How CPG Brands Can Deliver on Supplier Diversity Promises

By Costas Xyloyiannis

Cover Image Attribute: This image is computer-generated using AI and is intended solely for illustrative purposes./ INDRASTRA-CREATIVES-AI202404002
Cover Image Attribute: This image is computer-generated using AI and is intended solely for illustrative purposes./ INDRASTRA-CREATIVES-AI202404002

There are many good reasons for global consumer packaged goods (CPG) brands to have supplier diversity programmes. For one, they face expectations from regulators, shareholders, and consumers, which if missed impact sales figures and share price. Further, brands that support supplier diversity may enjoy economic benefits as a by-product and of course, they can make a positive impact.
 

Reasons aside, supplier diversity is a top-level issue with at least eight of the world’s top 10 CPG brands by spend1 having stated goals in this area. For example2, Unilever has committed to spend €2 billion annually with diverse businesses by 2025. By the same year, Mars intends to reach £1 billion globally in diverse business spend and have at least 60% of its suppliers actively promoting diversity programmes within their organizations. Other brands including Mondelēz International, Coca-Cola and Nestlé are also dedicated to sourcing from businesses that are 51% owned by a historically under-represented group. 

Likely, more CPG brands will continue to make supplier diversity a priority. 

While the leaders of global brands embarking on this journey plan to drive spend to diverse suppliers, in practice, their teams on the ground face an obstacle: diverse suppliers are difficult to find. Only a portion are indeed certified as ‘diverse’, and those who are certified wouldn’t necessarily be skilled to match specific market needs.   

The challenge of discovering diverse suppliers must be addressed for progress to occur. This presents CPG leaders with an opportunity to tee up their teams for success by helping them add robust sourcing processes. To achieve this, Supplier Diversity teams can follow a three-phase approach…   

Take stock of your existing supplier diversity status

Before teams can deliver on supplier diversity commitments, it’s sensible to determine how many diverse suppliers the brand already works with. This is done through a combination of surveying suppliers and using data enrichment services to match against existing databases of diverse suppliers. 

When it comes to actioning these surveys, teams should take care to offer suppliers a positive and helpful experience, because it will impact the quality of results. For example, if suppliers receive questions that don’t apply to them or that aren’t in their first language, this will obstruct their ability to respond most helpfully. At best, it will slow them down and at worst, they may not even respond. 

So, the idea is to remove any barriers to them providing reliable feedback. A great way to do this is through segmenting suppliers into categories and communicating with them accordingly. Whatever the approach to surveying suppliers, let it be congruent with acting like a “customer-of-choice” because this is likely to get the most out of them. A recent HICX survey revealed that a staggering 73% of suppliers for some of the world’s biggest manufacturers would “go the extra mile” for their most important customer if this was also a customer-of-choice. 

Proactively grow your number of diverse suppliers

Once the number of diverse suppliers working with the brand has been determined, teams can grow their selection by improving how they source. 

First, buyers and requestors should be guided to proactively work with diverse suppliers. This can be done with education and policies, and by applying some practical steps. For instance, teams should define their criteria for what qualifies as a diverse supplier in their business and territories, and then use online directories and desktop research and ask contacts for recommendations. Any potential diverse suppliers can then be evaluated for suitability. 

Next, once new diverse suppliers are found, they must be onboarded with processes that capture their information reliably so that the brand can offer them a helpful experience going forward. 

In establishing these policies, Supplier Diversity teams will benefit from the help of Procurement because the function already works with and onboards suppliers. Should Procurement, then, be taking an advisory role in helping buyers to drive spend with diverse suppliers? 

Lock-in progress by maintaining supplier data

Finally, with diverse suppliers found and onboarded, their data must remain accurate. This step is crucial because teams need a clear view of the supply chain to deliver supplier diversity promises. But in reality, many supplier diversity teams from CPG brands face a barrier: they can’t see who their suppliers (some tens of thousands of them) are and what they’re doing. For instance, teams need to know: where is this supplier based? What qualifies them as ‘diverse’? Do we have the same number of suppliers from diverse businesses today as we did yesterday? Taking too long to resolve these questions, or not being able to answer them at all, can expose the brands to report errors and inefficient operations. 

If leaders can keep supplier data accurate, then they can reveal a bright and clear supply chain view and arm their teams to deliver the least risky most impactful supplier diversity plans possible. Encouragingly, there is a route to solving the supplier data problem, in which some forward-thinking brands, such as Mondelez and Unilever, are taking the lead. 

There are three tried and tested ways to tackle supplier data quality. First, reject anything less than 100% accuracy in supplier master data. Create the conditions in which this goal can be realised by transforming the digital procurement environment so that master data can take priority. Next, ensure that data related to every new supplier relationship – diverse or standard – gets captured upfront with structured, controlled, and dependable processes. And finally, this and any new data that enters the system must be protected with data governance, so that a reliable golden record can be maintained.

At the end of the day, by supporting Supplier Diversity teams to add robust sourcing processes, CPG leaders can arm them with the tools needed to deliver on ambitious goals and leave a positive impact. 

About the Author:

Costas Xyloyiannis is co-founder and CEO of HICX, the leading supplier experience management solution. Costas founded HICX in 2012 to address the challenges of bad supplier data in the enterprise. 

He holds a Master’s degree in Computer Science from Imperial College London and has 20 years’ experience in helping some of the world’s largest companies to take control of their supplier data and deliver a superior supplier experience.

He strongly believes in the importance of data and supplier-centricity as a foundation for digital transformation in business and is a regular speaker and contributor on this topic. 

References

1. Global Data Top 10 CPGs by sales list

2. Unilever annual report, Mars Supplier Inclusion & Diversity Policy Statement and website, Mondelez website, Coca-Cola website, AB InBev Supplier Diversity Program of the Year announcement, PepsiCo’s 2023 DEI Annual Report, Nestle website, P&G website, L’oreal commitment (no numbers) stated website

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IndraStra Global: How CPG Brands Can Deliver on Supplier Diversity Promises
How CPG Brands Can Deliver on Supplier Diversity Promises
By Costas Xyloyiannis
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https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwp0QwImAk9lQpnGj6QZf07YZVL26-8-lg_gDLGwGZdz2srHrOIuIGNdUcw7KBokH1evQn1WfiiuwTBw1WGtCq4EI6nVcUd4U7AQ26Q4OimKhhpTxhrpLxo9pYZJSs9VUTISjSNqj31HGOpyYPK6NrTKPr1CheFQ8zdWiGaKduDqRgT4UrV2sZi391jII/s72-w640-c-h376/INDRASTRA-CREATIVES-AI202404002.jpg
IndraStra Global
https://www.indrastra.com/2024/04/how-cpg-brands-can-deliver-on-supplier.html
https://www.indrastra.com/
https://www.indrastra.com/
https://www.indrastra.com/2024/04/how-cpg-brands-can-deliver-on-supplier.html
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