Kathey K. Porter - Supplier Diversity For Dummies

Supplier development doesn’t mean you’re investing in or managing the businesses. It’s about giving them the necessary tools to help understand their capability or competency and allow them to increase their competitive advantage (and, hopefully, match them to opportunities within your organization).

Supplier development is also an important step in the strategic sourcing and the supplier relationship management (SRM) processes. With strategic sourcing, supplier discovery and engagement allow the organization to identify and work with the best suppliers to create win-win situations. Strategic sourcing looks beyond just price as the basis for making decisions to award.

Supplier relationship management is an intentional and system-wide assessment of suppliers’ strengths and capabilities and how they match to opportunities within your organization. It’s the planning and execution of all interactions with suppliers, in a coordinated fashion throughout the relationship life cycle, to maximize the value of the relationships.

Because of the strategic focus of both strategic sourcing and SRM, they’re great complements to supplier development activities and provide the perfect springboard to transition small and diverse businesses into actual suppliers. Supplier development doesn’t focus solely on developing the professional capacity of these businesses. It focuses on building relationships, which is the foundation for every successful procurement transaction, to deliver greater levels of innovation and competitive advantage than can be achieved otherwise. Further, it moves the relationship beyond just a traditional, transactional purchasing arrangement. It’s like that old proverb: If you give someone a fish, you feed them for a day; if you teach someone to fish, you feed them for a lifetime.

Programs with a heavy focus on supplier development and not enough on their internal processes run the risk of being viewed as one-dimensional — offering training (which, honestly, businesses can get anywhere) but no real access to opportunities. Many argue that small and diverse businesses don’t need more training; they need access to contracts. This belief is due to the overgrowth of training programs that offer nothing more than a certificate and words of encouragement at the end.

The benefit of creating your own supplier development program, and the incentive for these businesses to commit their time and energy to participate, is that they can build relationships and learn your processes, which will, hopefully, lead to a business opportunity. Successful supplier development programs not only train but also have an end goal in mind — to leverage the training to create a pathway to opportunity within the organization.

Many supplier diversity programs start with the end goal in mind, approaching it as a destination rather than a long-term organizational process. This method isn’t necessarily the wrong way to think about supplier diversity, but it may not allow you to identify the gaps because you aren’t deconstructing the process and considering every step needed to achieve your goal of adding value. Having properly designed business processes in place is the key to efficiency, scalability, and competitiveness and ensures that the program will be a vital part of the organization for years to come. This area is where the SDM model is an effective tool. You can read more about the model in the earlier section “ Introducing the Supplier Diversity Management (SDM) Model.”

The SDM model is a guide that helps you identify the key functions at every phase of the process and map out the activities you should incorporate based on your organizational culture. It’s not a cookie-cutter approach. Rather, it allows you to consider those details that are unique to your organization and adapt your program activities to those that allow you to achieve your outcomes. In this model (refer to Figure 3-3), you see how each phase impacts the next phase. Starting at the left, organizational stakeholders (external process) drive internal activities (internal process) which then impacts diverse businesses (supplier development process). These activities work collectively to create value.

The following sections offer a few tips to consider as you begin using the SDM model in your organization.

Internal efforts include a focus on the 4 P’s — policies, procedures, processes, and people — your in-reach efforts, and your programs. The following are some key questions to consider:

Can we create a map for our supplier diversity process?

How comprehensive do we want our efforts to be?

Are we willing to devote necessary resources to develop this process?

How do we view/value supplier diversity?

What are our expected outcomes? What value do we want to add?

External efforts focus on collaboration. Here are a few questions to ask yourself:

What resources do we need for support?

What community resources are available — that is, large businesses, industry experts, other business development agencies, and so on?

How will they add value to our program?

When organizations come to me about their programs, it’s usually because they’re not getting the results they’d hoped for. They have the willingness and the elements of what can be a strong program, but it’s still not coming together. By deconstructing their program using the SDM model, they can readily see the gaps. For example, they might be experiencing challenges in finding small and diverse businesses. They may have the requisite internal elements, but they haven’t incorporated the supplier engagement and development program to get firms into their pipeline. Or they may be having issues increasing departmental utilization with small and diverse businesses. This usually indicates that their internal programs, specifically the 4 P’s, may need to be reviewed to ensure that each area has been addressed.

This last phase is about (wait for it) development. Keep the following in mind:

How much can we devote to supplier development?

How will we incorporate supplier development into our program?

How will supplier development fit into our program?

What happens after?

How do we keep businesses engaged?

Chapter 4

IN THIS CHAPTER

Recognizing the similarities and differences between supplier diversity and DEI

Understanding how the two programs can work with each other

Discovering some common dangers in lumping both initiatives together