Overcoming Supplier Diversity Capacity Challenges

We've written a ton about supplier diversity on Spend Matters PRO recently and today we'd like to feature an excerpt from a piece that ran earlier this week.

Being a well-run diverse business just isn't good enough. Many supplier diversity professionals as well as most SMWBEs (Small, Minority, Woman-owned Business Enterprises) suffer under the misconception that Fortune 500 firms are ready to do business with SMWBEs if only the SMWBE could get a meeting with the right category manager around the right opportunity... sound familiar? The following article explains why that assumption is a serious stretch, or a considerable leap of faith. But before you read further, make sure you read this article first – it covers necessary prior groundwork.

In working with diverse suppliers, many take the phrases "capacity constraints" and "supply base consolidation" too lightly. Even the best prepared diverse supplier – the one walking in the corporate door fully registered in the company's SLM (supplier lifecycle management) tool, with their current diversity certificate already uploaded, prepared with exciting products, and several client references – can still easily fail to get any business.

Why? The truth is that even if corporate rules against supplier proliferation were relaxed, and you (the supplier diversity manager) could add the diverse vendor to the vendor master or at least the approved vendor list, it might be more of a curse than a blessing for them. You need a big fire hose to slake the thirst of a Fortune 500 firm. To the typical SMWBE, even one order (that would make business sense to an F500) will likely require more capacity than the SMWBE can deliver.

This shouldn't come as a surprise, since most diverse firms are small (actually exceedingly small). This is almost by definition, since the larger a firm gets, the shareholder count usually increases, and at some point the diverse firm is no longer owned in a way that supports SMWBE certification. This is normally a good thing – it shows business success. Capacity is needed to get there. And supplier diversity programs need to focus more on building capacity in new ways.

Spend Matters PRO subscribers can access this entire research brief which provides detailed strategies and analysis to overcome supplier diversity capacity issues including:

  • General capacity requirements
  • Understanding the supplier perspective
  • Multi-tier supply management
  • Second-tier spend analysis
  • Contractual enforcement approaches
  • Supplier development integration
  • Supplier certifications
  • Mentoring programs
  • Long-term partnering/teaming
  • Equity investments
  • Category management integration
  • A case study of where supplier diversity capacity planning worked in practice

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Contact Sheena: smoore@spendmatters.com

- Jason Busch

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