Increasing diversity spend continues to grow in importance at organizations across the nation and as a responsibility for procurement professionals to manage. Your leadership team may be energized about this aspect of spend, and you’re currently working to evolve and improve your program.
While diversity spend strengthens your company’s commitment to diversity, equity and inclusion (DE&I) initiatives, brand reputation and corporate social responsibility (CSR) impacts, there are business benefits that help your organization remain competitive. A more diverse supply chain can help introduce fresh ways of solving problems, creating products and provides access to other solutions you wouldn’t have otherwise.
Companies are at different stages of their diversity goals, and to help your procurement and supply chain management team achieve them, a group purchasing organization (GPO) can streamline the process with added visibility into the market, manage the spend categories and find cost-effective diversity spend solutions.
We’re taking a look at how procurement leaders are using a GPO to help increase diversity spend while driving speed to savings.
What is Diversity Spend & What Value Does it Bring?
With diversity spend, the amount of money the company spends on good or services from a diverse supplier, there are lots of opportunities for procurement teams to locate the best options through group purchasing.
To be certified as a diverse business, the organization must be at least 51% owned and controlled by an individual of a diverse category. There around 16 categories in the U.S. including:
Organizations understand the value of partnering with diverse owned businesses opening the door to opportunities that promote progress. Through the diverse strengths and perspectives that diverse groups bring to the table, companies have a strategic advantage to win business, access to innovation through a variety of new products and services and stimulate economy growth helping smaller businesses succeed. The creation of a diverse supply chain works to secure the inclusion of diverse groups into procurement plans and can also lead to success in other areas such as recruitment and attracting investment.
We’re also seeing a broadening of the definition to include more than just how much money is spent with diverse businesses but also looking at the company’s workforce and whether there is equal representation in their board and leadership.
How Can Procurement Achieve Diverse Spend Goals?
Studies show that diverse teams are more profitable, innovative, productive and competitive. You may be collaborating with your company’s diversity manager on the diversity plan which is likely to mature over the next few years. You’ve started these programs and are preparing to incorporate them into your everyday sourcing strategies. So, what knowledge do you need to be equipped with right now?
We’ve consulted with industry expert Josh Schreck, Director of National Accounts at OMNIA Partners supplier Populus Group, a minority and veteran owned business. They've helped procurement teams and businesses earn millions of dollars in diversity spend over the years.
Difference Between Tier 1 & Tier 2 Diversity Spend
There are a variety of ways your organization can capture diversity spend, and a GPO can connect your procurement team to both tier 1 and 2 suppliers.
|TIER 1||TIER 2|
|Companies can earn tier 1 diversity spend when they partner directly with a diverse supplier.||Companies earn tier 2 when a diverse supplier is engaged through a subcontractor relationship.|
OMNIA Partners supplier Garland/DBS is an example of how you can achieve tier 2 diversity spend as they use subcontractors that can help companies and agencies fulfill the requirement. Garland/DBS manufactures and distributes high-performance building envelope solutions for commercial facilities. 68% of their overall business is with small businesses with 10% women-owned, 14% minority-owned, and nearly 24% to small business with disadvantaged business designations.
Any spend run through Populus Group can be captured as tier 1 diversity spend, and they also have strong relationships with other diverse suppliers should additional tier 2 spend be required.
OMNIA Partners supplier Grainger provides a network of diverse small business resellers help you meet your socioeconomic goals while supporting small and local businesses. Through the Distributor Alliance Program, you can gain access to more than 60 businesses that carry a range of certifications including small businesses and minority-, women-, veteran- and service-disabled veteran-owned businesses.
These are just a few of the many solutions and resources group purchasing gives you access to in your diverse spend journey. To learn more and browse all diverse suppliers, visit our robust portfolio with diversity classifications.
How Can Procurement Leverage a GPO for Success?
Procurement leaders can team up with their GPO to evaluate your current diverse spend, create a plan on how accomplish the spend goals and how to manage expectations with the different interpretations of the term “supplier diversity.” The GPO team has subject matters experts to guide procurement teams through the process while ensuring money, time and resources are saved.
The GPO verifies that suppliers are certified through third-party certification agencies streamlining the process of determining which suppliers meet diversity goals and classifications. Your GPO consultant helps procurement establish a target, develop the goal, and provide speed to solutions that’ll achieve the goal.
With a large spend cube and a large list of projects to complete, purchasing professionals don’t have to research the market and do an RFP. The GPO has the visibility you need and already identified diverse suppliers along with all associated work. With visibility comes the comfort of knowing the GPO keeps up-to-date information and data on the suppliers within the contract portfolio. Within diverse spend dollars, it’s important to also ensure there is equity among suppliers, which your GPO advisor can manage for you.
|Promoting Progress through Diversity Spend|