the hackett group overview - ncsdp.com€¦ · the hackett group 2008 supplier diversity study...

45
The Hackett Group 2008 Supplier Diversity Study Results: Insights into Program Performance and Practices Kurt Albertson Director of Advisory Services January 09, 2009 Results for Participating Organizations

Upload: lecong

Post on 30-May-2018

215 views

Category:

Documents


0 download

TRANSCRIPT

The Hackett Group 2008 Supplier Diversity Study Results: Insights into Program Performance and Practices

Kurt Albertson

Director of Advisory Services

January 09, 2009

Results for Participating Organizations

Page 2

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Statement of Confidentiality and Usage Restrictions

This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a

competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for

any purpose is strictly prohibited without the prior written consent of The Hackett Group. If a contract is awarded to The Hackett Group, as a result of, or in

connection with the submission of this document, any right to duplicate, use, or disclose all or any part of the contents contained herein will be subject to the terms

and conditions of a separate agreement.

Copyright © 2009 The Hackett Group, World-Class Defined. All rights reserved.

Page 3

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Table of Content

Supplier Diversity Study Overview

Supplier Diversity Objectives

Supplier Diversity Spend Analysis

Measuring Supplier Diversity Performance

Keys to a Successful Supplier Diversity Program

Supplier Diversity Program Governance

The Impact of Global Sourcing on Supplier Diversity

Looking Ahead

Page 4

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Continuing Economic Instability and Global Markets will Challenge Supplier Diversity Managers to Create Real Value and Rethink Program Scope

A complex set of objectives drive supplier diversity programs with direct to consumer organizations stressing

brand recognition and non-direct to consumer organizations emphasizing customer and government

requirements. ..both objectives can be directly tied to revenue which is critical to success

Nearly three quarters of diversity suppliers have less than $100k in annual spend with any one participant

and account for less than six percent of the total supplier diversity spend reported. An organization’s

objectives should dictate the optimal approach for their diverse supplier adoption strategy

Temporary staffing, facilities mgmt, construction services, contract manufacturing, and IT consulting were

identified by participants as the categories with the highest opportunity for diversity suppliers

While percent of spend with diverse suppliers is tracked by most participants there are a broad range of

metrics measured depending on an organization’s objectives and we are seeing more organization

quantifying the value delivered from these programs

Participation in supplier diversity associations, embedding practices within existing processes, and

executive level support were identified as having the highest positive impact on supplier diversity success

while availability of resources and acquisitions of diverse suppliers had the greatest negative impact

Procurement is typically responsible and accountable for supplier diversity programs although a broad array

of functions are consulted and informed with the CEO most often reviewing program performance

Global sourcing is critically/very important for more than two-thirds of participants and over half believe

global sourcing will have a negative impact on supplier diversity programs

Page 5

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Supplier Diversity Study Objectives and Scope

The Supplier Diversity Study was conducted to better understand…

The objectives of organizations related to their supplier diversity programs

The measurements that organizations use to gauge success against these objectives

The factors that drive and hinder supplier diversity success

The impact of globalization on supplier diversity programs

The Supplier Diversity Study focused on…

Supplier Diversity performance within the United States

In many instances supplier diversity was defined broadly and based on the scope of the

study participants

Page 6

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Participants Ranged Across a Broad Types of Industries with an Even Split Between Service and Manufacturing Segments

Industry Demographics

Financial, Insurance, and Professional Services

Pharmaceuticals & Biotechnology

Utilities and Chemicals

Consumer Products and Retail

Healthcare Equipment & Services

Telecommunication and Transportation Services

Technology and Automotive

Transportation

$4,797

$17,747

$22,578

US Spend US Revenue Global Revenue

Average Participant Size(million)

Page 7

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Nearly All Participants Reported Metrics based on Suppliers in the United States Although 78% of the Participants were Global Companies

Participant Geographic Presence

Global Presence

Regional presence within U.S.

National presence within U.S.

