Supplier Onboarding Policies

Viewing 13 posts - 1 through 13 (of 13 total)
  • Author
  • #292379

    This member from the buy-side is re-writing their Procurement Policy and revamping their process for the requested addition/approval of a new supplier. 

    This member is seeking best practices for procurement policies, specifically covering topics such as: 

    1) What spend does/does not require a PO?
    2) Consequences for Procurement Policy Violations
        a) Ex: Committing company funds without a PO or contract
    3) How are violations to the Procurement Policy enforced?
    4) Process for requesting a new supplier add?
        a) Who reviews/approves/denies this request?



    1. Very grey today.   Some spend is clear (rent, utilities, etc— not on a PO).  Services goes through a contract/work order process, not specifically a PO).

    2. Policy in place but not strictly enforced

    3. Per above.  Could be consequences but little reporting and enforcement today.

    4. Typically happens at time of invoice (no PO, so invoice triggers new supplier set up).  Trying to move this up in the process and ensure the business engaged procurement to help source a supplier

    4a. AP


    This varies from company to company.  Most companies have guidelines but do not always hold to the guidelines and allow for many exceptions. Those companies that have best in class policies (or guidelines) and hold their organizations to them are those that have sound governance committee and/or process.  Governance should start with leaders within the business/operations, procurement, HR, Finance and in some cases Risk/Legal.  If the policies are established with collaboration between all these functions at a Sr. level, the adherence to the requirements are better enforced.  If Procurement, HR, or risk/legal (especially procurement and HR) try to establish a policy on their own, it is harder to gain compliance and hold stakeholders accountable.

    If there is collaboration and governance in place to establish and enforce policy then some best practices for procurement policies I have seen are as follows:

    1.Spend levels?  There should be a clear delegation of authority established for PO and/or contract approval.  It is not as straight forward for dollars, however, there may need to be approval levels based on non-standard contracts (contracts that do not comply with your standard T&C around indemnification, IP, warranties, and/or insurance).   

    2.Consequences?  I have seen violations state “. . .up to termination” depending on severity.

    3.Enforced?  Policies need to state that procurement owns the overall oversight and responsibility for all fund commitments. Even if the business did the quoting and selection without procurement, before the business or the supplier can engage, procurement must have final say and approvals.  This would be regardless of the level that committed – if it is outside of procurement they are subject to discipline.  An example:  in a previous role, I would backdoor the managers and go to the suppliers stating “if they do business without procurement authorization, they are doing it at no cost to the company because the company cannot be held liable for payment without proper documentation or authority.”  I have gone as far as having the supplier invoice the stakeholder since there was no authorization / PO (that got everyone’s attention and changed behavior very fast).  The other way to enforce behavior is by delaying payment to the supplier and/or escalating through your governance of non-compliance through an established standard communication.

    4.Supplier Additions?  Procurement should have input into supplier additions to ensure compliance to strategy.  No supplier should be added without buyer knowledge and/or approval.  This is just part of a step that is built into your supplier add process.


    Barbara Lauer

    Principal, Talent Advisory Services, Global

    [email protected] I Mobile: 920.224.3974



    1. Utilities, Travel Expenses, C-Suite expenditures.

    2. There are no consequences, as only approved invoices can be entered into the system, and AP has a list of people who can approve expenses without a PO.

    3. N/A.

    4. We have a vendor portal that certain people have been approved to invite to fill out their information.  We control the set-up of new vendors by having all the requests for credit run through the corporate purchasing department.  We will not fill out the credit paperwork for a vendor that is outside of our established programs.



    1. It depends on the department: for most of the company spend under $2,500 can be accomplished by a Pcard, except for software purchases or services conducted on company property.  If the exceptions listed or over $2,500, then a contract has to be created which includes terms and conditions (not just deliverables and a price).  A few select departments have limits from $10,000 to $50,000 without involvement of Procurement where Procurement would add no value (i.e. costs are a required fee that cannot be competitively bid).

    2a. The Procurement Manager contacts the erring departments Manager.  This had little effect, so we started publishing a monthly list that was reviewed by the Officers and that cleaned it up within 60-days; no one wanted their department on the list.  However, this was deemed degrading, so the practice was stopped after 6-months and we are now back to the Procurement Manager giving verbal lectures with infractions back on the rise to former levels.

    3. (see above)

    4. Any Supplier can be added as long as there will be business conducted with the Supplier.  Business must be competitively bid if over $50,000.

        a. Who reviews/approves/denies this request?  Procurement reviews and approves process with assistance from Accounts Payable.



    1. What spend does/does not require a PO?  

    Ex: Political and Charitable Contributions, Sponsorships  –up to a certain limit • Employee Placement Fees • Royalty Payments • Facilities Emergency Repairs up to a certain limit • Tax Payments to Governmental Agencies • Exhibit Fees – up to a certain limit • • Fee-for-Service Payments to wholesalers 

    Ex: Credit Card: Acceptable Non-travel Related Expenditures  • Books (up to a certain limit • Conference Registrations and organizational dues, seminars, subscriptions (up to a certain limit )

    2. Consequences for Procurement Policy Violations 

        a. Ex: Committing company funds without a PO or contract (invoice must be approved by the controller)

    3. How are violations to the Procurement Policy enforced? N/A

    4. Process for requesting a new supplier add? (New Supplier Add portal.  Supplier requests added by business owner)

        a. Who reviews/approves/denies this request? (approved by strategic sourcing)



    1.No PO = No Pay policy (all spend needs PO unless on catalog)

    2.Consequences = if no PO we don’t pay the invoice – now if the work has been done we clearly have to pay but require the business owner to enter the PO late and we track those

    3.Violations = track and report to upper management

    4.New Supplier Adds = AP manages, but any exceptions to standard terms require procurement + SVP approval (i.e. payment terms, no 3-bids, etc.)



