An Assignment on: Supplier diversity as a business practice

Submitted by: Sudhir Goyal -11022

Chandan Pahelwani -11047 Seema Shah Ramdevsinh Zala -11073 -11099

Submitted to: Prof. Sushil Chaurasia

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Introduction
Diversity is becoming very important in business strategy throughout the world. Diversitys scope and levels of implementation differs by geographical territory, and therefore often influenced by differing local legislative regimes. Diversitys importance cannot be underestimated. Supplier diversity has now become the main area of diversity that involves procurement in linking suppliers as part of the supply chain.

How it fits the business agenda

Supplier diversity is an integral part of corporate social responsibility and sustainability and therefore high on the political agenda. It increases competitive advantage for businesses.Supplier diversity has become increasingly prominent as firms have recognized the economic benefits of broadening their supplier base to include minorities . The supplier diversity strategy is highly effective framework to show an organizations responsible procurement agenda as part of its (corporate) social responsibility ethos. Equal opportunities, greater social inclusion, good race relations, the fostering of local economic development and the diversification of supply risk are the positive benefits of a supplier diversity strategy.

Definitions
In its Supplier Diversity paper (2006), the Centre for Research in Ethnic Minority Entrepreneurship (CRME) quotes a definition of supplier diversity put forward by the UK Environment Agency. It states that: supplier diversity is a process through which equal opportunities are provided to all businesses to compete. Already a well-established concept in the U.S. public sector, supplier diversity has become an important part of supply chain management in corporate America. Supplier diversity involves the purchasing of goods and services from businesses owned and operated by visible minority groups. Three categories of diverse supplier bases currentlyexist: Minority Business Enterprises (MBEs), WomenBusiness Enterprises (WBEs), and Disabled Veteran Business Enterprises (DVBEs). Whereby,MBEs seems to constitute the largest percentage of supplier diversity focus; for instance, AT&T's supplier diversity goal is to have 15% MBE, 5% WBE, and 1.5% DVBE participation in its supply chain.

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United States- the beginners of supply diversity

United States was one of the first countries to formalize a process for managing and promoting supplier diversity. One example is the New York and New Jersey Minority Supplier Development Council Inc (the Council), established in 1973 as a vital link between major corporations and minority business enterprises (MBEs). This Council is part of the network of 39 regional affiliates of the National Minority Supplier Development Council Inc (NMSDC). The stated aim of the Council is to aggressively seek viable minority suppliers for procurement opportunities with its corporate membership. The Council enables corporations to diversify their base of competitive suppliers. This activity by the NMSDC increases opportunities for Council-certified suppliers and helps facilitate employment and economic development.

Challenges for MBEs

In 2002, NMSDCobserves that large firms were streamlining their operations by seeking larger first-tier suppliers that can deliver high volumes. So following are some of the challenges faced by MBEs in regards to supplier diversity: Supply chain rationalization has resulted in a severe downsizing of the supply base and a preference of corporations to rely on a few preferred suppliers, often at the expense of MBEs; Since companies are buying from fewer suppliers, average contract sizes are increasing and this makes it difficult for MBEs to compete; The use of modern production systems such asJust In Time (JIT) delivery systems means thatcorporations become even more dependent on afew preferred suppliers; Greater use of electronic ordering may posesome obstacles to smaller MBEs that are competing with larger suppliers; and Higher quality standards may cause problems forMBEs because higher quality standards may require MBE to invest in upgrading theiroperational capabilities.

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Guidelines for corporations for successfully implementing supplier diversity

There are number of key guidelines for corporations to implement supplier diversity. These emphasize: (1) The need for integrating supplier diversity into business goals to build competitive advantage: Supplier diversity can become a source of advantage when firms integrate the program into their business goals and develop the capabilities to manage them effectively. Both objectives can be accomplished by linking supplier diversity to overall organizational performance. This can be done by identifying and clearly articulating the goals of the program and developing strategic plans for those goals, including defining the firm's performance expectations for suppliers and evaluating the program's contributions to the firm's overall performance. (2) The importance of top management support: top management commitment can be defined as top management acceptance of supplier diversity as an operational and strategic option. It entails providing visible leadership on this issue, including the provision of resources that are needed to accomplish the goals of the initiative.Top management has toframe supplier diversity in ways that facilitate theacceptance of the practice by stakeholders.