North American presence

Scope of Supplier Diversity Program

Spend with suppliers both within and outside the U.S. and they are tracked as part of the same metrics

No plans to include spend with non-U.S. suppliers within the next 3 years

Plans to include spend with non-U.S. suppliers within the next 3 years

Spend with suppliers in the U.S. and also track separately spend for non-U.S. suppliers

Page 8

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Table of Content

Supplier Diversity Study Overview

Supplier Diversity Objectives

Supplier Diversity Spend Analysis

Measuring Supplier Diversity Performance

Keys to a Successful Supplier Diversity Program

Supplier Diversity Program Governance

The Impact of Global Sourcing on Supplier Diversity

Looking Ahead

Page 9

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

While the Need to Tie Supplier Diversity Objectives to Tangible Benefits is Critical Particularly in Today’s Economic Environment, Intangible Benefits Still Rank High on the Priority List

9%

13%

16%

16%

38%

13%

28%

31%

31%

31%

34%

28%

47%

38%

31%

38%

28%

28%

13%

34%

31%

19%

19%

16%

22%

22%

6%

3%

3%

9%

13%

0% 25% 50% 75% 100%

Improve service/ quality through local supply

Achieve social recognition by industry and supplier diversity associations

Increase market penetration/ recognition in targeted diversity markets

Drive social and economic benefits within targeted communities

Meet supplier diversity requirements of customers/ government contracts

Drive corporate image through supplier diversity initiatives

Support corporate culture around diversity and social responsibility

Critically Important Very Important Important Somewhat Important Not Important

Tangible Benefit Intangible Benefit

Page 10

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

There Does Appear to be A Strong Correlation Between the Level of Importance Organizations Place on Tangible and Intangible Objectives and Supplier Diversity Performance

5

2.5

High Importance Lower Importance

Intangible Objectives

Times Recognized or Cited versus Importance of Intangible

Objectives (median)

19%

5%

High Importance Lower Importance

Tangible Objectives

Percent of Spend with Diverse Supplier versus Importance of Tangible Objectives (median)

Page 11

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Many Organizations Have Multiple Critical/Very Important Objectives for their Programs which Tends to Drive Focus and Ultimately Performance

13%

9%

13%

6%

25%

9%

3%

22%

0 1 2 3 4 5 6 7

Number of Critical or Very Important Objectives Identified by Percent of

Organizations

5

4

0

15%

5%

7%

Many Moderate Few

Performance versus Number of Critical or Very Important Objectives

Recognized/Cited

% of Diverse Supplier Spend

Page 12

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Direct to Consumer Organizations Tend to Put Greater Importance on Objectives Tied to Brand Recognition within Target Markets While Non-Direct to Consumer Organizations Emphasized Requirements of Customers and Government

3.93.7 3.8

3.4

3.9

3.4 3.4

2.6

3.23.5

3.1

3.9

3.4

4.0

Increase market penetration/

recognition in targeted diversity

markets

Drive social and economic benefits

within targeted communities

Drive corporate image through

supplier diversity initiatives

Improve service/ quality through local

supply

Support corporate culture around

diversity and social responsibility

Achieve social recognition by

industry and supplier diversity

associations

Meet supplier diversity

requirements of customers/ government

contracts

Importance of Objectives for Supplier Diversity Program

Direct to Consumer Non-Direct to Consumer

Importance of Supplier Diversity Objectives

5 – Critically Important 3 – Important 1 – Not Important

4 – Very Important 2 – Somewhat Important

Page 13

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Table of Content

Supplier Diversity Study Overview

Supplier Diversity Objectives

Supplier Diversity Spend Analysis

Measuring Supplier Diversity Performance

Keys to a Successful Supplier Diversity Program

Supplier Diversity Program Governance

The Impact of Global Sourcing on Supplier Diversity

Looking Ahead

Page 14

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

70% of the Diverse Suppliers Have Less than $100k in Annual Spend Although these Suppliers Represents only about 6% of Total Diversity Spend

