Executive Briefings

Learning to Integrate Supplier Diversity into the Strategic Sourcing Process

Consider supply chain management a large puzzle comprised of many pieces. One major piece that many organizations find essential to form a complete picture is strategic sourcing, which involves the ongoing evaluation of purchasing activities and a commitment to look at all qualified solutions for both direct spend (costs associated with raw materials and parts for goods) and indirect spend (costs necessary for supporting production).

Learning to Integrate Supplier Diversity into the Strategic Sourcing Process

By reviewing sourcing strategies on an ongoing basis, organizations can find areas for improvement and ensure they are getting the best product and service at the best value. Additionally, it allows corporations to make decisions based upon market intelligence rather than personal and historical preference or instinct. Since strategic sourcing supports creative approaches and works to challenge the status quo, it's not hard to see how it can help support supplier diversity goals.

A Changing Landscape

Today, many organizations are working hard to make their supplier bases more inclusive of minority and women-owned business enterprises (MWBEs). Why? Because customers and stakeholders are demanding it. They want corporations to work with organizations that are more reflective of the communities in which they operate. According the U.S. Census Bureau, these communities are expected to become even more diverse over time. By the end of this decade, it is predicted that "no single racial or ethnic group will constitute a majority of children under 18."

Not only are communities becoming more diverse, but MWBEs are experiencing steady growth. According to the 2013 State of Women-Owned Businesses Report, since 2007, women-owned firms have added 175,000 jobs to the U.S. economy. The report also finds that in 1997, just 17 percent of women-owned firms in the U.S. were led by women of color. Today, one in three women-owned firms are diverse.

In 2011, the Commerce Department's Minority Business Development Agency (MBDA) and the U.S. Census Bureau released data detailing the growth of African American-owned firms in the U.S. From 2002 to 2007, the number of these organizations increased by 60.5 percent to 1.9 million firms. African American-owned businesses were also responsible for more employment growth than non-minority businesses during the same time period. MBEs today are still growing despite the impact of the recession. With MWBEs becoming more visible on local, national and global levels, it's time for organizations to make sure their sourcing strategies are paying attention to this growth.

Making Supplier Diversity Systemic

In order for strategic sourcing to support supplier diversity, an organization first needs to work towards making supplier diversity systemic. Supplier diversity shouldn't be considered a program, initiative or even a fiscal year priority. Rather, it needs to be thought of as a natural part of the overall business process.

To accomplish this, leadership must be on board with supplier diversity. Support from upper management is essential for highlighting the role of diverse supplier inclusion to all employees, including sourcing professionals. When employees recognize that the C-suite cares about supplier diversity, they're one step closer to internalizing the concept themselves.

Conditioning employees to accept supplier diversity sometimes requires organizations to change individuals' core values and principles.  To engage employees, including those with spend management responsibilities, companies should conduct supplier diversity training to introduce the topic to those unfamiliar with it. For example, many people don't realize that they can find MWBEs with national and global capabilities.  And in some cases, current suppliers might be already certified but no one previously inquired. With greater awareness, organizations are better positioned to find diverse suppliers. Education and expectation setting also allows organizations to include diverse supplier engagement and successes as part of the job description and experience for sourcing positions. Some companies then review an individual's commitment to supplier diversity during employee evaluations and require sourcing meetings to report on diverse spend goals and achievements.

Promoting Inclusion of Diverse Suppliers

Once sourcing professionals understand the role of supplier diversity and their organization's goals, they will be able to cast a wider net and look beyond incumbent suppliers. By allowing for more competition in the sourcing process, employees can identify qualified diverse providers and issue a request for proposal.

Even in cases when diverse suppliers are not yet considered qualified suppliers, sourcing teams should work to cultivate relationships with these companies. When members of a sourcing team make an effort to meet with diverse providers at prospecting meetings or local events, they can form connections and provide tips so that organizations can be considered as suppliers in the future. Building relationships and keeping diverse suppliers in the supply base helps organizations in the long run as this can assist the diverse suppliers in creating a competitive value proposition to meet future sourcing needs. Increasingly, customers have supplier diversity requirements that they must meet. Thus, they want to work with organizations that source products or services from diverse suppliers. Companies that already have diverse suppliers identified will have more confidence that they can meet these customer needs with their current supply base, rather than having to pass on the opportunity or scramble to create new relationships with other suppliers.

Also important to note is the benefit of reporting and assessing all spend and cost savings on a regular basis. Many organizations already diligently record spend, yet may not take the time to study how much of this spend is being allocated to diverse suppliers. Through measurement, organizations are able to assess data and track success. Thus, they can pinpoint a certain department that is excelling at sourcing diverse suppliers and identify areas that still need improvement.  This creates the opportunity for internal benchmarking across departments to improve in this area. Continuously tracking and evaluating diverse spend also sets a standard and demonstrates to employees that keeping qualified MWBEs as suppliers is important.

Finally, it's imperative to celebrate supplier diversity successes. Showing employees that working with a diverse supplier helped reduce costs or secure a client win can give them inspiration for the spend that they manage. Ultimately, highlighting success with diverse suppliers makes it harder for individuals to ignore the power of building relationships with MWBEs.

The End Goal

Making supplier diversity systemic is by no means simple. It requires continuous effort and support from both leaders and employees. However, once sourcing teams integrate supplier diversity as standard practice for all sourcing activities and understand the importance of looking beyond traditional supply sources, it allows them to expand their prospective supplier base and identify MWBEs that can provide high-quality products and services at a great value.

