How CPG Brands can Deliver on Supplier Diversity Promises

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How CPG Brands can Deliver on Supplier Diversity Promises

April 11th, 2024 Costas Xyloyiannis Leave a comment

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.

About HICX

HICX helps Global 5000 companies to take control of their supplier data and to deliver a great supplier experience. The HICX Supplier Experience Platform enables businesses with thousands of suppliers to efficiently on-board and manage the end-to-end lifecycle of all suppliers, to achieve a single version of truth for all supplier data, and to remove the friction from supplier relationships. Some of the world’s largest companies trust HICX for the management of their supplier data, these include Unilever, Mars, Mondelez, Lenovo, Baker Hughes and BAE Systems.

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How Pharmaceutical Brands can be Resilient: Let’s approach Supply Chain Resilience Holistically

November 6th, 2023 Costas Xyloyiannis Leave a comment

While inflation and economic pressures, such as the recent US price reforms, force pharmaceutical brands to be even more frugal than usual, they will do well to not tackle cost efficiency as a solo issue. Brands require resilience in various areas, and chief among these is compliance. Stringent regulations must be followed, although the supply chains from which they are navigated, are incredibly complex.

So, can brands manage resilience factors, such as costs and compliance, holistically? Supplier expert and HICX’s CEO, Costas Xyloyiannis, says they can.

His view is that on the one hand, each factor has unique requirements, such as finding ways to cut costs or to stop risky activities. However, each factor also stems from a common cause: murky supply chains. By fixing poor-quality supplier data, therefore, brands can empower themselves to be robust.

Costas believes that pharmaceutical leaders who can achieve this balance, will futureproof their supply chains and gain true resilience. He offers three insights to leaders who want to get this right.

Pharmaceutical supply chains are among the most complex.

In the pharmaceutical industry, the definition of ‘supplier’ is particularly complex. Typically, suppliers are highly specialized in relevant fields, such as healthcare and research, and they serve various manufacturing plants to meet a unique range of purposes.

Another characteristic of the industry is that it’s open to high levels of scrutiny. Businesses must comply in a heap of areas, for example, data and privacy, waste management and corporate social responsibility. Those who fail to keep up with and meet legislation face severe penalties. Hefty fines and reputational damage are just the tip of the iceberg. To stay compliant, these businesses request a vast amount of information from suppliers, and they need it to be accurate. Before it can be accurate, however, supplier information must be captured and stored coherently.

Complex digital setups are now a strategic disadvantage.

In practice, however, the way in which supplier information is captured and stored is haphazard. Over time pharmaceutical businesses have invested in various digital tools with which to transact with suppliers and manage them. The digital setup now is very complex: most tools are magnets for collecting and storing supplier data, which creates multiple datasets. And in this fragmented state, master data is compromised. It is riddled, when viewed as a whole, with outdated and duplicate entries which makes it difficult to tell which entries are accurate.

Supplier data informs what leaders decide and do, so when its quality is questionable so is the business’s ability to compete. First, bad data jeopardizes compliance which attracts penalties such as large fines and reputation damage. Next, when a pharmaceutical business can’t see what suppliers are doing, it can’t meet quality and performance thresholds, for example, maintaining a specific temperature during transportation or storage. This slashes revenue and long-term business prospects. Finally, low supply chain visibility compromises the time-sensitive business of outsourcing warehousing and distribution. It’s a competitive disadvantage, therefore, to have poor data.

On the other hand, businesses with reliable data gain a strategic advantage. Suppliers and their information are vital assets. Their data is used by thousands of internal stakeholders and a whole array of functions—from Inventory Management and Quality Control, to the Board. Further, suppliers themselves directly impact performance. They represent value in the form of innovative ideas, supply in times of high demand, quality and much more. Businesses need suppliers. In fact, a recent HICX study revealed that suppliers are 24% more likely to go the extra mile for a customer of choice. It’s in a brand’s interest therefore to make the most of this vital relationship. HICX likes to think of this as Supplier Experience Management.

Fixing key supplier challenges is beneficial, and possible.

Businesses that address supplier experience and data can be more resilient. The ability to be cost-efficient, compliant, and generally competitive, requires two virtues: accurate supplier data, and satisfied suppliers.

To supply chains, accurate supplier data is the life-blood. It leads to compliance, which reduces the risk of fines and reputation damage. Further, it uncovers opportunities in supply chains with which businesses can make money.

Resilience also comes more easily to those businesses whom suppliers like. The equation is straightforward: treat suppliers well and they will treat you well. HICX’s study also shows that when stock or output is low, suppliers are 20% more inclined to prioritize orders for a customer of choice. This status, a HICX survey shows, is also likely to yield lower prices and better service. Winning supplier favor therefore reaches the bottom line. Further, the study suggests that being a customer of choice also brings better levels of compliance.

So how can businesses fix the data problem and improve supplier favor?

The first opportunity involves the tools through which businesses manage suppliers: reconfigure this setup to create a golden record. What’s key is to have a central platform. Let it connect all the tools in the setup, vet all incoming entries for quality and govern the data. The idea is to capture and store master data in one place, and let it be accessed by other tools in the digital setup, but not altered. This way, data quality is maintained.

