This year we are celebrating the 25th anniversary of the Women’s Business Enterprise National Council (WBENC) and as a certified women’s business enterprise (WBE) we look forward to attending their conference in Atlanta next month. Our clients who have supplier diversity strategies are attending to meet new potential suppliers and connect with current suppliers. In this post we’ll go deeper into how organizations with supplier diversity strategies, as opposed to simply supplier diversity programs, can yield the best return on investment for companies that are committed to diversity, equity and inclusion (DEI) and de-risking their supply chains.
In our last post we talked about what can go wrong when supplier diversity programs are performative and not transformative. The post mentions the importance of supply diversity professionals knowing their priority categories for spend, particularly when engaging with community organizations.
For organizations with strong supplier diversity programs, supplier diversity conferences provide an opportunity to put into practice the supplier diversity strategy they’ve implemented. In order to do that effectively, they need to have the following steps in place already:
- Spend goals and analysis
- Forecasting and Budgeting
- Priority categories
DAI works with clients to ensure that their values, policies, and processes align when it comes to supplier diversity. To see the outcomes, let’s consider two examples, a company that has a supplier diversity program versus one with a supplier diversity strategy.
Supplier Diversity Program
This example may sound familiar to supplier diversity professionals, and diverse suppliers, who have spun their wheels traveling and connecting to make an impact with supplier diversity programs. In fact, when programs function this way, they reinforce the misperception that qualified diverse suppliers, “just aren’t out there.” This is despite data that shows not only are diverse suppliers there, but they are exceeding expectations, according to a study that asked corporations how their diverse suppliers measured up. When our supplier diversity professional does not have a strategy this is how a conference looks.
Preparing for the conference includes mostly logistics and marketing. Logistics and marketing are important pieces to the story, especially because supplier diversity can help brands experience a brand boost. But when that is the main objective of attending these conferences, other opportunities for ROI are left on the table.
Drinking from a firehose with suppliers. Because preparation for the conference focused on mostly marketing and booth efforts, when suppliers arrive at the booth, there’s no clear messaging. Suppliers in all industries and verticals will pitch their solutions. Without clarity on what problems are urgent priorities, supplier diversity professionals are just gathering cards and looking for needles in haystacks. Without a strategy, not only does supplier diversity miss out on great suppliers, they get inundated by suppliers that are not a good fit.
Draining and frustrating interactions with suppliers. This is where we can see the misperception that great diverse suppliers are not out there start to take shape. Without a strategy and plan for the goals for supplier diversity broadly, and objectives for the conference more narrowly, conversations are not productive. Pitches sound ineffective and uninformed because suppliers don’t know what organizations are looking for. This leads to frustration for both diverse suppliers and supplier diversity professionals.
Missing out on good solutions for category managers and buyers. Finding great suppliers can be difficult, even more when supplier diversity isn’t able to clearly communicate next steps. In many cases, the next step is an introduction to category managers and buyers. Without knowing what those buyers are looking for, supplier diversity folks have a bunch of introductions to make but no buyers. And when buyers do need an introduction, supplier diversity folks don’t have one ready.
Disengaging with category buyers. In some organizations, supplier diversity is incidental to the purchasing process or even seen as a barrier. This is a result of a complex intersection of factors and the many roles that supplier diversity plays within the organization. By not including supplier diversity as a strategic asset in the supply chain, supplier diversity representatives are not set up for success. They are unable to position the right suppliers for the right projects and…
The cycle continues. Because supplier diversity isn’t valued strategically, they are not brought into conversations early enough. Thus, the representatives lack insight into budgeting and forecasting that would determine categories and spend. And the steps above repeat themselves.
From a performative to transformative program
“Supplier Diversity professionals need to understand the following questions. Fundamentally, how are goods and services purchased? And that has a couple of elements. First, do you do strategic sourcing? Are you looking on a macro basis to say for this category, here’s how we’re going to buy these goods and services? You also need to understand the actual procurement process. Can a business unit independently go out and buy goods and services? Is there a centralized procurement function? Is it procured by geography? Is it procured by dollar amount? “- Kevin Keane, Executive Director, DAI
The good news is that your organization does not have to look this way. When supplier diversity representatives have a strong handle on categories and spend, they provide strategic value. Then, organizations can realize the profit potential that comes with successful supplier diversity strategies. In these programs supplier diversity professionals are:
- Forecasting goals. As a matter of regular business operations, regardless of upcoming events and conferences, supplier diversity representatives are working with procurement, category buyers, and finance to set a baseline, benchmark goals, and identify opportunities to bring in diverse suppliers.
- Sharing responsibility for the goals. Supplier diversity works with people in diverse parts of the organization to get buy-in for their goals. They communicate and make connections internally and showcase these shared wins to embed supplier diversity in their culture.