Source: Cintas Corporation

Keywords: supplier base, diversified workforce, MWBE, supply chain management, human resources

By reviewing sourcing strategies on an ongoing basis, organizations can find areas for improvement and ensure they are getting the best product and service at the best value. Additionally, it allows corporations to make decisions based upon market intelligence rather than personal and historical preference or instinct. Since strategic sourcing supports creative approaches and works to challenge the status quo, it's not hard to see how it can help support supplier diversity goals.

A Changing Landscape

Today, many organizations are working hard to make their supplier bases more inclusive of minority and women-owned business enterprises (MWBEs). Why? Because customers and stakeholders are demanding it. They want corporations to work with organizations that are more reflective of the communities in which they operate. According the U.S. Census Bureau, these communities are expected to become even more diverse over time. By the end of this decade, it is predicted that "no single racial or ethnic group will constitute a majority of children under 18."

Not only are communities becoming more diverse, but MWBEs are experiencing steady growth. According to the 2013 State of Women-Owned Businesses Report, since 2007, women-owned firms have added 175,000 jobs to the U.S. economy. The report also finds that in 1997, just 17 percent of women-owned firms in the U.S. were led by women of color. Today, one in three women-owned firms are diverse.

In 2011, the Commerce Department's Minority Business Development Agency (MBDA) and the U.S. Census Bureau released data detailing the growth of African American-owned firms in the U.S. From 2002 to 2007, the number of these organizations increased by 60.5 percent to 1.9 million firms. African American-owned businesses were also responsible for more employment growth than non-minority businesses during the same time period. MBEs today are still growing despite the impact of the recession. With MWBEs becoming more visible on local, national and global levels, it's time for organizations to make sure their sourcing strategies are paying attention to this growth.

Making Supplier Diversity Systemic

In order for strategic sourcing to support supplier diversity, an organization first needs to work towards making supplier diversity systemic. Supplier diversity shouldn't be considered a program, initiative or even a fiscal year priority. Rather, it needs to be thought of as a natural part of the overall business process.

To accomplish this, leadership must be on board with supplier diversity. Support from upper management is essential for highlighting the role of diverse supplier inclusion to all employees, including sourcing professionals. When employees recognize that the C-suite cares about supplier diversity, they're one step closer to internalizing the concept themselves.

Conditioning employees to accept supplier diversity sometimes requires organizations to change individuals' core values and principles.  To engage employees, including those with spend management responsibilities, companies should conduct supplier diversity training to introduce the topic to those unfamiliar with it. For example, many people don't realize that they can find MWBEs with national and global capabilities.  And in some cases, current suppliers might be already certified but no one previously inquired. With greater awareness, organizations are better positioned to find diverse suppliers. Education and expectation setting also allows organizations to include diverse supplier engagement and successes as part of the job description and experience for sourcing positions. Some companies then review an individual's commitment to supplier diversity during employee evaluations and require sourcing meetings to report on diverse spend goals and achievements.

Promoting Inclusion of Diverse Suppliers

Once sourcing professionals understand the role of supplier diversity and their organization's goals, they will be able to cast a wider net and look beyond incumbent suppliers. By allowing for more competition in the sourcing process, employees can identify qualified diverse providers and issue a request for proposal.

Even in cases when diverse suppliers are not yet considered qualified suppliers, sourcing teams should work to cultivate relationships with these companies. When members of a sourcing team make an effort to meet with diverse providers at prospecting meetings or local events, they can form connections and provide tips so that organizations can be considered as suppliers in the future. Building relationships and keeping diverse suppliers in the supply base helps organizations in the long run as this can assist the diverse suppliers in creating a competitive value proposition to meet future sourcing needs. Increasingly, customers have supplier diversity requirements that they must meet. Thus, they want to work with organizations that source products or services from diverse suppliers. Companies that already have diverse suppliers identified will have more confidence that they can meet these customer needs with their current supply base, rather than having to pass on the opportunity or scramble to create new relationships with other suppliers.

Also important to note is the benefit of reporting and assessing all spend and cost savings on a regular basis. Many organizations already diligently record spend, yet may not take the time to study how much of this spend is being allocated to diverse suppliers. Through measurement, organizations are able to assess data and track success. Thus, they can pinpoint a certain department that is excelling at sourcing diverse suppliers and identify areas that still need improvement.  This creates the opportunity for internal benchmarking across departments to improve in this area. Continuously tracking and evaluating diverse spend also sets a standard and demonstrates to employees that keeping qualified MWBEs as suppliers is important.

Finally, it's imperative to celebrate supplier diversity successes. Showing employees that working with a diverse supplier helped reduce costs or secure a client win can give them inspiration for the spend that they manage. Ultimately, highlighting success with diverse suppliers makes it harder for individuals to ignore the power of building relationships with MWBEs.

The End Goal

Making supplier diversity systemic is by no means simple. It requires continuous effort and support from both leaders and employees. However, once sourcing teams integrate supplier diversity as standard practice for all sourcing activities and understand the importance of looking beyond traditional supply sources, it allows them to expand their prospective supplier base and identify MWBEs that can provide high-quality products and services at a great value.

Source: Cintas Corporation

Keywords: supplier base, diversified workforce, MWBE, supply chain management, human resources

Learning to Integrate Supplier Diversity into the Strategic Sourcing Process