Supplier Diversity – opening up opportunities

We’ve covered supplier diversity for a while, and we’ve argued that conceptually it can have a number of objectives and benefits. Those may be customer facing (being seen by customers to be doing the right thing) but more fundamentally, it should aim to find suppliers who can bring competitive advantage to the organisation (or help it better achieve strategic goals in the case of the public sector). And that means being open to suppliers of all types and backgrounds.

So how can organisations achieve this? I’m not primarily thinking of deliberately tilting the level playing field for certain suppliers, although that is of course an option. I heard an interesting presentation recently  about public procurement in South Africa, where a complex scoring system is used to give firms of certain types a quantitative advantage in procurement exercises.

But here we’re more interested in actions that simply help to ensure the playing field is not accidentally disadvantaging certain types of suppliers. So let’s look at the initial stages of the procurement process today – identifying requirements and initial approach to the market.  (We'll move onto other stages of the procurement process in later pieces). Here are the key points to consider if you are looking to achieved  a diversity friendly supply base.

  • In terms of determining and defining requirements, it is easy to exclude many suppliers unconsciously. For example, the simplest way this occurs is through aggregation of demand and grouping requirements into larger and larger contracts. Much of the category management effort over the last years has gone into aggregation – it can have benefits, but obviously it can exclude many smaller firms from the market. So think carefully about the pros and cons here. (This is a major topic of course and we will return to it in different contexts).
  • That aggregation can be geographic within a single commodity – so buying cleaning services on a national rather than local basis. Or it can arise from grouping different requirements – so putting cleaning, catering and other services into a ‘total facilities management’ package. Either of these routes can make it harder for smaller firms, or just suppliers who aren’t currently working with you, to break into your market.
  • How will diverse suppliers actually know you have an opportunity? Advertising contracts in some manner is key to attract different suppliers to your organisation. That can be via your website, media type advertising, developing lists of potential suppliers to whom you proactively send opportunities. there are many options. (This is an area where the public sector actually leads the private, we’d argue, given the large number of websites that perform this service for government and related buyers).
  • You may wish to target different supplier groups directly rather than simply generic promotion of opportunities. That where groups like WE Connect or Minority Supplier Development UK (MSDUK ) can help – and there are others in different countries of course.  Meet the buyer events can also be helpful to find and develop new suppliers.

And on that note, I’m attending a MSDUK event for the first time shortly. “Meet the Buyer: Facilities Management, Office Build, Design & Furniture” is at Holborn Grange Hotel, London, 2pm on April 29th, and it is aimed at buyers and sellers in those sectors.  So buyers of FM services, prime contractors who might be interested to use more diverse suppliers as sub-contractors, and of course minority-owned suppliers themselves will be present. There is more information about the event here – maybe see some of you there!

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  1. Alan Holland:

    This piece hits the proverbial nail on the head. Many buyers are inadvertently hindering supplier diversity through a misconception that unfettered demand aggregation delivers greater value. FM is a classic case in point where specialisms and regional suppliers can deliver greater value but the crux of the challenge for buyers is how to split the pie…. The solution of course is to let the market communicate this through contingent discounted bidding on bundles of smaller contracts of their choice. The key to unlocking this solution is, therefore, an evaluation engine that can reason about this much richer bidding landscape.

    That key is optimisation, or to be more precise, affordable and easy to use optimisation.

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