SUPPLIER DIVERSITY
START-UP MANUAL

Created by
Diversity Resources, Inc.
2005

Introduction: Supplier Diversity Best Practices

by
Akiva Lewis
Diversity Training Group
http://www.diversitydtg.com

An integral part of any organization's diversity program is to ensure that they promote diversity outside of the company in addition to their internal efforts. One way organizations accomplish this goal is through supplier diversity programs that support minority owned businesses with which they do business. Supplier diversity can include all underrepresented groups who can provide goods or services to the organization . They are commonly referred to as minority and women owned business enterprises (M/WBE's). However, it can include all types of organizations that are owned or operated by underrepresented members of the population. There are five key steps every company should follow to set up and run an extensive and effective supplier diversity program:

• Defining the Scope of Supplier Diversity
• Link Supplier Diversity with Organizational Goals – Make the Business Case
• Connecting with Underrepresented Suppliers
• Running the Supplier Diversity Program
• Supplier Development Program for Underrepresented Suppliers

The first step, defining the scope of supplier diversity, is critical to the successful development of an effective program. Like any business objective, the mission statement of the supplier diversity initiative must define what it is, why it is important, and how it will impact the organization. To make a true commitment to supplier diversity, the organization should consider all suppliers of goods and services that the organization purchases . This includes everything from raw materials and IT suppliers to legal services and janitorial supplies. Incorporating all types of goods and services is a powerful statement of how serious the organization really is in supporting underrepresented companies with whom they do business.

Additionally, organizations should set measurable goals for their supplier diversity program. What percent of total purchases does the organization want to make from underrepresented suppliers in one year, five years, and ten years? How many new minority/women/disabled suppliers does the organization want to do business each year? Are there certain competitors that you want to surpass in your commitment to supplier diversity? How do they measure their performance on supplier diversity? These are all questions that an organization should consider as it begins its development of a supplier diversity initiative.

Linking supplier diversity with the organization's goals is the next step in creating a successful program. The objectives and motivations that drive the supplier diversity initiative must support those of the organization as a whole. The business case for supplier diversity must be clear to everyone in the organization. This is an important step in getting support from all members of senior management, from operations to finance, marketing, and human resources. The organization must develop and communicate a clear and concise mission statement and vision for supplier diversity to employees, vendors, customers, and shareholders. Everyone connected with the organizations must understand the role and level of importance of supplier diversity so they can be active participants in the program . One key tool that will help demonstrate the organization's commitment to supplier diversity is to make it part of the performance review process. Hold all relevant employees accountable for achieving specific goals with supplier diversity and reward those that exceed those goals.

Once the organization understands the role of supplier diversity and is committed to making it successful, the organization must find and start contracting with M/WBE suppliers. To do this, each organization must develop specific criteria for determining what constitutes a diverse supplier. You can't measure it if you don't know what it is. Therefore, it is critical for an organization to clearly define the process for identifying and verifying companies that qualify as underrepresented . Now the procurement department must proactively seek out companies that meet their criteria for supplier diversity and start doing business with them. However, it is also important to help current suppliers understand and comply with the new supplier diversity program. Perhaps they can qualify for the program or make a connection with suppliers that meet the criteria.

The fourth step in the process is actually on ongoing concern– running the supplier diversity program. To be successful, this involves the coordination of multiple parties in the organization including procurement, contracts, program managers, and senior leadership. Relationships have to be continuously formed with new suppliers and reinforced with existing suppliers. In addition, there are several things an organization can do to support their supplier diversity efforts. These include:

• Develop and Collect a Supplier Diversity Qualification Survey
• Produce and Distribute a Minority Business Brochure
• Attend Business Opportunity Fairs in Local Communities
• Participate in Minority Business Professional Organizations
• Create Business Directory to Connect M/WBEs with Individual Customer Users
• Outline Roles of Supplier Diversity Program Management

Of course there are many other things that organizations can do to effectively run a supplier diversity program. These are some of the best practices that are working today in leading companies.

The final piece of a supplier diversity program is the ongoing development of the program and underrepresented suppliers. By nurturing the success of suppliers, an organization can ensure the continual supply of goods and services as well as the trust and confidence of vendors, customers, employees, and shareholders . The following are some development programs that an organization might consider:

• Mentoring
• Consulting services
• Favorable Financial Terms
• Recognize and Reward Participating M/WBE Suppliers
• Hosting Trade Fairs for M/WBEs and Procurement
• Conduct Site Visits for M/WBEs, Including Detailed Interviews Covering Operations and Management
• Conduct Seminars for M/WBEs to Learn How to do Business with your company
• Provide Technical and Managerial Assistance to M/WBEs
• Emphasize Importance of Second Tier M/WBEs

Organizations are constantly looking for ways to gain a competitive advantage over their competitors. Supplier diversity can lead to cutting costs, promoting innovation, and connecting with customers. However, as more and more companies incorporate supplier diversity programs, supplier diversity no longer becomes a source of competitive advantage. Rather it is a competitive imperative. The five steps outlined in this article are the foundations for a successful supplier diversity program that will help companies meet the challenges of the 21 st century.

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SAMPLE MISSION STATEMENTS

FROM McKesson Corporation: www. supplier.diversity@mckesson.com

McKesson Corporation recognizes and promotes the outstanding contributions made by small and diverse businesses to the economic health and diversity of communities throughout the United States of America . These businesses include small disadvantaged, historically underutilized, minority-owned, women-owned, veteran-owned, service-disabled veteran-owned and HUBZone businesses as well as Javits-Wagner-O'Day Act (JWOD) nonprofit agencies. Through its company-wide subcontracting program, McKesson encourages and facilitates small and diverse business sales opportunities.

