Recently we've been talking about looking beyond spend to measure the success of our supplier diversity programs. Economic impact, number of diverse suppliers in the supply chain, and other metrics provide a holistic view of success. But dollars spent with minority-owned businesses remains the foundation of any successful supplier diversity program. We set spend goals each year, hopefully higher than the previous year, as a way to forge ahead toward economic equality and business success. How can we increase spend to meet these goals?
Make supplier diversity a priority.
Your entire organization should be working together to ensure the inclusion of diverse suppliers in contract opportunities. Is your CEO committed to supplier diversity? How about the rest of the C-suite? Procurement? Category managers? Are they actively supporting the program throughout the organization? For your supplier diversity program to truly excel, it needs to be a priority from the top down.
Set benchmarks and goals.
When benchmarking your supplier diversity program, look for inspiration beyond your industry to become best in class. Evaluate the processes used by leaders in other industries to find quality programs against which to benchmark your own. As a bonus, bringing in techniques from other sectors can give you a competitive edge over your peers and establish your organization as a leader within your own industry.
Using what you've learned from leaders in supplier diversity, set smart goals based on industry standards. Tracking your progress provides measurable results to prove the efficacy and necessity of the program over time. Setting meaningful goals also ties supplier diversity to business strategy for the organization as a whole. Your goals should be reasonable and achievable, help to identify weak areas that need improvement, challenge the status quo and discourage complacency, confirm the need for change, and provide strong motivation for change.
Measure and report your success.
Reporting is a key indicator of success for your supplier diversity program. Consider which metrics need to be included to satisfy stakeholders, how often to report, and how to get the most out of the data you've collected.
This is a good time to think about what you can automate about the process of collecting data as well as the use of technology to protect the integrity of your data. For example, you can save yourself and your team hours of tedious data entry by using a third-party database for supplier information. A frequently updated database that draws from multiple verified sources can provide the data you need with a few keystrokes as opposed to calling suppliers individually to verify information.
Reporting on spend is also a tool for keeping stakeholders engaged in your program. When they see evidence of increased spend, moving toward your goals, they are more likely to remain committed to supplier diversity.
According to a recent survey conducted by CVM Solutions, 46.6% of respondents generate reports from their supplier diversity program at least quarterly, with many reporting monthly. Think about your organization: Would monthly or quarterly reports keep interest high or be overwhelming? Is a bi-annual report sufficient? You know what's best when it comes to your organization and stakeholders.
Another note about reporting: If your company has any federal contracts, then you must track and report diverse spend to be in compliance with federal mandate. Be diligent about compliance to avoid nasty repercussions.
Now let's talk about increasing actual dollars spent with diverse suppliers. How do you integrate these businesses into an established supply chain?
- Expand your supplier base. Review upcoming contracts as well as expiring contracts for opportunities and reach out to diverse suppliers with an invitation to bid. Replacing incumbent, majority-owned businesses with a minority-owned supplier not only increases your diversity spend, it promotes innovation, encourages competition among suppliers, and gives you access to new consumer markets.
- Share your supplier diversity tools with procurement personnel to streamline access to potential suppliers. For example, if you use a supplier locator tool to help you search for potential suppliers, provide your procurement team with access so they can identify potential suppliers with a few keystrokes. A supplier portal, configured to your organization's specifications, allows you to vet potential suppliers before they even submit a proposal. The easier you make it for procurement to find, vet, and reach out to diverse suppliers, the more likely they'll be to do so.
- Tier 2 reporting is one of the easiest ways to increase diversity spending because you're simply reporting spend that already occurs within your supply chain. Ask your Tier 1 suppliers to report their diversity spend to you, then make it easy with a customized supplier portal.
We want our supplier diversity programs to be robust and meaningful, to positively impact our organization and our suppliers. As we scale and expand our programs, don't forget that a strong foundation—dollars spent—is what makes all the other initiatives viable.