CEO’s Desk: Driving Corporate Supplier Diversity: One Spend Category at a Time

 

Author: ConnXus Founder and CEO Rod Robinson

Rod

When we launched ConnXus 5 years ago this month, we had no products, no customers, no supplier database to speak of, and two employees, including yours truly.

Today, we have more than a dozen employees, and our growing list of enterprise customers include some of the most recognized corporate brands on the planet. ConnXus provides a suite of technology-enabled solutions that help them better manage their supplier relationships as well as collect & manage data, track, monitor and report diversity spend activity at multiple levels of the supply chain.

The growth of our enterprise SaaS (software-as-a-service) business model has led to us building a database of nearly 2 million of the approximately 15 million diverse businesses in the United States.

But, how useful is it to have information on 2 million diverse suppliers when most major corporations only have 5,000 – 10,000 total active suppliers at any time?

This is when a new a way thinking can create change. Through our work, we’ve learned more about the many great diverse suppliers that serve our enterprise customers. Those suppliers are capable of real growth by serving even more of our customers.

Growing a Diverse Supplier Base: Pick a Category

One of our enterprise customers recently launched an initiative to increase diversity spend across numerous professional services categories including Information Technology (IT), a category worth tens of millions in annual spend. They realized that of the nearly 100 IT firms they were doing business with, only 5 were diverse.

With a database of nearly 2 million diverse suppliers across hundreds of spend categories, our IT category consists of 12 subcategories, including staff augmentation, consulting, software, information management and data services.

A quick search of the ConnXus database revealed a total 1,035 diverse IT providers nationally. After applying search filters based on our customer’s requirements, we ultimately identified nearly 300 firms qualified to do business with this specific customer, as well as for several others with similar requirements.

Our customer is now positioned to more competitively bid out IT projects to a broader set suppliers. That will ultimately lead to increased diversity spend, higher quality and lower cost.

It was truly gratifying to later learn that our enterprise customer has already started to engage with a handful of these firms regarding future opportunities. We look forward to replicating this across other high value categories. As I reflect back to the beginning of ConnXus, such value creating “ConnXions” was always the ultimate goal.

8 Questions Your Small Business Clients Should Ask When Seeking Capital: Question 1: What kind of lender are you?

 

Publishing Note: This is part one of an 8-part small business financing blog series in partnership with The Business Backer.This blog series will clear the financial fog, providing you with the tools necessary to make the best financing decision for your diverse or woman-owned small business.

Each blog will address a key question you should ask potential funders before accepting a deal. Making an informed financing decision can help you avoid the traps and find the right partner for your business.

 

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Question 1: What kind of lender are you?

Like many businesses in the world, there are lenders who work hard to deliver good solutions for their clients’ best interests, but there are others who don’t. Let’s first define these groups:

BROKERS

A broker is a third party sales office whose primary job is to bring together lenders and borrowers. Brokers find business owners in need of funding, collect their information and shop the deal to multiple funders. Seems like a good idea in theory; the business owner saves time by hiring someone else to do their research and comes out with the best deal in the market. The problem is finding a trustworthy broker who will do just that. While there are reputable brokers out there who put the business owner’s interest first, some will push deals that are much larger than the business owner originally wanted or can afford, simply to collect a larger commission. Others will conveniently leave out that they are, in fact, brokers and not direct lenders. Added commissions charged to the business owner can be as much as 20% and these are often hidden in blended invoices.

DIRECT FUNDING COMPANIES

Direct funding companies remove the middleman and work with the business owners directly for their funding needs. Direct funding companies typically offer a specific financing product built for businesses within their ideal credit box. Credit models, approved industries, deal amounts, terms and fees vary from funder to funder, which can make the search for the right product very time consuming. Compared to the lengthy paperwork and approval process required by traditional lenders, direct funding companies can typically provide approvals and funding within a matter of days with little to no paperwork.

NEW – FINANCING FACILITATOR

Facilitators are direct funding companies with the capabilities to not only provide direct funding themselves, but can also facilitate funding from partner funding companies, credit unions, banks and SBA lenders. Unlike brokers, facilitators not only have a network of partners representing the full spectrum of lending options available for their small business customers, but they also are a direct lender themselves. Facilitators evaluate the credit profile and borrowing circumstances of the small business to determine the best options. For instance, your clients may be “bankable,” just not with the bank where they currently hold their business deposits. There could be banks in other areas of the country that will welcome these clients, even if their current bank does not. By managing these partner relationships and staying up-to-date on new options and policy changes, facilitators can offer a variety of options to business owners so they can make an educated decision on their financing.

Whether your clients choose to work with a broker, direct funding company or financing facilitator, understanding who they are working with and what to expect are the first steps to finding the right financing option. Understanding their lender’s process and asking these questions before any agreement is sent can save a lot of time, headaches and money.

Stay tuned for next month’s question – What fees are involved?

4 Trends in Supplier Diversity Reporting & Risk Management

 

Author: CEO and Founder Rod Robinson

Rod

You’d be hard pressed to find a major corporation today that doesn’t have some form of supplier diversity initiative. And a key component of supplier diversity programs is the periodic reporting of progress against established goals and objectives. As more organizations move from compliance-driven to market-driven programs, they’re raising the bar in program investment, management, marketing and reporting of performance metrics.

These corporate trendsetters provide their investors, board members, government agencies and other stakeholders real value: a baseline from which to evaluate and benchmark supplier diversity program performance and impact.

