Workplace Ready Program FUNDED BY THE AUSTRALIAN GOVERNMENT Diversifying your supply chain Reconciliation Australia acknowledges Supply Nation formally the Australian Indigenous Minority Supplier Council (AIMSC) and the Department of Education, Employment and Workplace Relations (DEEWR) for their contribution to the information presented. 1. Recommendations Supplier diversity aims to increase the opportunity for businesses owned by people from minority or marginalised groups to supply their goods and services to public and private sector organisations. Supplier diversity offers under-represented businesses the same opportunities to compete for the supply of quality goods and services as other suppliers. Increasing the representation of Aboriginal and Torres Strait Islander businesses within your organisations supply chain may form part of your organisation s overall supplier diversity program or it may be a stand-alone strategy. Either way, your organisation s commitment to building Aboriginal and Torres Strait Islander suppliers into your organisation s supply chain will offer substantial benefits for your organisation, for Aboriginal and Torres Strait Islander owned businesses, and for communities as a whole. To support your organisation to achieve its Aboriginal and Torres Strait Islander supplier diversity objectives, the content in this toolkit will look at six recommended steps for building Aboriginal and Torres Strait Islander businesses into the supply chain: Develop the business case. Define the scope of your Aboriginal and Torres Strait Islander supplier diversity program. Engage the right people across your organisation to ensure they understand your Aboriginal and Torres Strait Islander supplier diversity program and its objectives. Connect with suppliers that are Aboriginal and Torres Strait Islander owned businesses. Run the Aboriginal and Torres Strait Islander supplier diversity program. Run an Aboriginal and Torres Strait Islander supplier development program. 2. Act getting it done 2.1. Develop the business case As with Aboriginal and Torres Strait Islander employment, it is essential that a business case is developed to ensure there is a clear understanding across your organisation as to why there is a commitment to sourcing from Aboriginal and Torres Strait Islander businesses. This will include the rationale and benefits for your business. Defining your business case will also assist in determining additional activities that will support your organisation to achieve its supplier diversity objectives.
Link Aboriginal and Torres Strait supplier diversity program with organisational goals A commitment to building Aboriginal and Torres Strait Islander businesses into your supply chain must support the organisation s procurement process as a whole. Linking your Aboriginal and Torres Strait Islander supplier diversity program with your broader organisations procurement goals is important in creating a successful program. Key elements of the Aboriginal and Torres Strait Islander supplier diversity program should look at how the program will support the company s strategic sourcing process and establish actions at each stage that enable the identification and inclusion of Aboriginal and Torres Strait Islander businesses. The business case for including Aboriginal and Torres Strait Islander businesses into your supply chain, and the benefits it will bring to your organisation, must be clear to everyone who will be involved in its development and implementation from senior management, to operations, finance, legal, marketing, human resources and front-line employees. Relevant areas of your business should be aware of how their section can influence the success of the program, as well as how the program may impact their work. This will enable them to be active participants in the program and more effectively embed the process within their business function. Define how your Aboriginal and Torres Strait Islander supplier diversity program will benefit your organisation Building Aboriginal and Torres Strait Islander businesses into your supply chain has the potential to bring real organisational benefits and help your organisation perform better, both economically and socially. Including Aboriginal and Torres Strait Islander businesses into your supply chain: Contributes to supply chain excellence by encouraging competition within the supply chain as the more competition you get for your contract, the more chances you have of finding the best possible supplier and achieving value for money. Leads to greater innovation and enhanced capability to deliver exceptional products and services as well as increased profitability through competition. Helps your organisation tap into the widest available talent pool of suppliers and reflects your genuine commitment to provide a level playing field for Aboriginal and Torres Strait Islander suppliers. Achieves cost efficiency as lower administrative overheads and management costs can lead to very competitive pricing. Can provide higher quality rather than standard bulk buying products, and frequently a greater sense of ownership can lead to greater pride in the quality of the product. Increases speed of delivery as less bureaucracy and shorter management chains can lead to much quicker turnaround on orders and queries. Strengthens institutional brand with key stakeholders by ensuring your organisation s suppliers accurately mirror the structure of your customer base. Improves your organisations dealings with Aboriginal and Torres Strait Islander owned businesses, customers and clients. Helps your organisation to meet requirements under the Australian Government s Indigenous Opportunities Policy (discussed in detail in step 5). Helps your organisation to meet its corporate social responsibility objectives. Can provide a competitive edge when tendering for contracts.
