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

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

2 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 2

3 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 3

4 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 4

5 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 5

6 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 Average Participant Size (million) $17,747 $22,578 US Spend US Revenue Global Revenue Page 6

7 Nearly All Participants Reported Metrics based on Suppliers in the United States Although 78% of the Participants were Global Companies Participant Geographic Presence Scope of Supplier Diversity Program Global Presence Regional presence within U.S. National presence within U.S. North American presence 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 7

8 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 8

9 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 Support corporate culture around diversity and social responsibility 28% 38% 31% 3% Drive corporate image through supplier diversity initiatives 13% 47% 34% 6% Meet supplier diversity requirements of customers/ government contracts 38% 28% 13% 22% 13% Drive social and economic benefits within targeted communities 16% 34% 28% 22% Increase market penetration/ recognition in targeted diversity markets 16% 31% 28% 16% 9% Achieve social recognition by industry and supplier diversity associations 13% 31% 38% 19% Improve service/ quality through local supply 9% 31% 31% 19% 3% 0% 25% 50% 75% 100% Critically Important Very Important Important Somewhat Important Not Important Tangible Benefit Intangible Benefit Page 9

10 There Does Appear to be A Strong Correlation Between the Level of Importance Organizations Place on Tangible and Intangible Objectives and Supplier Diversity Performance Times Recognized or Cited versus Importance of Intangible Objectives (median) 5 Percent of Spend with Diverse Supplier versus Importance of Tangible Objectives (median) 19% 2.5 5% High Importance Intangible Objectives Lower Importance High Importance Tangible Objectives Lower Importance Page 10

11 Many Organizations Have Multiple Critical/Very Important Objectives for their Programs which Tends to Drive Focus and Ultimately Performance Number of Critical or Very Important Objectives Identified by Percent of Organizations 25% 22% Performance versus Number of Critical or Very Important Objectives 5 15% 4 13% 9% 13% 9% 5% 7% 6% 3% Many Moderate Few Recognized/Cited % of Diverse Supplier Spend Page 11

12 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 Importance of Objectives for Supplier Diversity Program 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 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 12

13 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 13

14 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% Percent of Diversity Suppliers by Average Annual Spend with Supplier Percent of Diversity Spend by Average Annual Spend with Supplier 25.6% 20.4% 14.5% 23.2% 9.0% 10.2% 8.4% 5.6% 4.9% 5.3% 0.8% 0.4% 0.3% 0.1% 0.0% 0.0% 1.4% < $100K $100K - $1M $1M - $5M $5M - $10M $10M - $20M $20M - $50M $50M - $100M $100M - $250M > $250M < $100K $100K - $1M $1M - $5M $5M - $10M $10M - $20M $20M - $50M $50M - $100M $100M - $250M > $250M 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 14

15 There Tends to be a Correlation with Average Spend per Diverse Supplier and Percent of Total Spend with Diverse Suppliers Avearge Spend per Diverse Supplier $592,089 Supplier Diversity Spend as a Percent of Total Spend 11% $288,705 5% $116,390 1st Quartile Median 3rd Quartile Top Half for Average Spend per Supplier Lower Half for Average Spend per Supplier Page 15

16 Category Ranking Across Multiple Metrics Shows the Categories with the Highest Supplier Diversity Opportunity (slide 1 of 2) Category of 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 Highest Percent of Participants Indicating Some Diversity Spend Ranking by Spend Category Average Diversity Spend per Participant Reporting Diversity Spend for Category Lowest Average Diversity Spend as a Percent of Participant Total Spend Category Diversity Spend as a % of Total Study Diversity Spend Note: Definitions for calculations are included at the end of this report Page 16

17 Category Ranking Across Multiple Metrics Shows the Categories with the Highest Supplier Diversity Opportunity (slide 2 of 2) Category of 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 Highest Percent of Participants Indicating Some Diversity Spend Ranking by Spend Category Average Diversity Spend per Participant Reporting Diversity Spend for Category Lowest Average Diversity Spend as a Percent of Participant Total Spend Category Diversity Spend as a % of Total Study Diversity Spend Note: Definitions for calculations are included at the end of this report Page 17