In my nearly 20 years in supply chain & procurement as both a management consultant and former CPO, I have had the unique opportunity to witness an evolution in supplier diversity reporting among the best companies. This evolution has resulted in a shift from unsophisticated, manual processes that limited scale and data accuracy to more scalable, technology enabled processes that greatly improve data accuracy and reliability. Based on what I am seeing in the market, I strongly believe this trend will continue.

Here are four key trends driving increased sophistication in supplier diversity reporting:

1. Comprehensive quantitative disclosure requirements will become the norm for domestic publically traded companies.

In April 2014, New York City Comptroller Scott Stringer, on behalf of the New York City Pension Funds, wrote the Funds’ largest holdings, including Apple, Pfizer, Oracle and American Express, asking them to disclose performance figures on their supplier diversity programs. The announcement further stated that 90% of S&P 100 companies have supplier diversity programs, but less than half of that group discloses data on program performance (NYC Comptroller Calls For Greater Supplier Diversity at 20 of NYC Pension Funds’ Largest Holdings).

The letter requested that companies disclose – annually — qualitative and quantitative performance data that sheds light on program effectiveness. Specifically:

  • To disclose their annual spend with diverse suppliers in both real terms and as a percentage of their total supplier spend, preferably by category;
  • To establish and disclose quantitative performance goals for their supplier diversity program and annual progress toward achieving these goals; and
  • To describe ways in which supplier diversity goals are reinforced throughout the organization, including for example, through (a) oversight by senior management and the board of directors and (b) specific compensation incentives for employees, managers and senior executives

My initial reaction to this news was, Wow! That’s strong. But considering the significant diverse representation of pension fund participants, these requests are quite reasonable. Connecticut followed a similar path, but went a step further by recently filing a shareholder resolution demanding that Monster Beverage appoint a female or minority board member.

This isn’t an anomaly. The diversity disclosure demands of large public investors, investment advisors and custodians will continue to increase. Meanwhile, corporate supplier diversity program metrics will be evaluated and benchmarked just like any other key performance indicator. As it should be.

2. Increased focus on supplier diversity spend data integrity.

Increased disclosure requirements come with increased data scrutiny. The Dodd-Frank Act requires six federal regulators, including the Securities and Exchange Commission, to assess the diversity practices of regulated entities, including publically traded companies. As such, the accuracy and reliability of supplier diversity status and spend data will be critical.

3. Diverse supplier relationship management as a model for broader supplier relationship & risk management.

Many best practices supplier diversity companies require diverse suppliers to register on a dedicated portal that is the entry point into a database. This portal captures relevant supplier qualification data including valid diversity certification documents. While this provides companies with great visibility into their diverse supplier base, non-diverse suppliers are typically not required to register on a portal that provides such transparency.

There is no better example of why this level of transparency will be required for all suppliers in the future than the financial services industry. According to an MQ article, the increase in regulatory scrutiny stemming from the global financial crisis has now reached beyond banks, to the companies that supply them. The Consumer Financial Protection Bureau (CFPB) and other regulators are holding financial institutions responsible for the actions of their suppliers. In 2012, several big name banks paid a total of more than $500 million to settle complaints resulting from the actions of third-party suppliers (“Managing when vendor and supplier risk becomes your own,” July 2013).

4. Heightened focus on Tier2 spend tracking & reporting.

Many best practices companies leverage technology applications to collect, track and analyze the relevant diversity spend of several of their prime suppliers. This benefits the company in a couple of key ways. First, the company gets credit for the direct diversity spend associated with its contract with the prime and an allocation of indirect spend. Second, the company gains visibility to new diverse suppliers that may become primes in the future.

In light of expected increased regulatory scrutiny and more focus around supplier risk management, some companies are starting to use their Tier 2 program as a basis for increasing broader supply chain transparency beyond supplier diversity. Some are even looking to track down to the Tier 3 level and beyond.

Why not? The more information that a company can have about its key suppliers (and their suppliers) the better. Technology removes the limitations that may have existed in years past.

8 Questions Your Small Business Clients Should Ask When Seeking Capital: Question 2: What fees are involved?

 

This is part two of an 8-part small business financing blog series in partnership with The Business Backer. This blog series will clear the financial fog, providing you with the tools necessary to make the best financing decision for your diverse or woman-owned small business.

Last month we introduced you to the state of small business lending and the first question your clients should ask when seeking financing: What kind of lender are you?

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Let’s dive into the next question:

Question 2: What fees are involved?

Hidden fees are commonplace in the consumer world, tacked on to a wide variety of purchases including airline tickets, cell phone plans, and medical treatments. Another frequent example is cable and internet service; we’ve all heard something about the Comcast debacle. It’s no surprise these fees are also common in the unregulated small business lending space. The truth is that some fees are necessary, such as those that intend to cover risk or services needed to process the loan. Other fees are completely frivolous and do not supplement anything except the broker’s or lender’s pockets.

HOW BAD IS IT?

With new lenders and brokers opening their doors every day and more capital available in the market for small businesses than ever before, the fight for the lowest rate is a cut-throat battle. The desperation to gain market share while continuing to make a profit has led some lenders and brokers to add unnecessary “fees,” which allows them to post a lower rate than the competition to earn business despite charging more. Fees may be disclosed and defined or they could be included within a blended, lump sum cost in the agreement, which is extremely confusing to the client.

Read More Here.

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