Shifting the Paradigm: Diversity Spend Sans Stigma

October 6, 2011

For most small business owners, being labeled as an MBE is shorthand for subpar service. Despite government mandates that companies set aside a portion of their budget for historically under-represented peoples, the number of small businesses who identify themselves as minority owned is shrinking. Today, less than 25,000 of the 7 million minority or women owned businesses in this country have 3rd party certifications denoting them as such. By and large, companies have reported that there is a stigma associated with certifying oneself as an M/WBE. There is a (valid) fear that if a company is minority owned, they limit the business they might receive from larger organizations. Thus, certification is an undue burden on the holder.

The question we must ask is: why? In some respects, government mandated diversity spend programs are seen as handouts; oftentimes, the various challenges M/WBEs have historically faced are forgotten, overshadowed by government intrusion in the affairs of private companies. In the most extreme cases, supplier diversity programs are viewed as unfairly tipping the scales for businesses that otherwise wouldn’t be qualified for the work they receive.  Despite suppliers’, OEMs’ and the government’s best efforts this perception will not go away.

There are, however, several ways in which we can champion diversity without losing sight of company goals and objectives. For one, more competitive procurement practices need to be established. In some large companies, procurement executives operate with little oversight into what they are buying and from whom; this leads to executives simply operating on the word of current suppliers as to which M/WBEs to do business with. In this example, it must be noted that the supplier you turn to cannot be expected to perform the same due diligence you would when procuring a vendor.

Another simple fix is to put in place systems to track the ROI of diversity spend initiatives. Attaching a hard dollar amount to the savings gleaned from diversity spend programs is crucial in winning the battle to erase the stigma of supplier diversity programs in your organization. Spend analytics best enables you to fight for maintaining—or even increasing—your supplier diversity spend.

Diversity Reporting Solutions, is a spend management system that streamlines internal information gathering, spend tracking and spend analysis for supplier diversity managers.

For more information on working with Diversity Reporting Solutions, contact Jaymie White at Jaymie.White@diversityreporting.com.


The Industry of Supplier Management Consolidation

August 10, 2011

 

Late last year, AECSoft, one of the three leaders in supplier diversity management, was acquired by SciQuest a ” leading provider of on-demand strategic procurement and supplier enablement solutions”.  A few weeks ago, it’s largest competitor, CVM Solutions, met a similar fate, being acquired by Kroll.  For those not familiar, Kroll is a division of Altegrity, a PE-backed holding company claiming to be the “largest commercial provider of background investigations for the U.S. government,”   With these two supplier management firms being acquired and merged into various roles, I’ve decided to take a look at what these transactions mean for the supplier diversity field.

As a whole, these transactions have no immediate impact in my eyes, however over the course of the next three years, a few changes may take place.  It was well known that AECSoft, a smaller, leaner firm offered many of its services at cheaper rates.  The organization promoted itself to the cost conscience OEM customer looking to handle a large array of spend information from various Tier 1 and Tier 2 vendors.  With the purchase of the company, like the supply management news site Spend Matters suggested, I feel that the former generous prices will be raised.  Again this is a forecast given over a 3 to 5 year period.  The later a contract renewal for the company, the more likely “new updates” will occur, along with “new fees”.  With the supplier diversity field already looking to save on costs, this may present unfortunate circumstances for some OEMs looking to grow their supplier diversity program if the fees become unbearable.  It  is my hope that they do not.

In taking a look at the CVM Solutions sale, it is my opinion that Kroll and the company will make for a better fit.  CVM Solutions was able to do a better job to grow their company’s offerings from a supplier diversity management company focus, to a broader supply chain  management  company.  This is a cue for the Kroll group and should provide an extra amount of growth opportunities that AECSoft does not have access to at this point in time.

