Supplier Diversity – a high quality debate from our readers

We wrote a piece a few weeks ago  around Supplier Diversity, and talked about the work being done both by individual organisations such as Merck and groups like WE Connect, and MSDUK, (Minority Supplier Development UK).  So we’re ready to come back and get into the topic further, but before we do, that last article drew some very good comments and debate which we’ll feature today in summary.

Morgan Lobb kicked things off.

“Supplier diversity is certainly not a fad and is indeed now a fast growing sector. Diversity in the UK is shifting from liability to asset. Many organisations have woken up to the commercial benefits diversity brings...  Not getting diversity right costs businesses a lot of money, for example, the pink pound in the UK is worth circa £6 billion P.A. If you’re a Russian vodka company you’re unlikely to get a slice of this as the consumers will vote with their pounds”.

Dan responded.

“Just to play Devil’s Advocate, is there any need for this? Any procurement should be based on best value, whether that is price, quality, risks, innovation etc. Any supplier that needs preferential treatment to be taken on board must therefore not be offering best value – in which case should they be contracted with”?

Mayank  and then Julie came back with these replies to him.

Dan,  Supplier Diversity is not about giving preferential treatment but just like a diverse board room brings fresh and innovative business ideas to make business more competitive and dynamic, reaching out and engaging with diverse suppliers provides different ideas, solutions and competitiveness to any supply chain”.

“Dan, there is a very strong need for this. Without it, there is a danger that only the big players win every time – that is not good for the economy as small businesses would find it difficult to survive and entrepreneurial spirit will be lost. It is the same argument when saying why do we need diversity and inclusion programmes in recruitment – some people might argue that there isn’t a need for focused programmes because surely we’re all working on a level playing field…”?

But Dan wasn’t conceding!

“Ah yes, but arguably you should be focussing on innovation, flexibility etc as part of your sourcing strategy anyway. It’s never just a straight choice between diversity and consolidation. Focussing on diversity could be seen to be concentrating on the means to achieve the end result at the expense of that end result”.

More good logic from Mayank:

“It is important for procurement organisations to ensure that it looks at all available options and suppliers to get best value for every deal. If 1 out of 10 SME in the UK are ethnic minorities, it makes a strong business case to ensure they are included in the sourcing process. They represent a growing proportion of small and medium size businesses and by reaching out to them, purchasing organisations will have access to new ideas and solutions that will only make supply chain more competitive and add value to the bottom line”.

Linda chipped in from the US:

“No one is suggesting to pay more for diversity. However, at least in the US (and I suspect coming soon to you blokes across the pond) supplier diversity programs matter to the SALES team. The RFPs for prospective new clients ask about them and weigh results on whether your company has one or not. Furthermore, if your company sells to the government, there are contractual obligations (in the US) to support small and disadvantaged suppliers. So NOT having a supplier diversity program could mean the loss of existing revenue or not winning new revenue. I suppose then the real question is – do your CUSTOMERS care about it....”?

Which got PlanBee involved:

“Please don’t hold up the US approach to Supplier Diversity, it is a farce and misused by too many SME’s as an excuse for not needing to be as good as their competitors. It’s also anti growth. We had suppliers that didn’t want to win more business as it meant they would fall over the SME threshold. You cant win this one by legislation”.

RJ brought some current experience to the party.

“Dan’s point is a good one. Many programmes I have seen (when working with US-based firms in particular), focus on targets and quotas for various diversity targets with little concern for whether the suppliers concerned exist or deliver value to the buyer. The difficulty for the internal user and end customer... is that many SMEs are simply not suited to the supply needs of large organisations. In addition, many SMEs would not want the hassle of dealing with some of these complex organisations who repeatedly pay late and change their requirements.

However, I am currently working with an organisation that uses reasonably large numbers of specialist niche advisors, most of whom are one or two-man bands. This gives them a much cheaper and more focused resource that is giving far better value than the major consultancy players would offer. That being said, it’s still not an easy organisation to work with as an SME and setting up new suppliers for one-off requirements is in danger of becoming an industry in itself so there’s an element of swings and roundabouts I would say”.

