Effective Strategies In Supplier Diversity
Reginald Williams, CEO, Procurement Resources, Inc., 111 Petrol Point, Suite 204, Peachtree City, GA 30269 (404)/631-3633.
82nd Annual International Conference Proceedings - 1997
THE BUSINESS RATIONALE BEHIND MINORITY PURCHASING
WHAT IS SUPPLIER DIVERSITY? Perhaps before we get into effective strategies, it would be worthwhile to clarify the business case for having supplier diversity programs in the first place.
Many Corporate Managers and their staff still haven't a clue as to why we're doing minority purchasing. Some see it as a philanthropic exercise; many think they're doing African-Americans and other minorities a personal favor; others see it as a form of social welfare; while others view it as a necessary evil forced upon them by the corporate elite.
For procurement professionals we must respond to these mindsets in such a way that we're not appealing to any value judgments with social overtones. In the end, our response must be logical, unambiguous and motivational. To do less would be to exacerbate and already cloudy reasoning process.
First - it must be understood that Supplier Diversity is a business imperative! It is a market-driven process which must be integrated into normal procurement operations. But it can only be achieved once staff are aware of its value and benefits and the resources have been provided to assist those charged with implementation.
Requirements to include minority and women suppliers have long been mandated by Government contracts. Increasingly, however, through self directed actions, corporations are making supplier diversity a business initiative which allows sharing in customer values and expectations.
Minorities and women represent the fastest growth in the consumer base and contribute dramatically to the revenue stream that major corporations enjoy. The premise behind supplier diversity requires that we ensure them access to the opportunities created by their own revenues.
These are the very people that companies want to fell invested in their products & services. What better way to earn their loyalty than to be business partners.
Thus, supplier diversity is not an option as we must not only ensure economic success for ourselves but we must also be responsive to our customers - from whom our revenues are derived.
With the present state of supplier base downsizing, corporate MBE utilization numbers are decreasing and the growth of this initiative has lessened significantly. We must, therefore, re-tool the process as an integral part of procurement re-engineering.
As I see it, Corporate America's task will be to ensure the continuity and awareness of this critical program thrust has part of the corporate mainstream by emulating best practices that produce solid results.
VALUE ADDED BY SUPPLIER DIVERSITY. My book, A Buyer's Guide to Doing Business With Minority Vendors _, clearly outlines the value of Supplier Diversity but the benefits may be more specifically listed here:
Through implementation of minority purchasing program your company will:
- Create new MBE partnerships among key segments of your customer base.
- Acquire long term versus short term achievable objectives to assist strategic planning.
- Provide a means through which your organization might share in your customer's success.
- Provide your supplier partners the opportunity for commitment to a common goal.
- Significantly enhance the building of your supplier diversity constituency.
- Provide the potential for increased cost savings by expanding the comprehensive envelope.
- Provide your company a unique advantage to leverage corporate economic power through in-kind rather than capital outlay.
- Provide a means for building up the economic base of the regions in which you operate through participation of a diversity of consumers.
- Provide increased opportunity for employment and economic development within the minority community.
- Increase the potential for positive public image on the part of the company.
- Ensure compliance with relevant regulatory requirements.
- Improve opportunities for increased market share and continued growth.
STAFF TRAINING. Training is the cornerstone to Advanced Strategic applications. It is the one common process that all companies agree to as a "best practice". It enhances Team building and orients staff to the mission by earning their trust.
But, our substantial experience show that training of key internal staff must be carefully orchestrated to ensure their support.
There are two distinct groups, that must be reached in the orientation and training process. First, Sr. Management - to ensure their `buy in' and support for each presentation must include clarification of the company's expectations for both staff and suppliers, as well as, motivation and incentive for high performance.
Training is more effectively done by outside consultants with established track records, working within your industry. The program should integrate staff as guest presenters and the session should be kicked off by the highest level senior executive appropriate to the task.
