16 September 2010 | Mayank Shah
Embracing supplier diversity brings big business benefits, says Mayank Shah. But it’s not simply a box to be ticked under CSR – it needs integrating into corporate strategy
Enterprise Rent-a-Car, Bank of America, ExxonMobil, PepsiCo and Eversheds all share a secret. They have identified the importance of supplier diversity and they are reaping the rewards that come from looking beyond the usual vendors.
Businesses of all sizes see supplier diversity as a way of driving innovation and stimulating growth. And it can help businesses save money and open up new markets. But what is it and how can your business enhance its supply chain?
Supplier diversity means opening up supply chains to a range of under-represented and disadvantaged groups, including ethnic minority‑owned businesses (EMBs) and organisations run by women and disabled people. There are about 310,000 EMBs in the UK.
To be more inclusive businesses must be proactive. Start with the following three steps:
• Conduct an audit of your supplier base and evaluate the effectiveness of your procurement process. Who are your suppliers? How often are they used? What measures have you taken to move outside the usual pool of suppliers? Which areas of the business would benefit from new blood? Diverse suppliers now operate in every area of industry, from catering to consulting, producing everything from IT components to marketing campaigns.
• Make supplier diversity a core part of business strategy. If supplier diversity is just regarded as a tick-box exercise it will fail. You need targets and accountability just like other areas of the business. Supplier diversity can’t simply be handed over to the person responsible for CSR, it has to include all parts of the business, and not just procurement.
• Engage and educate diverse suppliers. Many vendors remain unaware of procurement opportunities. Those that do often need support to navigate the purchasing process. One way to engage a new set of suppliers is to attend “meet the supplier” events, which give you the chance to meet a wide range of suppliers from diverse backgrounds.
One business that has successfully embraced supplier diversity is PepsiCo UK. It understands that it’s not about favouring EMBs. Rather it’s about levelling the playing field through all tiers in the procurement function. Formal mentoring roles have been created to assist EMBs new to PepsiCo UK. The mentors help suppliers understand PepsiCo’s expectations, decision-making processes and standards. The mentoring programme enabled one of our EMBs to secure a large contract with PepsiCo UK’s juice company Copella, providing apples for the business.
Ian Brennan, European procurement manager at PepsiCo UK, says: “The capability, enthusiasm and innovation has been tremendous. These companies perform more than adequately and have a great speed of turnaround.”
PepsiCo UK’s experience can attest to the fact that EMBs can meet the demands of large corporate clients once given an opportunity to prove themselves.
But, for supplier diversity to succeed, organisations must make it a key part of their corporate strategy. Senior management support and accountability is critical.