In addition to subcontracting opportunities, McKesson's supplier diversity program supports the viability and growth of small and diverse businesses through contractual mentoring relationships that advance meaningful growth opportunities. Since 1994, McKesson has maintained a mentoring program that provides extraordinary support and guidance to its small and diverse business protégés.

Customer Support
The supplier diversity program supports McKesson customers seeking ways to promote small and diverse business purchasing. Through periodic performance reporting as well as contract-specific, general business, supplier-specific and mentoring activities, McKesson's second-tier program provides customers with information and opportunities that further enable small and diverse businesses to participate in the nation's healthcare business.

Supplier Support
McKesson buyers can provide interested suppliers with information about current and future sales opportunities. Owners and representatives of small and diverse businesses are encouraged to contact McKesson to market their products and services.

Supplier Diversity - Creating a Valuable Connection
(From MasterCard International, Inc.)

MasterCard® values diversity. We promote it within our workforce and have an inclusive environment that encourages us to actively support it. Increasing diversity among our suppliers is equally important. Launched in 2001, MasterCard's Supplier Diversity Program has helped to enhance opportunities for minority, women and veteran owned businesses that supply goods and services to MasterCard in the United States . Our mission is to provide high-quality business partners and suppliers from an inclusive pool of rich and diverse resources.

Supplier Diversity makes good business sense for several reasons:

• allows MasterCard to better serve our customers;
• enables MasterCard to strive to be the best business partner by recognizing and advocating diversity in our supplier base;
• supports brand building efforts by reflecting our customers' demographics through supplier resources;
• creates business relationships that strengthen our communities; and
• demonstrates commitment to overall corporate responsibility and citizenship.

By forming mutually-beneficial business relationships with a diverse base of high-quality, cost effective suppliers, MasterCard will enhance its service and its competitiveness. Just as our employees come from diverse backgrounds, so too must our suppliers.

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COMMON QUESTIONS AND ANSWERS
SMALL BUSINESS ADMINISTRATION 

Certification

What does the term "certification" mean when referring to minority or woman-owned businesses?

Certification is a process of analysis conducted by certification agencies in order for businesses to become a Minority Business Enterprise (MBE) or Women Business Enterprise (WBE). This process ensures that a business is actually owned, controlled, and operated by the applicant(s) by properly certifying only those businesses that meet the strict eligibility requirements of the program.

Applicants are generally small businesses 1 that are minority and/or women-owned (MBE or WBE). There are certification programs that apply to other categories of applicants such as Disabled Veterans Business Enterprise (DVBE), Historically Underutilized Business (HUBZone), 8(a) Business Development and Small Disadvantaged Business (SDB). Certification programs can be on local, state regional or national levels depending upon the certification.

Is my company eligible for certification?

Business owners must meet certain criteria in order to become certified. There are basic guidelines and requirements common to many certification programs. However, each certifying agency may have additional or different criteria. Some of the basic requirements for minority and/or women-owned business certifications are as follows:

The business is 51% or greater owned and controlled by one or more minorities or women. The applicant(s) must be able to show that the history of company management and daily business operations are controlled by one or more minorities or women.

The term "minority" refers to ethnic minority of either gender of the following categories: African American, Native American, Asian-Pacific American and Asian-Indian American, Hispanic / Latino Americans (including Portuguese), and Asian / Pacific Americans. The latter group includes those with ancestry in China , Japan , Korea , Vietnam , Cambodia , Laos , the Philippines , Malaysia , Indonesia , the Pacific islands, Thailand , Burma , Bangladesh , India , Sri Lanka , and Pakistan . Proof of minority status is required.

Business owners must be a U.S. Citizen. Permanent residents (green card holders) can also be certified.

Some certification agencies will accept Legal Resident Alien status.

Small Business Administration (SBA) certifications including 8(a), Small Disadvantaged Businesses (SDB) and Historically Underutilized Businesses (HUBZone) have other criteria that must be met. Please refer to www.sba.gov for a full description of the certification programs and the eligibility requirements.

What are the different types of certifications available?

Certifications are available for minorities, women, disadvantaged, disabled veterans, small businesses and HUBZone. Some of the common certification programs are briefly described below.

WBENC (Women's Business Enterprise National Council) and NMSDC (National Minority Supplier Development Council) certify women and minorities, respectively.

SBA certifications such as 8(a) and SDB certify disadvantaged business owners defined as businesses with one or more socially and economically disadvantaged individuals(s). HUBZone certification is for those businesses located in "Historically Underutilized Business Zones". To find out if your business qualifies as a HUBZone Enterprise please go to www.sba.gov .

Some local and state governments have their own MWBE and small business certifications. Please check the web sites of your local and state governments for information.

What are the benefits of becoming certified?

Certification by an authorized agency establishes that the company meets the eligibility requirements for that particular program (minority, women, disadvantaged, etc.). This validation is important to organizations that have procurement goals to meet in the utilization of small, diverse and disadvantaged businesses. Certified businesses are entered into supplier databases of these certification agencies and these databases are accessible by organizations who honor these certifications.

How long will the certification process take?

The certification process can range from 30 days to 6 months once the application is submitted to the certification agency. The length of time varies greatly and is dependent upon the certification agency and if additional documentation is requested in order to complete the application process. Although each certification has a checklist of requested documents, sometimes the certification agencies will require information not originally on the application checklist based upon the initial information you provide them.

1. See the following link from the Small Business Administration indicating the definition of “small” in different business sectors.

Table of Small Business Size Standards (PDF - Requires Adobe Acrobat Reader)

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SAMPLE FORMS 

Registration Form

Many companies include a form on their Supplier Diversity Web site which companies can use to register as a supplier. Here is one example from PolyOne Corporation:

Supplier Registration Form
(PDF - requires Adobe Acrobat Reader)

Supplier Registration Form
(Microsoft Word Document)

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