- Sharing incentives for goals. A best practice among the gold-standard supplier diversity strategic programs is to incentivize the decision makers along the supply chain that facilitate bringing new suppliers in.
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- Focussing on strategic objectives of the conferences. By the time supplier diversity teams arrive at the conference, they have a laser focus on the strategic objectives of attending the conference, the categories where they hope to make a difference and what mechanisms – sponsorships, roundtables, panels – will help communicate that to diverse suppliers.
- Prioritizing strategic suppliers and developing capacity for others. As the people to meet at supplier diversity conferences, supplier diversity teams will still be pursued by suppliers that are not ready or not a good fit. However, when they have an understanding of their priorities, they can get the right suppliers into the right process while funneling potential suppliers into capacity development, mentorship, or other organizations. This is when the program moves from performative to transformative.
- Proactively engaging with stakeholder organizations. Before, during, and after the conferences, it’s important for supplier diversity teams to understand the resources available to them as a result of their corporate sponsorships and memberships. They will communicate with the regional and national organizations to make sure they are identifying and certifying companies that will make a dent in their spend.
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- Providing value internally and externally. Now supplier diversity representatives and their teams are poised to provide value for category buyers and leaders within their organizations. They are also in a position to provide value for suppliers as an advocate in their programs and a leader in community organizations to build their capacity.
- Facilitating opportunities. As a strategic asset, supplier diversity can facilitate opportunities to mitigate risk in the supply chain, to develop diverse suppliers to grow with the company, and establish their organizations as leaders in the space. Rather than perpetuating a frustrating cycle, supplier diversity is growing and expanding influence within the organization.
How to address categories and spend strategically as a supplier diversity team
There are three processes that supplier diversity teams can use to launch from a program to a supplier diversity strategy.
Spend goals and analysis
The first step for supplier diversity teams to really get an analysis of the categories that are strategic areas where their companies can add diverse suppliers is to get a baseline of where the spend is and where it can go. Companies address different verticals throughout their companies for different reasons. Direct spend addresses a particular project need, client need or compliance need. Indirect spend can streamline internal operations, facilities, and processes. In large purchasing organizations gaining insights into these areas will require the enthusiastic participation of the finance team, category managers and buyers, and often advocates within the business units themselves. As a supplier diversity person, you may look at this piece and think there’s no way you can possibly do this on your own. And you’re right.
Forecasting and Budgeting
“And then finally, I think the other key part is understanding the budgeting process and understanding how the budgeting and forecasting works. That, combined with understanding the category, really gives you insight to say, what is the spend? Where are there opportunities? How can we find ways to insert supplier diversity and diverse suppliers into this overall financial component so that we can start very early on in the process? Say, what are we spending total? Where are we spending it on? Who are we spending it with? Now, let’s get our diverse suppliers in there.”- Kevin Keane, Executive Director, DAI
Part of getting a baseline for spend is knowing where your organization is now in terms of diverse suppliers, spend and opportunities. To truly transform a supplier diversity program into a supplier diversity strategy, you need that information in advance. You need to know years in advance what the strategic direction of the organization is, where spend will be increasing and decreasing. For example, if there is a large capital construction project in year 1, there could be a vast supplier diversity spend, lots of visibility into opportunities, and compliance goals that an organization has to meet. Unless construction is core to your business, once that capital project is over, in years 2 and beyond, you’ll need advance insight into where that spend is going, and how to get new suppliers in new industries into the supply chain.
Priority categories
“So I think the most honest and forthright thing to do, both for corporations and for certifying agencies is understanding what goods and services are being purchased and how they can facilitate those relationships. Ultimately, that’s what these diverse suppliers are looking for. They’re looking for commercial opportunities.” – Kevin Keane, Executive Director, DAI
Armed with the information of where your organization is and where the priorities are going, supplier diversity teams can have fruitful and productive conversations with suppliers. There won’t be immediate opportunities in all categories. But by identifying those areas where there are opportunities, and prioritizing them with enough time to source and build relationships with new suppliers, supplier diversity teams can elevate those suppliers that will make an impact on spend goals, and, ultimately, the bottom line.
And with enough advance notice, those companies that are in priority categories without immediate opportunities can participate in mentorship and capacity development programs. This allows supplier diversity teams to vet and qualify suppliers informally and at a more helpful scale. Rather than scouring databases with a 6 month lead time (or less), strategic supplier diversity teams are building the diverse suppliers that will grow with them.
We work with our clients to create strategies out of programs, to turn the performative to transformative. We’d love to talk about your supplier diversity goals and how we can help.
In our next post, we’ll talk about how DAI aligns our spend with our values in our strategic alliances with other diverse suppliers. It’s important to us to walk the talk we give our clients when it comes to supplier diversity and we’re proud to be aligned with world class diverse suppliers. Stay tuned for the final post in this series in the coming weeks.
Find out more about our award winning supplier diversity services on our page or contact us for more information.
