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ASCM Insights

Episode 59: The State of Supplier Diversity (and So Much More)

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Bob Trebilcock: Welcome to The Rebound, where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post-COVID world. This podcast is hosted by Abe Ashkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, Editorial Director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now, to today's episode.

Hello and welcome to today's episode of The Rebound, the state of supplier diversity and so much more. I'm Bob Trebilcock.

Abe Eshkenazi: I'm Abe Ashkenazi.

Bob: Joining us today is Aylin Basom. Aylin is the CEO at Supplier.io, a platform for managing your supplier diversity efforts and more recently for your ESG efforts. Aylin, welcome.

Aylin Baysom: Hi Bob, Abe. Great to be here. Thanks for having me.

Bob: We're glad to have you. Aylin, it's almost 20 years ago now. Way back in 2006, I spent about five years writing for DiversityInc. Now, the magazine's readers were chief diversity officers. One of the areas I was asked to cover was supplier diversity. Then as the Obama administration began pushing the creation of green jobs, sustainability and corporate responsibility became part of my beat.

This was a whole new world to me. I'd never heard of a CDO, supplier diversity, or a three-legged stool for that matter. Fast forward, and those subjects that seemed a little esoteric nearly two decades ago, are now on the to-do list of every supply chain executive I know. At the same time, we know two things. There are a lot of competing interests for supply chain managers' attentions, and this stuff ain't easy.

Let's start with what's the state of supplier diversity today, and as well as sustainability in corporate governments. Those are just some of the things we're going to talk about. Aylin, you and I had a chance to meet here in Chicago a couple of months ago, and one of the things that fascinated me was what you're doing by taking some of the complexity out of supplier diversity. My understanding is you're going to do that around ESG.

To kick this off, just give us that short version of what Supplier.io does.

Aylin: Yes, absolutely, Bob. Supplier.io powers the most successful, responsible sourcing programs globally. We work with most Fortune 1000 companies. For over 20 years, we've helped organizations track, manage, and grow their supplier diversity program. To your point, we knew our customers have been tasked to integrate sustainability into their operations, and based on both customers and market demand, now we're also offering tools that seamlessly merge the supplier diversity with the critical pillars of ESG. Our customers can have responsible, sustainable, and, as we call it, accountable sourcing.

The best way and easiest way to explain this is we help organizations know who their diverse and sustainable and social suppliers are in their supply chain. We bring visibility so they know their spend with these suppliers. We also help them grow by allowing anyone in the organization to easily search and find these certified, diverse, social, or sustainable suppliers within our database.

We have the largest database in the world that has about 4 million suppliers holding over 5 million certifications. If they're diverse, maybe they have NMSDC or WBENC or Disability:IN certifications. If they're social, maybe they have B Corp certification, right? If they're sustainable, perhaps they have Fairtrade or CDP rating or maybe EcoVadis certification. Essentially, we help our customers, again, find these suppliers, but also expand their program and be able to do both economic and environmental impact analysis of their supply chain.

Abe: Aylin, your organization creates an annual report that provides us tremendous information. From your research, how healthy are the diversity programs? Have we gotten beyond the checklists of diversity supplier?

Aylin: Yes, great question. We have been doing the State of Supplier Diversity Report and research for the last six years, and it's been fascinating to be able to analyze the trends. In this year's report, we saw a lot to be excited about, so that's the good news. We do continue to see supplier diversity driving business value.

To your point, Abe, is it more than a check in the box? Is it really providing business value? 66% saying that it improves their supply chain competitiveness. This year, we also saw 53% of the companies say it also enhances their brand image. We've also consistently seen positive support from senior leadership, including the CEOs and chief procurement officers.

This year, we also asked about business leaders from across the company, and see if they're also supporting supplier diversity. 61% of the companies said they do have support from senior business leaders across the company, which is really exciting to see. Another point that I would say based on that research, last year we saw accountability was a challenge with many programs lacking clearly defined goals. Most leaders didn't have supplier diversity in their performance scorecards.

