How to reach your goals on supplier diversity and supplier management

When a company considers how to improve its supplier diversity, it can do so along with improving its supplier management overall. But how does a business go from getting started to reaching its goals with suppliers?

In the first article in this series, we showed that businesses starting this process don’t have to choose between supplier diversity and supplier management. You should do both at the same time.

But now, let’s consider how to execute a plan to build relationships with suppliers and reach your business goals. You’ll need to understand three areas of SRM, or supplier relationship management: how your suppliers align with your business goals, how you manage supplier risk and how you address supplier development.

  1. Assessing suppliers — This function involves supplier segmentation, which is evaluating each of your suppliers to understand their importance to your business. By classifying them, you can determine which ones need more attention and which ones have strategic value that will help your business reach its goals.
  • Also ask these questions:
  • What is your spend with all suppliers (diverse and non-diverse)?
  • Are you measuring the impact of that spend?
  1. Accounting for risk — Understanding your suppliers can help you cut down on risks, like unethical sourcing, forced labor in their supply chain or poor performance in the past.It’s also important to get to know your supplier so you understand how much dialogue and management you’ll have to invest with each supplier.Another aspect of risk that’s vital is knowing who your supplier does business with and if its suppliers are diverse, innovative or ethical. Risks deep in the supply chain need to be known and monitored.
  • Also ask these questions:
  • What is your risk mitigation plan with your suppliers, and how is compliance monitored?
  • Do you have exposure with your suppliers’ suppliers? How is this monitored?
  1. Addressing supplier development — Once you’ve segmented your suppliers to find the key ones to your business, it’s important to develop relationships with them that drive innovation, improve customer satisfaction and add value for both parties. Focusing on the customers and the easy use/adoption of your product is a trend in business that helps companies differentiate themselves in the marketplace. It’s also vital to reconsider relationships and being on the lookout for new suppliers who can deliver innovation and execute on the next big idea.
  • Also ask this:
  • Do you have supplier development plans for suppliers to maintain compliance, monitor governance and manage risk?

These best practices apply to building relationships with diverse suppliers and non-diverse suppliers. It’s part of building a sound business foundation and knowing how to collaborate with all types of suppliers.

To understand these issues better, the next article in this series will be a Q&A with SRM expert Daryl Hammett of ConnXus, a provider that connects buyers and qualified suppliers.

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