Sourcing for diversity, with all things being equal

Cincinnati - With far too many winks and nods, my managers would proclaim that we needed to make a push to bring on more “minority” suppliers. This request typically came every year or so, at the request of a senior manager who was trying to comply with government related contractual terms, the request of a large customer or perhaps some level of social responsibility discovered in an airline magazine article. For my colleagues, it was a burden and not a responsibility. And management often looked the other way as it failed to gain traction. It was solidly placed in the “this too shall pass” bucket found in most departments.

These efforts were poorly supported and thinly tracked, with data often fudged to meet an impending audit or presentation. As with most special programs, lip service was the name of the game and we were soon back to doing our regular jobs … saving money in any way possible. And that is the crux of the issue. We were told that we could source with minority suppliers … with all things being equal. That meant don’t spend one penny more than you do with your current, and most likely non-minority, supplier.

Far too many buyers went through the motions of building an inclusive supply base. They paid lip service to the minority suppliers who were allowed to visit or with whom they met at the obligatory trade show supporting minority business development.

We all heard the usual excuses. First, who had the time to onboard a new supplier? Back in the day, many of the minority suppliers were often service providers, attempting to replace an incumbent supplier who typically did a decent job. Second, the era of building supplier relationships was in vogue and it was nearly sacrosanct to eliminate an existing supplier no matter the cause. And third, cost reduction pressures. Even when the minority supplier program would get some legs, the cost element became the overriding factor not to engage. You know…with all things being equal … use them if their pricing was significantly lower. It often wasn't.

Let’s expand the definition of minority suppliers, a term that is getting a bit out of date. HUB, or historically underutilized business, are those defined by the Institute for Supply Management as "a business that is at least 51% owned by a person or persons who have been socially or economically disadvantaged due to color, ethnic origin, gender, physical disability or other factors that result in barriers to the conduct of business." But now the more inclusive term is focused on supplier diversity.

According to the Westchester, Illinois supplier diversity advisory firm CVM Solutions, diverse suppliers include minority, women, LGBTQ, veteran and disabled owned businesses. In a survey of 277 diverse suppliers, CVM Solutions looked at the state of supplier diversity from the supplier side. Their data was interesting and showed diverse suppliers are most often well-established businesses, having been in business four years or more. More than 80% of the respondents were small businesses, employing less than 100 employees. They were also making some inroads into large businesses, with over half of the respondents claiming about 25% of their sales is with Fortune 1000 companies. Finally, their biggest challenge was getting in front of the right decision makers at potential customers. They found networking sessions were the most valuable tool for that opportunity.

Source: Supply Chaindive