According to a May 17 article in LogisticsToday, “Most Supplier Diversity Programs Fail to Deliver,” a recent survey of nearly 40 Global 1000 companies by The Hackett Group has found that, while companies with world-class procurement organizations tend to diversify their supplier spend more successfully than others, this doesn’t mean that their supplier diversity programs are successful. They use overly simplistic metrics to assess diversity programs that might, for example, be too diversified to meet their supplier procurement needs and corporate goals.
This failure in supplier diversity management results from a “serious misalignment” between corporate objectives and operational performance based, in large part, upon an inability to monitor and measure actual results. This misalignment is further magnified when the companies are dealing with the complex challenges of global sourcing.
Meeting the supplier diversity challenge boils down to determining, on an ongoing basis, whether fewer larger suppliers or many smaller suppliers best meet corporate goals. Our experience at CVM Solutions in providing supplier diversity management services to Fortune 100 companies has confirmed The Hackett Group survey conclusion that there is no “simplistic” answer to this challenge.
The real answer to the supplier diversity challenge begins with the data. A central repository of data about company suppliers with easy access to critical information at a high level, along with detailed drill downs whenever needed, is required to provide a true picture of supplier activity.
Companies must be able to automate the on-boarding and overall management of suppliers, as well as to enrich existing information and add new vendors, to save the time and cost caused by duplicate or out-of-date records. They also must be able to sort out complex vendor organizational hierarchies to determine supplier linkages for all activity across the supplier’s entire organization. Additionally, companies need a proactive program to identify minority and women-owned suppliers that supports corporate diversity goals.
An effective supplier management solution will result in cost reduction and improved competitiveness through comprehensive supplier base rationalization and a simplified and streamlined ability to find and manage new, improved suppliers. Other major supplier management benefits include the identification of savings or new revenue opportunities through the improvement in working capital by leveraging linkages in the existing supply base to manage same suppliers’ payment terms, and increased community involvement and competitiveness from minority- and women-owned businesses.