To quote Spend Matters about the CVM Solutions transaction, “For those outside the industry, the deal might seem a bit like a synergistic stretch. But under the surface, there appears to be a significant amount of synergy (stay tuned as we investigate this further). And more broadly speaking, the likely forthcoming announcement is representative of a significant ramping of new large company interest in the supplier management market. In fact, we’ve heard from half a dozen often large and brand name organizations in recent months that are either getting into this market or are curious about it.”

The key here is the last piece about “half a dozen often large and brand name organizations….getting into this market or are curious about it.”  This could mean further acquisitions of companies like Supplier Gateway or other methods used to “test the market”.  I feel like this is an interesting piece due to the changes in spend tracking it could cause for OEMs as well as the reporting structure.  Unfortunately I feel that this is a further step away from the hope of Tier I companies that all OEMs will get on one reporting schedule.  But with more resources, perhaps a more efficient reporting system or systems are just around the corner.


MWBE Websites – How to Make Life Easier for Your Big Customers

June 21, 2011

Raise your hand if you love updating your website!  I can’t see any of you, but what are the odds that from the day this has been posted, not a single hand has gone up in gleeful anticipation of HTML coding and CSS stylesheets?

Yeah, this looks about how I feel

So having said all of that, why not do your website right the first time?  This post is all about things the supplier diversity guy (or gal) at that really big customer of yours wants you to put up on your website to make his life easier.  We all know that making our customers happy leads to more business, and this is especially true of the supplier diversity department folks.

First:  Have a website!  Even a bad website is better than NO website!  If I’m looking for a company on the internet to verify information on whether or not they exist, where they’re located, etc. I need to be able to find them, or I’m going to assume the information in my database is wrong.  If I find a simple 4 page website with text and an address for your business, I’ll at least know you exist.

Second:  Include your company name as it reads on your NMSDC certificate.  DBAs are the enemy of good book keeping for supplier diversity.  If your company name is John Cougar, LLC, please don’t list your name as John Mellencamp on your website.  It made it hard for fans then, and it makes it hard on the supplier diversity department now.

Third:  Include a copy of your certificate on your website somewhere easy to find.  This makes it so no one needs to call you just to do a simple paperwork check.  A scanned and updated certification is priceless in how much time it saves because it can be used to update all of the databases as a first source.  Don’t be afraid to put your information as a Minority or Woman Owned business on the internet.  It’s not something to be ashamed of, put it out there proudly!

These three simple steps will make a real difference to supplier diversity departments who spend way too much time tracking this information down.  I know when I fill out these reports and have a question, I’m always thankful when I come across web sites that have this information available where I can find it.  Some suppliers are so hard to find that the information doesn’t get resolved until after the deadlines, and unreported spend doesn’t help anyone in the supplier diversity community.


Best Practices for Supplier Diversity

May 9, 2011

Within each company there is a department catered towards the inclusion of underrepresented vendors.  These departments focus on the recruitment and mentoring of minority and women owned businesses.  The ultimate goal is to allow diverse vendors a fair chance at different contracts offered by each company.  A pretty simple objective yet alot of times, these departments are a marketing ploy.  It is meant to say “Hey look at us, we hire companies owned by white and [insert diverse vendor race/sex here]!”  This is a mistake.

The focus is to give a fair shot and not necessarily to hire diverse vendors.  If a diverse vendor is not qualified for a contract, then they should not win it, regardless of gender or race.  A supplier diversity department’s objective of course, is to fine qualified vendors for all tasks but this must be reflected in upper management’s policies and actions.  If a company is having issues with recruiting qualified diverse vendors, it may be because a serious stance has not been taken within the supplier diversity department.  The majority of cost a company will take on in building a department devoted to increasing overall spend with diverse vendors is time.

