Supplier Diversity For Dummies. Kathey K. Porter

part may be two-fold:

       External stakeholders: Whether they’re consumers, community leaders, business partners, or the small and diverse businesses themselves, external stakeholders can provide the motivation and push that organizations sometimes need in order to take action. As I discuss in Chapter 2, supplier diversity started in response to the social and economic inequality of the 1960s. Over the years, as it entered different phases, the shift was usually in response to some kind of external force. In fact, even the resurgence supplier diversity experienced in 2021 was a result of the racial and social unrest of 2020.External stakeholders are also resource partners in that they team up with an organization to deliver programs to small and diverse businesses, especially if the organization doesn’t have enough resources to fully devote to this function. Further, they’re prime partners (suppliers with a direct contract with the organization) that may provide subcontracting or other businesses partnering opportunities to small and diverse businesses.

       Community outreach:Community outreach involves actively engaging in the community to scout and recruit companies to do business with your organization. The supplier diversity industry has done a great job of creating opportunities to connect small and diverse businesses to decision makers. Before the COVID-19 pandemic, on any given day in any city, there was no shortage of events in which small and diverse businesses participated.

      The supplier development process

      Through external collaborations (see the preceding section), organizations realized that they could provide additional support in a way that was cost effective yet still impactful. It also engaged their prime partners and encouraged them to adopt their own supplier diversity efforts providing additional opportunities for small and diverse businesses. This relationship gave rise to the importance of supplier development.

      As the name indicates, the focus is on development — proactively creating a pipeline of small and diverse businesses ready to work with your organization. As organizations become more intentional about supplier diversity and allocate more time and professional resources to their programs, they have to look beyond just spend analytics. Supplier development allows you to do that and has become one of the most important facets of the model. Investing in small and diverse businesses not only prepares them for the rigors of doing business with your organization, but it also primes them for contract opportunities with other institutions. This boost helps build their capacity, which is vital for long-term growth and entrepreneurial sustainability.

      Supplier development is probably the process that’s missing from most supplier development programs. Supplier development comes in many forms, from informal efforts such as workshops and networking events to more structured programs including mentoring programs, accelerators, and matchmaking. What you decide to do depends on the stage of your program, your budget and resources, your organization’s goals, and what makes sense for your organization.

      

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.

Getting Started with SDM

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.

      Phase 1: Internal efforts

      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