This topic is 1-F-3 in the CPSM exam and explores why organizations should have a supplier diversity program, how such a program should be developed and how it should be implemented. Here is a summary of ideas that the CPSM aspirant needs to consider:
- Why Supplier Diversity: Supplier diversity refers to minority and women owned suppliers. You have read a lot about how minority and women employees seem to have a lesser percentage of jobs than in the population. Efforts by Human Resources to improve the situation has resulted in major improvements in the US and the world. The logic is simple and becomes clearer when you think that when 50% of the population is women, they should have 50% jobs if they have the qualifications. The same for minority employment. It is relatively easier to hire a diverse workforce because hiring, supervision and performance is at an individual level. On the other hand, suppliers particularly of bigger organizations tend to be larger firms with a lot of good history that provides comfort ( and lower risk, think Risk-Value matrix) to the buying company. In other words, it seems simply more risky to buy from smaller diverse organizations. Thus at an NMSDC ( National Minority Supplier Corporation) meeting a supplier sadly commented that the only real orders received were for non-core services like cafeteria, lawns and facilities maintenance. Bigger organizations tended to stay with existing suppliers for direct raw materials and services as it just seemed safer. The more enlightened organizations ( a major insurance company I know of ) has a simple logic: if customers are changing in composition, and becoming more diverse, it makes sense that employees and suppliers are equally diverse. And that is a better business logic for diversity than simply moral arguments of "that is the right thing to do."
- How supplier diversity: Larger organizations have between 1 or 2 supplier diversity managers that try to include and introduce diverse suppliers into the organization from the supply department. These diversity managers work with organizations like the NMSDC and Women owned business organizations ( see the SBA website) who try and facilitate entry as suppliers to such organizations. Processes involved include registration at a diverse-supplier portal so that the supplier pool is enlarged. Also efforts at including diverse suppliers as Tier-2 suppliers to the main Tier-1 suppliers is also attempted. The process is slow and a lot remains to be done.
- Measuring supplier diversity:The more evolved the buying organization and the higher the top management priority, the more the measurement and reporting of how much in each commodity was purchased from diverse suppliers. In addition, the ISM has a new qualification called CPSD, that brings credentials to this very specialized advocacy function.
To summarize, just as diverse employees reflect diversity in the market of organizations, diverse suppliers reflect customer diversity and is a very important supply leadership goal for supply management leaders.