18 Percent of Participants Indicating Some Diversity Spend by Category Facility Management and Maintenance Services Marketing - Professsonal Agency Temporary Staffing/ Contract Services IT - Hardware (e.g. computers and servers) Office Supplies Telecom Services (voice and data) Facility Maintenance Supplies (e.g. MRO) Other Professional Services Legal Services Training and Development Services Commercial Print IT - Consulting Services IT - Software Consulting/Audit/Tax Services HR Services Construction Services Catering and Food Office Furniture and Equipment Engineering Services (non-it) IT - Other Services IT - Maintenance Services Research & Development Services Logistics Services Contract Manufacturing Services Packaging Materials Subscription and Memberships Executive Search/Staffing Services Airlines, Car rentals, Lodging Other Services Real Estate Warehousing and Distribution Services Other Direct Materials Other T&E Expenses Telecom Equipment IT - Peripherals and Consumables Capital Assets (e.g. mfg equipment) Purchased Finished Goods for Resale Parts and Assemblies Travel Agency Supply Chain Services Bulk Commodities Other Materials 0% 20% 40% 60% 80% 100% Page 18

19 Average Diversity Spend per Participant Reporting Diversity Spend for Category Contract Manufacturing Services Supply Chain Services Other Services Construction Services Packaging Materials Other Direct Materials Temporary Staffing/ Contract Services Facility Management and Maintenance Services IT - Consulting Services Capital Assets (e.g. mfg equipment) Other Professional Services Engineering Services (non-it) Legal Services IT - Other Services Facility Maintenance Supplies (e.g. MRO) Consulting/Audit/Tax Services IT - Software Research & Development Services Logistics Services Warehousing and Distribution Services Marketing - Professsonal Agency Parts and Assemblies IT - Hardware (e.g. computers and servers) Commercial Print Telecom Services (voice and data) Airlines, Car rentals, Lodging Purchased Finished Goods for Resale Executive Search/Staffing Services HR Services Training and Development Services Office Furniture and Equipment IT - Maintenance Services Telecom Equipment Office Supplies Subscription and Memberships Catering and Food IT - Peripherals and Consumables Bulk Commodities Real Estate Other T&E Expenses Other Materials Travel Agency Page 19 $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 Average includes participants reporting spend for a category

20 Average Diversity Spend as a Percent of Participant Total Spend by Category Contract Manufacturing Services Other Direct Materials Temporary Staffing/ Contract Services Construction Services Packaging Materials IT - Consulting Services Engineering Services (non-it) Research & Development Services Facility Maintenance Supplies (e.g. MRO) Logistics Services Facility Management and Maintenance Services Capital Assets (e.g. mfg equipment) Parts and Assemblies Other Services Marketing - Professsonal Agency IT - Software Other Professional Services Legal Services Supply Chain Services Consulting/Audit/Tax Services Office Furniture and Equipment Commercial Print Warehousing and Distribution Services Executive Search/Staffing Services Other Materials IT - Other Services Bulk Commodities IT - Hardware (e.g. computers and servers) Training and Development Services Purchased Finished Goods for Resale Telecom Equipment HR Services IT - Maintenance Services Subscription and Memberships Telecom Services (voice and data) Office Supplies Real Estate Airlines, Car rentals, Lodging IT - Peripherals and Consumables Catering and Food Travel Agency Other T&E Expenses Average includes participants reporting spend for a category 0% 1% 2% 3% 4% 5% Page 20