69.9%

23.2%

5.3%0.8% 0.4% 0.3% 0.1% 0.0% 0.0%

< $100K $100K -$1M

$1M -$5M

$5M -$10M

$10M -$20M

$20M -$50M

$50M -$100M

$100M -$250M

> $250M

Percent of Diversity Suppliers by Average Annual Spend with Supplier

5.6%

20.4%

25.6%

9.0%10.2%

14.5%

8.4%

4.9%

1.4%

< $100K $100K -$1M

$1M -$5M

$5M -$10M

$10M -$20M

$20M -$50M

$50M -$100M

$100M -$250M

> $250M

Percent of Diversity Spend by Average Annual Spend with Supplier

Organizations targeting percent of diverse supplier spend may be best served with several large divers suppliers

while organizations targeting corporate image market awareness may be best served developing smaller suppliers

Page 15

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

There Tends to be a Correlation with Average Spend per Diverse Supplier and Percent of Total Spend with Diverse Suppliers

$592,089

$288,705

$116,390

1st Quartile Median 3rd Quartile

Avearge Spend per Diverse Supplier

11%

5%

Top Half for Average Spend per Supplier

Lower Half for Average Spend per Supplier

Supplier Diversity Spend as a Percent of Total Spend

Page 16

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Category Ranking Across Multiple Metrics Shows the Categories with the Highest Supplier Diversity Opportunity (slide 1 of 2)

Category of Spend

Percent of Participants

Indicating Some Diversity

Spend

Average Diversity Spend

per Participant Reporting

Diversity Spend for

Category

Average Diversity Spend

as a Percent of

Participant Total Spend

Category Diversity Spend

as a % of Total Study

Diversity Spend

Contract Manufacturing Services

Temporary Staffing/ Contract Services

Construction Services

IT - Consulting Services

Facility Management and Maintenance Services

Engineering Services (non-IT)

Other Direct Materials

Packaging Materials

Facility Maintenance Supplies (e.g. MRO)

Other Professional Services

Other Services

Legal Services

Research & Development Services

Logistics Services

Capital Assets (e.g. mfg equipment)

IT - Software

Marketing - Professional Agency

Supply Chain Services

Consulting/Audit/Tax Services

IT - Other Services

Parts and Assemblies

LowestRanking by Spend CategoryHighest Note: Definitions for calculations are

included at the end of this report

Page 17

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Category Ranking Across Multiple Metrics Shows the Categories with the Highest Supplier Diversity Opportunity (slide 2 of 2)

Category of Spend

Percent of Participants

Indicating Some Diversity

Spend

Average Diversity Spend

per Participant Reporting

Diversity Spend for

Category

Average Diversity Spend

as a Percent of

Participant Total Spend

Category Diversity Spend

as a % of Total Study

Diversity Spend

Commercial Print

Warehousing and Distribution Services

IT - Hardware (e.g. computers and servers)

Office Furniture and Equipment

Training and Development Services

Executive Search/Staffing Services

Telecom Services (voice and data)

HR Services

Purchased Finished Goods for Resale

Office Supplies

IT - Maintenance Services

Telecom Equipment

Other Materials

Bulk Commodities

Airlines, Car rentals, Lodging

Subscription and Memberships

Catering and Food

Real Estate

IT - Peripherals and Consumables

Other T&E Expenses

Travel Agency

LowestRanking by Spend CategoryHighest Note: Definitions for calculations are

included at the end of this report

Page 18

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Percent of Participants Indicating Some Diversity Spend by Category

0% 20% 40% 60% 80% 100%

Other Materials

Bulk Commodities

Supply Chain Services

Travel Agency

Parts and Assemblies

Purchased Finished Goods for Resale

Capital Assets (e.g. mfg equipment)

IT - Peripherals and Consumables

Telecom Equipment

Other T&E Expenses

Other Direct Materials

Warehousing and Distribution Services

Real Estate

Other Services

Airlines, Car rentals, Lodging

Executive Search/Staffing Services

Subscription and Memberships

Packaging Materials

Contract Manufacturing Services

Logistics Services

Research & Development Services

IT - Maintenance Services

IT - Other Services

Engineering Services (non-IT)

