PurchTips edition #356

Organizations often need certain documentation to onboard a vendor.  Sometimes risk, technical complexity, or other factors may require you to obtain extensive amounts of documentation from some vendors.  Where organizations run into trouble is when they require all the various types of documentation from every vendor.  They often do this because they feel it’s too hard to decide what documents are required for each vendor and it’s easier to ask every vendor for everything.

However, these lazy organizations don’t realize the consequences of that approach.  The consequences include:

• Having a weak supply base: Unwieldy amounts of paperwork “scares away” all but the most desperate vendors.  Today, vendors don’t want to do a ton of work for the mere “chance” of earning enough business to eventually justify the effort.  Some may simply opt out of putting that much effort into earning potential business, leaving only the most desperate vendors to respond.  And a high-performing organization wants the best vendors, not the most desperate.
• Paying high prices: Right away, the organization seems like a “high-maintenance customer.”  Vendors factor into their pricing how much work goes into serving a customer.  High-maintenance customers rarely get top discounts.
• First delivery delays: If loads of unnecessary paperwork have to be completed by every vendor then reviewed by your organization, every vendor onboarding effort may take weeks to complete.  This can unnecessarily delay the delivery of simple goods and performance of simple services that should be quick and easy to complete.

Now, obviously, you don’t want to have a different onboarding process for every new vendor. And you don’t want to structure your vendor onboarding process to require so much analysis to figure out what documentation is needed every single time you need to add a vendor.  So, it is best to strike a balance by identifying a limited number of categories of vendors, each with their own documentation requirements.  Three to 6 categories is manageable.