Supplier Diversity – Time to Plan Ahead and Get Your Data Cleansing Done

supplier diversity

Supplier diversity is a reporting need that means many things to companies. Perhaps it’s complying with small business set-aside requirements related to a federal contract. Or it could be understanding local business impact when seeking city and state contracts.

Another common area is reporting on spend in contracts between commercial firms. Consider, for example, the partnership between Coca-Cola and Delta Air Lines, 2 Atlanta companies with a long business history, where Delta exclusively stocks Coke products. Delta is also interested in understanding which small-, minority- and women-owned business enterprises (SMWBE) are involved in supporting Coke’s business with Delta, among other things.

Good data are needed regardless of requirements – but how do you get there? If you ask the accounts payables (A/P) team who among your suppliers qualifies as SMWBE, you’ll likely get a blank stare or an incomplete list with some good guesses, at best. It’s just not part of the typical A/P workflow to capture this information. In many cases, even if your ERP solution could store this information with the level of precision required for correct spend reports, it most likely does not, and certainly not with any level of expiration date indication.

If you have an actively managed enterprise-wide supplier registration portal solution, ideally as part of a master data management (MDM) initiative, go ahead and pat yourself on the back, then move to the head of the class. You’ve got the perfect foundation.

Unfortunately, few companies will be seated next to you. Not many are anywhere near that level of maturity. If you are like most firms, whatever A/P or IT hands you in the form of a vendor list is likely a sad-looking spreadsheet with numerous double entries. (At least, that’s what you suspect based on the similar-looking names, but can you be sure?) Perhaps a quarter of the entries also lack even the most basic information, such as full addresses.

What to Do?

For the bulk of practitioners needing solid supplier diversity reports, the first step is finding out who you’ve done business with over the past year or so and then send this vendor list to one of the firms that clean it up and augment this with supplier diversity information. As anyone with multiple ERP systems knows, the supplier list will need some preparation – at least deduplication to consolidate multiple entries of the same supplier.

At the same time, it is often worthwhile to validate a few other data points such as Tax ID, OFAC (and its myriad sublists of personae non grata) and other lists of parties you are not supposed to do business with. This can be extended to include lists of your customers, too – in the context of restricted technology – and would then need to comply with International Traffic in Arms Regulations (ITAR), Export Administration Regulations (EAR) and such lists of whom not to do business with on the sell side. Perhaps this is a way to shift the data cleanse outlay onto the sell-side P&L.

Once your preferred data cleanse supplier has done its job – which can take from 2 to 8 weeks depending on provider, their technology, and the time of year, with January and February typically being the busiest time – you can send the clean and updated list back to IT and layer in all of the spend associated with the supplier flagged as diverse in some form or another. Depending on your business (i.e., if you have government contracts with contract-specific goals and targets) you might need to tie all payments to specific contracts to be able to provide reports at that level.

For regular commercial-to-commercial sector contracts, it’s usually a matter of conforming to the requirements stipulated by the client. Most Global 2000 firms want to see what percentage and amount of their spend with you, as a supplier, resulted in upstream SMWBE activities, with you acting as a buyer.

Note that SMWBE definitions vary by country. For example, in the US all commercial firms with supplier diversity programs are interested in the small businesses, woman-owned and minority-owned programs. Veteran-owned and service-disabled veteran owned suppliers don’t get as high of a mention as the previous categories, and the most recent diversity addition, LGBT, is far less sought after by the Global 2000. (One reason could be that there are few suppliers certified as LGBT-owned.)

Who Can Do the Data Cleanse Job For You?  

This is not a long list. The number of firms delivering these insights and services has remained short over the years.

Perhaps surprisingly, the supplier information data-giant Dun & Bradstreet is usually not the greatest source for diversity data. Yes, they certainly have a massive database of suppliers, but much content in the supplier diversity area is self-reported.

D&B’s greatest weakness usually lies in the ethnic classification area, which is really not D&B’s fault – it’s the certifying organizations that are oddly reluctant to share their certified supplier lists with the spend data cleanse specialists, so it’s an industry-wide challenge. This has been pointed out in earlier Spend Matters articles. We fail to see why the certifying organizations do not share information about their members as much as possible.

That problem aside, here are a few other smaller companies to turn to for supplier diversity data needs – in alphabetical order:

  • ConnXus is a fairly recent, National Minority Supplier Development Council (NMSDC)-certified entrant into this field, and they claim a more modern technology approach that enables a data cleanse turnaround as short as 2 weeks. Disclaimer: Spend Matters has yet to talk to clients of ConnXus data cleanse services.
  • CVM Solutions (now part of Kroll) has done supplier diversity data cleanses for over a decade. The company is no longer diverse themselves (they used to be NMSDC-certified) and this is usually something that carries weight in the diversity spend area.​
  • SupplierGATEWAY is another NMSDC-certified veteran in the supplier diversity space and works hand in hand with Diversity Information Resources (DIR) to deliver data services.

The smaller firms – several of whom are diverse themselves – have managed to develop their own databases of which suppliers are certified and or not, thus overcoming the challenges facing non-diverse firms in this market.

Spend Matters welcomes introductions to other firms that are active in the supplier diversity space, whether solutions or data services. For current supplier diversity data cleanse needs, all 3 companies are worth contacting.

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