miscommunication and identify it early. 

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