Supplier diversity

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Supplier diversity refers to the use of minority-owned businesses as suppliers, and a supplier diversity program is a proactive business program which encourages such use within an organisation's supply chain. Minority-owned includes black and minority ethnic business ownership, women owned, veteran owned, LGBT-owned, [1] service disabled veteran owned, historically underutilized business, and Small Business Administration (SBA)-defined small business concerns. [2] The Hackett Group refers to "approximately 16 categories" covering various aspects of supplier diversity. [3] It is not directly correlated with supply chain diversification, although utilizing more vendors may enhance supply chain diversification. Supplier diversity programs recognize that sourcing products and services from previously under-used suppliers helps to sustain and progressively transform a company's supply chain, thus quantitatively reflecting the demographics of the community in which it operates by recording transactions with diverse suppliers.

Contents

United States

Paul D. Larson links the establishment of supplier diversity concerns to the American civil rights movement in the 1960s. [4] : Page 3 

Diverse- and women-owned business enterprises are among the fastest-growing segments of the U.S. economy. Diverse-owned businesses generated an estimated $495 billion in annual revenue in 1997 [5] and employed nearly 4 million workers, while women-owned firms employed about 19 million people [6] and generated $2.5 trillion in annual sales.

Alongside the Women-Owned Small Business Program, the US Small Business Administration also operates an Economically Disadvantaged Women Owned Small Business (EDWOSBs) program for preferential award of federal contracts in certain industries. [7] A wider categorization including women, minority, disabled veteran, and/or LGBT business enterprises (WMDVLGBTBE) is referenced in Californian supplier diversity requirements. [8] [9]

The Hackett Group, in their 2019 study of supplier diversity, found that US companies increasingly adopt supplier diversity programmes to achieve objectives associated with reputation management, their own corporate diversity culture and investment in their local communities, rather than reasons connected with legal compliance, and there are a growing number of companies who aim to extend supplier diversity within their tier 1 supply chain but also set expectations for tier 2 supply chain engagement activities to include supplier diversity language. [3]

Public contract bidding

Certain states within the United States, as a part of their bidding process, incentivize Minority Business Enterprises (MBEs) and women-owned business enterprises (WBEs) to bid for publicly awarded construction or service contracts. They may also declare that a percentage of the work performed on a contract be awarded to an MBE or WBE. [10] [11] [12]

In New York State, a goal was set in 2014 for the award of public contracts to women and minority businesses to increase from 20% in 2014 to 30% by 2019. [13] When the target was increased, the Association of General Contractors (AGC) sued the state for failing to release documents via New York's Freedom of Information Law (FOIL). The AGC was concerned that the state had not conducted a proper contract analysis before declaring the increase of the MWBE goal to 30%. [14] The AGC stated that the 30% goal did not reflect the availability of MWBEs statewide. The AGC also questioned a later study - performed by Mason Tillman Associates Ltd. of Oakland, California - which was paid for by the state in consideration of its employment goals for state contracts. [15]

In 2018, the state was also considering establishing goals for the workforce of contractors awarded public contracts, but insisted these goals were not quotas. If contractors could not make a "good faith" effort to reach the goals, contractors might not be eligible for future public contracts for a length determined by the state. [15]

There have been cases where contractors have been charged with crimes for impersonating MBEs. In New York in 2018, Eastern Building & Restoration was charged for fraudulently receiving over $1 million from public construction contracts by representing itself as an MBE during the years 2012 - 2014. [13]

Canada

In Canada, supplier diversity is supported and facilitated by five councils:

The Supplier Diversity Alliance Canada, formed in 2016, draws together the work of these councils (although the Canadian Council for Aboriginal Business is not directly involved in the alliance). [4] : Page 4 

New Zealand

Supplier diversity initiatives in New Zealand are aimed in particular at engaging with Pasifika businesses. [16]

Europe

A "Handbook on Supplier Diversity" published by the European Commission in 2009 made "a strong case for supplier diversity" in the European Union, acknowledging that "Europe is still at the beginning of its journey towards supplier diversity". The handbook was supported by Supplier Diversity Europe, a business-led initiative which at that time operated in the UK, France and Germany, along with the Migration Policy Group and the Economic and Social Research Council. [17] The slower pace in adopting supplier diversity programmes in Europe, compared to the United States, was also acknowledged at the World Economic Forum in 2020. [18]

See also

Related Research Articles

<span class="mw-page-title-main">Supply chain management</span> Management of the flow of goods and services

In commerce, supply chain management (SCM) deals with a system of procurement, operations management, logistics and marketing channels, through which raw materials can be developed into finished products and delivered to their end customers. A more narrow definition of supply chain management is the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally". This can include the movement and storage of raw materials, work-in-process inventory, finished goods, and end to end order fulfilment from the point of origin to the point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.

Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual obligation to "procure", i.e. to "ensure" that something is done. When a government agency buys goods or services through this practice, it is referred to as government procurement or public procurement.

Purchasing is the procurement process a business or organization uses to acquire goods or services to accomplish its goals. Although there are several organizations that attempt to set standards in the purchasing process, processes can vary greatly between organizations.

E-procurement is a collective term used to refer to a range of technologies which can be used to automate the internal and external processes associated with procurement, strategic sourcing and purchasing.

National LGBT Chamber of Commerce American not-for-profit advocacy group

The National LGBT Chamber of Commerce (NGLCC) is a U.S. not-for-profit advocacy group that aims to expand the economic opportunities and advancement of the LGBT business community. Its headquarters are in NW in Washington, D.C. NGLCC is the exclusive certifying body for LGBT-owned businesses known as LGBT Business Enterprises (LGBTBEs), and advocates for LGBT business inclusion in corporate and government supplier diversity programs. In October 2017, the organization changed its name from the National Gay & Lesbian Chamber of Commerce to National LGBT Chamber of Commerce to better reflect the entire LGBT business community it serves.

Supplier relationship management (SRM) is the systematic, enterprise-wide assessment of suppliers' strengths, performance and capabilities with respect to overall business strategy, determination of what activities to engage in with different suppliers, and planning and execution of all interactions with suppliers, in a coordinated fashion across the relationship life cycle, to maximize the value realized through those interactions. The focus of supplier relationship management is the development of two-way, mutually beneficial relationships with strategic supply partners to deliver greater levels of innovation and competitive advantage than could be achieved by operating independently or through a traditional, transactional purchasing arrangement. Underpinning disciplines which support effective SRM include supplier information management, compliance, risk management and performance management.

The U.S. Women's Chamber of Commerce was founded in 2001 to increase economic growth opportunities for women. As the only national organization of its kind, the U.S. Women's Chamber of Commerce works in concert with its over 500,000 members, national and local association partners, and key influencers to open doors for women business owners and career professionals.

Minority business enterprise (MBE) is an American designation for businesses which are at least 51% owned, operated and controlled on a daily basis by one or more American citizens of the following ethnic minority and/or gender and/or military veteran classifications:

  1. African American
  2. Asian American or Pacific Islander
  3. Hispanic American - A U.S. citizen of true-born Hispanic heritage, from any of the Spanish-speaking areas of the following regions: Mexico, Central America, South America and the Caribbean Basin only. Brazilians shall be listed under Hispanic designation for review and certification purposes.
  4. Native American, including Aleuts

Government procurement or public procurement is undertaken by the public authorities of the European Union (EU) and its member states in order to award contracts for public works and for the purchase of goods and services in accordance with principles derived from the Treaties of the European Union. Such procurement represents 13.6% of EU GDP as of March 2023, and has been the subject of increasing European regulation since the 1970s because of its importance to the European single market.

Sustainable procurement or green procurement is a process whereby organizations meet their needs for goods, services, works and utilities in a way that achieves value for money on a life-cycle basis while addressing equity principles for sustainable development, therefore benefiting societies and the environment across time and geographies. Procurement is often conducted via a tendering or competitive bidding process. The process is used to ensure the buyer receives goods, services or works for the best possible price, when aspects such as quality, quantity, time, and location are compared. Procurement is considered sustainable when organizations broadens this framework by meeting their needs for goods, services, works, and utilities in a way that achieves value for money and promotes positive outcomes not only for the organization itself but for the economy, environment, and society.

Government procurement or public procurement is when a governing body purchases goods, works, and services from an organization for themselves or the taxpayers. In 2019, public procurement accounted for approximately 12% of GDP in OECD countries. In 2021 the World Bank Group estimated that public procurement made up about 15% of global GDP. Therefore, government procurement accounts for a substantial part of the global economy.

A vendor management system (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.

<span class="mw-page-title-main">Invitation to tender</span> Business process

An invitation to tender is a formal, structured procedure for generating competing offers from different potential suppliers or contractors looking to obtain an award of business activity in works, supply, or service contracts, often from companies who have been previously assessed for suitability by means of a supplier questionnaire (SQ) or pre-qualification questionnaire (PQQ).

A woman-owned business is a specific designation used by American government agencies and industry associations to set aside special programs to encourage and empower female business owners. Most definitions of this term involve a practical look at the legal and ownership structure, as well as the issue of control of the day-to-day operations of a business. The consideration of control of a business is meant to discourage the practice of men placing wives, daughters, or low-level female employees in positions of ownership, when in fact she may have little to do with the day-to-day management of the company, for the sake of receiving some government benefits or other consideration.

Supply Nation is a non-profit organisation that aims to grow the Aboriginal and Torres Strait Islander business sector through the promotion of supplier diversity in Australia. The organisation was founded in 2009 by Michael McLeod and Dug Russel, co-founders of Message Stick Communications, with pilot funding from the Federal Government.