Ensures you organisation is purchasing genuine Aboriginal and Torres Strait Islander products, and services, rather than look alike copies, mass-produced or imported products/services. 72% Aboriginal and Torres Strait Islander employment In addition to generating value internally, building Aboriginal and Torres Strait Islander businesses into your supply chain is a great way for your organisation to extend its commitment to ensuring Aboriginal and Torres Strait Islander people have greater employment opportunities in many different sectors. This supports greater choice and opportunity for Aboriginal and Torres Strait Islander people and increases opportunities for economic development and job creation in local communities. In 2012 Supply Nation first surveyed its Indigenous suppliers to understand how the increased focus on Aboriginal and Torres Strait Islander representation in business and government supply chains was impacting on broader Aboriginal and Torres Strait Islander employment figures. It was found that of those Supply Nation certified suppliers surveyed, 72% of their employees were themselves Aboriginal or Torres Strait Islander*. This data tells an important story. Including Aboriginal and Torres Strait Islander businesses in your procurement chain not only supports wealth generation in the communities in which your organisation operates, it also supports Aboriginal and Torres Strait Islander businesses to employ Aboriginal and Torres Strait Islander people. So, in conjunction with your organisation s Aboriginal and Torres Strait Islander Employment Strategy, including Aboriginal and Torres Strait Islander businesses in your supplier diversity program is a great way to support indirect employment for Aboriginal and Torres Strait Islander people and build opportunities for Indigenous economic engagement. * 72%: IEDS Draft for Consultation Message Stick Group response October 2010 2.2. Define the scope of your Aboriginal and Torres Strait Islander supplier diversity program Defining the scope is critical to the development of an effective supplier diversity program. Will your program be limited to certain sourcing categories or will all areas of your procurement requirements be considered for supplier diversity? Which suppliers will your organisation target as part of its supplier diversity program? These are important questions to answer to ensure your program is focused and provides returns for your organisations investment. Clearly define the opportunities available When defining your program s scope, consider all the opportunities that your procurement strategy could offer to Aboriginal and Torres Strait Islander businesses. You may look to consider everything from IT suppliers to business consulting and legal services, catering and hospitality, corporate gifts, Human Relations consulting and recruitment, media, marketing and advertising, office products and services and transport and logistics. Incorporating as many different types of goods and service in your Aboriginal and Torres Strait Islander supplier diversity program is a powerful statement of how serious your organisation is in supporting underrepresented companies with whom you do business.
Understand the ways your organisation can diversify its supply chain Aligning your Aboriginal and Torres Strait Islander supplier diversity program with your company s operations is crucial to the sustainability of your supplier diversity program. For the program to be fully effective it needs to be embedded within procurement, sales and product / service development functions of your business. Your Aboriginal and Torres Strait Islander supplier diversity program may focus on directly purchasing products and services from Aboriginal and Torres Strait Islander businesses; encouraging your suppliers to procure its products and services from Aboriginal and Torres Strait Islander businesses (known as second tier sourcing); or both. I. Direct purchasing Direct purchasing involves your own procurement team identifying Aboriginal and Torres Strait Islander businesses from which to purchase products and services from. With direct purchasing, your procurement team can take on responsibility for sourcing, supplier performance and supplier development. It is important to build your procurement team s capacity to effectively target suppliers and procure their products and services. Organisations such as Supply Nation (formally AIMSC), as well as national, state and regional Indigenous Chambers of Commerce and Indigenous business centres, provide services that will support your procurement team to develop and implement an Aboriginal and Torres Strait Islander supplier diversity program. Attending networking events such as Supply Nations meet the buyer forums are great ways to build relationships with potential Aboriginal and Torres Strait Islander businesses. II. Second tier sourcing Second tier sourcing occurs when a first tier (preferred) supplier to your organisation enters into a contract with an Aboriginal and Torres Strait Islander supplier to provide goods/services in support of your first tier supplier s contract. Consider how your organisation can encourage your first tier suppliers to source products and services from Aboriginal and Torres Strait Islander businesses. This will further support your supplier diversity goals and help extend opportunities throughout your supply chain. How Staples (formally Corporate Express) diversified their offering One of the unique elements of the Staples RAP is their commitment to building Aboriginal and Torres Strait Islander owned businesses into their supply chain. Staples was a Founding Member of the Australian Indigenous Minority Supplier Council (now Supply Nation). Staples procure products and services directly from Supply Nation certified suppliers for their own use. In July 2010 they signed their first major contract with a Supply Nation certified Indigenous supplier and they have continued supporting Supply Nation certified suppliers ever since. However, supplier diversity for Staples is not just about supporting Supply Nation certified suppliers for their own operations. One of the biggest impacts they have made on supplier diversity is offering their customers products from Supply Nation certified suppliers. This approach can help reduce customers concerns over volumes and continuity of supply. It can also help their customers to fulfil their own diversity purchasing goals. In January 2011, Staples launched a range of Supply Nation certified office products from Nallawilli Office Wares (NOW) including copy paper, notebooks, envelopes and manila folders. NOW participate in Staples annual product expos where customers can view their new range of available products. NOW is included in Staple s range of catalogue products which makes it easy for Staples customers to support Supply Nation certified suppliers through their regular catalogues and