    We work with buy-side companies on their sourcing strategies and programs.


    Policy and Governance is a component of our Advisory services.


    If the SIG Member wants to speak with one of our team have them contact me and I will set it up.


    Trust this is helpful.






    John Bree  |  SVP & Partner  |  Neo Group

    [email protected]  |  M: 732.306.8022



    1. What spend does/does not require a PO?

    All spend for IT related purchases require a PO. For non IT purchases, >$50k


    2. Consequences for Procurement Policy Violations

        a. Ex: Committing company funds without a PO or contract

    We have a both a signature authority table by role for approving reqs/pos/invoices and there is a separate “contract approval” table with specific named people/roles that can execute agreements. In this case PO’s by themselves are not considered agreements.


    3. How are violations to the Procurement Policy enforced?

    Invoice file audited for payments made >$50k that did not have a PO. 1st time violators are contacted with cc to manager for awareness. Escalations progress from there


    4. Process for requesting a new supplier add?

        a. Who reviews/approves/denies this request?

    Request to add supplier form and workflow required with department VP sign off. AP/Purchasing review to determine if the supplier is necessary or whether or not other suppliers exist or preferred suppliers exist. Process is run to ensure the supplier is not on any government watch list for excluded-debarred reasons



    This is a topic that is coming up frequently these days.  It’s very much a ‘it depends’ situation.


    Generally, we see companies trying to manage the following 4 goals:

    1.Controls (controllership is key proponent)

    2.Visibility (sourcing is key proponent)

    3.Transactional Efficiency (AP is key proponent)

    4.User-Friendliness (end-user is key proponent)


    These goals are often antagonistic.  As such, the key to developing an effective P2P policy is to:

    1.Find the right balance across the 4 goals

    2.Adjust it by business, geography, & category

    3.Make sure there is appropriate end-user buy-in and technology to enable


    The answer to this looks very different based on organization.  For example,

    1.Manufacturers in a regulated environment would tend to focus more on #1 & #2

    2.Media companies would tend to focus more on #3 & #4


    I am happy to engage my expert for a discussion on this.  It’s definitely not a ‘one size fits all’ solution.


    Mike J.



    Michael Jette

    (O): +1 732 382 6565, 4693 | (M): +1 (917) 757-7964

    [email protected]




    1. All work/services require a PO.  The only exceptions are those paid for with Corporate Amex.  These Credit Card payments are generally for T&E type of expenses. 

    These still go through an approval process during reconciliation.

    2. Work/services cannot begin without a PO.  This is stated in the SOW signed by vendor and company.  Employee is subject to discipline, including termination. 

    3. Depend on the type of violation.  This ranges for a write up, losing approval level ($), all the way to termination.  

    4. Intake form with required fields to properly categorize the vendor.  The vendor will see and agree to general T&Cs in completing the form.  The vendor is vetted through procurement.


    1. -Reoccurring spend that has no need of control/validation of commitment, units consumed or unit price through a PO  e.g. – Organizational Membership dues, utility bills, donations, lease of buildings, and fixed commercial overheads etc.

    -High Transaction, low value products or services where no specification controls are needed – low value MRO consumables, employee travel, 

    -Transactions and control managed in Vendor Systems –   Vendor Managed Tool crib,  Cell Phones  

    -Confidential spend at executive discretion – Donations, Charity events, special legal events etc. 

    2. -Hard stop in the process system –  E.g. Payment cannot be processed without PO, and system automatically defaults standard terms to PO in absence of contract reference. 

    oSupplier classification – Non PO suppliers are flagged (through SCM Controls) , if not payment cannot be processed without PO.

    -Consequences of violations   – Corrective instructions to vendors, putting the individual team through SCM end-user training, escalations of repeat offenders. 

    3. -Mostly through the ERP/EAM system workflow controls.  And educating the vendor base NO PO (Or Contract), DO NOT DELIVER 

    -Integrating the work and project management process/systems with P2P

    4. -Controlled in financial system as workflow 

    oBusiness User with required product/service details enters new vendor request (or can ask SCM Buyer/Sourcing to enter the request)  

    oFirst validation – Applicable Buyer validates if the requirement can be delivered by one of the incumbent vendors. If not, obtains minimum setup information from new vendor and workflows the form.  Covering levels of qualification relevant to product/service/Spend

    o2nd Validation approval – SCM Leadership (Mgr. Director)  Approves, Rejects, Sends back for review

    oFinal QA and Entry – Vendor Master Data Administrator  

    -Note:  Business user can recommend a vendor and provide scope/expectations.  As long as scope/expectations criterion is met the decision of adding/rejecting a vendor is exclusive with SCM. 



    What spend does/does not require a PO? 

    It is a combination of spend and the risk rating of the engagement. Those limits need to be set by each organization based on your risk tolerances.  Based upon that we have a specifically prescribed process to do a PO at [company].


Viewing 13 posts - 1 through 13 (of 13 total)
  • You must be logged in to reply to this topic.