New NLPA Course Tackles Global CSR and Supplier Diversity Challenges

supplier diversity

A few days ago I spoke with Charles Dominick, president and CPO of Next Level Purchasing Association (NLPA) on the topic of supplier diversity. NLPA has just made available a new course module focused on strategic supplier diversity. This is part of the fourth and highest level of NLPA’s strategic procurement and supply management body of knowledge (SPSM-BOK) program.

As a driver behind the new course, Charles brought up some industry perspectives and mentioned how, in his experience, even established programs in companies considered leaders in supplier diversity practices have been merely tactical in their approach to the area.

That’s a statement I would concur with. An effective supplier diversity program is one that delivers meaningful business impact in the areas and among the customer bases a firm is active in. Meaningful business impact also includes metrics such as top line growth, product and service innovation and other KPIs less typically associated with procurement. Charles also finds this to be a useful way of looking at supplier diversity programs, and it is reflected in NLPA’s programs as well.

Checking Boxes Doesn’t Drive Results

The tactical qualities mentioned above can be seen in how most supplier diversity programs focus on “check the box” activities — for example, collecting and validating certificates and preventing fraud. In defense of supplier diversity departments, most have fairly meager budgets and few resources. But it is true that few firms have moved supplier diversity into strategic market share-driving efforts.

Take a look at what can happen, however, when supplier diversity programs are aligned with strategic goals, as in this case Charles shared. The University of Pittsburgh Medical Center, a $10 billion healthcare organization, competes in a region where a Highmark-owned hospital network is its main competitor. Neither company accepted the other firm’s health care plans, so local customers were confused and frustrated when they lost access to their preferred doctors. To address the negative brand impact from the plan restrictions, UPMC realized that consumers don’t pay attention to marketing campaigns focused on excellent service — this is presumably expected, and not seen as a differentiator.

Instead, once it dawned on UPMC that consumers do pay attention to CSR and supplier diversity, it created a big ad campaign focused on highlighting what UPMC has done in this area. This was a great success for UPMC and took its competitor by surprise.

HR as a Procurement Resource

HR and its employee diversity efforts can also tie in with procurement, as it often does in European organizations. Charles suggests viewing HR as a partner. Have it evaluate suppliers’ hiring practices, for example.

This is an area that can get contentious, however, both from the perspective of influencing business partners internal policies and also in being difficult to manage, as the requirements and laws are often unique to each country. For example, U.S. firms are often interested in the ethnicity of the company owners and this information is then used to steer business to such suppliers. This is something that isn’t legal in many other countries. In the U.K. and in E.U., there are laws that severely restrict the use of preference for such suppliers. In one country you must, in the other you can’t.

International law aside, global programs can be built on the principles of meaningful local business impact. This should hold true in any country around the world, as what is meaningful can be adjusted according to local rules while applying a sourcing and procurement process where this is considered.

International Scale

Especially for global firms, it is critical to have a consistent approach to supplier diversity, something that can be followed throughout the organization, even if local execution might take radically different forms. Training and internal awareness are also critical, the last perhaps the hardest to establish. Much like sophisticated global supply chain risk management (GSCRM) programs, a supplier diversity program also needs to consider the extended supply chain and not just look at isolated segments of the business.

“Supplier diversity was once thought of as merely a way of complying with customer requirements or even just a nice thing to do,” Charles said. “But as today’s leading organizations have demonstrated, supplier diversity done strategically can be a core part of an organization’s social responsibility program and a profit booster to boot.”

Cynical perhaps, but I think Charles might underestimate the degree to which supplier diversity and CSR still get down-defined to mere tactical compliance or fuzzy social obligation by companies. But it is clear that a fresh, holistic take on how the supplier diversity and CSR activities can set a company apart against competitors is needed.

We wish NLPA and Charles Dominick best of luck with the new course, and we invite comments from any reader who has gone through the new addition.

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