e-commerce site ordering. In September 2010, Staples introduced a range of paper coffee cups featuring Indigenous art designs with educational messages from Corporate Connect AB, a Supply Nation certified supplier whose mission is to spread information about Aboriginal and Torres Strait Islander people. Staples also has a Supply Nation certified Indigenous family-owned printer, Print Junction, as part of their print management offering and offer their customers access to a range of corporate gifts from other Supply Nation certified suppliers. Agree on definitions As part of understanding the scope of your Aboriginal and Torres Strait Islander program, it is essential that you establish a definition of what your organisations agrees to be a legitimate Aboriginal and Torres Strait Islander business. There is no set definition or source of what an Aboriginal and Torres Strait Islander supplier business is in Australia. It is important that your organisation defines and agrees on a definition that best suits your organisation and goals. Supply Nation identifies their Aboriginal and Torres Strait Islander suppliers as: At least 51 per cent ownership of the company by an Indigenous Australian(s). The company is lead/managed by a Principal Executive Officer who is an Indigenous Australian. The key business decisions regarding the company s finances, operations, personnel and strategy are made by an Indigenous Australian(s). The company is able to distribute its equity to members or others trading as a business. The business is located in Australia. Tourism Australia and Indigenous Business Australia s definition of an Indigenous business for their Indigenous Tourism Champions Program (Champions) is a business that is at least 50 per cent Aboriginal and Torres Strait Islander owned, or offer an experience delivered by Aboriginal and Torres Strait Islander people. 2.3. Engage the right people across your organisation to ensure they understand your Aboriginal and Torres Strait Islander supplier diversity program and its objectives www.aimsc.org.au Australian Indigenous Minority Supplier Office Limited (AIMSC) 2011 CEO and Executive team Organisation s that have the commitment from the CEO, Board and Executive for building Aboriginal and Torres Strait Islander businesses into their supply chain, and that have a public commitment, are more likely to be successful in adopting supplier diversity practices
and implementing their Aboriginal and Torres Strait Islander supplier diversity program. It is also important that the Executive team understands the role and level of importance of supplier diversity so they can be active participants in the program. Developing leaders and champions for your Aboriginal and Torres Strait Islander supplier diversity program Line management ownership and buy-in is essential. Line managers who own your organisation s Aboriginal and Torres Strait Islander supplier diversity goals are very effective champions. Engaging relevant line managers early allows them to understand the organisations commitment, vision and desired outcomes. It will also ensure any assistance, support or training requirements are addressed early. In order to properly address all Aboriginal and Torres Strait Islander supplier diversity policy and program requirements, it is imperative that your organisation has an adequate number of dedicated employees as well as the resources required to accomplish these objectives. Identifying a supplier diversity program leader that manages day-to-day implementation, monitoring and review of the Aboriginal and Torres Strait Islander supplier diversity program within your organisation is a key determinant of success. Once your organisation has developed clear and concise goals for supplier diversity, it is essential that the supplier diversity leader is accountable for achieving these goals. Including your supplier diversity program in the performance review and audit processes will assist your organisation to achieve its specific goals and recognise those who have met or exceed goals. It is also important to recognise employees with innovative ideas for attracting diverse suppliers to your organisation s supply chain. Training in industry best practices will continually grow your supplier diversity leader s ability to identify potential diverse suppliers who can fit in the supply chain. 2.4. Connect with Aboriginal and Torres Strait Islander owned business suppliers Build Aboriginal and Torres Strait Islander supplier lists Strategies should be developed to source new Aboriginal and Torres Strait Islander suppliers while expanding the capacity of existing Aboriginal and Torres Strait Islander suppliers to match short-term and long-term opportunities. Building a credible database of Aboriginal and Torres Strait Islander suppliers is a long-term commitment and requires your organisation to develop relationships with both the suppliers directly and also with a range of supporting organisations. It may also be useful to engage with your suppliers, vendors, clients or partners to understand the diversity of the suppliers they use in order to broaden your own Aboriginal and Torres Strait Islander supplier list. Develop relationships with supporting organisations It is worthwhile developing relationships with organisations that can connect you with potential Aboriginal and Torres Strait Islander suppliers. Ensure your organisation works closely with them to find talented diverse suppliers who can fit within the defined scope of your Aboriginal and Torres Strait Islander supplier diversity program. The resources section of this toolkit contains listings of organisations and services that can assist in connecting you with Aboriginal and Torres Strait Islander suppliers.
