supplier diversity program

Sustainability & Diversity

How to create a data-fuelled supplier diversity program

Will Binder Jan 28, 2021

The interest in supplier diversity programs is growing. In the past, a separate team would take care of selecting diverse suppliers. However, today it is becoming part of the buying process and is an important area of sustainable procurement.

Many spend analysis providers are integrating diversity data from third-party vendors so that procurement has an up-to-date view of progress.

Compliance and disclosure requirements are increasing for publicly traded companies. This means an increased focus on data integrity in reporting ESG performance--especially from tier 2 suppliers. 

This blog will show you how to create a supplier diversity program that's powered by data.

What is a diverse supplier?

Diverse suppliers are defined as a business that is more than 51% owned and operated by an individual or group that is part of a traditionally underrepresented or underserved group.

In the United States, there are more than 15 categories used to identify diverse businesses. A few examples are small or micro-enterprise, minority, LGBTQIA+, women, veteran, and disability-owned enterprises.

Diverse suppliers are an important part of the economy. For example, in the US there are more than 2.5 million veteran-owned businesses that generate more than $1 trillion in sales per year.

 

Why implement a supplier diversity program?

  • To support your business strategy.

  • To align with your corporate culture.
  • To support your sales growth.

Many leading companies such as Coca-Cola, Target, UPS, Walmart, Merck, and Toyota have aligned their supplier diversity programs with business strategies. 

See how Citrix implemented their Supplier Diversity Program with Sievo.

These programs provide opportunities for companies to align with customers' values and fulfill their needs while continuing to be profitable.

A supplier diversity program can:

  • Drive innovation in products and services.

  • Increases your flexibility and resilience

  • Increase cost savings and efficiencies.

  • Demonstrate your commitment to local manufacturing and sustainable sourcing.

  • Show your involvement in promoting social change.

  • Be an important selling point in hiring, as candidates are increasingly looking for companies that align with their values.

  • Align with your customer expectations.

  • Ensure compliance with regulatory requirements.

All in all, you widen the pool of potential suppliers and bring new ideas which promote competition and improve service levels.

 

How to create a supplier diversity program

Let's cover the basics of starting your program:

1. Set Goals

Your goals should be defined by a policy. Common targets could be the number of new diverse suppliers or the value of spend with diverse suppliers. 

2. Document the current status

There may be some diverse suppliers already on your database in specific commodities, or within some departments or regions. Get to know where you're at currently. 

3. Identify the gaps between the goals and the current reality

Once you have a view of the current status of your supplier diversity spend, procurement can lead the charge. Work across functions to identify development areas.

4. Develop a strategic plan to achieve the goals

Your plan will depend on the maturity level of your existing program, your ambition levels, and corporate goals.

Successful implementation will likely require changing some of your existing sourcing practices, proactive supplier outreach, and regular reporting to build awareness and buy-in across functions. 


Using data to grow your diversity program

Procurement data is the key to unlocking visibility into your spend. Here are a few ways spend analytics and external data can advance your diversity initiative. 

Supplier Diversity

Supplier discovery

Finding diverse suppliers is often a stumbling block in successful program implementation.

There are service providers such as Supplier.io that use offer accurate, categorized, and up-to-date databases. They provide information on certified and third-party verified suppliers, by category and location.

You can proactively seek out diverse suppliers to support them in the certification process or create mentoring, training, or networking programs.

By helping them meet standards and better understand the corporate buying process, you are increasing your resilience as well.

In the short term, finding diverse suppliers in specialized markets may not always be possible. Having a data-driven approach to supplier diversity will help identify areas where a more long-term development approach may be needed. 

 

Managing your diversity program

Tracking and validating spend with your newly identified diversity suppliers is tricky. 

Your suppliers may change status through new ownership or certification. Spending may change and should be reflected in your reports.

Managing this data is difficult manually. A spend analysis solution can consolidate, validate and summarize it for reporting purposes.

 

Reporting on diversity spend

Periodic management reporting of progress against established goals and objectives is the norm.

At a minimum, your reporting will need to include key numbers such as total spend, total spend with diverse suppliers by category, then by sub-category and by location.

Additional metrics that may be measured are cost savings achieved or the number of jobs created. It may be difficult to establish any other direct economic impact such as social improvements or revenue creation in the early stages of a diversity program.

Reporting is simplified when the data is managed using automated processes.

 

supplier diversity dashboard for procurementSupplier diversity dashboard in Sievo Procurement Analytics

 

"The increased visibility has made supplier diversity initiatives more integrated, not just within the procurement function, but through increased visibility and urgency at the C-level with executives calling for progress tracking and statistics.”

-Neeraj Shah, CEO at supplier.io

 


Common supplier diversity KPIs

  • Total or percentage of spend with diverse suppliers

  • Diverse spend opportunities pipeline

  • Number or percentage of diverse suppliers

  • Number of sourcing activities that included a diverse supplier

  • Number or percentage of diverse suppliers that are strategic partners

  • Percentage of diverse suppliers meeting or exceeding expectations

  • Savings from diverse suppliers

Growing your program

Leading companies are tracking historical diversity spend to gain a better picture of how suppliers are performing and to identify needs for supplier development. This also includes tier 2 suppliers.

For instance, Coca-Cola requires its contracted suppliers to set targets to commit 10% of their own expenditure to certified diversity suppliers.

These trends mean that a supplier diversity management solution is needed to manage spend analytics, ensure data integrity, identify Tier 2 spend, and provide data that supports the growth of diverse suppliers.

diversity guide embedded form

Your Diversity Journey Starts with Sievo.

Read the Whitepaper

Supplier diversity initiatives are slowly moving away from a CSR goal and becoming a business imperative for resistance and agility. Read "Supplier Diversity in Procurement" to learn the success factors of diversity programs with this expert Whitepaper.

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