The NMSDC has 8 Goals that act as guidelines to building such a department.  Within each goal are subgoals, or key points that must be accomplished in order to achieve the overall goal.  Almost like a checklist the key points can be taken step by step.  Explanations for the goals are also included for readers who wonder why certain goals are included.  Here is a quick list of the goals

  1. Establish Corporate Policy and Top Corporate Management Support
  2. Develop a Corporate [Diverse] Supplier Development Plan
  3. Establish Comprehensive Internal and External Communications
  4. Identify Opportunities for [Diverse Companies] in Strategic Sourcing and Supply Chain Management
  5. Establish Comprehensive [Diverse] Supplier Development Process
  6. Establish Tracking, Reporting, and Goal Setting Mechanisms
  7. Establish a Continuous Improvement Plan
  8. Establish a Second Tier Program
A quick glimpse shows that, for the NMSDC, building, maintaining, and expanding the supplier diversity department are keys to establishing an effect one.  From this, you can see that companies must first start at the top of a corporation and get “buy in” for the department.  Next others within the company must believe in the policies created and work to build and maintain the department.  Accountability must be given with a hard reward and discipline structure at its foundation.  This will allow for the department to have credence.  Communicating and including the entire company is key.  Also giving the company continual updates on progress allows for employees to see that this is a serious policy.
It’s all about Corporate support and doesn’t take much in cost to set up.  It cannot be treated as a nonprofit portion of the company.  For top managers, recruiting diverse vendors must be included in the foundation of the company.  This is the only way that a supplier diversity department will be taken seriously and be effective.

So just what is the color of opportunity?

April 21, 2011

The above title is an interesting question that usually has a simple answer.  GREEN!  In the simple context of “why businesses and opportunities exist”, the answer green is pretty much spot on.

For Melvin Gravely and many others within the supplier diversity field, the color green is only the surface answer to a deeper issue.  If you notice, the color green itself is more complex then many people realize, as green is made up of the colors blue and yellow.  Like many businesses, in order to get to the color of green, many other internal “colors” must collectively contribute to the same cause in order to be successful.

So what does all this mean?  After reading “What is the color of opportunity?” I feel that I have a better insight on the overall goal and mission of the supplier diversity field.  As I climb atop my soapbox for a moment, I want to begin by giving a short review of the book  in question.  Melvin Gravely’s “What is the color of opportunity?” is one that I picked up from the Toyota Opportunity Exchange and only recently re-read.  It is a quick read of about 120 pages and takes interested parties through a story of two men and their challenges within the supplier diversity field.  The main objective of the book is to make the audience (MBE/WBE entrepreneurs and supplier diversity professionals) think of ways in which to better prepare themselves going from the Set Aside and Access Eras to the new Competitiveness era (this new era beginning after the Wall Street Fiasco of the late 2000’s).

The good things about the book (and the reasons I am writing this post), are the highlighting of the current situation, and the major themes the audience can learn from to benefit themselves.  I agree that the way supplier diversity is handled now is different then it was in the past few years.  Companies are looking to downsize their suppliers in all areas and are looking to be more cost effective.  With this, MBEs and WBEs must stop thinking “disadvantaged” and start thinking “entrepreneurial”.  One of the big questions Gravely asks is “What would I do if I were not a minority or women owned company?”  This question can go a long way towards how many MBEs and WBEs are run.  I also liked how he tackled the issue of the spend goal for M/WBE hiring companies.  A deeper goal must be in place other then a number goal otherwise it is not a commitment but an interest by the company.  Spending with various companies must be treated as a committed business venture just like other arms of a business otherwise the supplier diversity department with said company will falter.

Ultimately a serious re-engineering (or just regular engineering ) is in order for some companies.  Like Gravely mentions, it is much easier for companies to continue their current efforts and blame society or the economy.  However this will not solve the issues that plague the industry.  A greater resolve and commitment (not interest) must take place with industry leaders.  This is currently being seen already with some OEMs attaching diverse spend count to general bids for Tier I suppliers.  A great start and forecast of things to come.