Promote your organisation and opportunities Consider ways that your organisation can publically promote its commitment to building Aboriginal and Torres Strait Islander businesses into its supply chain and its Aboriginal and Torres Strait Islander supplier diversity program. Proactively communicating to Aboriginal and Torres Strait Islander suppliers about what it takes to do business with your company is an important step in building a diverse supplier list. It is also important that your Aboriginal and Torres Strait Islander supplier diversity program includes opportunities for your employees to promote your organisation to those suppliers who fit in to your supplier diversity program scope. Attending events, both locally and nationally, that connect you with diverse suppliers is invaluable and will assist in developing best practice approaches. 2.5. Run your Aboriginal and Torres Strait Islander supplier diversity program Define SMART goals An organisation that sets realistic, measureable goals will be more successful than one that does not. Failure to set goals will also create problems when measuring performance. The supplier diversity goals should be specific, measurable, achievable, realistic and timely (SMART). They should be documented and have a specific purpose for the organisation in meeting certain goals. Consider who within your organisation should be consulted or involved in setting these SMART goals, for example, the executive leadership during strategic planning process or line managers. Review and reform procurement strategy, policy and processes Once the business case has been articulated and goals defined, it is essential to refine your procurement policies, systems and processes so that supplier diversity principles can be incorporate into your procurement strategy. These policies can be general supplier diversity policies or Aboriginal and Torres Strait Islander specific procurement policies. Procurement policies have often developed over many years based on past practices and standard commercial processes. These tend to limit opportunities for both clients and potential suppliers. Regularly reviewing progress on the implementation of your organisations Aboriginal and Torres Strait Islander supplier diversity program and policies ensures that it: Delivers value for money and improvements in service delivery arrangements. Is planned and undertaken in a structured, controlled and co-ordinated way. Contributes to delivery of the budget, medium term plan and efficiencies as identified by your organisation. Utilises and exploits technology to improve services and generate efficiencies and Establishes and develops collaborative opportunities, partnerships and new and more effective ways of working. If your procurement is not carried out by designated procurement employees, or if your procurement team requires additional support or training, organisations such as Supply Nation will be able to provide support and training during this stage.
Reforming procurement within the Australian Public Service Indigenous Opportunities Policy (IOP) and Commonwealth Procurement Rules (CPR) are simple illustrations of Commonwealth procurement measures to leverage employment and business outcomes for Aboriginal and Torres Strait Islander Australians from government spending. Indigenous Opportunities Policy (IOP) The IOP seeks to leverage major Commonwealth government spending on goods and services to maximise Aboriginal and Torres Strait Islander training and employment opportunities and the use of Aboriginal and Torres Strait Islander suppliers. The IOP requires that for tenders of Government business over $5m (or $6m in construction) in areas with a high Aboriginal and Torres Strait Islander population, a plan must be included as part of the tender for providing training and employment opportunities to local Aboriginal and Torres Strait Islander people and for the use of Aboriginal and Torres Strait Islander suppliers that are small and medium enterprises. http://www.deewr.gov.au/indigenous/employment/documents/suppliersiopfactsheet.pdf Commonwealth Procurement Rules (CPRs) For contracts over $80,000, there is an exemption for Aboriginal and Torres Strait Islander businesses built into the CPR. The exemption allows Commonwealth government agencies to contract directly with Aboriginal and Torres Strait Islander enterprises without the need to conduct a full tender process, on the condition that the procurement represents value for money. The exemption complements the IOP and seeks to increase access to the Australian Government procurement market for all Aboriginal and Torres Strait Islander small to medium enterprises. http://www.finance.gov.au/publications/finance-circulars/2011/docs/finance-circular-2011-02_commonwealth_procurement_guidelines.pdf DEEWR is a great example of how the CPR has been included in their internal procurement policy. DEEWR has applied an exemption of the requirement to obtain three quotes for contracts valued at less than $80,000 to allow DEEWR to seek services from Aboriginal and Torres Strait Islander businesses and bypass the competitive phase of procurement as long as value for money is achieved. Develop a communication strategy Creating an organisation-wide communications plan that includes a variety of internal and external channels will help reinforce the value proposition to your employees and connect your organisation with the community it serves. The internal focus should be to raise awareness of your organisation s commitment and successes in its Aboriginal and Torres Strait Islander supplier diversity program. It should also recognise internal advocates for the program. Externally the communication strategy should focus on raising awareness of your organisation s commitment to procuring with Aboriginal and Torres Strait Islander
