If you are looking to expand your supplier diversity efforts and push your program to greater heights, thus ensuring that a sustainable process continues for bringing diverse suppliers into your supply chain, look no further than Tier 2 reporting. As corporate supply chains consolidate to drive efficiencies, Tier 2 reporting offers a straightforward proposition for enhanced diverse supplier growth and development by honing in on untold additional dollars of diverse spend each year.
You have well-established and positioned Tier 1 prime suppliers that receive your large contracts. For your supplier diversity program to ultimately meet its objectives, your supply chain partners also must be on board with your SD goals. So pairing your Tier 1 suppliers with smaller Tier 2 diverse enterprises affords you that opportunity to build significant second-level spend.
Take the example of Fiat Chrysler Automobiles. Then named Chrysler Group LLC, Chrysler won the National Minority Supplier Development Council’s (NMSDC) prestigious Corporation of the Year award in part because of its focus on Tier 2 reporting. NMSDC noted that Chrysler was the first U.S.-based automotive company to launch a Tier 2 program, requiring its Tier 1 suppliers to report their own spends with diverse suppliers.
In announcing the award, NMSDC noted that Chrysler sources about 17 percent of its products, services, and solutions from diverse suppliers annually for a total spend of more than $5 billion. The automaker said its Tier 2 program had generated $985 million in reported 2013 spend.
Yes, imagine adding $1 billion to your diverse supplier spend each year.
Another major corporation, The Hartford, actively encourages Tier 2 spend, for instance, as a means of embracing certified “subcontractors providing goods or services to Tier 1 or primary suppliers of The Hartford.” The insurer also includes indirect spending within its Tier 2 reporting, such as prorated contracted spending with diverse suppliers based on supplier sales or a percentage of a supplier's total revenue.
Technology company Hewlett Packard’s Enterprise Global Supplier Diversity policy promotes that Tier 2 spend consists of “payments … used directly or indirectly, from the prime suppliers in support of Hewlett Packard Enterprise contracts.” It offers elaborate guidance on Tier 2 reporting, including an instructional manual with reporting instructions via an online system.
Many organizations, to ensure their Tier 2 priorities do not get unwieldy because the process embraces potentially many more diverse suppliers, tap into managed services to get the job done. There are many private sector companies offering these services.
Going with a managed service provider for Tier 2 reporting not only can ensure accurate reporting for your supplier diversity program, but also assists your primes in their reporting.
For instance, some reporting requirements of Toyota Motor Engineering & Manufacturing North America, or TEMA, through its formal Tier 2 Sourcing Program include completing a Tier 2 report online for accurate reporting; calculating achievement to target; and ensuring top management is aware of performance.
Perhaps the best way to think of Tier 2 managed services is in the same way that organizations rely on providers to manage parts or all of their information technology infrastructures. The expertise, people resources, or technology solutions may not be available in house to cover the intricacies of the reporting requirements, so bringing in resources to help with these important tasks could be the way to go.