Risk mitigation has become a constant for supply management organizations as they strive to secure supply, move production closer to customers and solve logistics issues. For many companies, that has meant developing more agile, responsible and flexible supply chains by looking for suppliers closer to home.
“Small, local businesses, many of which are diverse, are a good way to build a more flexible supply chain,” says Stephany Lapierre, CEO and founder of TealBook, a Toronto-based supplier data platform provider. “At the same time, they are also a great source of innovation” and community-building, she adds. They enable organizations to build a sustainable brand that customers and consumers value.
Capturing Diverse Spend
The Black Lives Matter movement opened awareness about diversity and diverse suppliers. Previously, many organizations considered supplier diversity a “check the box” measure to meet regulatory or funding requirements, Lapierre says.
Over the past few years, companies have made a more concerted effort to improve their supplier diversity programs, she says. The C-suite and stakeholders have gotten involved. “Board members started asking such questions as: Do we know how much money we're spending with small, diverse businesses? Do we have a target?” Lapierre says. As a result, “a lot of companies have made commitments to supply diversity — and they don't want to back out of those commitments.”
For a successful supplier diversity program, organizations need to understand their existing supplier base and establish a strong baseline, not an easy undertaking. “When you’re doing business with thousands of suppliers, depending on how complex your supply chain is, the hard part is knowing who's small and diverse in the first place,” Lapierre says. For one reason: More than 90 percent of such businesses aren’t certified as diverse, she says.
“When you launch a supplier diversity program, you need to identify your mission — why you’re doing this — and communicate it,” she says. “You also need to have a path to be able to communicate with suppliers that you want to bring into your program, making it easier for them to do business with you.”
Another issue companies face is that the supplier data they have tends to be messy and full of duplicates. Not knowing the supplier’s ownership information as well as size and revenue can make it even more difficult to determine small, diverse suppliers.
Organizations generally request such information about whether a supplier is certified as diverse and their suppliers’ use of smaller, diverse suppliers. But not all vendors respond to such requests. Among other issues: (1) There is no single definition for supplier diversity; it can mean different things depending on the locale and the company, and (2) it can be hard to ascertain the right person to contact and to find that contact information.
Ensuring all possible spend has been captured — pinpointing whether there are additional small suppliers that could be certified or non-certified as diverse — can be like “finding a needle in a haystack,” Lapierre says. “Companies may not have that visibility.” Not only can the process take weeks to months, it’s also a huge manual undertaking, she says.
Technology Can Help
Technology can help streamline the process, as platforms and programs can increase supply base visibility as well as an organization’s ability to respond to stakeholders and board members.
Technology is also beneficial to suppliers: An online portal or platform can make it easier for them to report on their status and activities, including their own use of diverse suppliers. Additionally, through such a platform, any buyer in the organization can access small diverse businesses more easily.
“Technology can make it easier to track efforts by sourcing managers to include small, diverse businesses, and see the impact of having those suppliers,” Lapierre says. “Recently, I was at a conference where someone said we have endless resources. It's true. If we tap into these small diverse suppliers, we have endless resources because those suppliers are always looking for ways to innovate.”
In addition to identifying their use of small, diverse suppliers, companies also must track spend — because the dollars spent with these suppliers tend to be small, it can be easy to overlook them, she says. “But by uncovering your true, diverse spend, it could add up to hundreds of millions of dollars,” she says. No matter the amount, it demonstrates the value such businesses are offering to the company.
“We're all trying to build a better world,” Lapierre says. “As an enterprise, you have shareholders. You're focused on growth. Yes, there's a lot of pressure right now with inflation and market disruption. But when you build a company that's socially responsible, it's going to help your employees feel proud. It's going to help your consumers recognize themselves in your supply chain and your employee base — and they’re going to want to buy more from you.”