21 Category Diversity Spend as a Percent of Total Study Diversity Spend Facility Management and Maintenance Services Temporary Staffing/ Contract Services Construction Services Contract Manufacturing Services IT - Consulting Services Other Professional Services Engineering Services (non-it) Legal Services Packaging Materials Facility Maintenance Supplies (e.g. MRO) Other Services Other Direct Materials IT - Other Services Supply Chain Services Consulting/Audit/Tax Services IT - Software Marketing - Professsonal Agency Capital Assets (e.g. mfg equipment) Research & Development Services Logistics Services IT - Hardware (e.g. computers and servers) Warehousing and Distribution Services Commercial Print Telecom Services (voice and data) Training and Development Services Parts and Assemblies HR Services Office Furniture and Equipment Office Supplies Airlines, Car rentals, Lodging Executive Search/Staffing Services IT - Maintenance Services Purchased Finished Goods for Resale Catering and Food Telecom Equipment Subscription and Memberships IT - Peripherals and Consumables Real Estate Other T&E Expenses Bulk Commodities Travel Agency Other Materials Page 21 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

22 Woman-Owned Businesses Represented on Average 2.4 Percent of Total Spend for Those Reporting Spend within Diversity Group 79% of total reported supplier diversity spend was from 1 st tier suppliers while 21% from sub-tier suppliers 2.35% Average Diversity Spend as a Percent of Total Spend by Diversity Category 2.01% 1.30% Percentages include participants reported spend for diversity category 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 Servicedisabled, Veteran Owned Native American Owned HUB Zone Owned 1 Other includes both diversity groups not identified as well as minority spend that participants were unable to allocate across specific diversity groups Page 22

23 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 23

24 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% Percent of Participants Reporting Metrics 89% 46% 50% 32% 32% 11% 7% 18% 14% 4% 4% 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 Page 24

25 Percent of Spend and Percent of Suppliers Reported by Participants: Diverse Suppliers and Small Businesses Diverse Suppliers Small Businesses 18% 40% 15% 28% 8% 8% 17% 14% 4% 4% 5% 5% 1st Quartile Median 3rd Quartile Percent of Spend with Diverse Suppliers Percent of Suppliers that are Diverse 1st Quartile Median 3rd Quartile 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 25

26 Organizations Also Commonly Measured Percentage of RFPs Diverse Suppliers Participated and Recognition Received by Industry Groups RFPS for which Diversity Suppliers Participate 50% Number of Times Recognized or Cited by Industry (annual) % 2 10% 1st Quartile Median 3rd Quarile 1st Quartile Median 3rd Quarile Page 26

27 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 27

28 Participants were Asked the Level of Impact that a Variety of Factors Have Had on the Success of the Supplier Diversity Programs 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 Level of engagement with internal stakeholders Acceptance by Business Units/ Operations Aligning Supplier Diversity Program with Corporate Social Responsibility Initiative Availability of qualified diverse suppliers Supplier development and mentoring programs Availability of internal resources to support program Tying diversity objectives with higher level company objectives (e.g. revenue, market share) Support from existing suppliers for driving 2nd tier diverse supplier participation Recent acquisition(s) involving your organization Business Process Outsourcing Initiatives Recent acquisition(s) involving your diverse supplier(s) 0% 25% 50% 75% 100% Significant Positive Impact Moderate Positive Impact Minimal or No Impact Moderate Negative Impact Significant Negative Impact 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. Page 28

29 Participation in Associations, Embedding Practices within Existing Processes, Executive Level Support and Networking Had the Highest Positive Impact on Program Success Percent of Participants Stating the Factor Had a Positive Impact on Supplier Diversity Program 87% 83% 79% 77% Participation in diverse supplier associations Page 29 Embedding supplier diversity practices within existing Procurement processes Level of support from Executives of your organization Networking with other organizations within your industry 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 highlevel 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 2 nd tier divers supplier adoption

30 Availability of Resources and Acquisitions of Diverse Suppliers were Factors Most Stated as Having a Negative Impact on Supplier Diversity Programs Percent of Participants Stating the Factor Had a Negative Impact on Supplier Diversity Program 43% 26% 23% 21% Availability of internal resources to support program Page 30 Recent acquisition(s) involving your diverse supplier(s) Availability of qualified diverse suppliers Business Process Outsourcing Initiatives 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

