Throughout my career, I have been involved in countless supplier diversity initiatives. I have worked with companies to develop programs from scratch, as well as enhance existing programs. Regardless of the project, the primary objective was always to increase spend with diverse suppliers. One thing that has become clear to me, through the years, is that companies must first be good at strategic sourcing before they can become good at supplier diversity.
Time and time again, I have worked with companies to jump-start their supplier diversity efforts only to find that the current procurement processes and infrastructure are not adequate to support a robust, high-performing supplier diversity program.
One of the most common findings during the assessment phase is that corporate procurement doesn’t control enough of the total spend to achieve the desired level of volume with diverse suppliers. Purchase transactions take place outside of procurement’s purview and often impede the organization’s ability to fully leverage enterprisewide spend for maximum savings, let alone increased diversity spend.
To illustrate the importance of a centrally controlled effort and its impact on higher supplier diversity spend, it is interesting to note how the level of diversity spend increases with higher levels of purchasing controlled spend. See the graphic below.
This is why it is so important that supplier diversity initiatives be approached with the same level of discipline and analytical rigor as a full-blown strategic sourcing effort. While the vast majority of my supplier diversity projects have resulted in identified cost reduction, coupled with increased diversity spend, organizational and process enhancements such as greater purchasing control over spend and additional capacity are often required to sustain the benefits.