Many organizations still struggle to effectively onboard new suppliers. Common challenges include:
- Lengthy process - Supplier onboarding can take weeks or even months to complete if done manually. This delays the ability to start doing business.
- Manual workflows - Much of the onboarding process often relies on manual data entry, lengthy forms, email threads, and spreadsheet tracking. It’s inefficient and prone to errors.
- Lack of visibility - With manual processes, it's difficult to get visibility into onboarding status. Stakeholders don't have clear updates on progress.
- Inconsistent data - Collected information isn't standardized across suppliers. This leads to incomplete or mismatched data.
- Compliance risks - Important steps like background checks and document collection can be missed without structured workflows. It presents compliance and audit risks.
- High costs - Manual onboarding takes up significant staff time and resources. This drives up operational costs.
- Limited scalability - It's challenging to scale manual processes to handle increases in supplier volume. This restricts business growth and partnerships.
- Poor experience - Disorganized onboarding frustrates suppliers and creates a negative first impression of the relationship.
Overcoming these challenges is key for organizations that want to improve operational efficiency, reduce risks, and build stronger supplier relationships through onboarding.
Lengthy Process
Supplier onboarding is often a time-consuming process that can take months from start to finish. It delays the time to value and poses a major challenge for procurement teams looking to rapidly onboard new suppliers.
Traditional onboarding relies heavily on paper-based documents, email communications, and spreadsheets. Suppliers must fill out numerous forms, submit copies of certificates and insurance documents, and provide other compliance paperwork. Collecting, reviewing, and approving all these documents is labor-intensive for procurement teams.
The back-and-forth communications needed to collect information and clarify requirements are also a headache. Suppliers often struggle to provide the right documents and data upfront delaying crucial checks, risk assessments, and contract finalization.
Manual Workflows
Many supplier onboarding processes still rely on manual, fragmented workflows. This introduces a number of challenges:
- Routing documents for signatures and approvals is slow and inefficient. It can take weeks for contracts and forms to be fully executed.
- Important documents are easily misplaced, lost, or expired. Without a central digital repository, materials are vulnerable.
- There are no audit trail tracking documents. It's impossible to see who has viewed, edited, or approved specific files.
- Data needs to be manually entered into multiple systems. Typos, data inconsistencies, and errors are common.
- The onboarding status is opaque. Stakeholders lack visibility into where suppliers are in the process. And suppliers don’t know where in the process they are, whether the provided information was approved, and what to expect next.
- Compliance risks increase with poor documentation and oversight. Audits become difficult with scattered trails.
- Suppliers have a poor experience trying to navigate workflows. This can sour the new relationship.
The bottom line is that supplier onboarding is fragmented, opaque, and error-prone. It fails to meet the demands of modern, global supply chains. Automated, digital processes can help businesses unlock efficiency, transparency, and scalability.
Lack of Visibility
Onboarding new suppliers often involves different teams and systems. Without automation and centralized tracking, it becomes difficult to identify where suppliers are getting stuck or delayed.
Key challenges around visibility include:
- No single source of truth on supplier onboarding status. Information is fragmented across emails, spreadsheets, and systems. This makes it hard to get a comprehensive view.
- Difficulty in tracking status and identifying bottlenecks without automation. There's no dashboard showing all suppliers and where they are in the process. Bottlenecks like missing checks or unresponsive suppliers can go undetected.
- Limited alerts and notifications. Since onboarding relies on manual hand-offs between teams, it's easy for suppliers to fall through the cracks. There's no automated way to flag overdue tasks.
- Data inconsistencies across systems. Supplier data often resides in multiple systems and can become out-of-sync without automated syncing.
- Poor reporting capabilities. Piecing together spreadsheets and system reports to generate onboarding metrics is time-consuming and prone to errors.
Inconsistent Data
Inconsistent data stored across multiple systems and documents is yet another pain point. For example, the proof of address contains different supplier data than what was collected during onboarding. These inconsistencies cause a number of problems:
- Confusion for procurement managers and employees when data doesn't match up across systems and documents. They waste time trying to determine what information is correct.
- Compliance risks if the wrong information is used for reporting or audits. Regulators will not accept mismatched data as an excuse.
- Payment delays and errors if invoices contain different supplier details than the purchase orders. This frustrates suppliers and strains relationships.
- Analysis and forecasting inaccuracies if reporting is based on inconsistent underlying data.
The root cause is that supplier data is manually entered and stored in separate systems without any connections between them. As updates are made, they do not flow through to all the different repositories of supplier information.