The aim of these training sessions is to achieve a level of business synergy with your internal customers and supplier partners in order to grow the constituency. What this means is that we must make minority purchasing a marketplace advantage instead of having it viewed as a business impediment. It is vital to ensure that both support and the resources are in place to ensure success.
Through a series of briefings, your company can focus on both procedural knowledge and behavioral skills to ensure successful prospects for supplier diversity. The expected outcome of the training is:
- Each staff member/prime supplier will fully understand the supplier diversity and what is expected of him/her.
- Simple and practical systems will be put into place to manage and document the process.
- The training program will have addressed behavioral issues such as stereotypical assumptions, gender bias, and the value of diversity.
- Both internal staff and external suppliers will become familiar with available resource (MBE supplier listings, purchasing councils representatives, etc.).
Training must focus on four specific areas:
- Sourcing : How to identify, pre-qualify and utilize MBE sources.
- Interpersonal Skills: What are the anticipated behavioral obstacles to success in the program and how might they be addressed.
- Practices & Procedures: What are the paperwork / documentation and tactical requirements to track and ensure MBE utilization.
- Legal & Regulatory Issues: What steps will be necessary to ensure the avoidance of regulatory compliance issues involving either Federal, State or Local Government laws and regulations.
The program agenda must also include the following topics:
- The rationale and value behind supplier diversity
- System fundamentals
- Staff performance expectations
- Strategic plans & initiatives
- Roundtable discussion (Q&A)
TEAM BUILDING WITH YOUR PRIME SUPPLIERS. Next in the process of taking your program to the next level is for you to enlist the support of your strategic partners.
The natural progression of prime suppliers is for them to become strategic partners. The distinction between suppliers and strategic partners is primarily on of degree. But, the unique characteristics of the strategic supplier partnership represents long term commitments that are essential to the business of each member in the partnership.
The concept of supplier partnerships is an offshoot of JIT principles. It began in the 1980s as a direct result of total quality management and manifested in the corporation's need to `downstream' its quality expectations into their suppliers' operation to ensure that end product goals would be met. And, it allowed greater control over product critical processes.
Under such strategic alliances, business between the parties is conducted under a very different set of rules than those that apply in the routine Buyer/Seller relationship. Relations are closely connected and mutually supportive. Supplier diversity is an appropriate vehicle for furthering the strategic partnership.
Your corporation's objective is to acquire added value through your strategic partner's operation serving as an extension of your company and vice versa. In such relationships, introduction of supplier diversity is easily accomplished. Indeed, Team building with your major prime (strategic) partners is a great way to both maintain control over the process and leverage the long term support you have nurtured.
As we move toward the end of the 21st century, we are witnessing a fundamental shift in both the form and nature of American business. One so profound that the very foundation of industry and commerce -- the contract between employer and employee and, perhaps more important, the partnership between Buyer and Supplier -- has shifted dramatically.
For these reasons, we have identified several critical implications for supplier diversity that must be addressed: All of these are covered in my book "Effective Strategies in Supplier Diversity _"
- Meeting the Challenges to Affirmative Action
- Supplier Base Downsizing / Consolidated Purchases
- Strategic Marketing Enhancement
- The Global Marketplace & Issues Involving Diversity
- Re-engineering or Reorganizing the Procurement Function
SUMMARY. The uniqueness that our company brings to this discipline is our access to so many different corporations in a variety of industry settings. Each one of these represents a unique product or service exposure involving some of the leading corporations of the world: AT&T, IBM, Coca-Cola, American Airlines, Hewlett Packard, Reebok, and the US Postal Service -- just to name a few.
The companies that manage this change effectively and understand it best, will be the companies that are ultimately successful in the marketplace. Having undergone the most extraordinary change since the industrial revolution, Corporate America must now re-think - how we do business...to survive!
In so doing, we must not take undue risk nor compromise any of the core expectations that figure prominently in the company's (quality, cost and value). Rather, our efforts must enhance our overall presence in the marketplace.