Office Furniture and Equipment

Catering and Food

Construction Services

HR Services

Consulting/Audit/Tax Services

IT - Software

IT - Consulting Services

Commercial Print

Training and Development Services

Legal Services

Other Professional Services

Facility Maintenance Supplies (e.g. MRO)

Telecom Services (voice and data)

Office Supplies

IT - Hardware (e.g. computers and servers)

Temporary Staffing/ Contract Services

Marketing - Professsonal Agency

Facility Management and Maintenance Services

Page 19

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Average Diversity Spend per Participant Reporting Diversity Spend for Category

$0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000

Travel Agency

Other Materials

Other T&E Expenses

Real Estate

Bulk Commodities

IT - Peripherals and Consumables

Catering and Food

Subscription and Memberships

Office Supplies

Telecom Equipment

IT - Maintenance Services

Office Furniture and Equipment

Training and Development Services

HR Services

Executive Search/Staffing Services

Purchased Finished Goods for Resale

Airlines, Car rentals, Lodging

Telecom Services (voice and data)

Commercial Print

IT - Hardware (e.g. computers and servers)

Parts and Assemblies

Marketing - Professsonal Agency

Warehousing and Distribution Services

Logistics Services

Research & Development Services

IT - Software

Consulting/Audit/Tax Services

Facility Maintenance Supplies (e.g. MRO)

IT - Other Services

Legal Services

Engineering Services (non-IT)

Other Professional Services

Capital Assets (e.g. mfg equipment)

IT - Consulting Services

Facility Management and Maintenance Services

Temporary Staffing/ Contract Services

Other Direct Materials

Packaging Materials

Construction Services

Other Services

Supply Chain Services

Contract Manufacturing Services

Average includes

participants reporting

spend for a category

Page 20

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Average Diversity Spend as a Percent of Participant Total Spend by Category

0% 1% 2% 3% 4% 5%

Other T&E Expenses

Travel Agency

Catering and Food

IT - Peripherals and Consumables

Airlines, Car rentals, Lodging

Real Estate

Office Supplies

Telecom Services (voice and data)

Subscription and Memberships

IT - Maintenance Services

HR Services

Telecom Equipment

Purchased Finished Goods for Resale

Training and Development Services

IT - Hardware (e.g. computers and servers)

Bulk Commodities

IT - Other Services

Other Materials

Executive Search/Staffing Services

Warehousing and Distribution Services

Commercial Print

Office Furniture and Equipment

Consulting/Audit/Tax Services

Supply Chain Services

Legal Services

Other Professional Services

IT - Software

Marketing - Professsonal Agency

Other Services

Parts and Assemblies

Capital Assets (e.g. mfg equipment)

Facility Management and Maintenance Services

Logistics Services

Facility Maintenance Supplies (e.g. MRO)

Research & Development Services

Engineering Services (non-IT)

IT - Consulting Services

Packaging Materials

Construction Services

Temporary Staffing/ Contract Services

Other Direct Materials

Contract Manufacturing Services

Average includes

participants reporting

spend for a category

Page 21

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Category Diversity Spend as a Percent of Total Study Diversity Spend

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Other Materials

Travel Agency

Bulk Commodities

Other T&E Expenses

Real Estate

IT - Peripherals and Consumables

Subscription and Memberships

Telecom Equipment

Catering and Food

Purchased Finished Goods for Resale

IT - Maintenance Services

Executive Search/Staffing Services

Airlines, Car rentals, Lodging

Office Supplies

Office Furniture and Equipment

HR Services

Parts and Assemblies

Training and Development Services

Telecom Services (voice and data)

Commercial Print

Warehousing and Distribution Services

IT - Hardware (e.g. computers and servers)

Logistics Services

Research & Development Services

Capital Assets (e.g. mfg equipment)

Marketing - Professsonal Agency

IT - Software

Consulting/Audit/Tax Services

Supply Chain Services

IT - Other Services

Other Direct Materials

Other Services

Facility Maintenance Supplies (e.g. MRO)

