The true costs of inefficient vendor onboarding

by | Sep 13, 2023 | Inventory Management, Order Management, Retailer Requirements, Retailers

The typical process for onboarding a new vendor or supplier can take weeks, if not months. Though it sounds like a long, annoying process, the truth is that it’s a much bigger issue. Whether you’re a supplier who is complying with retailer requirements, or a retailer who is trying to meet your larger suppliers’ guidelines, a months-long onboarding process can cost you a lot of money in lost sales opportunities and even actual hard costs.

You can get an idea of how much this might cost by looking at your predicted sales and subtracting the length of time of the proposed onboarding process. How much product could you have sold in two months? Three months? Six months? What risks are you incurring from not being first to market? That is the actual financial loss to you when onboarding time drags on.

Our data shows that during vendor onboarding, it takes an average of 13 communications from a retailer to a supplier to get them to pay attention, let alone follow through with their end of the process. That’s just one supplier. Now multiply that by the number of suppliers you onboard each year, and you’ll get an idea of how expensive and widespread these delays become. A similar scenario exists when the roles are swapped.

What if you could shorten that amount to just a few days? Those lost opportunities become actual sales. What could have been hundreds of thousands of dollars lost is now hundreds of thousands of dollars in revenue.

The cost of meeting supplier demands

Retailers that need to align with their larger vendors’ requirements may attempt to leverage supplier-specific solutions. But because these are stand-alone, one-off systems, they actually cost more in the long run, taking significant time and labor to manage. Running separate programs for separate suppliers prohibits you from getting the true value of order automation and results in operational inefficiencies.

Instead, get the full value of automation in your procure-to-pay cycle by leveraging the same processes across all suppliers. Without the same process across all suppliers, you’re likely to incur unnecessary costs.

Actual vendor onboarding costs

When it takes anywhere from six weeks to six months to connect your retailer database to a supplier’s business system (or vice versa), not only are you losing out on revenue, but think about all the programming costs you’ll pay. If you’re paying a programmer to handle this, and it takes them several months to do the onboarding, how much does this cost in terms of salary and overhead? What about the time your merchandising team spends with onboarding, answering questions from vendors and ironing out the details? It takes too much time and often results in errors, damages supplier relationships and distracts from core business functions.

These are actual hard costs for vendor onboarding. Anything you would have sold once you’ve operationalized is offset by all the money you spent to get to this point. Slow onboarding delays profitability even further until you’ve recovered those initial costs.

A wallet-friendly solution

SPS Commerce provides flexible, affordable services, whether you need to meet the requirements of your most important brands, or you’re looking to onboard all your suppliers to your specifications. We’ll quickly help retailers find suppliers that have the products they need, the delivery capabilities they require and the ability to plug into their EDI system in a few days rather than a few months. This means you’ll make money almost immediately, not weeks and months later.

Faster onboarding also means you can pick up new trends and hot new products almost immediately. If you heard about the big new toy or amazing new technology that everyone suddenly started raving about in October, you could onboard the supplier in a few days and still take advantage of the fast-growing trend in time for the upcoming holiday season, instead of sitting helplessly as the rest of your competitors rake in the sales.

You don’t need expensive, sophisticated technology to connect to your trading partners. With our time-tested system, SPS has served thousands of retailers and suppliers around the world. And we do all the onboarding on your behalf. Now, instead of making 13 phone calls or sending 13 emails, you can pass the supplier to SPS, and we take care of the rest.

Once the supplier is properly connected to the SPS network and plugged into your ERP system, there’s the additional matter of getting their item data to match up with yours. We can help with that, too.

Our EDI solution serves as a “universal translator” between suppliers’ data and their various formats, and the retailers’ ERP systems and formats. We get everything to match up so you can start exchanging product data, purchase orders and all the other documentation associated with a transaction.

Learn more about how to minimize effort and costs in meeting your suppliers’ requirements. If you’d like to see the SPS solution in action, request a free demonstration or speak to one of our onboarding experts.

Scott Roti