As companies move from compliance-driven to market-driven supplier diversity programs, they’re increasing resources for management, marketing and reporting. Supplier diversity is maturing, becoming more ingrained in every aspect of doing business and recognized as vital to the bottom line.
An effective supplier diversity program is one that demonstrates measurable results over a variety of metrics. As the saying goes, “what gets measured, gets done.”
But how do you know which metrics to measure?
SET YOUR GOALS
Checking against the wrong metrics can lead companies to take actions that don't drive towards the objects of the supplier diversity program. First, decide what you want to achieve, then measure and report results for a period of time before setting pertinent goals.
Your goals should be achievable and realistic, meaning you or someone you can influence controls the outcome. For example, rather than simply tracking diverse supplier spend, it is often equally as relevant to track diverse supplier count.
Many entrepreneurs have a goal of building their enterprise to a point that it becomes attractive to larger companies for purchase or to outside investment that could take the founding (diverse) owners to less than 51% ownership, thus losing its diversity status. These scenarios are beyond your control, but can directly impact your company's level of diverse spend. Expanding your diverse supplier base and establishing that as an important, regularly reported metric as part of a strategic sourcing initiative can make it easier to adapt when a supplier loses diversity status.
Services such as a Data Enrichment scrub can help identify diverse organizations that are already are a part of your supply chain, allowing you to expand your diverse supplier base, and track the growth of your supplier diversity program which enables you to develop goals ensuring the integrity of your supplier diversity program.
GO BEYOND TYPICAL METRICS
It is easy to focus on top-level metrics, such as tracking spend with Tier 1 and Tier 2 suppliers and the breadth of the supplier base. While these are critical metrics, the benefits of a diverse supply chain extend beyond these numbers. As the implementation of supplier diversity programs has matured, success has moved from being measured and evaluated solely on achieving spend goals to being measured by the program’s impact on the economy and within the organization.
The most successful supplier diversity programs demonstrably drive business growth and increase shareholder value. A supplier diversity team can increase executive buy-in and commitment by going beyond typical metrics and linking to business strategy in bottom-line terms.
Consider reporting these metrics in addition to spend and the number of diverse suppliers in the supply chain:
Cost Savings: How has expanding your diverse supplier base reduce costs (e.g. by creating opportunities for MWBEs, therefore increasing competition among suppliers)? How has building relationships with existing diverse suppliers led to cost savings? By leveraging parent-child family linkages, how have you demonstrated savings?
Market Share: How has your supplier diversity program helped increase market share/market penetration within diverse communities? How has this impacted your corporate image within diverse communities?
Revenue Impact: How has partnering with diverse suppliers positively impacted the organization's revenue? How do diverse suppliers factor into revenue forecasts?
Economic Impact: How many jobs have been created as a result of increasing spend with diverse suppliers? What is the income effect of your diverse supplier base? What are the tax contributions to doing business with diverse suppliers? How has integrating diverse suppliers into the supply chain impacted local economies?
As a new best practice, systems should be put in place that allow you to easily gather data at the same level of granularity with which you set your goals. In doing so, this allows your supplier diversity team to create relevant, meaningful reports that link to the company's overall business strategy and develop a robust, diverse supply chain that leads to innovation and growth.