Packaging Materials

Legal Services

Engineering Services (non-IT)

Other Professional Services

IT - Consulting Services

Contract Manufacturing Services

Construction Services

Temporary Staffing/ Contract Services

Facility Management and Maintenance Services

Page 22

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Woman-Owned Businesses Represented on Average 2.4 Percent of Total Spend for Those Reporting Spend within Diversity Group

2.35%

2.01%

1.30%

1.01%0.86%

0.72%

0.28%0.21% 0.15%

Woman Owned Other Asian-Pacific Owned

Hispanic Owned Asian-Indian Owned

Black Owned Service-disabled, Veteran

Owned

Native American Owned

HUB Zone Owned

Average Diversity Spend as a Percent of Total Spend by Diversity Category

Percentages include participants

reported spend for diversity category

79% of total reported supplier diversity spend was from 1st tier suppliers while 21% from sub-tier suppliers

1Other includes both diversity groups not identified as well as minority spend that participants were unable to allocate across specific diversity groups

Page 23

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Table of Content

Supplier Diversity Study Overview

Supplier Diversity Objectives

Supplier Diversity Spend Analysis

Measuring Supplier Diversity Performance

Keys to a Successful Supplier Diversity Program

Supplier Diversity Program Governance

The Impact of Global Sourcing on Supplier Diversity

Looking Ahead

Page 24

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Percent of Spend with Diverse Suppliers is Tracked by Most Participants but there are Also a Broad Range of Other Metrics Measured Depending on an Organization’s Objectives

93%

46%50%

32%

11%7%

32%

18%14%

4% 4%

89%

Percent spend with diverse

suppliers

Diverse suppliers as a percent of total

suppliers

Percent of spend with

small businesses

Small business suppliers as a percent of total

suppliers

Percent increase in

revenue associated with

program

Percent increase in

market share associated with

program

Percent of RFPs for which

diversity suppliers

participated

Dollar value of RFPs for which

diversity suppliers

participated

Percent customer

proposals won for which your

diversity program was a

criteria

Dollar value of customer

proposals won for which diversity

program was a criteria

Dollar value of economic impact on targeted

communities

Number of times diversity

program recognized by

industry

Percent of Participants Reporting Metrics

Page 25

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Percent of Spend and Percent of Suppliers Reported by Participants: Diverse Suppliers and Small Businesses

18%

8%

4%

15%

8%

4%

1st Quartile Median 3rd Quartile

Diverse Suppliers

Percent of Spend with Diverse Suppliers

Percent of Suppliers that are Diverse

28%

17%

5%

40%

14%

5%

1st Quartile Median 3rd Quartile

Small Businesses

Percent of Spend with Small Businesses

Percent of Suppliers that are Small Businesses

Metrics were self-reported across all supplier diversity categories considered in-scope of the participants program

Page 26

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Organizations Also Commonly Measured Percentage of RFPs Diverse Suppliers Participated and Recognition Received by Industry Groups

50%

20%

10%

1st Quartile Median 3rd Quarile

RFPS for which Diversity Suppliers Participate

5

4

2

1st Quartile Median 3rd Quarile

Number of Times Recognized or Cited by Industry (annual)

Page 27

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Table of Content

Supplier Diversity Study Overview

Supplier Diversity Objectives

Supplier Diversity Spend Analysis

Measuring Supplier Diversity Performance

Keys to a Successful Supplier Diversity Program

Supplier Diversity Program Governance

The Impact of Global Sourcing on Supplier Diversity

Looking Ahead

Page 28

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Participants were Asked the Level of Impact that a Variety of Factors Have Had on the Success of the Supplier Diversity Programs

The factors that most negatively impact success tend to be those around the availability of diverse suppliers and internal resources

to while some of the factors that most drive success are around internal and external networking. Executive support and embedding

supplier diversity practices into existing processes has the highest level of positive impact.

