In recent decades, countries around the world have begun to embrace supplier diversity initiatives as a means of enabling underrepresented populations to compete and thrive in business. In addition to empowering women- and minority-owned businesses, supplier diversity initiatives also have significant payoffs for the companies that enact them. For starters, they encourage innovation and increase competition between suppliers, ensuring that contractors receive the best value at the best possible price. Supplier diversity programs have also been shown to give their creators a competitive advantage in minority-dominated markets and boost overall brand loyalty and perception—all things that impact a company’s bottom line.
Due to these benefits, many top-performing international businesses like Barclays have adopted supplier diversity programs and publicly advertised their commitment to supplier diversity as a means of evolving their brand identity. As more companies race to embrace supplier diversity, it’s become clear that the first ones to successfully enact supplier diversity are likely to reap the greatest rewards.
Although setting up a supplier diversity program is a great first step, in order to take advantage of the benefits these programs offer, you must have a means of evaluating and improving upon your efforts. Below, we’ve outlined five key steps to measure the success of your supplier diversity program and optimize your approach to see the greatest impact on your business.
1. Create Clear and Actionable Goals
Each company will have their own reasons for creating a supplier diversity program and different goals they’d like to achieve with the program. Objectives and expectations for supplier diversity initiatives may also vary internally between stakeholders, C-suite members, and other departments.
Before you begin to configure your reporting, it’s important to outline what your company objectives are and how you will measure your progress toward those goals. What areas of your business would you like your supplier diversity program to influence? Your bottom line? Your local economic impact? Your market share?
Laying out clear and actionable objectives will keep everyone in your organization on the same page and help you determine what metrics to focus on in your reporting.
2. Identify What Key Performance Indicators (KPIs) You’ll Track
Once you’ve outlined your goals, the next step is determining what metrics you’ll use as KPIs to evaluate your progress. The most common KPIs used to measure supplier diversity initiatives are:
How much money your company is spending with diverse suppliers.
The number of diverse suppliers that your company contracts with.
This can be broken down into a few different metrics. For example, you can track the number of jobs created by your supplier diversity program, as well as the economic impact of those jobs on local communities.
The ratio of organizational spending to revenue over time.
Your program’s impact on revenue earned and projected.
Your company’s sales in relation to the overall revenue of your industry. Market share is typically expressed as a percentage and can be calculated for your industry as a whole or for individual submarkets within your industry to reveal how much market share has grown in each subcategory.
How many diverse suppliers were contracted within the stipulated time frame. You can also compare this metric to churn, or the amount of diverse suppliers that left your company during the same period.
Deals Lost (Due to Disqualified Suppliers)
If you’re losing a lot of deals because suppliers don’t meet your qualification criteria, then you may be aiming your marketing and outreach efforts at the wrong audience. Partnering with a supplier diversity agency can help you gain access to a list of diverse suppliers in your desired industry and geographic area.
Tier 2 Diverse Suppliers
This metric tracks the diversity efforts of your direct (Tier 1) diverse and non-diverse suppliers in terms of their diverse spend and diverse count. To report on these numbers, you’ll need to collect data from your suppliers on a routine basis.
Once you’ve chosen what metrics to track, be consistent and diligent in your reporting. Changes aren’t bound to happen overnight—if you change what metrics you’re tracking or don’t follow a strict reporting cadence, it will be much harder to track your growth and gain the insight you need to improve.
3. Establish a Baseline
To track your progress, you need to know where you started. Look into your current supplier portfolio and identify baseline figures for each metric that you’d like to track.
Your payroll and procurement departments should be able to help you access data on how much your company is spending with each supplier, the volume supplied, and the diverse status of all suppliers in your current portfolio.
As you source these baseline metrics, make sure to take note of the duration of non-diverse supplier contracts to identify opportunities to diversify down the road and give diverse suppliers adequate notice to renew.
4. Draw Insight from Data
In order to use the data you’ve gathered to inform your approach, you need a consistent and efficient means of organizing and analyzing incoming data. Although it’s possible to collect and analyze data by hand, doing so will require more time and resources as your program continues to scale. Furthermore, a manual reporting process heightens the chances of human error and can inhibit rather than enable cross-sector visibility.
Supplier diversity tracking software can help you automate this process and make it easier to draw the insight you need to optimize your organizational spending, improve your diverse contracting efforts, and hone the impact of your program. As you choose between different software solutions, it helps to know what qualities and functionalities to look for.
The ideal software solution should:
Offer data enrichment to provide greater visibility and ensure the accuracy of your database.
Be user-friendly so every department can access key insight and updated account information.
Allow you to customize reporting to see both the big picture and the impact of your supplier diversity program on individual objectives.
Automate the data collection and analytics process to save you time, improve the accuracy of your results, and offer real-time insight to adjust to market changes.
Be agile and robust enough to scale with your growing company.
For more information on what to look for in a supplier diversity solution, download our free checklist.
5. Optimize as You Go
If you understand the impact of your supplier diversity program on KPIs, then it’s possible to optimize your approach in real time. By recognizing areas of your business that benefit from supplier diversity efforts and areas that are unimpacted or suffering, you’ll be able to determine where to double-down your efforts or how to tweak your approach to see a greater impact on specific problem areas.
If you find that one area of your business isn’t seeing the results you were hoping for, resist the urge to change everything at once. Instead, limit changes to one area or focus to determine how each of your efforts and initiatives are contributing to your success. This cyclical process of reporting, drawing insight, and tweaking your strategy will help you continue to evolve your program in the most optimal way and reap the greatest results.
What supplier diversity tracking or reporting methods have you found most beneficial to your program?