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Hidden Costs of Manual Vendor Onboarding

Look beyond direct labor costs for the real picture

Manual vendor onboarding (supplier onboarding) processes come with several inherent risks and numerous hidden and potentially significant costs that organizations need to be aware of. These risks can impact efficiency, accuracy, total cost, and overall effectiveness of an onboarding process. Here are some common risks and hidden costs associated with manual vendor onboarding:

  • Errors and Inconsistencies:
    • Manual data entry increases the likelihood of errors and inconsistencies. Typos, misinterpretations, or oversight can lead to inaccuracies in vendor information, potentially causing problems in the future and increasing an organizations risk.
  • Compliance Issues:
    • Manual processes may struggle to keep up with changing regulatory requirements. Non-compliance with industry regulations or legal standards can result in fines, legal action, and damage to the organization’s reputation.
  • Risk Management:
    • Manual processes rely on individuals and manual “systems” to track insurance expirations and other compliance related deadlines which can result in large financial liabilities for non-compliance or uncovered incidents.
  • Slow Processing Time:
    • Manual onboarding tends to be slower than automated processes. Delays in vendor onboarding can hinder business operations, especially when quick access to goods or services is crucial to your business.
  • Lack of Visibility:
    • Manual processes often lack transparency and real-time visibility. This can make it challenging to track the status of vendor onboarding, monitor progress, and identify bottlenecks or issues promptly. It also generates unneeded calls and emails from suppliers who lack visibility into where they stand in the process.
  • Security Concerns:
    • Physical paperwork and manual filing systems may pose security risks, such as unauthorized access to sensitive vendor information. Data breaches can lead to financial losses and damage to the organization’s reputation.
  • Difficulty in Scaling:
    • As the number of vendors grows, managing manual onboarding becomes increasingly challenging. The process may become cumbersome, inefficient, and difficult to scale without a proportional increase in resources and the costs associated with those resources. If your organization is in a growth mode, the inability to bring on new vendors into the supply chain in a rapid and efficient manner may hind growth and growth and cause downstream issues.
  • Dependency on Key Individuals:
    • If key individuals responsible for manual onboarding leave the organization or are unavailable, it can lead to disruptions and delays. There may be a lack of institutional knowledge about specific vendors or processes.
  • Inefficient Communication:
    • Manual communication channels, such as emails and phone calls, may result in delays and miscommunication. This can lead to misunderstandings between the organization and vendors, affecting the relationship.
  • Limited Audit Trail:
    • Manual processes often lack a comprehensive audit trail, making it challenging to trace changes, identify problem areas or access historical data. This can be a problem in case of disputes or the need for retrospective analysis.
  • Vendor Experience:
    • Cumbersome manual processes may negatively impact the vendor experience. Complicated onboarding procedures may deter potential vendors, and existing vendors may become frustrated with time-consuming requirements. Manual and outdated onboarding processes send the message to the supplier community that your organization is not operating in an efficient manner.
  • Costs and Resource Intensiveness:
    • Manual onboarding is resource-intensive, requiring significant time and effort from staff. The associated labor costs, potential for errors, and the need for physical storage space can contribute to higher operational expenses. It is also costly and resource intensive for your vendors and suppliers, and those costs may be passed along in the goods and services you purchase from them.

To mitigate these risks and lower the costs of operating in a manual environment, organizations can consider transitioning to automated or semi-automated vendor onboarding processes. Automating the vendor onboarding process through a vendor portal based onboarding solution offers improved efficiency, accuracy, compliance, vendor experience, risk management, cost savings, scalability, and standardization. These benefits contribute to higher levels of productivity, enhanced vendor relationships, and a competitive advantage for your business.

If your company has not already invested in a portal based, automated vendor onboarding / supplier onboarding system you are missing out and putting your company at a disadvantage. Contact ICG Consulting to start a discussion on how your organization can implement a vendor / supplier onboarding portal for your organization, or to schedule a demo of one of ICG’s comprehensive vendor portal or vendor onboarding solutions. You can also watch a short video on ICG’s back-office solutions.