0% 25% 50% 75% 100%

Recent acquisition(s) involving your diverse supplier(s)

Business Process Outsourcing Initiatives

Recent acquisition(s) involving your organization

Support from existing suppliers for driving 2nd tier diverse supplier participation

Tying diversity objectives with higher level company objectives (e.g. revenue, market share)

Availability of internal resources to support program

Supplier development and mentoring programs

Availability of qualified diverse suppliers

Aligning Supplier Diversity Program with Corporate Social Responsibility Initiative

Acceptance by Business Units/ Operations

Level of engagement with internal stakeholders

Networking with other organizations within your industry

Level of support from Executives of your organization

Embedding supplier diversity practices within existing Procurement processes

Participation in diverse supplier associations

Significant Positive Impact Moderate Positive Impact Minimal or No Impact Moderate Negative Impact Significant Negative Impact

Page 29

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Participation in Associations, Embedding Practices within Existing Processes, Executive Level Support and Networking Had the Highest Positive Impact on Program Success

87%

83%

79%77%

Participation in diverse supplier associations

Embedding supplier diversity practices within

existing Procurement processes

Level of support from Executives of your

organization

Networking with other organizations within your

industry

Percent of Participants Stating the Factor Had a Positive Impact on Supplier Diversity Program

• Participating in diverse supplier associations provides access to diverse supplier, networking opportunities, information on

diversity events, and best practices

• Embedding supplier diversity requirements into existing sourcing, purchasing, and supplier management processes helps

insure that supplier diversity objectives are aligned with the overall objectives of Procurement

• Executive level support for supplier diversity programs is critical as program objectives are most commonly aligned with high-

level business objectives like revenue growth and corporate image

• Many organizations noted that networking with industry peers has been helpful in exchanging best practices, identifying new

sources of supply, and driving adoption of 2nd tier divers supplier adoption

Page 30

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Availability of Resources and Acquisitions of Diverse Suppliers were Factors Most Stated as Having a Negative Impact on Supplier Diversity Programs

43%

26% 23% 21%

Availability of internal resources to support

program

Recent acquisition(s) involving your diverse

supplier(s)

Availability of qualified diverse suppliers

Business Process Outsourcing Initiatives

Percent of Participants Stating the Factor Had a Negative Impact on Supplier Diversity Program

• There was a broad range of available resources allocated to support supplier diversity programs among participants but an

unclear ROI that may exist within some programs likely drives an under allocation of resources

• As diverse suppliers become larger and more successful they are often acquired losing their diverse supplier status and

having a significant impact on an organization’s supplier diversity metrics

• The availability of qualified diverse supplier is hindering success, however, only half of the participants identified supplier

development and mentoring programs as a driver of success and some organizations identified the availability of qualified

diverse suppliers as an enabler of their program’s success

• Outsourcing initiatives can impact diverse suppliers by reallocating services to an outsource provider

Page 31

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Table of Content

Supplier Diversity Study Overview

Supplier Diversity Objectives

Supplier Diversity Spend Analysis

Measuring Supplier Diversity Performance

Keys to a Successful Supplier Diversity Program

Supplier Diversity Program Governance

The Impact of Global Sourcing on Supplier Diversity

Looking Ahead

Page 32

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

We Also Looked at the Level of Investment that Organizations Make into Supplier Diversity Programs from a Resourcing and Budgeting Perspective

$4,004

$1,642

$808

1st Q Median 3rd Q

Level of Supplier Diversity Spend per Dollar of Supplier

Diversity Budget1

1Training, sponsorships, tradeshows, advertising,

memberships, promotions, etc. related to

supplier diversity program

$137

$60

$27

1st Q Median 3rd Q

Supplier Diversity Spend ($millions) per Supplier

Diversity FTE

53%38%

6%

3%

Source of Supplier Diversity Budget

Separate budget maintained for supplier diversity related expenses

Functional budget (e.g. Procurement) supports supplier diversity expenses

Funding approved on a per request basis

No funds allocated for supplier diversity expenses

Page 33

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Procurement is Most Typically the Responsible and Accountable Function for Supplier Diversity Programs Although A Broad Array of Functions are Consulted and Informed

Responsible Accountable Consults Informed

Procurement 53% 41% 6% 0%

Sales & Marketing 16% 0% 31% 28%

Human Resources 3% 3% 38% 38%

Communications 6% 3% 31% 44%

Finance 6% 13% 25% 25%

Businesses/ Operations 16% 0% 25% 47%

CEO 3% 9% 13% 53%

Board of Director 0% 0% 6% 59%

Responsible –This is the person or group responsible for performing the activities associated with the supplier diversity program.

