Supplier Onboarding Software - Part 2
Onboarding Software Benefits
There are significant benefits that an organization can realize from adopting onboarding software. First, as described in Part 1 of this article, a smooth process enabled by software can yield large process cost savings. Second, the effective use of onboarding software can improve interaction with suppliers and prospective suppliers. Third, supplier onboarding software can reduce maverick or off contract purchases. Fourth, it can centralize supplier data. Fifth, it can reduce errors in supplier data, invoices, purchase orders, and other areas. Sixth, it can be used as a stepping stone to being the process of measuring and managing supplier performance. Finally, it can be used to quickly and cost effectively obtain information on new suppliers. The following sections describe each of these benefits in additional detail.
Reduce Process Costs
Clearly there is a large opportunity for process cost savings from the effective use of the right onboarding software. This is a function of automating things that normally are very labor intensive and time consuming. For companies that do not have automation in supplier onboarding, implementation of software can result in large savings in this process and allow more effective deployment of existing resources.
Improve Interaction with Suppliers
In addition, if the onboarding software is used effectively, it can improve a company's relationship with its suppliers by making it easier to do business with. This includes making it easier to obtain purchase order, send invoices, and get paid. With a streamlined interaction with suppliers, the company and its suppliers have more time to focus on what they do best. Suppliers will also be more inclined to lower prices or to provide extra services if the company is easy to do business with.
Reduce Maverick Purchases
Having a centralized onboarding process and supplier management system can help the purchasing department to reduce or eliminate rogue buying. With supplier data more readily available, people in the company will have difficulty contracting with non-approved suppliers or suppliers that have not been through the onboarding process. This helps to centralize purchases and bring more spend under contract which results in better pricing and higher quality goods and service purchases.
Centralize Supplier Data
A strong supplier onboading system will help an organization to centralize supplier data and to maintain it in a consistent format. It should also be accessible over the web so that people from different geographic locations can view supplier data and locate qualified suppliers. The ability to share this data is extremely important for maintaining and effectively using this data across a larger organization.
Supplier onboarding software can reduce errors. With suppliers entering their own data into the system and good checks to prevent incorrectly formated data, the data that goes into the system is often much more accurate than other methods. In addition, by generating invoices from the purchase order, the company can ensure that the are paying only for services that they have purchased and good that comply with the order. Moreover, having the ability to check shipment with invoices and purchase orders also reduces errors and improves accuracy of orders and payments.
Manage Supplier Performance
A good supplier onboarding system creates a foundation for the organization to evaluate, monitor and manage, supplier performance. In combination with supplier performance management software, an organization can track supplier performance and can identify risks based on the performance of a supplier. Since supplier data is already centralized and available, this is a logical new step for many organizations.
Obtain New Suppliers
By giving prospective suppliers the ability to submit profile information over the web, companies can allow new suppliers to make themselves known to the company. A supplier can submit profile information in a few minutes without further contact from the buying organization. This saves time and helps companies to build their supply base. A good supplier onboarding process and system also makes it easy obtain information from prospective suppliers on their organization, capabilities, and pricing. This information is helpful to have in case the company wishes to make a purchase in the future. In this case, the company will have updated and accurate data from the supplier.
Onboarding software gives a company visibility into the onboarding process. With reports and dashboards, personnel can view the exact stage of the onboading process that each supplier is in and can obtain details on progress for all suppliers. This provides the ability to better control and manage the process and can be used to develop ways to improve things.
Selecting Supplier Onboarding Software
To maximize the benefits described above, it is important that the company has a process in place to evaluate prospective supplier onboading automation solutions. This is important because adoption of the wrong software will result in a process that does not obtain the maximum benefit and creates other problems. When considering supplier onboarding automation, a company should consider several factors. These include process coverage, ability to expand, the current IT infrastructure, the ease of use, the software vendor, the flexibility of the solution, headcount, and the total cost. These factors are outlined and described in more detail in the sections below.
