Procurement’s Role in Spend Analysis, Business Strategy and Supplier Diversity
Procurement departments are finally having their day, and successful companies are recognizing the key role they can play in achieving strategic goals, enforcing policy, and communicating results throughout the organization. As many organizations wrestle with current and new expectations on diversity, sustainability, and supply chain management — procurement is an underleveraged role in many organizations. Their unique, centralized position infiltrates the entire infrastructure, allowing for enhanced innovation, coordination, and data accumulation, which are essential elements to successfully execute a supplier diversity initiative.
Procurement is a Critical Strategic Hub
Procurement departments exist in all larger organizations, and while their influence on spend choices can vary, they consistently have access to and information about the entire array of suppliers servicing institutional needs. To respond to current and new expectations, it is critical that procurement departments embrace their roles as strategic advisers to the C-suite and all departments. This includes:
- Building relationships with internal partners
- Aligning with leaders on vision, goals, and what success looks like
- Developing a clear understanding of data sources, data strategy, and spend analytics
- Defining & understanding roles, agendas, and responsibilities to accelerate buy-in and change
- Developing a cohesive narrative that creates a competitive advantage
An enhanced mandate for a procurement department builds on its existing locus, which is uniquely integrated into all areas of the organization.
Procurement is an Important Strategic Partner Internally & Externally
While not the sole initiator of corporate expenditure, the procurement department is uniquely suited to spearhead efforts to institute, measure, and analyze supplier diversity within an organization. Most procurement departments have developed workflows to organize and manage the supply chain, and this can be enhanced with additional criteria to support diversity, supplier diversity, and sustainability efforts. As companies expand on their diversity efforts and establish goals for supplier diversity and sustainability, the procurement department can ensure that buying decisions align with company policy.
Leveraging Procurement to Capture Supplier Data & Drive Business Insights
In tandem with the Finance team, the right data can be collected to manage and measure success. This includes spend data, demographic information, and supplier profiles. The collection and reporting of this information can bring new data-driven insights that are largely self-funded and can guide the strategic direction of the company. Where corporate spend is not within the ambit of the procurement mandate (e.g., departmental discretionary funds), the role of the procurement department is uniquely suited to implement and track diversity initiatives in partnership with these alternate cost centers.
Procurement and the Importance of Supplier Diversity
These data-driven insights can demonstrate commitment to supplier diversity and make a statement to investors, employees, and surrounding communities that a company is going beyond a check-the-box policy to a sustained commitment to supplier diversity. This can enhance brand awareness, appeal, and build goodwill.
When developing a supplier diversity program, it is worth being clear on the benefits that include:
● Improve the reputation in your community: Corporations with physical locations need to consider their relationship with their neighbors. A supplier diversity program should include a local sourcing component, which will bring additional benefits to the community.
● Break the status quo and provide an expanded talent pool of suppliers: Just as diversity in hiring benefits the organization with innovative perspectives and approaches, diversity in suppliers opens the competition, encourages creativity and service, and delivers heightened loyalty to suppliers who are granted an important opportunity.
● Customers’ expectation of companies to increase Diversity, Equity. and Inclusion (DEI) efforts: today’s consumer expects brands to demonstrate a genuine commitment to issues beyond the basic transaction, and DEI is a major concern that can influence customer choice and loyalty. Including accurate supplier diversity data in reporting on DEI initiatives delivers on this promise.
● Meet regulatory requirements and enhance your Environmental, Social, and Governance (ESG) performance: Corporations who transact business with government entities will be more competitive if they can demonstrate a DEI component in their business. Multi-tiered supplier diversity can make an important difference when pursuing a government contract.
● Create loyalty with your clients: Just as brand selection is influenced by an organization’s commitment to concerns beyond commerce, loyalty of existing clients is enhanced by a demonstrable commitment to DEI.
Using the existing infrastructure, systems, and expertise of the procurement department allows an organization to build on this knowledge to capture existing data about supplier diversity, identify areas of improvement, streamline reporting, and create a story of success and innovation. The adaptation of procurement to this role may take some internal effort, but it is well worth the outcomes it will generate.
About Florence Amate
Florence Amate is the Founder and President of Laisar Management Group. A management consulting company based in Silver Spring, Maryland, that is helping organizations rethink the role Supplier Diversity and Sustainability plays in their overall business strategy. Organizations in every industry have relied on Florence and her team to shape their community engagement and sustainability strategies.
Florence’s belief that companies are stronger when they take the time to understand their common interest within the communities they choose to operate has been evident in the projects she has worked on over the last 12 years. Since 2011, she has successfully developed and managed economic and workforce inclusion solutions utilizing various proprietary business and data analytics applications. Organizations have embraced how internal and external data can be used to improve their bottom line, tell their story and build stronger and more vibrant communities.
About Laisar
Laisar provides supplier diversity, sustainability services and solutions. Laisar’s innovative, and integrated solutions for economic inclusion and workforce utilization, shapes community engagement and overall corporate strategies. We work with clients to develop and execute programs that bring socio-economic benefits to the communities where they live, work and play.