Accountable – To whom the responsible person is accountable; this is the person who is held accountable for the supplier

diversity program.

Consults - Provides input and advice to the responsible group or person; these are the people communicated with prior to

actions being taken or decision made.

Informed – Must be notified of results, but need not be consulted; these are the parties who are notified about an action after it

has been performed.

Page 34

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Multiple Executives Typically Review Supplier Diversity Status on an Annual Basis with CEOs Leading the Way at Most Organizations

78%

69%

38% 38%

31%

9%6%

CEO Procurement Leader

COO HR Leader Marketing/ Sales Leader

Chief Diversity Officer/ Council

Board of Directors

Review Supplier Diversity Status At Least Annually

5

3

2

1st Quartile Median 3rd Quarile

Number of Executives reviewing supplier diversity performance at

least once per year

Page 35

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

A Centralized Procurement Structure was Predominate and Participants Most Often Positioned Supplier Diversity as a Stand-Alone Initiative

29%

61%

10%

Procurement Governance Structure

Centrally led (coordinated centrally but executed de-centrally)

Predominately centralized

Predominately decentralized

63%

34%

22%

16%13%

Stand-alone initiative focused solely on supplier diversity

Part of a broader corporate social

responsibility initiative

Part of a broader initiative around

building/maintaining organization's culture

Part of a broader initiative focused on improving corporate

image

Other

Positioning of Supplier Diversity Program

Page 36

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Most Organizations have Fairly Mature Programs and 60% Leverage Diversity-Owned Marketing Agencies to Help Target Diverse Markets

18

10

7

1st Quartile Median 3rd Quarile

Number of Years Supplier Diversity Program has been in Place

10%

17%

33%

13%

17%

10%

Level of Importance for Leveraging Diversity-Owned Marketing/ Advertising Agencies to

Reach Diverse Markets

Critically important

Very important

Important

Somewhat important

Not an important

Unknown

Page 37

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Table of Content

Supplier Diversity Study Overview

Supplier Diversity Objectives

Supplier Diversity Spend Analysis

Measuring Supplier Diversity Performance

Keys to a Successful Supplier Diversity Program

Supplier Diversity Program Governance

The Impact of Global Sourcing on Supplier Diversity

Looking Ahead

Page 38

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Global Sourcing is Critically/Very Important for 68% of Participants and 55% of Participants Believe It will Have a Negative Impact on Domestic Supplier Diversity Programs

39%

29%

13%

6%

10%

3%

Importance of Global Sourcing

Critically important Very important

Important Somewhat important

Not important Unclear

3%

14%

14%

21%

34%

14%

Impact on Spend with US-based Diverse Suppliers due to Global Sourcing

Significant positive impact Moderate positive impact

Minimal impact Significant negative impact

Moderate negative impact Have not considered

As organizations look globally for new sources of supply domestic diverse suppliers face greater cost

and scope of service pressures resulting in increase competition and fewer opportunities

Page 39

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

More than Half the Participants Have No Plans to Help US-based Diverse Supplier Compete Globally and 80% Have No Time Frame Established to Expand Supplier Diversity Program Outside the US