One of the most important things in selecting the right supplier onboarding software is to make sure that it covers all parts of the company's onboarding process. It is important that the organization that is seeking to implement this software understands its current process and the costs entailed in performing this process to determine areas for the greatest cost savings. An understanding of the process can also help the organization to better manage the process when the software is in place. When a company understands the benefits of the software and has set clear goals for the project, it will be easier to evaluate solutions. Gaps in automation can result in problems including the need to customize software, purchase new functionality, or render the software unusable due to a significant hole in the process.
Ability to Expand
Another important aspect of supplier onboarding software is that it should provide an organization with the capability to expand beyond the core supplier onboarding functionality. This means that the data from the onboarding process should be accessible and usable by other parts of the organization. This will be helpful for supporting new initiatives or the expansion of existing ones. Additionally, the data from the onboarding process should be available for other important applications within the company. This can provide additional value and support other procurement activities beyond and outside of the purchasing department.
Current IT Infrastructure
The current IT infrastructure is another consideration in purchasing supplier onboarding software. If some of the supplier onboarding process is currently handled in several different systems, it is important to consider how adding an onboarding system will affect these other systems and the type of activities that are done with each application. With the right system, it might be possible to eliminate redundant systems or reduce IT maintenance costs by moving parts of the process to another system. Additionally, the software that will be used should match the policies of the IT department as well as company's plan for managing applications and supporting business units.
Ease of Use
An often overlooked aspect of purchasing supplier onboarding software is the ease of use. Software that is easy to use and highly intuitive will become adopted more quickly, require less training, and will reduce support questions from suppliers. It is extremely important that the software is easy for suppliers to use since they will be entering much of their data and updating their profiles. Although it can be hard to quantify ease of use, this is not something to overlook in the decision making process.
It is also important to consider the vendor that is providing the onboarding software. Beyond the standard vendor viability and purchasing questions, the organization that is evaluating software should consider a couple of other things. First, the software vendor should have personnel that are quite knowledgeable about supplier onboarding. Second, the vendor's focus and strategic vision should be on the same areas that matter to the buying organization. Organizations that do not focus on the onboarding process (sell it as an add-on) may not be as inclined to enhance the product on a regular basis or deliver quality improvements.
The onboarding process can be quite complex and each organization may have a slightly different process. Consequently, it makes sense for an organization to use a vendor that is flexible and has software that matches the process exactly or can be tweaked slightly or configured to match the process. Vendors that have a standard way of doing things and can't change, will force the organization to change to accommodate the vendor's predefined process instead of the other way around. This can cause headaches for the buying organization and can result in additional costs.
The actual headcount requirements for the company to run the onboarding process using the software is also very important. This ties into other areas like the total cost and the process coverage, but it is also an important factor on its own. If one solution will allow the company to assign two people to do the job that another solution will require 6 people to accomplish, it can make a lot of sense to go with the solution that requires the lower headcount. This may seem obvious, but it is worth repeating since headcount is one of the major drivers of cost for the onboarding process in most companies.
The cost of the supplier onboading solution is important as well. However, the process of quantifying costs is not as easy as collecting price quotations. There are several things that the company needs to consider in evaluating a supplier onboarding solution. One of the most obvious costs to consider is the cost of the solution. This could be quantified by the number of users, number of licenses, or other common metrics. It is important to note all of the costs and to have an accurate understanding of realistic use cases. Another cost to consider is the process improvements offered by the solution. There may be different process costs savings delivered by each solution. This is much harder to quantify, but can be done if the organization has a keen understanding of the onboarding process.
Clearly, the decision to change or automate the supplier onboarding process is important. It can have far reaching impacts on the organization and encompass many different functional and operational areas. An organization that understands it current process and the key drivers of supplier onboarding costs will be better equipped to manage and make improvements to this process. For most organizations these improvements will involve automation and will provide many tangible and measurable benefits. By effectively implementing automation for the onboarding process, an organization can dramatically lower the cost per supplier and can eliminate problems down the road.