Fairmarkit and supplier.io are excited to announce our official partnership. Since 2020, we have had the pleasure to work closely to identify an opportunity to impact supplier diversity programs. Through our collaboration, we are committed to driving corporate spending to diverse vendors through tail spend.
Today’s leading enterprises have a unique opportunity to make a lasting impact on the communities they serve by ensuring diversity amongst their supplier base and directing more spend to those vendors. Both corporate and government mandates are driving significant change. In the US alone, US companies have committed more than $50 billion in minority- and women-owned businesses over the next ten years, according to McKinsey. Over the last few years, public commitments made by leaders across industries such as Jamie Dimon of JPMorgan Chase, Zander Lurie of SurveyMonkey, and Bracken Darrell of Logitech, have energized other organizations to do the same. As technology providers, we recognize that we have a role to play as well, and view it as our responsibility to help make those commitments a reality.
The combined power of supplier.io and Fairmarkit gives procurement organizations an innovative solution to supplier diversity, allowing these programs to become a more integrated part of the sourcing process. Powered by the robust dataset from supplier.io, Fairmarkit makes it easy to implement, enforce, and report on supplier diversity initiatives across all spend, not just large RFPs. With Fairmarkit’s automated sourcing platform, now you can ensure that diverse vendors are identified, recommended, and invited to bid for every requisition.
The challenges with supplier diversity programs today
So why have these diverse suppliers and vendors traditionally been limited to a small segment of requisitions? At Fairmarkit, we interviewed over 30 supplier diversity leaders to find out the answer. Common challenges emerged including:
- It is a manual, time-consuming process to search for registered vendors
- There is an insufficient pool of diverse, registered vendors
- It is difficult to ensure compliance with inclusion rules
- There is no internal tagging for diverse vendors in their system
- There are limited resources, including budget and people
Due to these challenges, most programs and supplier diversity professionals only focus on large RFPs. Diverse vendors are identified by manually searching through a database and inviting them to participate. After being invited, the chance that the RFP is actually awarded to diverse suppliers is low, as incumbents are awarded most of the business.
Supplier diversity teams are doing the best they can with the tools and resources at their disposal. However, shifting actual dollars to diverse vendors continues to be challenging. According to a supplier.io study in 2022, 78% reported that they believed supplier diversity has had a measurable to significant impact on their companies.
It is clear that there is the potential to have a bigger impact. By focusing solely on these few, high-value RFPs, organizations are missing a massive opportunity to divert spending across the rest of their transactions.
The path forward for supplier diversity is through AI and tail spend
Tail spend is typically considered the frequent, and often unmanaged, purchases that account for a relatively small percentage of a company’s overall spend, but a disproportionately large percentage of its total transaction volume. It is around 80% of transactions in volume, yet only constitutes about 20% of a company’s spend in dollars.
Given the frequency of these tail spend purchases, it makes it difficult to include them in supplier diversity programs because of the high volume of requisitions. It becomes nearly impossible for humans to manually intervene to properly identify, invite, and ensure compliance for thousands of transactions, and thousands and thousands of diverse vendors per request.
Fairmarkit’s AI technology can automatically remove these manual processes, allowing buyers to easily ensure that diverse vendors are identified, recommended based on historical data for each unique event, and automatically invited to bid for every requisition—large strategic RFPs or small tail spend RFQ purchases. This leads to a multitude of benefits including:
1. Tail spend helps you hit your supplier diversity goals faster
Driving tail spend to diverse vendors helps you hit your supplier diversity goals faster. With a higher volume of transactions, procurement teams have the ability to invite more diverse vendors to bid. This helps organizations reach supplier diversity goals faster including how many diverse suppliers are being invited to bid per requisition and adding new diverse suppliers to your supplier database with the partnership between supplier.io’s certifications and Fairmarkit’s AI technology to expand your supply base with diverse suppliers to mitigate risk - all without adding headcount, increasing cycle times or sacrificing competitive pricing.
2. Tail spend gives diverse suppliers a bigger chance of winning the business
Supplier.io shared in their 2022 State of Supplier Diversity Report that (unsurprisingly) one of the biggest challenges for diverse suppliers is difficulty being discovered by larger companies. Meanwhile, 73% of respondents said finding or identifying qualified diverse suppliers to be relatively extremely challenging and 61% said having adequate staffing to help maintain their supplier diversity programs and initiatives was extremely challenging. In using Fairmarkit’s AI technology with supplier.io, companies can automatically be introduced to and invite these small businesses to bid on purchases (including smaller purchases) - giving diverse suppliers the opportunity to win business and allow buyers to contribute to their diversity initiatives without adding more work or manual intervention.
3. Tail spend stops the “passing the responsibility” effect
Gone are the days of passing the responsibility down the chain. To the diverse suppliers, we are here to help shift the dynamics for you. This partnership will help break the cycle of passing the baton to your vendors’ vendors. Our solution creates a path for every organization to easily hit their supplier diversity goals for tier 1, tier 2, tier 3, etc. suppliers using the data and automation Fairmarkit and supplier.io provides. We are all responsible for doing our part.
4. Automation eliminates the limits on including diverse suppliers
Fairmarkit’s autonomous sourcing removes many of the barriers of sourcing from diverse suppliers. Organizations can easily identify diverse businesses from Fairmarkit’s and supplier.io’s directories. They also no longer have to restrict themselves to artificial limits such as “3-bids-and-buy.” It is now just as easy to invite tens of suppliers and increase the number of opportunities which include diverse candidates.
5. Driving supplier diversity programs through tail spend helps the economy
According to figures from The National Minority Supplier Diversity Council, certified MBEs generate $400 billion in economic output that leads to the creation or preservation of 2.2 million jobs and $49 billion in annual revenue for local, state, and federal tax authorities. Spending money with these diverse suppliers helps your organization plus the economy, both on a local and national level. It’s a win-win.
Our commitment to supplier diversity
“As a procurement leader, it's always been important for me to remember the real-life impact of the work that we do in sourcing and procurement,” says Erin McFarlane, VP of Product Innovations & Partnerships at Fairmarkit. “Our cost-savings allow companies to reinvest in other ways, our efficiency gains mean products get to market sooner, and avoiding risk means that consumers can rely on our companies to deliver the products and services they need without interruption. Those impacts aren't always crystal clear to a sourcing manager or buyer on a day-to-day basis, though. ESG and DEI initiatives, however, make it very clear how procurement pros impact the real world. By giving small, minority and women-owned, veteran-owned and other diverse suppliers a seat at the table, we are helping our communities grow in real and measurable ways. By directing enterprise spend in a more sustainable way, we can have a tangible impact on climate change, pollution reduction, waste management and carbon emissions. That's a real difference that we're all making every day, and it matters.”
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