Overcome the challenges of building a supplier diversity program
There may never be a better time for your organization to diversify its supply chain by including more minority- or women-owned businesses. The global COVID-19 pandemic brought supply chains to their knees and highlighted the need for rethinking supplier relationships. Meanwhile, the Black Lives Matter movement has shone a spotlight on racial inequality and social justice issues.
Diversifying your supply chain will not merely broaden your overall supplier base. It will also let you tap into the rapidly growing minority business segment while increasing the number and quality of bids.
But the road to success is not always easy. Below, we’ve outlined three obstacles that may present themselves and two helpful tips to help get you started.
Obstacle 1: You lack the budget and resources to start a supplier diversity program
In a recent Fairmarkit webinar, Coca-Cola head of global supplier diversity and inclusion Terrez Thompson said a significant hurdle to implementing an effective program is the lack of budget and staff support. You need funds for a range of essential activities—like new due diligence, dues for diversity organizations and implementing technology and data analysis that helps you track your progress.
Far too many initiatives are “one-man shops,” says Thompson. Such a small resource outlay can only be successful if you only have a few commodities to purchase. Otherwise, you need to get the funds to really make a go of broadening your roster to include more minority-owned businesses.
But Thompson says small teams can operate successful programs if they utilize third-party support to identify suppliers and help them with their reporting. Yet even managing third-party consultants requires time and money.
Obstacle 2: Nobody knows about the supplier diversity program
If no one at your company is interested in expanding relationships with minority-owned businesses, then your program won’t get off the ground.
Madison Gunter, director of supplier diversity and sustainability programs at Salesforce, says it’s crucial to identify champions throughout your organization. And once they have success finding and using diverse suppliers, that success needs to be promoted.
“As people in other parts of the business see the successes that have come about from supplier diversity—and how they have participated in making those successes—it is important to recognize and replicate them in the future,” says Gunter. “Give credit where credit is due to the people throughout the organization who succeed in helping diversify the supply chain.”
Obstacle 3: You can’t identify any diverse suppliers that fit your business
What if you can’t unearth any minority- or women-owned suppliers that fit well with your business? You might be surprised how often this can happen. These companies are out there. It just sometimes takes a little digging. Try contacting one of the many supplier diversity organizations that help companies achieve their goals.
Karmetria Dunham Burton, general manager of global corporate supplier diversity and inclusion at Delta Airlines, says it’s crucial to identify candidate companies with scale and scope. You can also help smaller suppliers build scale by providing resources and setting them up for success.
In general, Thompson thinks that the digitization of supply chains and the economy will be an equalizer for many young businesses, making them more competitive and easier to find.
“Digitization will elevate those diverse suppliers to be more competitive with the overall supplier ecosystem,” she says. “The ability to have access to technology and digitization will make entry to big corporation supplier rosters easier than it was when suppliers needed to show brick-and-mortar facilities. Those on the leading edge of digitization—finding ways to cut costs and deliver in different ways—will be revolutionary.”
Secret 1: Find a friend or sponsor to support the supplier diversity initiative
Lack of diversity doesn’t have to be a problem you solve on your own. Burton suggests that procurement professionals tasked with the challenge should try to create alliances with their company’s employment diversity officer and the sustainability officer.
“Those leaders tend to have more visibility around workforce diversity,” she says. “The work around supplier diversity can sometimes get unnoticed, and employment diversity and sustainability are sometimes further along. An alliance will help create holistic visibility of diversity in your organization.”
A friend or sponsor in your company’s leadership team is also vital. Once you achieve buy-in from the C-suite, you can use it as a bargaining chip throughout the company. People are more likely to listen and take notice of an initiative if your top management is behind it.
Secret 2: Measurement is everything
No matter how wonderful you think your program is, it won’t last the distance if you can’t quantify your success.
Gunter suggests setting goals, barometers, and baselines throughout the company to evaluate progress and accountability empirically.
Part of that measurement should be understanding and defining the different groups that your diversity program aims to engage, says Alexis Bateman, director of sustainable supply chains at the Massachusetts Institute of Technology. So, it’s crucial to track your inroads. Many ownership and management categories—such as minority, LGBTQ, veteran, and women—need to be defined so that everyone in the organization and beyond can understand your progress.
Burton says absolutely must monitor certain, specific procurement metrics. For instance, at Delta, she tracks the percent of spend achieved at her top supplier level (Tier 1). Further down the roster (Tier 2), she monitors the number of diverse suppliers and direct and indirect spend within the category.
Burton also thinks that the overall number of diverse suppliers added is a useful metric. You can see an increase in your Tier 1 spend without actually adding new businesses, so “you need to evaluate whether you’re diversifying your diversity,” Burton says. Because if you keep spending with the same suppliers, it minimizes the opportunities to bring new people on board.
But the metric that most excites Burton is economic impact: “Increasingly supplier diversity professionals will be able to measure how their program is impacting the economy overall,” says Burton. Key performance indicators would include jobs created due to a procurement contract and the resultant sustainable economic independence for the community in which the supplier operates.
So, beware of the obstacles and listen to the secrets. Because now is the time to ramp up your supplier diversity program.