Costas Xyloyiannis
There are many good reasons for global consumer packaged goods (CPG) brands to have supplier diversity programs. For one, they face expectations from regulators, shareholders, and consumers, which if missed impact sales figures and share price. Further, brands that support supplier diversity may enjoy economic benefits as a by-product and, of course, they can make a positive impact.
Reasons aside, supplier diversity is a top-level issue with at least eight of the world’s top 10 CPG brands by spend, having stated goals in this area. For example, Unilever has committed to spend €2 billion (US$2.137 billion) annually with diverse businesses by 2025. By the same year, Mars intends to reach £1 billion (US$1.248 billion) globally in diverse business spend and have at least 60% of its suppliers actively promoting diversity programs within their organizations. Other brands, including Mondelēz International, Coca-Cola and Nestlé, are also dedicated to sourcing from businesses that are 51% owned by a historically under-represented group.
Likely, more CPG brands will continue to make supplier diversity a priority.
While the leaders of global brands embarking on this journey plan to drive spend to diverse suppliers, in practice, their teams on the ground face an obstacle: diverse suppliers are difficult to find. Only a portion are indeed certified as ‘diverse,’ and those who are certified wouldn’t necessarily be skilled to match specific market needs.
The challenge of discovering diverse suppliers must be addressed for progress to occur. This presents CPG leaders with an opportunity to tee up their teams for success by helping them add robust sourcing processes. To achieve this, Supplier Diversity teams can follow a three-phase approach:
1. Take stock of your existing supplier diversity status
Before teams can deliver on supplier diversity commitments, it’s sensible to determine how many diverse suppliers the brand already works with. This is done through a combination of surveying suppliers and using data enrichment services to match against existing databases of diverse suppliers.
When it comes to actioning these surveys, teams should take care to offer suppliers a positive and helpful experience, because it will impact the quality of results. For example, if suppliers receive questions that don’t apply to them or that aren’t in their first language, this will obstruct their ability to respond most helpfully. At best, it will slow them down and, at worst, they may not even respond.
So, the idea is to remove any barriers to them providing reliable feedback. A great way to do this is through segmenting suppliers into categories and communicating with them accordingly. Whatever the approach to surveying suppliers, let it be congruent with acting like a “customer-of-choice” because this is likely to get the most out of them. A recent HICX survey revealed that a staggering 73% of suppliers for some of the world’s biggest manufacturers would “go the extra mile” for their most important customer if this was also a customer-of-choice.
2. Proactively grow your number of diverse suppliers
Once the number of diverse suppliers working with the brand has been determined, teams can grow their selection by improving how they source.
First, buyers and requestors should be guided to proactively work with diverse suppliers. This can be done with education and policies, and by applying some practical steps. For instance, teams should define their criteria for what qualifies as a diverse supplier in their business and territories, and then use online directories and desktop research and ask contacts for recommendations. Any potential diverse suppliers can then be evaluated for suitability.
Next, once new diverse suppliers are found, they must be onboarded with processes that reliably capture their information so that the brand can offer them a helpful experience going forward.
In establishing these policies, Supplier Diversity teams will benefit from the help of Procurement because the function already works with and onboards suppliers. Should Procurement, then, be taking an advisory role in helping buyers to drive spend with diverse suppliers?
3. Lock-in progress by maintaining supplier data
Finally, with diverse suppliers found and onboarded, their data must remain accurate. This step is crucial because teams need a clear view of the supply chain to deliver supplier diversity promises. But in reality, many supplier diversity teams from CPG brands face a barrier: they can’t see who their suppliers (some tens of thousands of them) are and what they’re doing.
For instance, teams need to know: where is this supplier based? What qualifies them as ‘diverse’? Do we have the same number of suppliers from diverse businesses today as we did yesterday? Taking too long to resolve these questions, or not being able to answer them at all, can expose the brands to report errors and inefficient operations.
If leaders can keep supplier data accurate, then they can reveal a bright and clear supply chain view and arm their teams to deliver the least risky and most impactful supplier diversity plans possible. Encouragingly, there is a route to solving the supplier data problem, in which some forward-thinking brands, such as Mondelez and Unilever, are taking the lead.
There are three tried and tested ways to tackle supplier data quality. First, reject anything with less than 100% accuracy in supplier master data. Create the conditions in which this goal can be realised by transforming the digital procurement environment so that master data can take priority. Next, ensure that data related to every new supplier relationship — diverse or standard —s gets captured upfront with structured, controlled, and dependable processes. And finally, this information and any new data that enters the system must be protected with data governance, so that a reliable golden record can be maintained.
At the end of the day, by supporting Supplier Diversity teams to add robust sourcing processes, CPG leaders can arm them with the tools needed to deliver on ambitious goals and leave a positive impact.
About the author:
Costas Xyloyiannis is the co-founder and CEO of HICX, a provider of supplier experience management technology used by Global 5000 companies, including Unilever, Mars, Mondelēz, Lenovo, Baker Hughes and BAE Systems.
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