(3) The critical role of supplier diversity champions: a diversity program will benefit from thekey role of an individual whose informal leadershipcan be instrumental in building support for the idea.This sort of person has been labeled a champion.A diversity champion is an individual or groupof individuals that provides critical informal leadershipfor the initiative.Champions can be instrumental in the implementationof supplier diversity because they oftenpossess leadership qualities. Two of these qualitiesare especially relevant: ability to engage in influenceactivities and transformational leadershipbehavior.

(4) The necessity of building a supportive organizational culture: Culture, the sum of shared values, norms, andbeliefs of an organization, expresses a firm'sorientation not only to internal stakeholders butto outsiders, including suppliers.a corporation shouldcreate a supportive culture in which the program can thrive. For such a culture to be developed, topmanagement needs to clearly articulate the vision ithas for the initiative. The business case must be laidout and explained so that employees realize it is inthe interest of the firm, and that diversity is not justsome social program. Expectations should also be set regarding what is expected of individuals anddepartments that are charged with implementingthe supplier diversity program.
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(5) The significance of relationship building: Being a larger buyer does not automatically make a corporation more powerful than a supplier. Even small suppliers can be powerful when there arefew substitutes for their product, their goods and services are critical to the buyer's marketplacesuccess, it costs buyers too much to switch from onesupplier to another due to inbuilt costs associatedwith making the change, or the industry is dominated by a few large companies. Therefore, corporations need to be careful about how theytreat their suppliers. Exchange partners who see the relationship as beneficial, fair, and equitable will continueto contribute input over the long term. The exchange ceases to exist when rewards are no longerforthcoming or inequities are perceived. Large corporations can grow relational assets such as trust and commitment by going out of their way to help develop the operational capabilities of suppliers.

Procedure to implement supplier diversity program:

Step 1. Ask for help and advice. Step 2.Appoint a supplier diversity coordinator. Step 3. Conduct a supplier survey (to establish thecurrent status and future targets). Step 4. Review your existing policies and procedures. Step 5. Formulate new procurement policy andprocedures. Step 6. Communicate with staff and existing suppliers. Step 7. Develop and implement a training program. Step 8. Communicate with ethnic minority businesses. Step 9. Develop targets and monitor your success. Step 10. Dont be afraid to celebrate success.

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Example of 3M
Were committed to proactively identifying small, minority-owned and woman-owned sources for the goods and services 3M needs. Were working to solicit capable firms, and execute orders and contracts with these firms as required to support 3M business needs. Heres why 3M pursues relationships with small, minority-owned and woman-owned businesses:

Diversity is a business strategy for growth. The minority population is the fastest growing segment in the United States and will account for a significant share of future consumer growth. Diverse suppliers are one way to access emerging diversity market segments.

Diverse suppliers reenergize our business. Diversity in our supplier base helps keep 3M open to innovative ideas and new ways of doing business, including offering unique strategies for reaching diverse markets.

Our suppliers become our customers. Diverse suppliers not only help us market more effectively to diverse consumers they are our customers.

Lower costs and faster response help the bottom line. Minority-owned and woman-owned businesses often are smaller and more cost-efficient due to lower operating costs. They also tend to be nimble, which allows them to quickly respond to business needs.

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Conclusion
Supplier diversity is being implemented globally as evidenced by the legislation. Its scope varies greatly. The development of supplier diversity ,set against a background of increasing globalisation,the acceleration of legislation and stakeholder pressure,suggests that it will be essential for businesses and public sector organisations. Barriers to competitiveness, similar to those currently experienced by small and medium sized enterprises,will remain. In the UK,ethnic minority businesses are still developing their capacity to enable them to take full advantage of procurement contracts. These businesses are obliged to compete in the global marketplace,where other suppliers may be better placed to meet cost, quality and delivery targets.However,the capacity will be developed to enable organisations to meet supplier diversity objectives in line with their organisational objectives.

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