Compliance Risks
Manual supplier onboarding increases risks of security, regulatory, or policy violations. When supplier information is managed through spreadsheets, email, and paperwork, it's difficult to track and audit everything effectively. Important details can be missed or mishandled.
Compliance risks arise when supplier records are scattered across different documents and systems. It becomes nearly impossible to monitor suppliers holistically for sanctions, denied parties, and other red flags. With siloed information, compliance checks are inconsistent and suppliers can slip through the cracks.
Other risks include incorrect or fraudulent supplier data that goes unverified. When onboarding relies on manual review, fake certifications, licenses, or financial details could be provided without detection. The inability to validate suppliers end-to-end makes organizations more vulnerable to cyber threats, fraud, and non-compliance.
High Costs
Complex onboarding processes require extensive staff time and resources. Suppliers must be thoroughly vetted and approved across procurement, finance, IT, and other departments. This manual work drives up labor costs significantly. According to estimates, the average cost to onboard a single supplier can reach up to $20,000 when factoring in employee hours.
With thousands of suppliers to manage, these costs quickly become astronomical. Personnel must gather information, ensure compliance, negotiate contracts, and handle administrative tasks for each new relationship. These redundant and repetitive workflows are inefficient. As more suppliers are onboarded, organizations must hire additional staff just to manage the burdensome process.
The costs continue to accrue after the initial onboarding as well. Any changes to contracts, policies, or compliance require revisiting each relationship individually. The lack of automation makes even minor adjustments tedious and time-consuming across an entire supplier base.
Limited Scalability
Onboarding large numbers of new suppliers manually is incredibly challenging. Trying to manage all steps of the process for a high volume of suppliers puts a huge strain on your teams.
Without automation, supplier onboarding does not scale well. There are bottlenecks at every step of the process as documents are passed around and information is re-entered into various systems. Suppliers fall through the cracks and procurement risks non-compliance by taking shortcuts to speed things up.
Manually onboarding suppliers is analogous to building a house by hand versus with power tools. Doing everything manually takes vastly more time and effort. With large supplier bases, organizations simply cannot rely on manual methods alone. Automation makes onboarding scalable by removing capacity constraints. This allows companies to tap into a broader network of qualified suppliers to drive innovation, reduce costs, and mitigate risk.
Poor Supplier Experience
Bringing new suppliers on board is often a frustrating experience for suppliers. Lengthy, manual workflows and processes create uncertainty on the supplier side. They lack visibility into where they are at in the onboarding process and when they will get approved. This opaque process leads to suppliers feeling they are not valued partners harming supplier relationships and satisfaction.
This makes suppliers less eager to work with the company in the future. Companies need to streamline and automate onboarding to provide customers with a smooth, timely experience. Clear communication and transparency in status updates are key. Treating suppliers as true partners starts from the first interactions during onboarding which defines the long-term relationship.
Overcoming Challenges with Dotfile
Supplier onboarding is a complex process, but the challenges can be overcome through strategic solutions. Here are some ways companies can streamline and improve their supplier onboarding using Dotfile:
Automation
Automating repetitive tasks like data entry and document collection can significantly reduce the manual workload. Workflow automation ensures consistent processes are followed for every supplier. This saves time while minimizing errors and compliance risks. AI-powered tools can even guide users during document submission stage, and extract and validate data from documents automatically.
Collaboration Tools
Dotfile’s Onboarding Flow gives suppliers self-service access to submit information and upload documents on their own timelines. Collaboration tools with built-in comments, tagging, and reminders enable teams to seamlessly exchange information in real time. This increases visibility and ensures tasks are solved in time.
Data Integration
Dotfile’s Case Management tool allows easy data management for everyone involved in the verification process. Moreover, APIs allow supplier data to flow directly into relevant CRM systems. Master data management provides a single source of truth for supplier data. This reduces inconsistencies and manual data entry boosting operational efficiency.
Analytics
Using data and analytics, organizations can identify inefficient processes to target for improvement. Analytics provide you with deep insights and a comprehensive view of your data enabling more informed decision-making and strategic planning. Organizations can benchmark metrics over time to measure performance improvements.
By leveraging these solutions, companies can transform cumbersome and inconsistent manual supplier onboarding processes into efficient, scalable programs. Taking a strategic approach enables organizations to onboard suppliers quickly and cost-effectively while ensuring compliance. Book a demo to see how we can help you automate supplier onboarding.