businesses and communicate contracting and tender opportunities and pathways for potential Aboriginal and Torres Strait Islander business suppliers. The strategy should also focus on informing Aboriginal and Torres Strait Islander businesses and other stakeholders of the programs processes and how to initiate contact and conversation with your organisation. If you organisation is investing in Aboriginal and Torres Strait Islander supplier development initiatives, communicating these through your channels will raise awareness of these opportunities and help your organisation to connect with new suppliers who may have the potential to supply products and services to your organisation. Ensure you measure your success and review your policy Developing supplier diversity program metrics that meet organisational goals is critical to success. It is important that your organisation captures baseline data on your year to date dollars spent and percentages with Aboriginal and Torres Strait Islander businesses so you can track your progress. When establishing reporting timelines, ensure they align with the reporting requirements for partner organisations such as Supply Nation, Reconciliation Australia and DEEWR. 2.6. Run an Aboriginal and Torres Strait Islander supplier development program Investing in the development of Aboriginal and Torres Strait Islander businesses in your supply chain provides a direct benefit to your organisation, as the buyer, as it will enable your Aboriginal and Torres Strait Islander suppliers to grow and mature and will assist them to move up the value chain, creating a two-fold benefit: The supplier is in a better position to provide goods and services at a larger scope. Moving up the value chain increases the supplier s sustainability and efficiency, therefore reducing the risk that the business will be unsuccessful. Investing in development for your Aboriginal and Torres Strait Islander suppliers may take many forms, depending on your organisation and the opportunities you have available. It is important that any development or training initiatives are considered when designing your Aboriginal and Torres Strait Islander supplier diversity program to ensure the programs are adequately resourced both with financial resources and human resources. The resources section of this toolkit contains listings of organisations, program and resources that are specifically targeted toward assisting with the development of Aboriginal and Torres Strait Islander businesses.
Capacity building and development for potential suppliers In many cases, potential Aboriginal and Torres Strait Islander suppliers may only require further information about your organisation s procurement requirements in order to effectively tender for a contact. In this case, development initiatives can be designed to link in with your current procurement process. By having a designated person review potential business opportunities for Aboriginal and Torres Strait Islander supplier s products and services, your procurement team will have a greater understanding of what additional information or support potential suppliers may need in order to secure contracts. Consider opportunities for your procurement team to work closely with Aboriginal and Torres Strait Islander suppliers who have the potential to qualify to do business with your organisation. By exploring your procurement requirements one on one with them, this may assist them in meeting the quality, cost or delivery objectives where they are currently falling short. Some of your potential Aboriginal and Torres Strait Islander suppliers may require more focused development in order to meet your organisations procurement process to become a supplier. It may be worthwhile providing consistent and planned annual training events for Aboriginal and Torres Strait Islander suppliers, as this will assist your organisation to grow its overall supplier base and identify potential new suppliers. Ongoing development of contracted Aboriginal and Torres Strait Islander suppliers Providing development opportunities and training for your current Aboriginal and Torres Strait Islander suppliers will enhance their ability to perform, thereby making them more effective and efficient suppliers. Evaluating Aboriginal and Torres Strait Islander suppliers capabilities and capacity will assist your organisation in understanding what potential business opportunities would suit your current suppliers. Working closely with Aboriginal and Torres Strait Islander suppliers will ensure your organisation is continually increasing opportunities for them to supply their products and services. Skilled volunteering and mentoring Consider what opportunities are available to engage your employees in mentoring Aboriginal and Torres Strait Islander businesses to develop the skills and capabilities required to effectively tender for contracts. Mentoring and business development via skilled volunteering provides valuable opportunities for your employees to grow their leadership skills and business acumen while also building relationships with Aboriginal and Torres Strait Islander people.