What Most CEOs Don’t Realize About Having a Lengthy Vendor Onboarding Process!
Hi. I'm Max Clark. Are your procurement roles costing you money? Probably. The answer is probably yes.
Speaker 1:What do I mean by this? I'm gonna give you a really extreme example. We work with the company, and the way that they onboard new vendors, very typical for, you know, mid market enterprise. They have to have a MSA in place covering all the PO and procurement you know, all the procurement roles, PO process vendor onboarding, payment submissions, yada yada yada. So MSA has to be in place before anything else can take place.
Speaker 1:Again, not unusual. Very typical. It takes them 8 to 10 months to onboard a new MSA. So what are the trickle down effects for that one right if you were acquiring anything for this enterprise equipment infrastructure widgets service anything you now have the option of going to a competitive bidding process which is gonna result in or a selection process an evaluation process which is gonna result in a vendor or provider being selected that in order for you to onboard you are going to have to go through 10 months of misery with the procurement process in order to get that MSA established before you can get an order executed to start whatever process has to take place at that point. And by the way, you know, when you start talking about like, let's just pretend like you're a 1000 users, you're changing your phone system or your email or anything.
Speaker 1:Right? Like, this isn't like a flip the switch kind of thing. It takes lots of planning, lots of coordination, lots of project, lots of lot of lot of lot. Right? So from the point that you actually sign the contract, it might still take you 6 to 9 months to actually implement whatever you're talking about.
Speaker 1:If your procurement process to get to the point where you can actually sign the order takes you 10 months, and then you've got whatever on behind it. Right? You have 2 things that really take place. 1 is the teams, the people that are trying to do good for that enterprise are handcuffed. They can't do anything.
Speaker 1:Right their option is 10 months of pain with nothing ever happening because by the way in many cases that onboarding process also rejects new vendors because the people that have to go through it don't want to do it on the procurement side either and the legal review and everything and they're just like no we're not gonna do it so then what you get to do is you get to look at what do we have access to with our existing vendors right people that have actually gone through this pain or we went through this pain with them our existing vendors this company oh what's really interesting this company has a resale relationship with this other company that then in turn has a resale relationship with this 3rd company. So I can buy the thing I need from the 3rd company, resold through here, resold back through here, and I can take and play margin in both places in order to get the thing I actually need because I have to only buy it from this place. I kid you not. Deal with this right now. And the other thing that's great about this is that thing over here might not even be what you want.
Speaker 1:It might just be something that actually kind of does what you need enough that you can kind of do it. Right? You're not even making decisions based on what you actually is the best thing for you or the best best scenario. It's just like, that's the only option we have, and the only way to get to it is if we do these, like, crazy cockamamie thing in between a and b in order to get there. And it's wild.
Speaker 1:And I know it's not limited to this enterprise, and we see this a lot. We see it in different variations. We see it in different severities. Hopefully, your procurement process isn't this fear. You might wanna ask.
Speaker 1:Like this might be a very simple talk about like if you have any insight or oversight into operations or finance what is the actual process from start to finish to onboard a new vendor and have you create a scenario where your company and your employees will not go through it because it's not worth it to get a new vendor and as a result you're not getting either the and by the way your vendors know if you can't onboard new people because they went through the process they know how how unlikely it is for you to go do it with somebody else. So now you've also got a situation where your existing vendors, your existing providers understand the landscape of where they're at. I mean, so now your procurement departments be like, oh, yeah. We went through renewals, you know, and and we were able to get, you know, an 8% reduction in our cost, you know, from this company on our renewal and, like, high five everybody. And it's like, yeah.
Speaker 1:Because they have 60% inflated margin on this thing because they know they can do it. And so great. You save 6%. But, you know, you just bought this thing at $22 a unit and, like, market rates, 8 dollars a unit. And, like, what are you so happy about?
Speaker 1:What you're so happy about is, like, you you've created this, like, fantasy nonsensical situation that you can now celebrate your, like, KPI that you got your, like, 8, 9, 10% savings on. But, you know, you're so grossly overpaying in the first place because the insanity that you created, like, this is horrid for you. Right? And by the way, these types of companies also like to waste, like, a year in an RFP process. And also you see a lot of vendors, a lot of providers just won't respond to RFPs because they understand the process that they're in with that RFP of, like, hey.
Speaker 1:We're just gonna validate pricing for the existing incumbent vendor that already has an MSA in place with you, and that you pricing for the existing incumbent vendor that already has an MSA in place with you, and that you just have to go out to market in order to generate some pressure against that vendor in order to improve your pricing with them. And we're just not gonna play along. It's just not worth it to us. Us. So is your procurement process costing you money?
Speaker 1:Probably is. What severity of it? I don't know. I would tell you if you haven't looked at this recently, you might wanna ask. You might wanna just look at it.
Speaker 1:How long does it take to onboard a new vendor? What is the process to get an MSA in place? How many vendors did you onboard last year? I know it's a pain in the butt. I know it's annoying.
Speaker 1:I know it's complicated. I know it creates other effects down the road, but, you know, basic agility here. You know, if if you wanna go out and you wanna actually end up with stuff that is good for you to have, like, this is just one of those things that you have to deal with and you to figure out how to deal with at scale as you scale the company. The better you do, the better off you are. I'd love to hear your procurement stories.
Speaker 1:How long does it take you guys to, your company to onboard a a new vendor? What's your MSA process like? Are you more or less than 10 months? Let me know. Comment below.
Speaker 1:Feeling.