This year, we saw a big increase with 72% of programs having clearly defined goals, and about 50% include supplier diversity in their leadership performance metrics, which is fantastic to see.

Bob: Aylin, in your earlier answer, you hit on one of the things that has always fascinated me about supplier diversity. That is, in the beginning, for instance, when I was first writing about it, there really were only two certification organizations, right? Women's Business Enterprise National Council, or WBENC, and the National Minority Supplier Development Council, or NMSDC. Today, there's got to be at least a dozen, if not more, organizations that represent diverse supplier categories.

If I'm a company, let's say I'm somebody who's coming to you and I'm trying to establish a supplier diversity program, how do I decide where to start and who to include? For instance, in your experience, is it being driven by customers? Is it being driven internally? How are companies making those decisions?

Aylin: Since we're a data company, and we do so much research, I'll mention a couple of the data points here as well. Supplier diversity leaders, the ones that are having very successful programs, we do benchmarking, we look at the best practices, research of those leaders. All of them told us that they are members of these councils that you mentioned. Then the top were NMSDC. You mentioned that 60% was members of NMSDC, 50% were about WBENC, Disability:IN was about 30%, and the NGLLC was about 28%.

Our job at our company, we provide the data on all of these certifications, as I mentioned earlier, right? If a supplier has any of these certifications, we want our customers to be able to search and find those specific suppliers in any of those categories. What is important, what these certification agencies do very well is also networking, providing industry groups. They do supplier development programs, which is extremely important. Which council or councils that you join should really be driven by your goals and objectives.

Make sure that I always tell the companies, understand the diverse supplier categories that are most relevant to your industry and your geographic region, and look at your current supplier base. Most of these leaders we interviewed as a part of our prior best practice research told us that joining these councils are great, but they're also active members. They can really help influence and take advantage of these council' supplier development programs. For example, if some of your most important suppliers are women-run businesses, you might want to join WBENC as a way to better tap into their many supplier development programs.

Abe: Aylin, as you're taking a look at the diversity programs, as you just indicated, the majority of them are driven internally in terms of identifying how the organization needs to respond to diversity. Do the customers care, or are there influences from the customers that are forcing organizations to pay attention to diversity?

Aylin: When we did the State of Supplier Diversity research, it's interesting to see the last six years' trends on what are some of the big drivers? The number one driver for over 80% of the programs, we found that the supplier diversity is important and focused because it aligns with the corporate values. Companies want to spend their money in a way that is consistent with who they are as a company. This seems to be really the same regardless of the industry. We've looked at that to see if it's different.

I will say, we also see some industries like retail and consumer goods leveraging their supplier diversity program to improve their brand, and win with the growing diverse consumer population. This is proven in the next 25 years, minorities will make up over half of the U.S. population.

For example, when we're actually talking with a company like Container Store, which is one of our customers, they know that, right? That they're, in the next 25 years, minorities are going to be half of the population. They've actually invited us to join their programs speaking with diverse suppliers. Fascinating thing was their executive sponsor for their program wasn't the chief procurement officer. It was the chief merchandising officer because their the mindset was, hey, it's clear that the diverse suppliers are critical to our merchandising and assortment strategy.

I've seen this again in different industries as well, like manufacturing. We see supplier diversity driven as a way to improve supply chain competitiveness and bring in new innovations. I'll give another example, Ford, one of our customers. Innovation is extremely important. It's a core value to them. They bring in diverse suppliers at the design phase as a way to bring in more innovation to their car designs and products before they even get to RFPs. It's certainly, it's changing in a positive way.

Bob: Aylin, you mentioned two things that I'd like to try and bring together in this question. One was, you were talking about in your annual report, asking about what value is it bringing, which suggests that somebody's measuring the success of the program. The second was supplier development, meaning, working on the success of your diverse suppliers. How are companies measuring the success of their supplier diversity initiatives? What do they decide is important and what are they monitoring that away? Then how are they measuring the success of their diverse suppliers?

