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In this guest post, Procurement Leaders invites Procter & Gamble CPO Rick Hughes, to look at supplier diversity - why its important and demonstrate value from the initiative.
As procurement professionals we are constantly creating, managing, transitioning and connecting our supply chains and supply chain partners in innovative ways to meet the needs of our customers and consumers. Aside from the traditional expectations of cost; quality; service & responsiveness and innovation we should all be looking for how to best infuse diversity in our supply networks, just as we seek to have diverse employee bases in our companies.
It has been proven that diverse teams of employees can out-perform homogenous teams. Having a diverse employee base, which mirrors the pool of recruiting talent for a company, is an objective for any company of scale. This principle also applies to our supply networks. As procurement leaders we must ensure this is recognised by the organisations we lead, as well as by our non-procurement colleagues in other functions and disciplines.
Diversity is often construed narrowly, to consider only visible diversity like colour or ethnic background. Considering diversity of supply on a much broader scale, however, enables breadth and depth in the supply chain that is supportive of the mandates we all have from the business units we support. Small companies (versus large multinationals) are often more responsive, and can innovate and iterate quickly.
In addition to this value add, there is another element of diverse supply bases to consider – that of investment in the employees and communities where the supply partners live and work. While this is an objective of many/most corporations, minority owned, women owned, small corporations disproportionately invest in their employees, their families and their communities.
I visited an Alaskan native corporation in the US to see firsthand what the company was doing to improve the lives of their employees and their communities. The profits of the corporation were shared among the owners (who were the Alaskan native tribal members) and used to strengthen communities who were struggling from loss of fishing revenue resulting from the growth of commercial fisheries. Another company in western China was sharing its profits among a remote village to provide basic necessities of life like clean water and decent housing.
There are many examples of small/ medium-sized companies enabling growth and business development over years or even decades. A third supplier we work with is celebrating 20 years in business (and the same time in supplying P&G). This small but growing firm has provided not only contract manufacturing services, but has expanded to now include promotional design and execution, promotional materials management, and has partnered with a large multinational to expand into customisation and display building. All the while, the employee base has grown and developed into loyal consumers of the products for which they provide services.
This last element, of enabling individuals and families to purchase consumer products, is a unique opportunity and advantage to B2C companies like P&G. It makes diversity of supply not only the right thing to do from a supply view, but also a business decision that makes sense. For us, supply diversity is part of ‘responsible sourcing', which includes other elements of supply management like stewardship, environmental sustainability and social responsibility & compliance.
As procurement leaders, when we review our supply chains and the value and capabilities they bring to our business, we must ensure we do so with a focus towards partner diversity in those chains. Where that diversity is lacking, leaders must drive the change we want to occur, champion the small firms, the un-tried supply potential, and ensure that opportunities for new suppliers are considered. We never know when the next Intel or Microsoft is being formed, and a diverse supply base can bring new capabilities and competencies to help drive our innovation, sales, and profits.
Rick's article appeared in Issue 48 Jan/Feb of Procurement Leaders Magazine. Subscribers can access the magazine here.