The Second Tier and Beyond
By Rajesh Voddiraju
H
ow to make the most out of your tier-
two supplier diversity program? This
question is raised quite often as large
organizations look to leverage existing
programs and improve the value to the
organization. In fact, tier-two supplier
programs can be expanded to include
areas beyond diversity such as sustainabil-
ity, risk, or compliance programs.
Industry supply chains have made
quantum leaps in efficiency and techno-
logical sophistication over the past
decade. Inititives such as global sourcing
and supplier-base rationalization have
changed the face of the supplier base,
shrinking it to as small as a quarter of what
it once was. In recent industry analyses,
CVM has shown how these corporate ini-
tiatives have also create additional risk to
the supply chain across Fortune 1000
companies. The suppliers that are still
standing are finding that the supplier services our customers want.” have had supplier diversity initiatives at
diversity offices of major corporations and The first step in implementing any tier- the top level of many different industries,
government agencies are delving deeper two program is selling the business value tier two and ‘tier x’ drive diversity efforts
into the supply chain to ensure the inclu- to your tier-one suppliers and gaining into the vertical industries that support the
sion of diverse suppliers. Those diversity executive buy-in. Whether your company top tier of businesses.” What exactly does
offices are extending their programs sells to consumers, commercial customers, buy-in and commitment involve? It
beyond their company’s own supplier base or local, state, or federal government enti- requires more than a handshake deal or
into the next tier and even further down ties, mature supplier diversity programs words of encouragement. You need to cre-
the value chain. expand their scope well beyond their ate a formal policy for a second-tier pro-
We have several well published exam- immediate tier-one suppliers. The dynam- gram. The policy should clearly articulate
ples of the impact that successful second ics of modularization, supplier-base your company’s desire to expand diversity
tier programs can have on large compa- rationalization, low-cost country sourcing efforts to tier two and beyond. It should
nies. Wal-Mart reorted record increases in (procuring materials from countries with also establish what is expected of prime
business with minority and women-owned lower labor and production costs), and suppliers that are required to participate in
suppliers even in one of the worst eco- other practices certainly affect the ability the program, including how goals will be
nomic times in history. Wal-Mart to grow the supplier diversity program if set, how frequently prime suppliers will be
increased its combined direct and second- one were to only think about the tier-one required to report sub-tier diversity spend,
tier spend to more than $8.1 billion with supplier base. and how those tier-one suppliers will be
minority- and women-owned businesses As with any major corporate initiative, held accountable to mutually agreed-to
through an innovative second tier pro- for the second-tier program to be a hit, it is goals. Samples of formal programs are
gram. “At Wal-Mart, we know we can critical to have the endorsement of execu- easily accessible.
make a difference in the communities we tive management and procurement. The Excellent resources are the National
serve and our commitment extends to world-class second-tier programs that we Minority Supplier Development Council
minority- and women-owned businesses at see today do indeed start with such a com- and the Women’s Business Enterprise
the local level,” said Theresa Barrera, vice mitment. Just look at Ford Motor Compa- National Council, corporate peers who
president of Supplier Diversity at Wal- ny, Wal-Mart Stores, Inc., Procter & Gam- have implemented a program in your
Mart Stores Inc. “We are proud of the fact ble, Johnson & Johnson, AT&T, and industry or region, and consultants such as
that, in these difficult financial times, we Motorola, Inc. These companies encour- RGMA & Associates. The policy would be
are able to deepen our commitment to age their first tier large suppliers to create difficult to materially implement unless
these important partners— giving them their own supplier diversity programs. amendments are made to existing standard
the potential to grow, while enabling Wal- Nannette Kelley, supplier diversity man- contracts requiring participation from
Mart to deliver and sell the goods and ager for Motorola, Inc., says, “Where we prime suppliers. Indeed, second-tier
Continued on page 26.
24 Celebrating over 15 Years of Embracing Diversity WWW.HNMAGAZINE.COM
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