I interviewed Tony Noe who discussed Sustainability and Diversity in the Supplier Base.
It’s nice to speak with you again, Tony, and today I’m looking forward to hearing your views on the topic of sustainability and diversity in your supplier base. Can you start by providing a brief background of yourself?
Well, I have been in procurement and supply chain for a little over 40 years. I have worked primarily in manufacturing, early years in the automotive industry; after that, some industry businesses where we provided to other businesses, and I have also worked in some consumer-product manufacturing. Since 2010, I have been working primarily as a consultant and helping companies in the service sector, both in governmental and private industry.
What is sustainability and what do you mean by “diversity in your supplier base”?
Sustainability has been kind of described as, if you think of it in terms of a raw material, if you’re buying 10 logs a month, is the renewal of the supply going to supply 10 a month from now on, or are you consuming it faster than they can grow?
With sustainability, you’re looking at if it’s a renewable resource. And your consumption rate, does it match the renewal of whatever that resource is or with discovery or the mining or the production?
In terms of a manufacturing company, it would apply to can your supplier produce enough in the same time frame you use to be able to keep up with you?
When I was in the automotive industry, one of the things that we frequently looked at was if the particular model, car maker that we were supplying a part to, if they went to full production, which was, theoretically, maximum ability to produce that car, could you product enough, and could your suppliers, your tier two, tier one, could they supply enough to keep up?
Prime example, General Motors, when we were producing a mechanical relay with 18 different models of General Motors cars. Volume was something in the neighborhood of 23 million a year we had to produce. Their projected maximum consumption was close to 47 million. When we built the production line and we checked out the suppliers who supplied the raw materials and components, they had to be able to produce at a rate continuously to be able to support a 37,000 line even though we didn’t actually have that kind of worth.
The industry today, there are a number of companies—Wal-Mart is a good one to use as an example—that man sustainability that you’re not using up a scarce resource, that your planned supplier product is not using some scare resource; this is not renewable and sustainable. That’s sustainable.
Diversity - when you’re looking at your supplier base. Is your supplier base, if you were to characterize it, would it be primarily large manufacturers, corporations, some classification of that nature, or is your supplier base made up of a variety, including minority elements, disadvantaged elements, other categorizes which the government describes as diverse suppliers? Are you looking to go with small businesses, or are you only going with big businesses? That’s kind of a litmus test for diversity supply base.
What about practice? Can you talk a little bit about how this is done in practice?
Many companies, because they have either federal contracts or large corporations buying from and demands it, are required to track their diversity and their suppliers.
In the same way that in business today, if your employee base is not diverse, if you’re not hiring multiple races, sexes, religions, whatever criteria happens to be on your list. Are your suppliers the same way?
In a federal contract you’re pretty much required to have at least made the effort if not successfully employed diverse suppliers, be they women-owned or minority-owned; there are a number of different categories that the federal government describes as diverse suppliers. But you track it based on your supplier registration, if you will. When a supplier comes to you and wants to do business with you and record all the data about that company, one of the questions at task is: How are you classified? How does the Small Business Administration classify you in terms of what you do?
That will usually answer the question because if the Small Business Administration has recognized them as a diverse supplier, they’ll have a specific category to fit in. You put that in the registry, and at the end of the day, you can look back and say, “I’m doing business today with” whoever it is. If you have 100 suppliers, you have 7, 10, whatever the number is, of diverse suppliers that you’re developing.
One of the things to me that ties diversity and sustainability together: If you’re in procurement, one of the things you always look for is competition. If you want to maintain a competitive environment out there in the workplace. One of the things we have to do is develop new suppliers, bring new people in to, especially in a category that might have very few people available.
You look for a supplier who has the beginnings of the capability, but you give them a little business, help to blow them up so that they can compete and get into the mix and you’re left with a diverse supply base that gives you an opportunity to develop what turns out to be a lot of the time.
Usually, you’re capable of serving small business that really values your business. If you’re buying some raw materials from a huge corporation and if you’re not a really big consumer, you’re maybe 1 percent of their business, so you’re not going to get a lot of attention. A small diversity supplier, someone who is a small business, and you give them the same amount of business, you could easily be 50 percent of his company, in which case, he’s going to give you a lot of attention.
A lot of times what makes or breaks procurement supply chain is the loyalty and the commitment on the part of the tier two suppliers to service you, and customer service becomes a very critical issue. By looking at the diversity actions available, you actually enhance your ability to improve your supply chain and, in doing so, maintain it and maintain the sustainability in the competitive environment.
Can you talk about where you have seen some good results?
There was a supplier that I dealt with during a contract working with a government contractor where they were originally a very small veteran-owned business. They had a long commitment and they really wanted to serve. Because of their unique abilities, they were able to provide us a competitive service to a, I guess, a large corporation—not lower but competitive; they were in the same range.
They grew to the point that they are now right on the edge of passing out of the small-business category. During that time, excellent service. We were able to work with them to help them understand the ins and outs of government contracting, and by doing so, we gained a very, very loyal supplier who went that extra mile to make sure that our services were performed very, very well. In that period of the case, those services had to be performed in Afghanistan, in the war zone.
They were able to find people willing to go ensure that all the services were set up properly at the forward-operating base to make sure that the services were performed properly. And they weren’t sending people; it was the owner and his partner. They were going over and making these trips to make sure it all worked. We were a major portion of their business. We got excellent, above-and-beyond service and really not at a premium price. In the long run, we created a company that now offers employment and has grown to the point where they’re self-sustaining; they can begin to compete in the busy market, and we got a benefit out of it in the meantime. It really serves both purposes, both, I guess, a bigger-picture purpose of helping develop a small business but also serves your company. In fact, you’ve got a supplier who well-performed that extra-mile service, which is what we all want for the supply chain.
Thank you, Tony, for sharing your views today on sustainability and diversity in the supplier base.
I appreciate the opportunity.
About Tony Noe
Strategic Sourcing/Procurement Professional and Leader