There’s no doubt that building a successful supplier diversity program benefits an organization in many ways, such as driving innovation, improving the bottom line and enhancing a positive brand image.
A supplier diversity program has been considered one of the best business practices in maintaining high moral and ethical standards. To maximize the effectiveness of the program,. procurement professionals are expected to not only build but also grow aggressively and expand a supplier diversity program to maximize the diverse spend.
One of the most powerful ways to scale your supplier diversity program is to analyze, track and manage multi-tier diverse spend and turn it into insights. Yet, it’s easier said than done. According to the Deloitte annual Global Chief Procurement Offer (CPO) survey, supply chain transparency is poor, with 65% of procurement leaders having limited or no visibility beyond their tier-one suppliers.
This article will dive deeper into this topic and why you should take it seriously.
What is Multi-Tier Diverse Spend Reporting?
Diverse Spend, also known as diverse supplier spend, is the dollar amount spent solely with diverse-owned suppliers. It can be measured by a dollar amount or percentage of total procurement spend.
Multi-tier goes beyond your first tier of suppliers and allows you to gain the complete picture of diverse spend in the supplier network within your supply chain. In other words, it collects data on both direct and indirect spend at Tier 2, Tier 3 and beyond.
Tier 1 and Tier 2 Supplier Diversity Spend
When it comes to diverse spend, there are typically two main supplier categories: tier-1 and tier-2. Both of them are critical for supply chain success. Tier-1 suppliers, also known as prime suppliers, are those businesses that directly sell products and services to a buyer, while tier-2 provide tier-1 suppliers with the products and/or services that are sold to that buyer.
The Importance of Increased Multi-Tier Diverse Spend Reporting Visibility
Implementing multi-tier diverse spend into your procurement practices is one of the best practices to recognize and advocate for underrepresented minority groups as well as diversify the supplier’s workforce. The following points are your competitive advantages if you have transparent multi-tier diverse spend data.
Scale Your Supplier Diversity Program
If you’re looking for ways to increase your diverse spend towards meeting the organization’s procurement goals, tracking beyond your tier 1 diverse spend is the ultimate solution. With full visibility and control, procurement teams not only save a lot of time and money to expand their program but also be able to look at their impacts in a broader view.
It’s fairly common that many small and diverse businesses in the supply chain may not be working directly with major organizations. Instead, they are likely to work with your Tier-1 suppliers. With full visibility and control, you can look at your whole supplier network beyond Tier-1, track and measure how much you indirectly spend and contribute to the community.
More Opportunities For Small and Diverse Businesses
“Without big data analytics, companies are blind and deaf, wandering out onto the web like deer on a freeway.” – Geoffrey Moore.
When having a clear view of your all-tier diverse spend, you take full control of how your tier-1 suppliers are doing and their spend activities. From there, you make a more strategic decision to partner with those Tier-1 suppliers that have subcontractors with diverse-owned businesses. In short, you indirectly support growth and job creation for the community.
As you expand your diverse spend reporting to Tier-2 and beyond, your program can demonstrate a more significant impact on the community. A strong supplier diversity program will demonstrate your commitment to making the world a better place, more so than just focusing on making money. It is a good branding practice as well as a key selling point when hiring.
Streamline Your Tier-1 and Tier-2 Diverse Spend Reporting
The challenges of measuring and tracking multi-tier suppliers are not easy at all. As you don’t directly purchase products or services from Tier-2 suppliers, there is some complexity to tracking this data. The only solution is to engage and coordinate with Tier-1 suppliers to collect and organize this data for every project.
As an organization may have thousands of Tier-1 suppliers and hundreds of ongoing projects, automating the process is a must. SupplierGATEWAY provides one-stop-shop solutions to streamline your multi-tier diverse spend management, then create a simple, intuitive and straightforward report demonstrating your impact.
About SupplierGATEWAY Economic Impact Reporting
Using our on-demand Economic Impact Reporting capability in the SupplierGATEWAY, you can comprehend a big picture of your diverse suppliers’ data, including what business category creates the most impact and what geographic regions are being impacted the most and how many jobs your inclusive behavior is supporting.
Our system leverages the BEA RIMS II model to analyze and summarize the economic impact of your spend in a comprehensive and user-friendly dashboard. To learn more, please visit our site.