Quality supplier data, thankfully, also improves supplier experience, which leads to the second opportunity: reform the way in which suppliers are perceived. Drive a mindset in which every supplier is considered a valued partner, who contributes towards mutual goals. One application of this mindset is to, while rejigging the digital setup, be mindful of how it could improve the user experience of every supplier. Another is to drive a culture in which suppliers are treated well. Simple actions—such as paying them on time, only sending relevant information requests and being fair—will go far in the journey to becoming a customer of choice.

As major pharmaceutical brands manage rising costs in an ever-changing world, they will benefit from treating the building blocks to resilience holistically. Within the complex pharmaceutical supply chain realm, compliance and general competitiveness can also be addressed. The answer is to focus on two problems as they relate to suppliers: data and experience. Let’s turn them into solutions. The way forward is to fix both digital setups and outdated mindsets. Getting this right will futureproof supply chains and make them truly robust.

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 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.

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How to Save Money through Suppliers without Sacrificing the Value they bring

June 23rd, 2023 Costas Xyloyiannis Leave a comment

With inflation hampering product sales and price rises, manufacturers have profits to protect. Many will react, as the sector has done for decades, by beating down suppliers on price. All this does though is bounce the problem around the supply chain. It drains suppliers of the resources they need to deliver vital enhancements—including supplies, information, and ideas—without which, brands are less competitive.

So, how can they protect profits without being vulnerable to significant risks and open to new opportunities?

Costas Xyloyiannis, CEO of supplier experience platform HICX, says brands can keep a competitive edge despite inflation. “Let’s help suppliers help us,” he says. Here’s how…

See suppliers as partners.

The best thing brands can do to cut costs through suppliers is to partner with them. This empowers suppliers to give their best, and when suppliers can give their best, brands are better placed to extract the value they need—such as quality ingredients, compliance information and ideas for innovation—in addition to reducing costs.

Therefore, the solution to managing profits in inflation is not to squeeze suppliers. It’s to give them a helpful experience. If there is one thing brands really need in order to collaborate with their suppliers, it’s trustworthy data.

Build from the data up.

When better to establish dependable supplier data than the moment each new supplier is integrated? Data is at the heart of every good supplier interaction. Without it, suppliers have a tough time working with brands and struggle to provide essential information. And without this information, brands are blind to social and environmental risks. Additionally, they miss opportunities such as to innovate sustainably and elevate their reputations.

When suppliers struggle to work with a brand, they’re also less inclined to go the extra mile—a recent HICX study shows that suppliers are 20% more likely to prioritize an order if they’re low on stock for a customer-of-choice.

The best supplier data is in the form of a “single source of truth”. When data is considered trustworthy, brands can make the working relationship significantly easier. This simplifies what it takes to receive helpful supplies, information, and ideas. Underpinning these goals is reliable supplier data, the collection and safeguarding of which should be established early.

Safeguard data integrity

Getting this right also requires brands to control how changes to the data are managed. There is a simple analogy with removing plastic from the world’s oceans—it’s pointless cleaning what’s already there while neglecting to address future pollution. Rather, invest disproportionately in preventing future plastic from entering the water. The same is true with supplier data. A ‘single front door’ through which all new data and all changes to existing data must pass, is essential. That door has both a technical and a governance role: it disables any other systems from making changes and governs who can make changes and under what circumstances.

Smooth out communication friction.

When supplier data is compromised, brands can’t communicate well with all their suppliers. Too often, they send long surveys to suppliers in order to receive information with which to manage risks and opportunities. And too often, the task is irrelevant to many of the recipients. For example, an initiative to determine how many product packaging suppliers in the USA comply with sustainability regulations might go to every packaging supplier in every country—including those who sell boxes for shipping. Each of these businesses would have to engage with the survey to determine whether it applies to them. This costs them time. Big brands might not directly feel the consequences, but logic dictates that it will be harder for these suppliers to give them quality information and work efficiently.

Thankfully, the reverse is also true. Brands that receive and store accurate supplier data—including contacts, plant-level, global and local data—properly and at the start of each new relationship can communicate better with their suppliers. This creates the perfect conditions in which to find cost-savings together while keeping sight of compliance risks and ways to innovate.

Don’t accept supplier friction.

While it’s sensible for brands to steady these communication issues from the outset, suppliers face many other bugbears. Late payments, unrealistic expectations and confusing technology are just some of the challenges. Brands can invest in supplier relations by understanding the friction points that their people, processes and technology put on suppliers. And by adopting truly supplier-friendly mindsets and technologies through which to work with all suppliers—from day one.

It’s one thing to give a handful of strategic suppliers a helpful experience, but if brands do so across the network, they can successfully reach their goals at scale. Every supplier should be treated as a partner. Encouragingly, forward-thinking brands such as Mondelez, Unilever, Mars and more, are already collaborating with all their suppliers.

We need more manufacturers to join the “supplier experience” movement. Because as we weather the cost-of-living crisis the route to staying profitable and competitive, is through mutual success.

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 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.

How CPG Brands can Deliver on Supplier Diversity Promises

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