Predictive Procurement: Your Solution to Supplier Diversity
Supplier diversity is increasingly being recognized as a critical objective for procurement. There are multiple reasons why this is such an important goal.
From a societal viewpoint, organizations that achieve supplier diversity help address inequality and social injustice. This benefits society in general, but being seen as part of the solution instead of part of the problem is also good for business. A company that embraces diversity is more attractive to prospective employees, customers, and investors. A more diverse supply chain is also a more resilient supply chain. The COVID-19 pandemic and its aftermath have driven home the importance of resiliency.
While supplier diversity has many indisputable benefits, it is also easier said than done. A 2021 Bain & Company study noted the complexity of promoting supplier diversity.
“Companies need a clear strategy to direct spending toward businesses owned by Black people, women, and other underrepresented groups. Companies also need to allocate resources to source, vet, and build capacity among diverse suppliers, as well as the infrastructure and technology needed to track supplier metrics and diverse supplier spending targets.”
Despite the challenges, Bain & Company concluded that supplier diversity is well worth the effort:
“Companies that diversify their supplier bases tap into the economy’s full potential and enjoy stronger business outcomes.”
Supplier Diversity is Critical for Multiple Reasons, and Predictive Procurement Is the Solution
So, it’s clear that diversity should be a top priority for any organization. Unfortunately, developing a strategy is the easy part, and it quickly becomes much more complicated—especially when it comes down to the infrastructure and technology part. As a result, implementing a process that effectively supports supplier diversity is a real obstacle many companies struggle with. However, there is a proven supplier diversity solution: predictive procurement. And there’s no better example of how predictive procurement solves the challenge of supplier diversity than Arkestro.
Here’s how it works:
Arkestro has a vast database of supplier diversity certifications to draw from. On the Machine Learning and modeling side, we can then prioritize and recommend diverse suppliers to businesses based on historical preferences to drive diverse spend. Arkestro can look at current non-diverse suppliers to find diverse competitors that will drive more diverse spend.
Arkestro uses a custom model for each client based on their specific supplier diversity goals. Goals can be customized so focus can be put on particular groups.
The model looks at historical data to understand how much volume any supplier can handle at any given time and whether that supplier is diverse or not. Conditions change, and there are a lot of assumptions baked into forecasting models, so we always recommend using Arkestro’s supplier relationship management features to confirm. These features will strengthen relationships with suppliers, and this can be especially helpful in building trust to drive business to historically underrepresented.
Box Uses Arkestro to Establish a Diverse and Inclusive Supply Chain: A Case Study
It’s always helpful to see real-life examples of how solutions actually help organizations achieve their objectives.
Box is a well-known, cloud-based content management, collaboration, and file-sharing company. Box also happens to be an organization that promotes social responsibility throughout all aspects of its operations, including procurement.
The company’s Chief Procurement Officer is Linda Chuan. She has built a reputation as an industry leader who is addressing racial injustice through supplier diversity, equity, and inclusion (DEI). Chuan’s objective was to increase supplier diversity, addressing inequality and injustice while also maximizing Box shareholder value. However, the company’s existing systems had limited visibility into the metrics needed to evaluate suppliers and make informed decisions. A much more advanced solution was required. She chose Arkestro and we worked together to improve supplier diversity at Box.
Arkestro delivered an automated system to streamline the process of increasing supplier diversity. We used KPI dashboards and sorted out Box’s existing supplier data in around two weeks.
The results speak for themselves. After implementing Arkestro, Box was able to develop supplier diversity dashboards covering its 1,800+ suppliers. Doing so empowered procurement decision-makers with the insights needed to achieve a more equitable supplier portfolio. That resulted in spending with diverse suppliers hitting 24% and continuing to grow. In addition, Arkestro’s capabilities support taking supplier diversity well beyond the basics.
Linda Chuan explains “Visibility into supplier diversity was limited to the types of businesses we were working with. Arkestro has given us more control and visibility into the diversity of the staff at companies we partner with, allowing us to take our diversity and inclusion program to the next level.”
To learn more about Arkestro and to see the advantages of using this advanced predictive procurement orchestration platform, book a free demo today.
And, check out Linda Chuan’s presentation at Optimal ’22 in New York below to learn more. Lastly, for full details on how Box used Arkestro to create an inclusive and diverse supply chain, request your copy of the case study here.