By Lisa Arnseth

January | February

COVER STORY

16 ISM January | February 2016

ISM January | February 2016 17

By forming strong relationships with a diverse supply base, supply management can tap into innovative solutions and give back

to the community at the same time.

SUPPLIER DIVERSITY BRINGS FRESH

PERSPECTIVES

ISM January | February 201618

No one wants to miss out on opportunities, espe-cially in a challenging, ever-changing market.

Companies are always on the search for “the next big idea,” and increas-ingly, innovations are found within pockets of the supply chain. With a robust supplier diversity focus, more organizations are finding deep wells of creativity and value from suppliers outside the mainstream.

It ’s good business sense to explore the diverse side of the supply chain, according to top procurement

executives like Fred Lona, senior director of supplier diversity for Hilton Worldwide. “Diverse suppliers help build cultural diversity in our local communities and offer a number of opportunities,” he says.

Lona has overseen a number of initiatives with companies owned by women, minorities, veterans and other underrepresented groups. Through its Supplier Diversity Program, the inter-national hotel chain devotes resources to bringing these suppliers into the Hilton fold by mentoring and offering training in a number of business com-petencies. Often, diverse suppliers are

smaller companies that need guidance to work effectively with Fortune 500 companies, but Lona says working with them is well worth it. “These suppliers are not tied down to the old way of thinking. They are often younger, more innovative companies that are not afraid of change,” says Lona. “Embracing change is how we move forward and stay competitive.”

Reflect and Serve the Customer Base

One of the best ways for an orga-nization to remain competitive is

to be in touch with and reactive to the nuanced needs of the customer base, and groups typically under the supplier diversity umbrella are growing exponentially in the United States. “It is estimated that minorities will be the new majority in the next 30 years,” said National Minority Supplier Development Council (NMSDC) President Joset Wright-Lacy in a September 2015 press release. “Attention must be placed on the growth and sustainability of a younger, multiracial population as they become the foundation of the American economy. If minority

businesses are not growing and suc-ceeding, the U.S. economy and the global economy will be negatively impacted.”

For companies willing to tap minority-owned businesses, the impact on the bottom line could be very lucrative. In mid-2015, the NMSDC, in partnership with The Institute for Thought Diversity (ITD), researched the effects of their nearly 12,000 certified minority busi-ness enterprises (MBE) on the U.S. economy and released their findings in an Economic Impact Report. The

report revealed that these MBEs pro-duce more than US$400 billion dollars in annual revenue and actively employ, either directly or indirectly, more than 2.2 million people. Additionally, the report found that minority-owned businesses contribute close to $49 billion in local, state and federal tax revenues.

Many companies work with diverse suppliers in efforts to be involved in and benefit from the communities in which they operate. At Pacific Gas & Electric (PG&E), working with local businesses within the energy company’s 48-county

SUPPLIER DIVERSITY BRINGS FRESH

PERSPECTIVES

“Our workforce and our entire economy are strongest when we

embrace diversity to its fullest, and that means opening doors of opportunity

to everyone and recognizing that the American Dream excludes no one.”

— Thomas Perez, United States Secretary of Labor

Learn more at instituteforsupplymanagement.org/CPSD or call Customer Service at +1 480.752.6276, opt. 8.

Expand your knowledge. Earning a Certified Professional in Supplier Diversity® (CPSD™) certification is the most notable way for professionals

whose responsibilities include supplier diversity to demonstrate adeptly speaking the language of purchasing and

supply chain. This certification distinguishes professionals as knowledgeable leaders to employers, colleagues, cus-

tomers and suppliers. The CPSD also delivers added value to business leaders and team members responsible for the

development and execution of supplier diversity initiatives.