Aylin: The primary ways organizations measure the success of their supplier diversity programs is around spend. Spend with diverse suppliers and diverse spend as a percentage of their total spending in their supply chain. The leaders, the truly successful, these successful supplier diversity programs that have been doing this for a long time that have actually best practices, when we talk with them, their biggest feedback to us was, they're not only measuring this at a company level, but also breaking the results down and tracking this by specific location and business unit.

I'll give you an example. Unilever is one of our other customers. They've built the supplier diversity metrics right into the business unit dashboards. Business unit leaders can see how supplier diversity is performing along with very important other business metrics like shipments, or cost savings, or revenue. Some programs are even taking it a step further, going beyond just dollars or measuring impact.

As an example, we work with a company like CVS Health. They do economic impact reporting to measure their success. They're not only measuring, yes, how much they spend, that's still important with diverse suppliers. They are looking at how that spend translates into jobs, wages, taxes, and more for the communities they do business with. This is a great way to see the both human and the social impact of your program, and can be much more meaningful for the organization than just dollars and cents.

The other way that we talk with our customers around evaluating the diverse suppliers their self, we always suggest, hey, regularly evaluate the performance of your diverse suppliers against key parameters, just like you would do with other suppliers like product quality, on-time delivery. It can be also customer service, right?

Again, it's about measuring internally the success, ensuring that the supplier diversity metrics are aligned with the business key success metrics, while you're doing that, ensuring that you continue to evaluate the performance of those diverse suppliers. Ensure again, that you're getting those products, the quality product, and as I mentioned, the service and the delivery that you need to be successful.

Abe: Aylin, let's shift gears a little bit. We talked a little bit about environmental side of this. Let's dig into a little bit more on sustainability, which is apparently new for your company. This has been a top issue for a lot of organizations. They've identified it in almost every survey as a top three initiative. What led you to this focus on sustainability?

Aylin: The easiest answer I can give, Abe, is the fact that our customers and the market is demanding this. We already solved for the data fragmentation issue in supplier diversity, but realized that our customers also have the same problem in ESG. They're having to go to so many sources to get data on who are their social or sustainable suppliers, just like they have been doing this for supplier diversity, which that's why they're working with us.

They have a challenge on getting supply chain visibility. They really were coming to us and saying, "Great that we can find these diverse certified suppliers within your database, but we need to know where to find more sustainable suppliers, as well as ability to do the greenhouse emission reporting." Procurement teams know supply chain can have a huge impact on a company's environmental impact, and their ability to hit their net-zero goals.

To be able to do that, they need access to accurate, actionable data and easy to use tools to make that possible. We're bringing our same centralized platform, global data to really help them achieve their goals. That's why we've actually started doing this and led us into this area. The feedback we've been receiving has been so positive, so we know and feel like we're on the right track.

Bob: Aylin, over the last couple of months and including just last week, both The New York Times and The Wall Street Journal have been reporting that one, some companies have become less vocal about their sustainability and diversity goals. They're not shouting it as much in press releases and more importantly, I think, now falling behind on their goals. What are you seeing in your set of customers, and what are some of the challenges companies are facing right now around diversity and sustainability goals?

Aylin: Supreme Court's decision to end affirmative action in higher education back in end of June created a lot of questions for businesses. Also, uncertainty around the implication in business practices tied to diversity, including supply management. We have been talking a lot with our customers across industries, any size of companies. We have been doing a lot of education around this.

Supplier diversity is not an affirmative action policy. It's a voluntary and intentional procurement practice really designed to increase supply-based competition and value to drive positive business outcomes that we discussed earlier. Unlike the use of affirmative action in higher education admissions, using diverse suppliers isn't a mandatory for companies. They choose to use them for a good reason. Supplier diversity represents more than increased access.

The goal of supplier diversity is not to be more diverse. It's really to strengthen business by opening supply chains to new ideas, alternative providers, disruptive technologies, new talents. We just talked about innovation, specialized insights often for local expertise. Again, we have been really talking a lot around this and partnering about why opening the supply chain and increasing supplier diversity means a lot of things. Of course, it includes minority-owned businesses, but it also including small businesses, woman-owned businesses, veteran-owned businesses.

