Where Is Your Company In Your Supplier Diversity Journey?

This summer marks the two-year anniversary of many supplier diversity commitments by major brands. At this milestone, it’s important for CEOs, Procurement Leaders, Supply Chain Experts and Supplier Diversity Professionals to evaluate these new or renewed commitments to ensure they are getting the maximum impact from supplier diversity and inclusion strategies.

Studies repeatedly show that companies with supply chain strategies that include supplier diversity and inclusion realize a substantial financial impact from their investment in those programs. Companies that commit to inclusive procurement experience a boost in branding and in sales.

But not every company can report such a conclusive impact. We work with clients to make sure they can measure, track and communicate their impact when it comes to supplier diversity and inclusion goals.

Below, we outline how we approach this work with our clients to ensure success.

Why focus on supplier diversity and inclusion right now? 

Supplier diversity and inclusion is at the intersection of critical issues facing organizational leaders right now: Supply chain, diversity, equity and inclusion, social and environmental issues, inflation, work from home and the engagement and retention of employees.  By not focusing on a diverse supply chain, companies run the risk of increasing their vulnerability to these challenges.

In contrast, strong supplier diversity and inclusion strategies drive financial results. The companies that implement supplier diversity best practices report impacts to the bottom line in the following areas:

1. Supply Chain Strategy: The current pandemic didn’t cause the supply chain issues we are currently facing, but the volatility demanded changes faster than the supply chain could adjust.  By sourcing from diverse and local suppliers, companies mitigate the risks of global supply chain disruptions.

“We’ve seen a couple of things, I think in the last 18 months, some of these aren’t going away… So we’ve seen issues with local transportation, regional transportation and national transportation. We know transportation is going to be a risk and continue to be a risk. So to the extent that you can mitigate that through local production or even regional production, that’s a value proposition. The other part we know is there’s issues related to raw materials, and we know there’s some opportunities to see if your goods can leverage a different set of raw materials. Finally, we see the workforce shrinking. With a smaller workforce, companies are competing more than ever for these limited resources.” – Kevin Keane, Executive Director, Directed Action.

2. Brand awareness and recognition: Hootology’s Supplier Diversity Impact Indicator showed that companies see a positive lift in its brand perceptions once consumers are aware of their supplier diversity initiative. With more scrutiny of brands, supplier diversity efforts become highly visible through social media. That means wins are amplified along with ruthless impacts for failures.

3. Innovation: Top companies look to diverse suppliers to provide revenue generation, cost savings and innovation that makes them competitive in the global market.

“If you look at the role of strategic sourcing and procurement, it’s to have a very healthy supplier base that’ll meet current demands, mitigate risks, meet within their cost profile, provide innovative goods and services. Right? So ultimately, supplier diversity can play a role in helping procurement and the supply chain achieve some of those objectives.” – Kevin Keane, DAI

4. Impact: By investing in local communities and suppliers, your company becomes part of an ecosystem of success that has impacts on government relations, employee engagement, and client relations. Authenticity is the lens through which corporations are judged. That requires moving beyond performative gestures of donations, sponsorships, and simple membership in a supplier diversity organization. True impact requires direct engagement and action within the community – and suppliers.

5. Validate your values: Companies are scrambling to show that they were places of meaningful work, as their employees re-evaluated whether or not work can compete with personal fulfillment.  Millennials and Gen Z workers have a strong sense of social justice and work to hold themselves and their employers accountable. Companies that can engage employees around meaningful action and impact have a competitive edge in managing human capital. Supplier Diversity and Inclusion Strategies provide a way for leaders to not only showcase their values but integrate them into the core business.

Supplier Diversity Best Practices

There are a number of factors that influence the success of a supplier diversity program and companies may find themselves at any one of these steps that make up the best practices for a world class supplier diversity and inclusion program.

Preliminary Step: Track and count spend. Before setting goals, companies need to benchmark. For companies that are still working on getting C-Suite support for initiatives, highlighting what the company is already doing can provide an incentive for a conversation about taking the effort further.   For supplier diversity representatives, this will illuminate the successes and will highlight what the company is doing right now.

Step 1: Secure Executive Support. Often Executive Support takes the form of a new goal or commitment to supplier diversity. Over the past two years, CEOs at companies like PWC, State Farm, Walmart and Meta made major commitments to spend millions or even billions of dollars with diverse suppliers. Some companies started brand new programs, recognizing the need to formalize a business process that can reap significant financial benefits for the organization. While it is possible to make progress on goals like tracking and counting spend without C-Suite leadership support, it’s not possible to realize the full potential of a supplier diversity and inclusion strategy without it.

Step 2: Engage with the Community

Once a company sets goals with C-Suite support, then it’s time to understand how the supplier diversity ecosystem supports buying organizations.  From the work DAI has done with Women’s Business Council Southwest and WBEC-West, we have seen first hand how organizations can strategically utilize those organizations. The key for corporate members of the organizations is not just to cut a check but to come in with a solid understanding of how they can use these organizations to source new suppliers strategically. To do that, companies need to know their categories, where the opportunities are, and work with the supplier diversity organizations to identify suppliers that meet those needs.