Why is the CPSD right for you?• Establishes your understanding of the entire supply chain, not just supplier diversity

• Proves you can lead a comprehensive supplier diversity program

• Emphasizes to your employer, suppliers and customers that you are serious about helping diverse suppliers and

your organization succeed

Why is the CPSD right for your organization?• Provides distinction that shows your organization’s commitment to diversity with your suppliers and stakeholders

• Enhances new opportunities to partner with innovative or otherwise untapped resources and markets

Ready to get started?Attend a free informational webinar to learn how to obtain your CPSD certification. Sign up to attend at

instituteforsupplymanagement.org/cpsdwebinar.

Become a Certified Professional in Supply Diversity (CPSD)

ISM January | February 201620

California territory is a true benefit. And in many areas of California, minority populations are already the new majority. The Latino and Asian-American communities are the largest of the growing popula-tion segments, and the lesbian/gay/bisexual/transgender (LGBT) and disabled veterans communities are being represented more frequently in business. Besides those groups, there’s also an emphasis on working with small local businesses. “We want our employees, and our supply base, to reflect the diversity of our commu-nity so we are better able to serve our customers and also to be an asset in our communities,” says Linda Winter, PG&E director of corporate services sourcing in San Francisco.

To that end, PG&E remains stead-fast in its supplier diversity efforts through its Supplier Development Program, where select suppliers are mentored by PG&E executives to help them grow and expand their busi-ness opportunities. “Every year, we sponsor Diverse Business Enterprises (DBEs) to formally take part in this pro-gram,” says Winter. “We give them executive mentorship, quality certifi-cation training, educational scholar-ships for management development programs, and customized business development plans.” The DBEs are also invited to networking events to find additional business opportuni-ties, both within and outside of PG&E.

Over the last three years, the company has spent an average of $2 billion with diverse suppliers, which accounted for more than 40 percent of its spend. And a number of these diverse suppliers have offered unique insights and ideas. For instance, Laurel Environmental Group in Oceanside, California, is a small, woman-owned enterprise that helped PG&E reduce

its waste stream through street lamp recycling. While most people don’t think about what happens to old street lamps at the end of their life cycle, Laurel Environmental Group developed custom technology to sep-arate each metal part of the lamp into

separate metal commodities, making sure any part that could be recycled or recovered for revenue was captured before any component of the lamp was sent to a landfill. This helped PG&E in its overall environmental goals.

Find Diverse Needles in the Haystack

Finding and vetting suppliers that can meet specific needs is a common challenge for large companies. One way PG&E finds suppliers is by doing

extensive outreach. “We go to com-munity-based organizations and meetings, such as business mixers, where we can meet numerous busi-nesses face to face,” says Winter. “Different chambers of commerce sometimes hold matchmaking events, and we stay active with certification partner organizations like the NMSDC. Our diversity teams are always out there, and we bring back a lot of infor-mation to the sourcing team.”

Certification partner organizations are also key to finding diverse sup-pliers at Nationwide Insurance, based in Columbus, Ohio. The sourcing and procurement team attends confer-ences hosted by groups like NMSDC and meet MBE owners directly, says Kimberly Proffitt, Nationwide vice president of supplier relationship management, diversity, risk and ana-lytics and operations. Nationwide has found a number of diverse suppliers through matchmaking events at these conferences.

“We appreciate the way these organizations handle matchmaking,” says Proffitt. “The diverse suppliers apply ahead of time, and the confer-ences send their corporate members a list of all the suppliers that want to go through matchmaking, which includes descriptions of the products, services and corporate profiles, and we pick which suppliers best match opportu-nities we have inside our organization. It’s a win-win because we meet with suppliers that align naturally with Nationwide, and no one wastes time. The suppliers benefit by spending quality time with companies that truly need their unique products and services.”

Lona also networks extensively to find MBEs to fill certain opportu-nities. “Organized efforts to get out and find these suppliers through

SUPPLIER DIVERSITY BRINGS FRESH

PERSPECTIVES

Thanks to the Supplier

Development Program,

Pacific Gas & Electric spent

US$2.1 billion with diverse

suppliers in 2014, which made

up 41 percent of its total

procurement spend.

