Spend Matters is a fantastic blog about procurement, sourcing, supply chain issues and more. It’s part of my regular reading and I highly recommend it to you. Today, the good people at Spend Matters featured a guest post by yours truly on Supplier Diversity. Enjoy!
Supplier Diversity: There’s an Easier Way
February 22, 2011 2:27 PM | Categories: Guest Posts, Suppliers, Innovation
Spend Matters is happy to present a guest post from Rod Robinson, Founder & Chief Connector for connXus.com. connXus.com is a new online service that makes it easy for corporations to locate, evaluate and engage performance-rated small, woman- or minority-owned businesses.
“I’d love to work with more diverse suppliers. I just have trouble finding them.”
For nearly 20 years, I’ve worked with major corporations on large-scale strategic sourcing and procurement transformation initiatives. I’ve served as the chief procurement officer for a Fortune 1000 company. Since 2005, I’ve worked with companies to improve or create supplier diversity programs. Time and time again, I’ve heard from my corporate clients how challenging it can be to identify new, quality, diverse suppliers. But I know from experience that it’s not an excuse.
I have experienced the same frustrations with out-of-date or incomplete databases, fragmented resources and expensive software. I’ve had no problem finding new or alternative suppliers, but it wasn’t always easy finding new or alternative diverse suppliers.
I’ve also heard from minority-owned businesses and woman-owned businesses how difficult it can be to share their qualifications or develop relationships with purchasing managers at large companies. They submit their information on corporate website after corporate website, and rarely get any real opportunities in return.
So, what’s to be done? I believe that we need to stop treating supplier diversity as philanthropy or insurance against lawsuits and employ it as what it truly can be — a business advantage. I’ve always looked at diversifying the supplier base as a way to increase competition for an organization’s valuable purchasing dollars. More competition means quality goes up and prices go down.
I know from personal experience that this approach works. In my CPO role, I reduced annual purchasing costs by $14 million while increasing the company’s spend with minority business enterprises by 42 percent. As a consultant, I’ve helped my clients reduce their costs by an average of 10 percent while increasing their spend with diverse suppliers by more than 300 percent. There are two changes any organization can make that can pay real dividends:
First, supplier diversity needs to be integrated into a company’s normal procurement process, not separated into a different department. We’re talking about buying products and services, not community relations. Put the procurement professionals in charge. They are experts who find suppliers, who help decide what a company needs to purchase and where it will be purchased. Incorporate supplier diversity goals into everyday processes. For instance, if every contract worth $100,000 or more must have three bidders, require that one of the three be a woman- or minority-owned business.
Second, supplier diversity needs to be driven by the demand side of the equation, not the supply side. Do you buy shoes to keep a shoe store in business, or because you need shoes? Determine what you buy first, and then seek out diverse suppliers who can provide it. Diversity spend goals should be established from the bottom-up, at the category level. There is nothing worse than setting a goal from the top, then finding out later that the goal isn’t achievable once the team starts to execute at the category level.
When you connect actual buyers with actual suppliers based on actual needs, everybody wins.
– Rod Robinson, Founder & Chief Connector for connXus.com