Setting up a new supplier diversity program can seem daunting – How do you find proven diverse businesses? How do you track performance? What metrics should you be tracking in the first place? Consider the following best practices when establishing your new supplier diversity program.
BENCHMARK AND GOAL SETTING
The first step in creating an effective supplier diversity program is deciding whom you will benchmark your program against and why. Answering the “why” should be fairly easy – to meet the organization's goals.
Setting meaningful goals 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. This last point is critical to establishing employee buy-in.
The “whom” to benchmark against is more challenging. Benchmarking is both a management tool for process improvement and an internal learning and sharing tool that continually improves processes by motivating culture change based on the idea that the company can be among the best in the world.
For your organization to be an industry leader, look toward best-in-class benchmarking. In the case of supplier diversity, look outside your own industry and evaluate the processes used by leaders in other industries. Bringing in techniques from other sectors may give you a competitive edge over your peers and establishing your organization as a leader.
A note: Benchmarking shouldn't just be about figuring out your target number; it should also guide you toward establishing the processes and culture that help you achieve those results throughout the organization.
IDENTIFY PROVEN DIVERSE BUSINESSES
Building a Tier 1 program may be easier than you think. The first step is to run your list of suppliers through a third-party data enrichment process to identify diverse suppliers you already do business with. Once you have identified these certified diverse suppliers, work on building your relationship and increasing spend with them.
When you have maximized opportunities with your current diverse supplier base, the next efficient way to find proven firms is through a master database of small and diverse suppliers containing detailed supplier information. This database should allow searching for suppliers through an Internet portal based on any parameter you choose. It should help your internal teams, or even your prime suppliers, find diverse businesses by making it easy to locate certified MBE, WBE, LGBT, SDB, 8(a), HUBZone, veteran, service-disabled veteran and small-business suppliers in one place.
COLLABORATE INTERNALLY WITH PROCUREMENT AND OTHER DEPARTMENTS
An effective supplier diversity program should constantly look for opportunities for existing and new diverse suppliers within the organization. Work with your procurement team to get visibility into when current contracts are expiring and new sourcing opportunities are coming up, then communicate with diverse suppliers about proposal requirements and deadlines.
Also the key to growing your diverse supplier base is integrating new vendors into your supply chain. Start by identifying commodity categories (or the NAICS code) for each supplier your company is currently doing business with, then run your supplier file through the third-party supplier data enrichment process.
Calculate the percentage of your current spend with diverse businesses for each category. Once you have these percentages, partner with a company who has access to WBENC, NMSDC, NGLCC and other certification agencies’ supplier information to see the most complete availability of diverse suppliers in your geographic area. Your goal is to identify categories that have (1) low utilization of diverse suppliers by your company and (2) a high concentration of diverse suppliers per the certification agencies.
Now you are ready to talk to your purchasing team about potentially replacing some of the incumbent non-diverse suppliers when their contracts expire or bringing in diverse suppliers for new opportunities.
COLLABORATE EXTERNALLY WITH PROSPECTIVE SUPPLIERS
In addition to working with your procurement team, you will want to collaborate with prospective suppliers to build a solid supplier diversity program. One way to do so is to implement a supplier registration portal that allows suppliers to find you and to facilitate the selection process. A registration portal uses commodity-specific surveys designed by you procurement team which asks suppliers to answer prequalification questions specific to the product/service they provide. By implementing this system,buyers spend time reviewing only those company profiles for suppliers that have been prequalified, cutting costs and increasing efficiency.
A successful supplier diversity program is one that demonstrably drives business growth and increase shareholder value. Tracking spend with Tier 1 and Tier 2 suppliers is critical, but consider going beyond these numbers to measure the program’s impact on the entire organization. Cost savings, market share, corporate image, revenue impact and economic impact are all valuable metrics to measure the long-term success of your supplier diversity program. Successful supplier diversity programs are constantly evolving by tracking results on a frequent basis, adjusting metrics when necessary and refining the program over time.
Establishing a high-impact supplier diversity program is a journey involving multiple steps: benchmarking and setting goals; identifying qualified diverse suppliers and opportunities for additional diversity spend; and tracking the program's performance. Follow these best practices to establish an effective, robust supplier diversity program that breeds innovation, reduces costs and increases competitiveness.