Supplier diversity is a challenge and an opportunity for companies across the globe. SAP has just announced a partnership between SAP Ariba and ConnXus at SAP Ariba live today. The partnership will make it easier for companies to improve the diversity of their suppliers.
The myth and the challenge met
Across the globe there is legislation and regulation that looks to improve or enforce supplier diversity. South Africa has a programme called BBB-EE (Broad-based black economic empowerment). In the USA federal procurement schemes have been set up under the Minority Business Development Agency (MBDA).
The challenge is preventing companies being excluded from procurement processes. This can be as a results of bias, unconscious bias and most importantly not being aware of their existence. Recent research by the Hackett Group showed: “99% of diverse suppliers meet buyers’ expectations, 23% consistently exceed expectations” (Source: The Hackett Group). This demonstrates that bias is unfounded and the actual challenge is locating and connecting to the right supplier.
The partnership between SAP Ariba and ConnXus aims to address this challenge. It will give minority owned suppliers access to both procurement networks. It will help buyers locate diverse small suppliers and help suppliers access markets they have hitherto been locked out from.
Both ConnXus and the SAP Ariba network are global. This will help US firms create partnerships with global companies that they would previously not have found. This is a growing requirment amongst US firms at least. The Hackett Group research also found that while more than 75% of US firms supplier diversity programs are currently domestic, 40% of these plan to extend its reach global. This can only be achieved through networks such as SAP Ariba and ConnXus
Jon Stevens, Global Senior Vice President, Business Networks, SAP Ariba commented: “The most effective supply chains are global, flexible and innovative. Diversity is key to enabling such supply chains and together with ConnXus, we aim to help companies drive it.”
Companies investing in supplier diversity also see direct as well as indirect benefits. McKinsey & Company noted: “Our latest research finds that companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians.”
The Hackett Group also identified other benefits including that new revenue opportunities are opened up. That is especially the case when using suppliers in international markets that companies have previously not sold into. It creates a level of goodwill and economic prosperity that can end up being a two way relationship to regions.
For some companies this can also be a competitive differentiator as buyer look to their supplier CSR credentials. It can also help to attract new talent. Millennials often consider CSR factors in making employment decisions. McKinsey & Company also noted: ”Diversity is probably a competitive differentiator that shifts market share toward more diverse companies over time.”
SAP Ariba and ConnXus will bring together their two networks by developing API’s to connect the two. The full details of what features this integration will have are not yet available. Daryl Hammett, COO/Co-Owner, ConnXus commented: “In 2016 alone, over $10 million in RFP, RFI and RFQ events were distributed on the ConnXus platform by Fortune 2000 companies, reaching over 1.7 million diverse supplier certifications and company profiles.”
Those 1.7 million suppliers are held in the ConnXus Database. This is a searchable database and allows users to locate a supplier by factors including location, certifying agency, diversity classification. It isn’t yet clear what qualification these suppliers will have on the SAP Ariba network. There is also no mention on whether they will be validated by SAP as existing suppliers are. Users of SAP Ariba Discovery will in time be able to search on the ConnXus database to locate new suppliers to negotiate with.
The inference is that the connection will be two way. Buyers on both networks are able to post RFP, RFQ and RFI opportunities across the divide. For buyers and suppliers this is good news. Quentin McCorvey, Sr., President and Chief Operating Officer of M&R Distribution Services, a small, minority-owned firm connected to the Ariba Network commented: “There is often a stigma associated with awarding large contracts to small, minority-owned firms. I am not looking for a handout, I am looking for a handshake—an opportunity to earn the business of a customer. SAP Ariba provides me with a platform from which I can do this and I look forward to the expansion of their capabilities with ConnXus.”
Whether there is any duplication between the 1.7 million suppliers on ConnXus and SAP Ariba’s 2.5 million companies, isn’t known. It is likely that the combination will be significantly larger.
The impact of this agreement could be substantive for minority owned businesses. Rod Robinson, CEO, ConnXus commented: “Together, we can open up RFP, RFQ and RFI events to a wider pool of minority-, woman-, LGBT- and veteran-owned businesses and enable global supply chains to become more responsible, sustainable and inclusive.”
This gives SAP Ariba a step on Infor GTNexus and will be interesting to see what their competitor does. When we spoke to Guy Courtin, GT Nexus he believed that this network of networks was the direction that the industry would go. With this announcement SAP Ariba seems to have taken a lead over its rival. It will be interesting to see how GT Nexus respond and with what alliances.