 “Women Business Council Southwest does a great job of bringing in their corporate members to help develop and grow and nurture, especially in the area of doing business with where you bring in specific industries. They do a great job on that. I think Women’s Business Council West also does an excellent job. They have a lot of interaction with their corporations so that relationships can grow and develop. With both organizations, their relationships with corporations evolve as the needs of the corporations change.”

Step 3: Clearly identify company roles and responsibilities

The previous steps are necessary but not sufficient for a supplier diversity and inclusion strategy.  To move supplier diversity from a program to a strategy, companies need to establish measures of executive accountability.

For supplier diversity representatives to understand their roles, they need to know:

1. Where supplier diversity sits in the organization? Procurement? DEI? And why there? What influence do they have in the larger organization?

2. How are goods and services purchased? Is there a strategic sourcing function? What categories provide opportunities for diverse suppliersIs purchasing centralized or decentralized?

3. Who is the economic buyer? Identify the people who can approve a purchase and ultimately make the decisions to include new suppliers

4. The process for budgeting and forecasting. Coupled with an understanding of the categories, understanding what is coming up makes the search for new suppliers more productive.

Step 4: Embed supplier diversity and inclusion into company culture and integrate it with Diversity, Equity, and Inclusion goals.  Often what keeps supplier diversity and inclusion as a program or initiative is being a stand-alone program that is siloed from core business functions. By integrating the goals and benchmarks across business functions, leaders are able to identify new categories of spend, identify roadblocks in the process, and eliminate them. This is where organizations can fully realize the impact in terms of employee engagement and retention because stakeholders – employees, suppliers, customers –  are savvy and understand the true commitment of organizations.

Step 5: Operationalize  Excellence. Building on Step 4, the operating model needs to align with the goals and the business functions across the organization procurement, legal, marketing and communications, technology need to be involved. Processes need to support organizations to be flexible in the ways they add new suppliers. This step is a journey in and of itself to consistently strive for improvements, cost savings and innovations. It’s at this point that the maximum impacts of the supplier diversity program are realized.

Step 6: Develop capacity of suppliers. Supplier development is a part of the operational excellence life cycle. Suppliers come to the network at various stages of their growth and development. Supplier development is the process of helping them expand and grow and become more mature in the realm of  insurance,  banking, technology and human resources. When their businesses grow, they can grow with their customers.

DAI’s approach can be utilized at any stage in the supplier diversity journey.

We find that most companies are doing some or part of a supplier diversity and inclusion program but fall short of the truly best in class programs that drive results.  With our clients, DAI brings expertise in corporate transformation methodologies, process excellence and system improvement that will allow your company to measure, promote, and improve the impacts of your supplier diversity program.

1. Preliminary Stage: We can help you make sense of the data you have, make recommendations to make that data more robust, and give recommendations to the C-Suite on next steps.

2. Step 1: For executives who want to take their program from performative to transformative, we ask what are you trying to achieve? What are you trying to get done? How are you measuring success? How is your board measuring success? Then we work with you to set the right goals, measure and track them, then report back on those achievements.

3. Step 2: We work with companies to determine what goods and services the organization is buying in the short, medium, and long term. Then we identify strategies for connecting with the organizations in the ecosystem that can help you find them.

4. Step 3: You have a supplier diversity person in their role and have been making progress. DAI works with you to determine how purchasing happens and how to influence that process in the future to maximize opportunities for new suppliers.

5. Step 4: One you understand the purchasing processes as they exist now, we work with you to identify the buyers, create additional advocates within the organizations, and make sure supplier diversity works across organizational functions.

6. Step 5: Organizations that are doing well and experiencing success with supplier diversity have opportunities to expand the impact of their programs on diverse suppliers and on their bottom line. Where can the processes be streamlined for time or cost savings?

7. Step 6: There are several ways to develop suppliers strategically by creating programs for capacity development. Mentorship programs, vendor summits, and scholarships accelerate the business processes of your suppliers. DAI works with you to make sure that your interventions are strategic given your supplier diversity goals.

With many DAI clients,  “The goal is to continue to make momentum right. The goal is to say, I need to find another supplier and another spend and another contract. And so ultimately, what we need is champions. They could either be economic buyers. They could be somebody in procurement, they could be somebody in sourcing that recognizes the value proposition” says Kevin.

Given the many ways your company stands to benefit from supplier diversity, the next articles in our supplier diversity series will focus on:

• Lessons learned from clients

• Understanding your spend and categories

• Supplier Diversity in Action: Highlighting Directed Action’s strategic alliances

We look forward to your thoughts, comments and shares in this series and are delighted to help you achieve your strategic transformation goals.

To see the Q&A with DAI Executive Director, Kevin Keane click {here}. Find out more about our award winning supplier diversity services on our page or contact us for more information.