31 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 31

32 We Also Looked at the Level of Investment that Organizations Make into Supplier Diversity Programs from a Resourcing and Budgeting Perspective Level of Supplier Diversity Spend per Dollar of Supplier Diversity Budget 1 $4,004 Supplier Diversity Spend ($millions) per Supplier Diversity FTE $137 Source of Supplier Diversity Budget 6% 3% $1,642 $60 38% 53% Page 32 $808 1st Q Median 3rd Q 1 Training, sponsorships, tradeshows, advertising, memberships, promotions, etc. related to supplier diversity program $27 1st Q Median 3rd Q 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

33 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 33

34 Multiple Executives Typically Review Supplier Diversity Status on an Annual Basis with CEOs Leading the Way at Most Organizations Number of Executives reviewing supplier diversity performance at least once per year 5 78% Review Supplier Diversity Status At Least Annually 69% % 38% 31% 9% 6% 1st Quartile Median 3rd Quarile CEO Procurement Leader COO HR Leader Marketing/ Sales Leader Chief Diversity Officer/ Council Board of Directors Page 34

35 A Centralized Procurement Structure was Predominate and Participants Most Often Positioned Supplier Diversity as a Stand-Alone Initiative Procurement Governance Structure 10% 29% 63% Positioning of Supplier Diversity Program 34% 22% 61% 16% 13% Centrally led (coordinated centrally but executed de-centrally) Predominately centralized Predominately decentralized 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 Page 35

36 Most Organizations have Fairly Mature Programs and 60% Leverage Diversity-Owned Marketing Agencies to Help Target Diverse Markets Number of Years Supplier Diversity Program has been in Place 18 Level of Importance for Leveraging Diversity- Owned Marketing/ Advertising Agencies to Reach Diverse Markets % 10% 10% 17% Critically important Very important Important 13% Somewhat important 33% Not an important 1st Quartile Median 3rd Quarile Unknown Page 36

37 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 37

38 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 Importance of Global Sourcing 3% 6% 10% 39% Impact on Spend with US-based Diverse Suppliers due to Global Sourcing 3% 14% 14% 13% 14% 34% 29% 21% Critically important Important Not important Very important Somewhat important Unclear Significant positive impact Minimal impact Moderate negative impact Moderate positive impact Significant 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 38

39 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 Plan to Support US-based Diverse Suppliers Competing in Global Markets Plans for Including Diverse Suppliers Outside the United States No action is being taken or is planned over the next year 52% No plans to include 55% We are establishing policies to insure that US-based diverse suppliers are included in the bidding process for all globally sourced spend 28% Plan to include but no timeframe 24% Our supplier development program is aimed at helping our US-based diverse suppliers compete on a global scale 21% Plan to include within next year 7% We are establishing targets under which a portion of our globally sourced spend will be awarded to US-based diverse suppliers 17% We plan include within 3 years 3% Taking US diverse suppliers on global missions to look at opportunities and meet global diverse suppliers 3% Currently included 10% Page 39

40 There Are Numerous Hurdles Facing Organizations for Including Suppliers Outside the US within Their Supplier Diversity Programs Hurdles to Including Diverse Suppliers Outside the United States within Scope of Supplier Diversity Program Identifying and defining diversity categories outside the United States is not clear 61% Non-U.S. diverse supplier spend is not currently recognized by government institutions, associations or customers Certification of diverse supplier status outside the United States is not well established We currently do include non-u.s. supplier spend in the scope of our diversity program 42% 45% 45% There are no major hurdles that I am aware 10% Resources and funding hurdles 3% Page 40

41 For Those Including Non-US Suppliers in Their Diversity Programs There Are Multiple Certification Processes Utilized Method to Certify Supplier Diversity Status Outside the U.S. We currently do not include non-u.s. suppliers in our diversity program 79% We leverage a non-u.s. based association to certify diversity status with non-u.s. suppliers 16% We allow suppliers to self report their diversity status 16% We perform our own due diligence based on information provided by the supplier and other available sources 11% We leverage a U.S.-based diversity association (e.g. NMSDC, WBENC) to certify diversity status with non-u.s. suppliers 5% Page 41

42 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 42

43 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 43

44 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 44

45 The Hackett Group Kurt Albertson TEL: Page 45