Supplier Diversity
Supplier Diversity: Food for Thought By Kenton Clarke President & CEO
DiversityBusiness.com F
or starters, let me share a brief defini- tion about supplier diversity for those
who may be unfamiliar with the term. “Supplier diversity is a business program amongst Fortune 1000 companies that en- courages the use of privately-held compa- nies owned by historically under-utilized businesses when purchasing goods/ser- vices.” Since I last shared my notes on supplier diversity, layoffs, program elimi- nation and the overall economy in 2008 & 2009 have caused setbacks within suppli- er diversity programs. Today, there are indications that these
setbacks have leveled off and appear to be on an upward trend. During 2010 we have seen hiring for supplier diversity positions return and spending continue to increase. The industry continues to drive spending through 2nd tier initiatives and procure- ment contract goals in this area. Reporting requirements have become a “Must Do” and are now audited on a regular basis.
This trend has been moving forward for the last 5 years and is no longer taken lightly. Each day, companies are expand- ing the number of prime suppliers required to report to them and many new corpora- tions have begun implementing similar programs.
Reality of Supplier Diversity I am happy to report the industry is get-
ting back on track but there are still find- ings of fundamental issues that need to be addressed in order to continue moving forward. For instance, margins which are squeezed at the “Prime” level continue to be a challenge for 2nd tier diverse suppli- ers who in some cases are required to streamline some of the work down an ad- ditional level (3rd). There are also indica- tions of large companies asking their sup- ply chain to be proactive, (buy from diverse companies) which in most cases, they are not willing to execute themselves
(unless required by their customers). This “Circle Jerk” has created apparent oppor- tunities on the 2nd tier which could have been procured on level 1 (no procurement executive would admit to this). Spending that is reported by both companies often results in overly inflated diverse spend- ing.
Finding additional “Spend” through
data scrubbing seems to have become a permanent process amongst many compa- nies. While a significant number of com- panies have their Accounts Payable re- cords coded in the front-end to capture diverse spend, squeezing out additional dollars from uncoded suppliers to meet targets is commonplace. The uncovering of this “Mystery Money” is now an ac- ceptable practice at all companies for measuring performance goals and targets. It also indentifies suppliers who in turn are forced to participate in the certifica- tion process. Large contracts (in excess of $10,000,000 or more) continue to be awarded to diverse suppliers as an addi- tional spend driver. A significant number of these contracts (when made public) are corporate pass-throughs, or so they appear to be. Discussions on the value of these awards to the diverse business community are questionable and can create brand lia- bilities for the large company when re- vealed. The idea of strategic partnerships has been stretched to create corporate/di- verse business partnerships with invoic- ing always occurring through the small “company” and, the majority of the work and profits going to the large corporation. In most cases, the RFP process has put weight on the diversity spend component and these partnerships have been created for a competitive advantage. There is still a zero sum game for diverse suppliers al- though huge dollars are being reported as diverse spend. This has resulted in an op- portunity for large corporations to win more contracts based on their diverse
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Continued on page 30 The Black E.O.E. Journal
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