Prompt payment is a commercial discipline which requires businesses to:

At around £290 billion every year, public sector procurement accounts for around a third of all public expenditure in the UK. EU-based laws continue to apply to government procurement: procurement is governed by the Public Contracts Regulations 2015, Part 3 of the Small Business, Enterprise and Employment Act 2015, and the Public Contracts (Scotland) Regulations of 2015 and 2016. These regulations implement EU law, which applied in the UK prior to Brexit, and also contain rules known as the "Lord Young Rules" promoting access for small and medium enterprise (SMEs) to public sector contracts, based on Lord Young's Review Growing Your Business, published in 2013.

Christine Nicole Simmons is an American businesswoman and the first African American and woman to serve as Chief Operating Officer for the Academy of Motion Picture Arts and Sciences. She leads the Academy's first Office of Representation, Inclusion, and Equity.

<span class="mw-page-title-main">EyeMail</span> American communications technology company

EyeMail Inc. is an American communications technology and digital marketing company based in Atlanta, Georgia. Founded by entrepreneur Lisa S. Jones, EyeMail Inc. is both a black and woman-owned business enterprise (WBE), and is an officially certified Minority Business Enterprise (MBE) by the NMSDC.

<span class="mw-page-title-main">Lisa S. Jones</span> American businesswoman and entrepreneur

Lisa S. Jones is an American businesswoman and entrepreneur, best known for being the founder of Atlanta-based video email company EyeMail Inc. As both a black and woman-owned business, EyeMail Inc. is classified as a Minority Women Business Enterprise (MWBE). Her company began as a start-up, eventually growing exponentially through partnerships with Microsoft, Delta Air Lines, Time Warner, Porsche North America, the Atlanta Tech Village, PepsiCo and, most notably, The Coca-Cola Company, through which EyeMail Inc. got selected by Microsoft as a premier MWBE supplier in digital marketing. Prior to dedicating herself to entrepreneurship, Jones worked in supplier diversity for telecommunications provider AT&T, and continues to develop a career as a thought leader and public speaker in the matter.

References

  1. ↑ Locke, G., Remarks at Gay and Lesbian Chamber of Commerce Annual Business and Leadership Conference, 19 November 2010, archived 26 November 2010, accessed 16 December 2023
  2. ↑ Small Business Administration, Small Business Size Regulations, accessed 31 March 2016
  3. 1 2 Hackett Group, Supplier Diversity: Moving Beyond Compliance Drive Meaningful Value, presentation by Fong, A. and Peters, G., published April 2019, accessed 4 March 2021
  4. 1 2 Larson, P. et al, The State of Supplier Diversity Programs in Canada: the Buyer's Perspective, published September 2021, accessed 8 June 2022
  5. ↑ "SBA's Office of Advocacy" (PDF).
  6. ↑ "Center for Women's Business Research: Publication Details". Archived from the original on 2008-01-05. Retrieved 2008-02-03.
  7. ↑ Small Business Act, 15 USC 637(m)
  8. ↑ California Public Utilities Commission, Supplier Diversity Program, accessed 26 January 2024
  9. ↑ California Tax Credit Allocation Committee, Housing Supplier Diversity Compliance Guidelines: Completing the Housing Supplier Diversity Annual Report, accessed 26 January 2024
  10. ↑ "New York State Contract System". ny.newnycontracts.com. Retrieved December 7, 2018.
  11. ↑ "MWBE Certification Eligibility Requirements (NYS Empire State Development)". esd.ny.gov. 4 April 2017. Retrieved December 7, 2018.
  12. ↑ "Minority and Women Owned Business Enterprises Program (NYS Dept. of Transportation)". www.dot.ny.gov. Retrieved December 7, 2018.
  13. 1 2 Gavin, R., "Colonie contractor faces prison in minority-ownership scam". www.timesunion.com. December 7, 2018. Retrieved December 7, 2018.
  14. ↑ Karlin, Rick (June 1, 2017). "Contractors sue state over FOILS and MWBE goals". www.timesunion.com. Retrieved December 7, 2018.
  15. 1 2 DeMasi, Michael (February 5, 2018). "Cuomo wants sweeping changes to New York's MWBE law". www.bizjournals.com. Retrieved December 7, 2018.
  16. ↑ Sharma, A., Increasing supplier diversity in our region, Gisborne Herald, published 7 December 2021, accessed 8 June 2022
  17. ↑ European Commission, Handbook on Supplier Diversity in Europe, European Website on Integration, published 17 December 2009, accessed 16 December 2023
  18. ↑ Mallinckrodt, V., How to move towards more inclusive procurement in Europe, World Economic Forum, published 6 October 2022, accessed 16 December 2023
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