In last two articles we discussed two questions about supplier diversity. Basic one like WHAT is Supplier Diversity and its types , Second most important one for business decision WHY? What are key business drivers to implement supplier diversity?
Now the third important question is HOW? What are my key parameters to make this decision on implementing diversity program? What are the steps? How should I determine what are my organizational needs? What is an assessment criterion?
Key steps or parameters for your decision matrix would be –
1. Define scope and set your goal – link it to organizational goal so you have good business case
2. Build the internal database; connect with suppliers, make the data complete.
3. Run a diversity program
4. Audit, Monitor and upgrade
Understanding your requirements and goal setting is first and important steps for implementing supplier diversity. This will not only enable you to asses and quantify the things for assessment and monitoring your program in future, this will also enable you to convey your ideas clearly with the stakeholders and ensure that the commitment is from top.
The goal setting is with 2 major aspects – one is to shortlist commodities that can be or should be bought from diversity suppliers. The other goal can be budgetary to ensure that $XXX in a period – quarterly or yearly – must be spent through diversity suppliers. A hybrid approach on “preferential” supplier list is also an option. In that case one can put the diverse suppliers as a preferred in the list of materials and do away with the budgetary constraints. This way your diversity program is not just a “Something for charity”, but actually a business driver. Also by doing this, if your risk chart signals that a small supplier would not be able to fulfill demand in said time, the order goes to next preferred. This will keep check of quality, innovation, commitment as well as business demands and risks in check.
Once you set the goal, ensure that the organization commitment to the program is there. All commodity managers, supply chain strategists, the procurement people knows and recognized importance of the program. This will make sure that the program gets on track once you set the ground for execution and not just remains on paper as a initiative. You may need to spend more time building collateral documents, presentations with departments, charting out risk path, getting a diversity consultant to answer all possible questions coming out and drawing a road map.
The next task is to check your database – which is a first step towards realization of the program and you will see that it’s not in as good shape as you thought about. Vendor master is always a pain area but also a powerful enough to save lot of (I mean it) money. You just need to be patient to check and make it cleaner, leaner and find negotiating opportunities from it to save. But that’s another topic to talk about. So get it normalized and standardized and may be classified. And then ask your service provider to identify diversity status of each supplier. Also ask each individual supplier to identify own diversity status. You may actually need to help your small suppliers to identify and register their status with the federal or state agencies or certifying agencies or own certification and auditing process. It’s a long and exhaustive process for sure as there has to be auditing and legal compliance with all this.
The next step is to run the diversity program for industry. So you campaign the program for industry players, attend conference, drive point to small suppliers about your program, encourage new vendors to register and identify them, shortlist commodities / supplier relationships, identify strengths, assess risks with individual entities, its impact and then make a tolerable risk impacted program. Go public with your diversity commitment and start building actual relationship with these suppliers.
Auditing and monitoring your program time to time is most important part of the process initially. Once it has its own traction, and becomes policy it will be on auto pilot mode and may need attention whenever there is a change. But setting it up and showing results (revenue, risk and reliability) are a herculean task to do. Right mindset can only drive it.
Be aware – it’s a change and people don’t like change. So expect resistance. Expect people opposing it. Be firm, be reasonable, and make sure you have good consultants always at reach to help you out justifying things – as you cannot wear many hats.
As we know now – WHAT, WHY and HOW, let’s look next week at the risk associated with the supplier diversity and probable mitigation of it.
Please post your comments here or send it to me by email on pmendki@gmail.com
Prashant Mendki, PMP
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