State of supplier diversity report, the research that we discussed earlier today, we were supposed to end the survey in July, but we actually decided after this happened, we fielded our study right after the Supreme Court affirmative action ruling, and used it as a way to get a pulse of how supplier diversity programs were faring, the face of this potential hurdle, and asked actually questions to these companies. Of course, we've had a lot of discussions also with our customers.

What we found out is while some programs, yes, have decided to be less vocal, to your point, Bob, about their support for supplier diversity, it's definitely not the trend we're seeing as it relates to investment focus and support within their organizations. In fact, 89% of the leaders we surveyed told us that politics has not impacted their program. 20% of them actually said, the economic conditions, the new rules are actually getting, they are getting the more support as a result of it. 16% of them said that they're going to be even more public because they set these goals and they're going to stand behind them.

In the conversations with our customers, we're consistently hearing the same things, the similar messages. The fact that, again, supplier diversity's a business strategy that improves that supply chain competitiveness and enhance brands, and all the things we discussed. It's not a handout nor a quota. It's just good business. We will continue to do education about this. These podcasts are important as well.

The most important thing that we say is, and our customers are aligned with us on this, is the fact that supplier selection isn't a zero-sum game. Supplier diversity programs don't mandate that a contract must be awarded to a specific group, whether it's a small business or a veteran-owned organization. Decisions is really around awarding a contract based on which supplier provides the best value for the company, best service, or the product for the company.

Again, supplier diversity programs ensure procurement has options and capabilities to select from, which makes the business more competitive at the end.

Abe: Aylin, last question. At our conference a couple of weeks ago, the ASCM CONNECT, one of the questions we asked a panel of sustainability experts was about the role, responsibility of not only ASCM, but supply chain professionals. They seem to have taken on every responsibility in an organization right now, just send it to the supply chain professional. Same question to you. How do we advance and educate our members about their role and responsibility on sustainability and supplier diversity? Beyond the rhetoric, how do we get them to talk about action and impact?

Aylin: I really appreciate this question, as well as this conversation. It's another great example of ASCM taking a leadership role in this, so really appreciate that. Over the last few years, procurement and supply chain teams really shifted their role to be more strategic to the business and as a competitive differentiation. We're all learning to shift from only focusing on cost, to focusing more on value to the company.

Hackett Group, one of the analysts, did a research and a recent CPO survey looked at how CPOs, the chief procurement officers are being measured. On the scorecard, it was fantastic to see that, yes, of course the costs and savings are number one and number two, no surprise there, but number three was supplier diversity. Clearly this is an important topic, and one that we need to continue to discuss.

For us, that means providing data-driven insights and best practices to help leaders make informed decisions that improve their programs. Education and training is very important. I mentioned earlier that we do this, and do a lot of research, and a lot of education, a lot of talking. We try to share real world examples of organizations that have successfully integrated sustainability and diversity in their supply chains, showcasing the benefit and the processes involved.

These podcasts, webinars are so important as well. We need to be able to discuss the latest trends and challenges, and even opportunities in sustainability and supplier diversity. We at Supplier.io, yes, providing solutions. That's what we're focusing on, ensuring that a software and a toolkit that can help organizations measure, track, and improve their sustainability and diversity metrics. Again, education and training, both internally as an organization, as well as all of us, we definitely need to be all hands on deck and really focus on that.

Abe: Aylin, thank you so much. Tremendous amount of effort and enthusiasm about this. Really appreciate you joining us today. That is all the time that we have. Special thanks to our guest, Aylin from Supplier.io. Finally, a special thanks to you for joining us on this episode of The Rebound. We hope you'll be back for our next episode. For The Rebound, I'm Abe Ashkenazi.

Bob: I'm Bob Trebilcock.

Abe: All the best, everyone. Thank you.

Bob: The Rebound is a joint production of the Association for Supply Chain Management and Supply Chain Management Review. For more information, be sure to visit ascm.org and scmr.com. We hope you'll join us again.

 

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