And finally, let’s have all of Harish Bhayani’s excellent contribution:

“Imagine a world without diversity. It can’t exist in any real sense. Diversity gives us life, society, advancement …. If you agree that employee diversity is important, then supplier diversity is also important, because suppliers are simply another part of your labour pool.

The trick is in having a clear understanding of the benefits, and the potential pitfalls and costs, and then creating a strategy which works for a particular organisation. Simple, but not easy! One of the most difficult elements is how diversity has become a subject which makes a lot of people anxious – the stick that Morgan refers to. Because we are often bombarded by the negative stuff, e.g. via the media or gossip, it tends to overwhelm our balance – we overlook the myriad times every day that diversity actually delivers for us all; we take it for granted.

Another very significant challenge is unconscious bias – science tells us that we all tend to have biases against different social groups, to different degrees, without even realising it. And those biases can lead us to discriminate unfairly without even realising it. So, while buyers (or anyone else for that matter) may think they are totally objective and rational, they are not. They key? Start out with a clear strategy for how to engage with your key stakeholders on the subject and how to address these sorts of issues”.

Thanks to everyone and we will have more on the topic very soon!

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Voices (3)

  1. Alis Sindbjerg Hemmingsen:

    Great input to the discussion by Justin Lambert from Merck. To my opinion there are always at least 2 questions which are essential when talking about Supplier Diversity. 1) You have to decide what types of suppliers will be considered diverse suppliers 2) You have to decide how you will track the use of diverse suppliers.

    Merck says: Our supplier diversity program includes large and small HUBZone, minority, women, veteran, and lesbian- and gay-owned business enterprises” – It could be interesting to learn how they ended up with this definition?

  2. Justin Lambert:

    It’s great to see Supplier Diversity sparking a healthy debate however Peter I just need to clarify one thing before the communications police get me, as a corporation Merck are called MSD everywhere, except in the United States and Canada, where we are known as Merck, just so we do not confuse ourselves with our German counterparts…

    So first the corporate bit; MSD is committed to sustainability in all business activities and aims to apply and abide by the highest ethical, social and environmental standards. We recognize that our business partners play an important role in our overall success. Accordingly, MSD strives to conduct business with individuals and organizations who share our commitment to high ethical standards and who operate in a socially and environmentally responsible manner.

    Now from my perspective; in my procurement work I have always aimed not only to get the best value for my company but also have a fair and inclusive sourcing approach, the inclusion of diverse businesses. In the European economy SME’s are a major source of entrepreneurial skills, innovation and employment. In the European Union some 23 million SMEs provide around 75 million jobs and represent 99% of all enterprises.

    Now I am not saying the balancing act between Globalization and local benefit is easy, far from it but in 2013 MSD have made a conscious decision to invest in supplier diversity by giving me the opportunity to dedicate time and resource on the subject, my programme covers EMEA under the title, Global Sourcing – Local Benefit, our inclusive sourcing policies will ensure we include and track SMEs in our tender opportunities in support of the EU Small Business Act and link this policy with our customer’s objectives, namely EU governments.

    I often tell anyone who will listen the following analogy, imagine a table and sitting at that table are six people from the same background, come from the same culture, have the same beliefs are educated the same way; you get my line of thinking, anyway just imagine how that conversation could be so one dimensional, now just imagine if the same table had people from multiple cultures and perspectives around it, surely that conversation would be more vibrant, provocative and much more creative. Now I may be wrong but just take time to stop and think, if you are in a corporate and you only speak to Business Development managers from other corporates, will you ever get a diverse business perspective, will you really be getting the best out of your supply market?

    For me the comment Linda made around “supplier diversity programs matter to the SALES team” is very powerful, for your supplier diversity programme to be relevant for you as a corporate, it is imperative that you link to what your customer wants and by doing so you will elevate Procurement above just a back office tactical cost saving activity.

  3. Gill thorpe:

    Thank goodness for the closing paragraphs – some of the earlier statements were quite depressing to read in 2013! As an SME who is very capable in dealing with the major global corporates – I look forward in reading and taking part in a bigger debate on this subject. …

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