Strategic Global Sourcing: Supplier Diversity

STRATEGIC
GLOBAL
SOURCING
Chapter – 9
Supplier Diversity
SUPPLIER DIVERSITY
 The concept of supplier diversity programs to support
economically disadvantaged groups in the United
States was born from the American sense of fairness
and equality, and supported by numerous government
sponsored programs that have been legislated into law.
But many of us are not familiar with the nature and
benefits of a diversity supplier program, and,
importantly, many do not fully understand how their
organization can support and benefit from these
programs.
SUPPLIER DIVERSITY
 As it relates to sourcing management, supplier diversity programs
expand the organization’s supply base by developing new sources
of sustainable supply as a means to expand competition. Diversity
programs support a supply base that is generally more
representative of the community than it would be without such
programs, since diversity sources are generally local businesses. We
call this process “inclusion.” Fostering inclusion supports the
economic welfare of the community and promotes the availability
of a viable workforce. Thus by increasing the diversity of the supply
base, we also increase its overall economic health. That is why we
chose to include the process in our examination of best practices in
sourcing management.
DIVERSITY PROGRAMS
 Definitions and Certification
 THE U.S. SMALL BUSINESS ADMINISTRATION

 THE NATIONAL MINORITY SUPPLIER
DEVELOPMENT COUNCIL
The Business Case for Diversity
 The Chubb Group of Insurance Companies states
its business case for diversity (on its web site) with
elegant simplicity:
 Those who perceive diversity as exclusively a moral
imperative or societal goal are missing the larger point.
Workforce diversity needs to be viewed as a
competitive advantage and a business opportunity.
That’s why Chubb makes diversity a business priority
and strives to achieve a fully inclusive diverse
workforce.
The Business Case for Diversity
 Many other organizations echo this concept. For example, Sears
Holdings’ diversity statement, posted on its web site, includes this:
 Sears Holdings endeavors to provide minority, women, small, HUBZone,

veteran or service-disabled veteran businesses with the maximum
opportunities to participate as suppliers and contractors for merchandise,
supplies and services used in all Sears Holdings business units.
 We recognize that supplier diversity adds value to our business. A diverse

supplier base stimulates growth in our communities while helping us bring a
wide variety of diverse merchandise and services to our customers.
DIVERSITY PROGRAMS
 Objectives
 The key objective in conducting a supplier diversity
program is to source, qualify, and purchase from small,
disadvantaged businesses.
 Measuring Success
 To be fully effective, a supplier diversity program must
have measurable goals. Measurable goals communicate
the program’s expectation and provide a framework to
measure progress.
DIVERSITY PROGRAMS
 The NMSDC suggests establishing these measurable goals:
 Performance milestones or in-process review/benchmarks to ensure that

adequate bidding opportunities are offered to MBEs
 Quantitative goals that reflect the corporation’s use of minority

suppliers/contractors (i.e., annual purchase dollars, percent increase over
previous year purchases, percent of total purchase value, etc.)
 Qualitative goals that reflect progress in implementing specific minority

business development strategies (i.e., mentoring, joint venturing, strategic
alliances, education, financial assistance, etc.
Supplier Diversity Best Practices
 Recognized best practices maintain that organizations should
have and adhere to a diversity business development policy
statement that is signed by the chief executive officer (CEO).
 This policy statement should guide sourcing operations and

should be a requirement in the sourcing and contracting process.
 Best practices also include a contract flow-down clause

requiring the implementation of similar policies by the supplier
in its sourcing and contracting activities.
Supplier Diversity Best Practices
 Best practices suggest that organizations should demonstrate a
number of specific characteristics in its diversity programs. As
stated by NMSDC, this includes:
 Commitment on the part of the chief executive officer and his/her

senior officers
 A minority business development director specifically assigned the
responsibility for implementing the program
 Minority business development goals that are established and
monitored the same as other corporate goals and objectives
 A corporate culture which promotes innovative techniques to develop
minority businesses

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STRATEGIC

 THE U.S. SMALL BUSINESS ADMINISTRATION

 Sears Holdings endeavors to provide minority, women, small, HUBZone,

 We recognize that supplier diversity adds value to our business. A diverse

 Performance milestones or in-process review/benchmarks to ensure that

 Quantitative goals that reﬂect the corporation’s use of minority

 Qualitative goals that reﬂect progress in implementing speciﬁc minority

 This policy statement should guide sourcing operations and

 Best practices also include a contract ﬂow-down clause

 Commitment on the part of the chief executive ofﬁcer and his/her

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