ISM January | February 2016 21

events are best, but I also do things like send emails to my peers, asking if they know any suppliers that might be interested in a specific oppor-tunity with Hilton,” says Lona. “We also started using reverse auctions, which has opened doors for diverse suppliers.” While Lona’s team is rela-tively new to reverse auctions in this manner, they are working to make supplier registration more of an auto-mated process. MBEs can register and be vetted quickly, with the added ben-efit of supply management tracking if diverse suppliers were included in specific bids, which suppliers were included and if they were ultimately awarded contracts. “Supplier diver-sity is now part of our normal pro-cesses thanks to this technology,” says Lona.

Offer Assistance and Encouragement

Working closely with diverse suppliers is important, says Proffitt. “Nationwide is committed to having sourcing and procurement directly involved with its MBEs to help them learn how to work with the company.” Like PG&E, Nationwide is committed to mentoring its diverse suppliers and actively introducing them to business partners to help expand their reach.

“We believe mentorship is incred-ibly important, because diverse sup-pliers are flexible, they are nimble, creative and innovative. But often, they are not prepared to stand up and give a presentation in front of leaders and executives for Fortune 100 com-panies,” says Proffitt.

For example, Proffitt ’s team worked extensively with an MBE mar-keting company, New Vision Media. Bringing a new supplier to the mar-keting category can be a challenge because of how important the brand

and its message are to the overall success of any company. Proffitt says New Vision Media caught her team’s attention with its unique vision and platform, and they mentored this supplier over two months to help it prepare a presentation to a group of Nationwide marketing executives.

“The thing that New Vision Media does that’s so special is they use drones to create videos with different perspectives to add a fresh spin to corporate messaging,” says Proffitt. “So we advised them to bring a video drone to the meeting, set it up on the table in the conference room with the marketing executives, and it would grab their attention and ensure they made an impression.” Sure enough, the executives were enthralled with the technology. And conversation flowed naturally into the professional presentation. Marketing eventually selected New Vision Media for a major campaign and plans to use the com-pany for other projects, which comes as no surprise to Proffitt: “As long as New Vision Media keeps up the inno-vative spirit we fell in love with, their potential to succeed is tremendous.”

Introducing diverse suppliers to other business units is an excellent way to increase opportunity for sup-pliers that have proven themselves, says Brenda R. Smith, CPSD, CPSM, CEO and chief relationship officer for BR Smith Inc. in Johns Creek, Georgia. “Talk to the commodity managers and other business units. ‘This MBE has done really well working with our company for 15 years. Do you have any opportunity for them?’ Try to market them,” she says. Smith, who worked for Nike for a number of years, has also had success connecting diverse suppliers with other large organizations. “Be creative and find ways to promote your MBE suppliers.

For example, when I was with Nike, we decorated our trade show booth with logos of suppliers that had done a million dollars or more in business for us, and that got them some atten-tion. I was able to introduce a small, MBE communications company to a large Fortune 100 company at a trade show event.”

Make Sure Everyone Recognizes the Value

As more corporate doors are opened to diverse suppliers, the pos-sibilities for innovation are endless. “Large companies have money as their capital, but diverse suppliers are smaller, and intellect is their capital,” says Proffitt. “They are entrepreneurs who have overcome barriers and biases to be in business, and that drive to be unique is what makes them so valuable to work with.”

Finally, it ’s important that everyone is on board to bring more diverse suppliers into an organization. Top-down support is key, but com-mitment must permeate all levels to be most effective. “I don’t think any company can be successful at this if only the supplier diversity group is working on supplier diversity,” says Winter. “Each of our lines of business at PG&E has goals in this area, with a champion who helps align diversity goals with the needs of that business. In fact, I’d say 80 percent to 90 percent of the work done at our company is done by people who do not have the word diversity in their job title, and that’s the key part: The diversity team is a champion and a leader in this area, but it takes the whole village of the organization to really make it come to life.” ISM

Lisa Arnseth is a publications coordinator

for Inside Supply Management®.

© Institute for Supply Management®. All rights reserved. Reprinted with permission from the publisher, the Institute for Supply Management®.