In the end it is up to the OEMs, Tier Is, and M/WBE suppliers to make these changes.  OEMs and Tier I must stay or begin to be vigilante when it comes to enforcing the “mentoring and aiding” of diverse vendors.   M/WBEs must become more competitive and diversified in the companies they deal with too.  Diversification does not mean business with multiple companies, but more so with multiple industries. If the auto or consumer goods industry fails, a M/WBE supplier should still be able to continue if management looks to create a well supported organization beforehand.  These things can be accomplished by networking.  Ask the supplier diversity professional at any company if there are other opportunities outside their industry if you have to, just remember to stay competitive so your employers can count on you to stay around.


DiversityInc’s Top 10 Companies for Supplier Diversity

March 14, 2011

On March 11th, 2011, Diversity Inc released its list of “Top 10 Companies for Supplier Diversity”.  In the words of Diversity Inc, these are companies “that develop strong relationships with suppliers and help them through mentoring, financial education and financial assistance build brand loyalty that is reflected in their workforce and consumer/client demographics.”

To create the list, Diversity Inc looked at an array of factors, including but not limited to “percentage of Tier I (direct contractor) and Tier II (subcontractor) spend with minority-owned business enterprises (MBEs), women-owned business enterprises (WBEs), and businesses owned by people with disabilities (including veterans) and LGBT people.”

The findings are pretty interesting and come with a few eye catching facts!

  1. All 10 companies mandate Tier II supplier diversity
  2. They average 14.5 percent combined Tier I spend with MBEs and WBEs, compared with 8.5 percent combined for the average of The 2011 DiversityInc Top 50 Companies for Diversity
  3. They average five employees in their supplier-diversity departments
  4. They all have a process to personally confirm the racial/ethnic/gender demographics of suppliers
  5. They all tie procurement-management compensation to diversity goals
  6. They all mentor suppliers and offer financial education and assistance

Pretty good list of averages!  The top 10 companies in order from 1 to 10 are Marriott International, AT&T, Sodexo, KeyCorp, HP, CSX Corp, Cox Communication, PG&E, Bank of America, and Merck & Co.

For more information click here.


Is there an industry wide definition for direct and indirect spend?

February 9, 2011

For automotive Tier I companies, reporting diversity spend is crucial in helping  win contracts.  For Johnson Controls, a leader in the supplier diversity field, being able to report consistently and accurately is as important as recruiting and hiring various M/WBEs.

With multiple OEM customers to report to, it is in a Tier I’s best interest to know the correct definitions of what they are reporting.  As with any report, if an error is made in what information is to be supplied, then both parties are harmed.  Inaccuracies are never good, especially ones that, in the near future, will influence contract winners and losers.  A quick example is an OEM like Chrysler.  5% of a normal contract bid  is checking a Tier I’s diversity spend performance.

With this fact, it is interesting to note that much of the auto industry differs in common definitions like direct and indirect spend.  On the OEM side, most companies view direct spend as all manufactured parts that can be traced to a vehicle made for them.  Indirect spend is all spend that cannot be traced to the vehicle, but is still spent from the contract on related goods and needs (i.e. cutting the grass at an OEM specific facility).  Makes sense, however there are different nuisances that complicates the matter.

What happens if a facility is not 100% for one OEM and the parts made cannot be traced accurately?  In this case can the  percent of sales be used from the facility to give an accurate spend account?  Some OEM’s feel that this is acceptable, while others do not.  What about for a manufactured part of a part of a part that ends up on a company vehicle?  Is that direct or indirect spend?  If a facility is 30% for one company, can you take all the parts manufactured in that facility and estimate the spend, or do you have to take a more direct account?  Is tooling a direct or indirect spend?  What about Just in Time facilities?  Other questions can arise to;  If a Tier I has spend with a minority female owned company, can that company be recorded for minority and women spend.

Giving specific definitions for each and every instance would probably be impossible.  There is no way a company, OEM or Tier I included, can account for every possible issue that can occur.  So what can be done?  The best route is take a moment and really stamp out an industry wide definition for direct and indirect spend.  I understand that not all definitions can be commonized, however, direct and indirect spend definitely can!