3%

17%

21%

28%

52%

Taking US diverse suppliers on global missions to look at opportunities and

meet global diverse suppliers

We are establishing targets under which a portion of our globally sourced

spend will be awarded to US-based diverse suppliers

Our supplier development program is aimed at helping our US-based diverse

suppliers compete on a global scale

We are establishing policies to insure that US-based diverse suppliers are

included in the bidding process for all globally sourced spend

No action is being taken or is planned over the next year

Plan to Support US-based Diverse Suppliers Competing in Global Markets

10%

3%

7%

24%

55%

Currently included

We plan include within 3 years

Plan to include within next year

Plan to include but no timeframe

No plans to include

Plans for Including Diverse Suppliers Outside the United States

Page 40

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

There Are Numerous Hurdles Facing Organizations for Including Suppliers Outside the US within Their Supplier Diversity Programs

3%

10%

42%

45%

45%

61%

Resources and funding hurdles

There are no major hurdles that I am aware

We currently do include non-U.S. supplier spend in the scope of our diversity program

Certification of diverse supplier status outside the United States is not well established

Non-U.S. diverse supplier spend is not currently recognized by government institutions, associations or customers

Identifying and defining diversity categories outside the United States is not clear

Hurdles to Including Diverse Suppliers Outside the United States within Scope of Supplier Diversity Program

Page 41

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

For Those Including Non-US Suppliers in Their Diversity Programs There Are Multiple Certification Processes Utilized

5%

11%

16%

16%

79%

We leverage a U.S.-based diversity association (e.g. NMSDC, WBENC) to certify diversity status with non-U.S. suppliers

We perform our own due diligence based on information provided by the supplier and other available sources

We allow suppliers to self report their diversity status

We leverage a non-U.S. based association to certify diversity status with non-U.S. suppliers

We currently do not include non-U.S. suppliers in our diversity program

Method to Certify Supplier Diversity Status Outside the U.S.

Page 42

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Table of Content

Supplier Diversity Study Overview

Supplier Diversity Objectives

Supplier Diversity Spend Analysis

Measuring Supplier Diversity Performance

Keys to a Successful Supplier Diversity Program

Supplier Diversity Program Governance

The Impact of Global Sourcing on Supplier Diversity

Looking Ahead

Page 43

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Looking Ahead…It will be a Turbulent Time

Economic instability will continue and supplier diversity managers will need to insure alignment with

changing corporate objectives and that performance reflects the real value created. Wrapping supplier

diversity around higher level initiatives like social responsibility will drive greater visibility and support

Globalization will continue and organizations will focus on policies and practices to support their domestic

diverse suppliers while rethinking how they define diversity taking into account the broader notion of

“responsible supply” and such factors as localization

Business line managers will focus on operational efficiency so embedding diversity requirements within

standard procurement processes and effectively communicating objectives will be as important as ever

Acquisitions and financial problems will continue within the diverse supplier community driving the need for

robust supplier management and development programs identifying diverse sources of supply and nurturing

diverse supplier growth and financial stability

Networking with peers and industry groups will continue to provide valuable insight for supplier diversity

managers and help drive support for second tier supplier diversity targets

Efficiency will be the focus of most organizations in 2009 and supplier diversity mangers will be asked to do

more with less

Advanced sourcing optimization techniques will be leveraged to include diversity status as a parameter in

complex and global sourcing events resulting in multiple suppliers and closer alignment with requirements

Page 44

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Definitions for Spend Analysis

Percent of Participants Indicating Some Diversity Spend

Calculated by taking the number of participants indicating some supplier diversity spend for the particular

category as a percent of the total number of participants

Average Diversity Spend per Participant Reporting Diversity Spend for Category

Calculated by taking the average dollar value of spend reported by participants by category including

those participants that indicated some supplier diversity spend for the particular category

Average Diversity Spend as a Percent of Participant Total Spend

Calculated by taking the average reported supplier diversity spend by category as a percent of

participant’s total spend including those participants that indicated some supplier diversity spend for the

particular category

Category Diversity Spend as a % of Total Study Diversity Spend

Calculated by taking the total supplier diversity spend reported across all participant for a particular

category as a percent of the total supplier diversity spend reported across all participants

Page 45

2008 Supplier Diversity Study Results© 2009 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

The Hackett Group2008 Supplier Diversity Study Results

Kurt Albertson

TEL: 770.225.7570

[email protected]