7 Tips to Shape the Future of Supplier Diversity in the Enterprise
My last article was an overview of how large enterprises have historically approached supplier diversity initiatives and why they have underperformed.
This article will focus on ways the enterprise can improve diverse supplier inclusion, selection and support practices. I recommend that teams consider leveraging some of these tips best fitting for their respective organizations.
1) Leverage Category or Business Reviews
Partner with the business stakeholder as part of the annual business or category review to discuss inclusion, award and supporting structure of smaller or diverse suppliers. Use the existing and developed cadences with your business partners to gain commitments to jointly improve these metrics to benefit the organization by partnering on opportunities.
Leverage Procurement’s network and business team knowledge to identify diverse suppliers that can be included in your sourcing events. However, also be mindful that not every project may turn into a sourcing event or an opportunity to change suppliers. Some sourcing events will lend themselves to this consideration but in complex sourcing or business scenarios, it may be difficult. However, these budget holders can still help improve supplier diversity by asking existing vendor partners to improve their respective diversity practices.
The enterprise can seek measurable commitments from these suppliers, such as increasing diverse resources supporting your account and doing business with diverse suppliers supporting your enterprise in the second-, third- or fourth-tier supply base.
2) Communicate to Bring Awareness and Seek Feedback
Create a communications plan to bring awareness of how and why supplier diversity can help the organization and the communities in which we live and work. While words like "supplier diversity," or "MWBE," "MBE" and the rest mean something to the Procurement community, it is essential to remember that these are all foreign to the business teams. So, let's make it part of our training and partnering plan for the year to bring awareness.
As noted on the previous point, include in your communications the multi-tier supplier diversity goals so that everyone can be on the same journey together. Seek feedback on strategies to improve supplier diversity from your stakeholders. The willingness to have the dialogue opens up an excellent opportunity to build partnership for a joint goal of improving supplier diversity.
3) Highlight Successes
Consider creating a "rodeo" or "showcase" opportunity forum highlighting how well the diverse and smaller suppliers are doing in your organization to other internal stakeholders and the executive leadership team. These diverse suppliers will have more consideration opportunities by other business areas for inclusion for upcoming spend decisions with these showcases.
Diverse and smaller suppliers are often more creative in execution approaches than larger suppliers because the latter are bound by rules and restrictions where nothing can be done or communicated to customers without a series of approvals at the highest levels. In contrast, the smaller and more diverse suppliers are more nimble, agile and can react faster. So, highlight out-of-the-box thinking, creativity, and partnership for success in your project or organization.
4) Identify and Track Diverse Suppliers
If your organization has the support for it, tap into platforms and tools to help identify diverse suppliers and their capabilities. If your organization does not have the budget or support to consider such modern Procurement practices, create a simple tracking spreadsheet or a database to capture diverse suppliers and their capabilities. Allow business stakeholders and enterprise end-users to easily access the information to understand which diverse suppliers already have agreements with your enterprise.
Some Procurement teams are getting creative by leveraging no-code tools and other methods to gain insights into their existing supplier base capabilities, monitoring and communication needs. For an organization lacking leadership, vision, support or investments, these may be great ways to start making progress or there is always the good old spreadsheet.
If you are using creative methods or tools, please share to benefit the broader Procurement, business and supplier communities.
5) Share Data, Knowledge, and Insights
Create or make data and insights accessible to your business stakeholders. One of the challenges Procurement organizations have historically suffered from is "hoarding information," where pertinent knowledge is only available to a select few, usually with the Procurement or business personnel engaged and not the entire organization.
I must point out that Procurement has never really been given the right level of investments in tools, processes and resources since it has been considered a "low budget" function. This has resulted in a lack of domain-centric leadership, support or the necessary tools that allow wider distribution of information, data and analysis across the enterprise.
Procurement teams should consider leveraging existing "supplier registration" or "onboarding" processes to capture supplier diversity status if not already being captured. For an enterprise already tracking supplier diversity metrics with a good program in place, you already have many diverse suppliers to engage with for opportunities. The key will be to bring broader visibility to who these suppliers are, their capabilities and how well they have been performing for your organization.
For an enterprise that hadn't considered supplier diversity programs until only after the events of 2020, they are likely far behind in other foundational areas needing investments with other leadership priorities to resolve. For those enterprises, if supplier diversity now ends becomes an important metric that the CPO and business leaders are being held accountable to, but without additional investments, a simple spreadsheet that is widely available to the organization through an Intranet portal will still be a good starting point to consider for making progress.
If your organization is successfully working with diverse suppliers, I would encourage you to share who they are and their capabilities with the broader Procurement community and myself.
6) Tailor the Enterprise Supplier Diversity Program as "Fit for Use"
We will need to reconsider how to make our supplier diversity program fit for use in the enterprise to make it successful. It means that we cannot apply a "one-size-fits-all" approach and expect it to provide its intended outcomes. Enterprises ask many small and diverse suppliers to accept the "take it or leave it" aspects around two key issues that bring difficulties:
- Length of net-payment terms: Going back to the cost of capital, capital accessibility and cash flow considerations, since small and diverse suppliers do not have a pile of cash or equity to tap into, getting paid in a reasonable time frame is essential.
- Unlimited or large insurance liability requirement: Like the net-payment terms, many large enterprises spend significant time and resources attempting to negotiate unlimited insurance provisions that are counterintuitive, only to conclude that it isn't realistic for small and more diverse suppliers.
For both of these, I would recommend that the CPO, the CFO or the CRO responsible for these requirements partner to create fit-for-use metrics to modernize these past practices. Past practices will otherwise continue to perpetuate the notion that small or diverse suppliers cannot work with a large enterprise.
I would welcome sharing with the broader Procurement community from those who have developed a more sophisticated method to refine our long-standing practices.
7) Invest in Making Your Supplier Partner Successful
Just as the organization and functional leaders have to invest in their employees to make them successful, the same also applies to making our suppliers successful. We have to be mindful of not doing the same when it comes to our suppliers and do a better job at partnering to make them successful.
Business stakeholders and Procurement teams should invest the time and effort to help supplier teams navigate through organizational norms and provide the support necessary to succeed. For the most part, this means spending time with them so that both sides can get to know each other, provide feedback, and be open to receiving feedback on areas that cause unnecessary burdens for diverse suppliers to succeed.
Interestingly, this isn't something we need to do more of or do differently with diverse or smaller suppliers, but rather invest the same amount of time and effort we put into larger suppliers to help them succeed. Such best practices are already established in well-run organizations as a norm across the supply chain, regardless of the size. Still, perhaps we need to be more mindful of it when smaller or new suppliers are chosen to support the enterprise since their success determines ours.
The events of 2020 made it crystal clear that diversity will make or break an organization. The success of the enterprise will be determined by the level of diversity its executive leadership embraces, evidenced by actions and transparency provided through metrics that drive accountability.
We all have a choice as leaders and as individuals to shape the future for a better tomorrow by providing our skills, knowledge, and efforts to improve the communities in which we live and enterprises where we work. Being a leader in helping change requires courage, dialogue and a tenacity to never give up on our vision of the desired future. Diversity is a critical element of our future across our communities and the world, both in our employees and suppliers. I am hopeful that some of my observations and tips are useful with at least the latter and encourage others to share their tips to make diversity initiatives successful.
Stay tuned for Part 3 of this article, which will focus on ways that suppliers can help achieve diversity goals and increase their access to opportunities.