Step 1: Make the Business Case for Supplier Diversity

Step 1: Make the Business Case for Supplier Diversity

Section Outline The Business Case Developing the Business Case: Slides 3-7 Examples of business cases: Slides 8-13 Supplier Diversity Definitions Definitions: 14-19

Developing the Business Case The business case: Grows supports the company s goals, aligns with the company s strategy and fits within the company s culture Identifies the value that the supplier diversity strategy adds to the company Is different for each corporation, company, or government agency There is no one-size-fits-all business case. The case for each company is different and the case is different across industries.

Developing the Business Case Leading companies find that, by strategically expanding their bid competitions to include minority-, womenveteran, GLBT-owned or small business suppliers, they: Realize cost efficiencies Leverage a wide range of high quality goods and services Support innovation with increased competition Sustain and build brand loyalty Develop key partnerships Support workforce diversity initiatives Tap into new markets and customers

Developing the Business Case The 4 Ws of the Business Case The written business case should answer four questions: What is the overall value that supplier diversity brings to this company and how does it impact the company s bottom line? Why does a supplier diversity strategy exist within this company? Where are we taking the company? How will the company know if the supplier diversity strategy is successful? How will goals be set Who is responsible for goals What s my incentive for meeting goals Who is responsible for the strategy s success? What roles will executives, managers, supply chain, and business unit/division leaders play in reaching the goals

Developing the Business Case Examples of key strategic drivers Cost Is driving down cost the most pressing issue? Is reducing cost that can be passed along to customers most important? Improved Performance For health-care companies is improved patient out-comes the key driver in how all decisions are made within the business operations of the hospital? For technology or other companies is acquiring innovative technologies the key strategy for improved financial performance? Gaining Market Share Is reaching the emerging Hispanic, Asian/Pacific Islander market important for profit growth? Is serving a new generation of veterans a key market segment for the company? In a business-to-business (B2B) or business-to-government (B2G) environment are there small business or other sub-contracting goals set by the buyer?

Developing the Business Case A Living Strategy The business case for supplier diversity is not static. It typically changes when one or more of the following changes: Internal changes: the business case will typically change when the company s goals, culture, or leadership changes External changes: the business case will typically change when the company s external environment changes. These may be economic, regulatory, competitor, or market condition changes.

General Motor s Business Case: An Evolution 1 General Motors Corp.'s supplier diversity program dates back to 1968 after race riots in Detroit a year earlier left 43 people dead and hundreds injured. The idea was to help provide jobs for the local community. GM provided loans to businesses near the company's headquarters that would be used to hire diverse employees from the community, says Linda Ware, GM's supplier diversity manager. By the early 1990s the program evolved and now includes more than 200 women- and minority-owned businesses. GM s goal is to use this strategy to expand its customer base as these diverse suppliers hire employees who will in purchase vehicles from GM. 1 Industry Week, November 12, 2011

Lockheed Martin s Business Case: Responding to Customer Needs 1 Lockheed Martin is a major supplier to the US federal government which sets goals for small business participation in a number of categories. These requirements drive Lockheed Martin s strategy The federal government's definition of a minority-owned business can include small businesses and veteran or service disabled veteran-owned companies. These smaller companies are often more nimble and innovative than larger suppliers, says Nancy Deskins, Lockheed Martin's director of corporate agreements and supplier diversity. "When you look at the passing of Steve Jobs and how he started his business in the garage of his parents' home, what these small businesses do is really bring innovation to our corporation in a much faster method to market than a real large corporation like Lockheed Martin might be able to do. 1 Industry Week, November 12, 2011

Boeing s Business Case: Access to Innovation 2 As Boeing increasingly focuses on its core competencies in high-end design, engineering and systems integration, we need suppliers that are highly focused on their own core competencies, continually striving to create additional value in everything they do. Small and diverse companies have proved in competition that they bring innovation, flexibility and strength to our supply base, as well as a passion for helping Boeing deliver the strongest possible solutions to our own customers. At The Boeing Company, we know that diversity brings strength, innovation and flexibility to our supply base. Tapping the skills and technologies available within the community of small and diverse businesses is vital to maintaining our position as the premier aerospace company in the world. 2 The Boeing Company s Website November 2012

