7 Supplier Diversity Challenges, Part II

PurchTips - Edition # 129 June 26, 2007

By Charles Dominick, SPSM

How Can You Meet Your Supplier Diversity Goals?

In the March 6, 2007 edition of PurchTips, I introduced you to the first two challenges of supplier diversity programs: deciding what types of suppliers will be considered diverse suppliers and tracking the use of diverse suppliers. Here are five more challenges…

Challenge #3: Finding qualified diverse suppliers. There are many resources for purchasing professionals to use when finding diverse suppliers including the National Minority Supplier Diversity Council and its local affiliates, the United States Small Business Administration, and local government offices.

Challenge #4: Verifying that a business is truly a diverse supplier. Some organizations set aside a certain amount of business for diverse suppliers. Supplier diversity experts work to identify “pass-throughs” and “fronts” - businesses that represent themselves as minority-owned businesses to win “set aside business” then outsource it to non-diverse suppliers. This has led to the need to prove that a business is truly a diversity supplier. Some organizations certify suppliers’ diversity status. Examples of these organizations include local minority purchasing councils and various government agencies.

Challenge #5: Setting supplier diversity goals. Many purchasers feel that setting supplier diversity spend goals conflicts with their primary goal of reducing costs. After all, how can you strive to spend a certain amount of money with a certain type of supplier when there is no guarantee that those suppliers will be competitive? But savings and supplier diversity goals don’t have to conflict. Having both types of goals motivates purchasing teams to work diligently at finding highly qualified diverse suppliers and maximizing the number of bidding opportunities granted to diverse suppliers.

Challenge #6: Understanding the risks of supplier diversity programs. With supplier diversity getting executive- level attention, there is always the risk that decision-makers will get overzealous and make supplier selections based primarily on the fact that a supplier is a diverse supplier at the sacrifice of cost, quality, delivery or service. Purchasers must maintain common sense in making all supplier selections.

Challenge #7: Sustaining supplier diversity momentum. According to an article on the University of Tennessee’s Web site, the majority of businesses fail within their first year and about half of those that survive that first year fail within in years two through five. Because diverse suppliers are often new and small in size, they are susceptible to failure. Some organizations actively invest in developing their diverse suppliers through training and setting up alliances with other suppliers.

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