US-based supplier diversity programs often represent one of the true success stories of niche-based initiatives that can have real impact with limited budget and resources. Most programs at larger companies still only have a single or handful of dedicated resources and budgets – at best – for supporting technology and data enrichment to manage and track supplier credentials, and reporting pales in comparison to other procurement solution areas. Yet the quantification of program results, including those in which diversity improvement is mandatory in government supply chains, often speaks for itself.
For this reason, might early payment programs, either by requirement or encouragement, be the next logical step to link to supplier diversity efforts? As my colleague David Gustin recently noted, in May the US government “sent around an optional data request to the 50 SupplierPay pledges to begin the process of measuring how the program is doing. The request includes a group of quantitative and qualitative questions. This volunteer survey is the first step in analyzing the pledges effectiveness.”
Further, the survey will go out and collect data around:
- Average time to pay small- and minority-owned businesses (this will be self-defined by the pledge and not the Small Business Administration)
- Improvement in time to pay small suppliers from date of pledge
- Total spend and percent covered by small suppliers
The results of the survey will be fascinating to watch. Such information could potentially factor into policy or government acquisition requirements for larger firms to not only make sure a certain percentage of indirect or direct spend – as defined by lower-tier or immediate tier-1 suppliers – goes to diverse suppliers but also how these suppliers are paid.
No doubt, one of the challenges in measuring payment terms and diversity spend will be how the percentage of spend counted under such programs is paid by tier-1 or tier-2 suppliers, not the procurement organization itself. But if this point, too, can be addressed through multi-tier reporting – much like diversity reporting initiatives themselves – it shouldn’t be much of an issue to factor this into the equation.
(Cross-posted @ Spend Matters)