Dell s Business Case: Building the Best Product 3 Diversity is a key aspect of how Dell does business, and diverse suppliers are an important component of our diversity-management model. Dell is committed to having a supply base that is reflective of our diverse customer base. We rely on the contributions of businesses that are owned by individuals of diverse backgrounds in order to deliver the best product, with the greatest value, to an increasingly diverse marketplace. Diverse suppliers that deliver creative product and service solutions have a positive impact on our customer relationships, the business community and the population at large. 3 Dell s Website November 2012

Nielsen s Business Case: Out of the Box Approaches 4 MWBEs are the growth engine of the U.S. economy and Nielsen is seizing the opportunities they provide through our Supplier Diversity efforts. MWBEs are a fresh group of quality, diverse suppliers that compete for procurement opportunities and provide Nielsen with out of the box approaches. MWBEs in our supply chain make positive contributions to our bottom line through cost savings while upholding our standard of excellence to exceed client expectations. We report our quarterly MWBE activity to eleven clients and this year, Nielsen s Supplier Diversity team provided RFP responses to six winning bids. As we know, satisfying the client is rule number one for client retention and expansion and we re proud that Supplier Diversity has a role in that effort. At Nielsen we embrace and support Supplier Diversity efforts because Supplier Diversity is good for business. 4 Nielsen s Website November 2012

Honda s Business Case: A Company that Society Wants to Exist 5 Honda strives to be a company that society wants to exist. Through our diverse array of products, and the processes required to produce, sell and use them, we impact society in many ways. Whether developing fuelefficient, low-emission products, minimizing the environmental impact of our global manufacturing operations, or assisting communities in need, Honda seeks to be a responsible company and community partner. Honda suppliers are critical to our ability to meet and exceed our customers expectations. Our Supplier Diversity Initiative helps us reach our goal of building a diverse supplier base. 5 Honda s Website November 2012

Supplier Diversity Key Terms and Definitions

Supplier Diversity Terms: Diverse Spend Diverse Spend Diverse Spend = A/G Where A is the aggregation of total dollars spent at both Tier I and Tier II with diverse businesses Where G is the total dollars spent that have been determined to be controllable

Supplier Diversity Terms: Controllable Spend Controllable Spend The amount of money that can be spent with diverse suppliers is limited to total external controllable spend categories which are negotiated and result in profits. Controllable expenses are incurred by a company where they have the option of choosing from various potential external suppliers. For example: Office suppliers, professional or consulting services. Non-Employee Compensation (appraisers, inspectors, temp help, contractors) Building Equipment (alterations, prop mgmt, maintenance, moves/installs and all out lease/maintenance on equip) Telecom & Data Processing Advertising and Promotion Professional Fees (attorney, professional recruiting, consultants, other professional fees) Other Expenses (postage/express mail, office suppliers, travel, training, loan expenses, collections, security, printing other outside services)

Supplier Diversity Terms: Uncontrollable Expense Uncontrollable Expense Non-Discretionary Expenses are those that cannot be controlled or restrained. Expenses incurred on an automatic and recurring basis and are not the results of a specific purchase. Examples of categories considered as an uncontrollable expense are the following: Taxes- Government agencies Property Taxes Private Households Utilities(light/water/gas/oil) Legal Fees (settlements) Licensed and Patent Items Charitable Contributions Possible Exception is Capacity Building Customer Rebates and Allowances Salaries, Wages and Benefits Travel Rent/Leases on Buildings Telephone Non-Domestic Spend

Supplier Diversity Terms: Exclusionary or Excluded Expense Exclusionary or excluded expenses are expenses that are controllable but for which there are no minority-, women, veteran, LGBT- or other diverse businesses from where your company can purchase them. For example, airfare to travel to client meetings is controllable but there are no airlines that would qualify as diverse thus this is an excluded expense.

Supplier Diversity Terms: Minority-, Women-, Veteran-Owned Business or Small Business Minority Business Enterprises (MBE) is a business that is at least 51 percent owned/operated/controlled by an African-American, Hispanic-American, Asian-Pacific American, Asian-Indian American, Native American, or veteran-owned with special disabilities. Women Business Enterprise (WBE) is defined as a business that is at least 51 percent owned/operated/controlled by a non-minority woman. Veteran Business Enterprise (VET), certified by DD214, is a U.S.- based small business at least 51 percent owned, operated and controlled by a non-active veteran or disabled service veteran. Small Business Enterprise (SBE) is defined as a business that meets definition criteria according to standards set by the Small Business Administration at www.sba.gov.