Identifying and vetting potential new suppliers is a necessary part of integrating diverse suppliers into your supply chain. Ideally, you would have access to an automated solution for supplier discovery, like a supplier registration portal backed by a constantly updated database. If you don’t have access to an automated solution, these are the steps to take in order to gather the information you need for your supplier database—as well as maintain the information once it’s there.
Determine geographic location
The geographical distance between the point of manufacturing and point of consumption has an impact on profit, as does the distance between a supplier and your company. If your manufacturing facilities are located in the Southeast but the supplier of a vital component for your product is located in the Upper Midwest, the cost of transportation adds to the cost of producing each item. Plus, you may run into logistical issues should weather, natural disaster, or any other incidents affect the method of transportation. An ill-timed snowstorm could set your production back days or weeks because a shipment couldn't get through. The geographic source of what a supplier is supplying is an important piece of data.
Pro Tip: Don't assume that a company's office location is the same as their warehouse location. Search a potential supplier's website, public records, and other sources to ascertain this information. Input it into your supplier database to use as a parameter when identifying possible suppliers for an opportunity.
Find up-to-date company contact information
It's hard to do business with a company if you don't know how to reach them. It's also difficult to pay an invoice if you don't have the vendor's current address. Up-to-date supplier contact information seems like an obvious part of your supplier database, but you might be surprised by how many out-of-date records you have, or how many errors your database contains due to human error.
You can request that suppliers update you when their contact information changes—and it's in their best interest to ensure that you have that information—but the reality is that people forget. If you're not using an automated solution, block off time every month to go through your supplier database and confirm contact information either through public records, a phone call, or an email to your contact within the company.
Include diversity category, certification source, and status
If your intention is to increase the number of diverse suppliers you work with, then obviously you need to know if suppliers are certified as diverse and in which category. As your supplier diversity program matures and your goals evolve, you will want to track spend in different diversity categories.
Perhaps you've increased your diverse spend to 5 percent, but within that spend, 80 percent is with MBEs and the remaining 20 percent is split between WBEs, LGBTBEs, DBEs, etc. If the majority of your spend is within one diversity category, is that truly meeting your company's goals? Are you overlooking potentially powerful suppliers in other categories?
Your supplier database should also include which third-party entity certified each diverse supplier, as well as what their current certification status is. Diversity certification is not a one-time achievement. Depending on the certifying party, companies may need to update their status every two to four years.
To find out a supplier's certification status and category, you'll need to ask them for proof of certification. That proof should come in the form of certification provided by the third party, such as the National Minority Supplier Development Council (NMSDC), Women's Business Enterprise Council (WBENC), National Gay and Lesbian Chamber of Commerce (NGLCC), and the U.S. Business Leadership Network (USBLN) for disability-owned businesses.
Verify the supplier's certification status by contacting the certifying entity and requesting confirmation. This verification process should be done annually if you don't have an automated solution that verifies and updates the status for you.
Procure commodity category
So, you know where a potential supplier is located, you have their contact information, and you know their diversity category and certification status. Great. But do you know what Acme Inc. can do for you, or what services GA Smith & Daughters Co. provide?
Commodity categories—NAICS and SIC codes—are an important piece of data in any supplier record. When you have an upcoming opportunity for maintenance or widget manufacturing, you need to be able to generate a list of potential suppliers who can meet that need.
To find a supplier's code, you can either request it from them directly or search the NAICS database for about $10 per business. Fortunately, this piece of information rarely needs to be updated, so once you have a supplier's code, you can quickly verify it when confirming contact information.
Define supplier revenue, size, and ownership type
Information about a supplier's revenue, size in terms of employees and capacity, and ownership type can help you determine if they are the right fit for an opportunity. This information is also helpful for risk management—can the supplier scale to meet demand? Is the supplier connected to other companies in your supply chain?
A lot of companies are not particularly forthcoming with this information, unless they are publicly traded. You can request the information as part of the vetting process, but when you're simply looking for potential suppliers, those requests are often met with silence. Fortunately, the NAICS database can help you find this information in addition to commodity categories. There is a per-record cost, but you can bring the cost down with volume discounts. Enter that information into your database and use it to generate reports on possible supplier partnerships.
Your supplier database is a crucial tool for identifying diverse suppliers to add to your supply chain. If you're not using an automated solution, make sure you have relevant information that you verify regularly, and time set aside to do so.