Creating Opportunity With Supplier Diversity
Building a Foundation for Diversity Reporting With Modern Sourcing
Today, supplier diversity is becoming an increasingly visible factor during vendor selection, but also a criterion for effectively doing business. Establishing a supplier diversity program is not always planned upfront, but can develop as result of necessity; which is exactly what happened at Endo Pharmaceuticals.
Making Procurement Comply With Government Requirements
The impetus happened when Endo’s contract with the U.S. Department of Veterans Affairs (VA) was up for renewal. The requirement for working with the government mandated Endo to track and report on it’s spend with small and diverse suppliers.
As a result of Endo’s business with the VA, the company had to set annual goals in a number of different diversity categories, which included committing to spend based on small business attributions (HUB Zone certified, woman owned, veteran owned, service disabled and small disadvantaged). Each diversity category required Endo to establish goals in percentage of spend for the coming year and to report actual results versus the previous year plan. If Endo did not show progress towards these goals, the VA could impose a number of penalties, including fines and loss of government contracts, all resulting in lost revenues and possible negative publicity for Endo.
Managing Supplier Diversity Spend Became Cumbersome
Endo’s procurement team quickly realized reporting supplier diversity data to Veterans Affairs would become a full time effort, accumulating hundreds of hours over time. Additionally, the risk of non-compliance was present given the inconsistencies in managing the supplier diversity data, combined with the growth of spend data within Endo’s four companies involved in the supplier diversity effort.
At the heart of Endo’s challenges were the technical issues of their current spend analysis tool. Managing spend data for diversity was very manual, often causing missteps made in accurately categorizing diversity spend. Based on these inflexibilities and a cumbersome data collection process with their current spend analysis platform, extensive manual manipulations were needed to properly measure and categorize supplier diversity spend. For instance, year after year procurement found gaps in their reports. Trying to find an explanation of why annual spend diversity goals were off resulted in several iterations of data collection and rework.
Due to the issues of collecting spend volume and percentage spend with diverse suppliers, ensuring government compliance with the Veterans Affairs contract required more time for analyzing and creating reports. Endo’s procurement team would come to realize that reporting on supplier diversity data to Veterans Affairs was a full time effort, accumulating hundreds of man hours over time. Additionally, the risk of non-compliance was ever present given the inconsistencies in managing the supplier diversity data, combined with the growth of spend data within Endo’s four companies involved in the supplier diversity effort.
Due to the technology improvements provided by (Determine), Endo no longer worries about consistency in reporting and can now focus on advancing their supplier diversity program to the next level.”
— Louis Galczynski, Senior Manager, Endo Pharmaceuticals
Supplier Diversity Needed a Modern Sourcing Approach
Solving the diversity spend issue was only part of the bigger challenge that Endo wanted to address. To overcome the challenges in diversity reporting and wider issues in procurement, Endo made the decision to partner with (Determine), and invest in one technology platform across spend analytics, sourcing, contract management and supplier information management. To solve the diversity reporting challenge, Endo took the following three-pronged approach:
- Address the problem of spend and supplier data. Endo needed to extract, cleanse, and enrich supplier information from their vendor master (SAP), and other sources of spend within the organization. By improving this data and data collection, diversity reporting could be pulled and more easily managed within the (Determine) SmartAnalytics platform.
- Allow suppliers to self-register and self-report. Endo embraced the use of (Determine) Supplier Information Management (SIM) to allow suppliers to self-register and self-report, and get 3rd party data on diversity linked to the company’s spend in SmartAnalytics®.
- Combine spend and supplier data in one location. Implementing the (Determine) Diversity Dashboard, analytics would now go one step further. By combining all necessary spend and supplier information in one place and providing sophisticated drill- down reporting and business discovery capabilities, Endo could now easily demonstrate results and easily compare those to their diversity goals through a dashboard tailored to the Veteran’s Affairs requirements.
By leveraging (Determine’s) solutions and services, Endo has increased the integrity of their supplier diversity efforts and created newfound efficiencies. Supplier diversity efforts that previously took 400 man-hours to complete was reduced by about 50%. According to Audria Moore, Senior Analyst Strategic Sourcing at Endo, “When using other tools, it was not as easy to pull the required data and filter for diversity requirement. But once we had ‘good’ data by using (Determine’s) solutions, we were able to easily slice and dice the data the way others required.”
We are always talking about how procurement should have a wider impact. Establishing diversity targets with (Determine’s) technology helps Endo ensure compliance with Veterans Affairs, but it also takes us beyond contracts and finance and into effectively managing corporate social responsibility.”
— Louis Galczynski, Senior Manager, Endo Pharmaceuticals
Comfort With Consistency in Diversity Reporting
Addressing supplier diversity as part of a bigger procurement effort has not only reduced time and improved reporting capabilities, but also helped Endo avoid costs of non-compliance. Now that procurement can easily monitor spend behavior related to its diversity requirement, Endo can actively identify capable diverse suppliers for establishing mutually beneficial business relationships central to their diversity program.