Why Marsh McLennan Thinks Supplier Diversity Should Be Your Procurement Strategy

A lack of supplier diversity data and insights and lack of verified diversity claims, these are just a few challenges most companies faced when diversifying their procurement suppliers. In fact, only 13.2% of companies in 2022 had global supplier diversity programs.

Since 2021, 68% of organisations have faced strong pressure for supplier diversification. From stakeholders to consumers, the pressure for companies to diversify their procurement activities is on the rise, greatly driven by a global standpoint for ESG.

In this exclusive Q&A with Tim Richter, Director – Global Sourcing & Head of Asia, Pacific & India at Marsh McLennan, we dive into the top questions surrounding supplier diversification in Australia. The category expansion of supplier diversity into disabled-veteran owned business and other trends that are shaping the landscape, and the effectiveness of leveraging on external sources for guidance and networking, we're unravelling it all here! 

Complete the sentence…. “Supplier diversity is more relevant and necessary than ever before..."

Because it promotes inclusivity, drives innovation, and enhances business resilience. In today's globalised and interconnected world, supplier diversity plays a crucial role in creating a more equitable and sustainable business environment.”

Inclusivity: By providing opportunities for underrepresented groups, such as minority-owned, women-owned, and veteran-owned businesses, and by actively seeking out and engaging with diverse suppliers, organisations can contribute to economic empowerment and social progress.

Innovation: By bringing in fresh perspectives, ideas and solutions in the form of unique products, services, and approaches, diverse suppliers often help organisations differentiate themselves in the market and meet the evolving needs of customers.

Business resilience: By reducing dependence on a limited pool of suppliers and diversifying their supplier base, organisations can mitigate risks associated with disruptions in the supply chain, such as natural disasters, geopolitical tensions or economic downturns.

What trends are you seeing right now in supplier diversity?

I am observing several trends in supplier diversity that are shaping the landscape.

Expansion of supplier diversity beyond traditional categories: While minority-owned (predominantly indigenous-owned in Australia) and women-owned businesses have been the primary focus of supplier diversity initiatives, there is a shift towards including other diverse categories such as LGBTIQ+ owned businesses, disabled veteran-owned businesses, and businesses owned by individuals from diverse cultural backgrounds.

Supplier development and capacity building: Organisations are recognising the importance of not only sourcing from diverse suppliers but also supporting their growth and development. Supplier development programs are being implemented to provide training, mentoring and access to resources that help diverse suppliers enhance their capabilities and competitiveness.

Data-driven approach: There is a growing emphasis on data collection and analysis to measure the impact and effectiveness of supplier diversity programs. Organisations are leveraging technology and analytics to track supplier diversity metrics, identify areas for improvement, and make data-driven decisions.

Integration of supplier diversity into corporate social responsibility (CSR): Supplier diversity is increasingly being integrated into broader CSR strategies. Organisations are aligning their supplier diversity efforts with their sustainability goals, community engagement initiatives, and diversity and inclusion strategies. At Marsh McLennan we call our code of conduct ‘The Greater Good’. You can read more about it here: Marsh McLennan's Code of Conduct

How can diverse suppliers assist in meeting supply chain gaps?

Diverse suppliers can play a crucial role in meeting supply chain gaps in several ways.

Local and regional knowledge: Diverse suppliers, particularly those from underrepresented communities, often have a deep understanding of local or regional markets. This knowledge can be invaluable in navigating complex supply chain challenges, such as sourcing local materials, complying with local regulations, or understanding cultural nuances. By leveraging the local knowledge of diverse suppliers, organisations can bridge supply chain gaps and establish a stronger presence in new markets.

Enhanced innovation and creativity: Diverse suppliers bring unique perspectives, experiences and ideas to the table. Their diverse backgrounds and expertise can lead to innovative solutions and approaches that address supply chain gaps. By engaging with diverse suppliers, organisations can tap into their creativity and leverage their unique insights to develop new products, services and processes.

Flexibility and agility: Diverse suppliers, especially smaller businesses, are often more agile and flexible in their operations. They can quickly adapt to changing market conditions, respond to unforeseen disruptions and provide faster turnaround times. This agility can help organisations address supply chain gaps and maintain business continuity in dynamic and uncertain environments.

Increased resilience and risk mitigation: Diversifying the supplier base by including different suppliers can enhance supply chain resilience. By reducing dependence on a limited pool of suppliers, organisations can mitigate risks associated with disruptions, such as natural disasters, geopolitical tensions or economic downturns. Diverse suppliers can provide alternative sources of supply, ensuring continuity of critical products or services.

Innovation is the lifeblood of every company, can you tell us about your Supplier Diversity Program?

Marsh McLennan has a global Supplier Diversity Program, which my team and I run locally. It has been successful for various reasons.

Commitment and leadership: A successful Supplier Diversity Program starts with a clear commitment from senior leadership at Marsh McLennan to promote diversity and inclusion within the supply chain. This commitment sets the tone for the entire program and ensures its integration into the company's overall strategy.

Policy and goals: Marsh McLennan has a formal policy that outlines the company's commitment to supplier diversity. The policy includes specific goals and targets for increasing the participation of diverse suppliers in the supply chain.

Supplier identification and certification: The program involves identifying and certifying diverse suppliers. This includes minority-owned, women-owned, veteran-owned, LGBTIQ+ owned, disabled veteran-owned, and other diverse businesses. Certification processes vary depending on the region.

Reporting and measurement: Marsh McLennan has established metrics and tracking systems to measure the progress and impact of the Supplier Diversity Program. Regular reporting on supplier diversity spend, contract awards and other relevant metrics helps monitor the program's effectiveness and identify areas for improvement.

Collaboration and partnerships: Marsh McLennan collaborates with external organisations, such as supplier diversity advocacy groups, industry associations and government agencies to gain insights, resources and networking opportunities that support the program's success. For example, here in Australia we are a member of Supply Nation.

It can be challenging to put these ideas into practice. From your experience, what has helped you move from strategy to execution?

Over and above the factors previously outlined (see question 4), I would also include Communication. We have taken a deliberate approach to building messages that tell a story; creating collateral that can support our message to more colleagues, making these available through multiple channels and allowing us to build greater momentum with the program over time. In fact, in the early years of our journey here in Australia, we have been able to almost double our diverse supplier spend each year over the last 5 years. The compounding effect is phenomenal.

From your perspective, what are the biggest current barriers to supplier diversity in the marketplace?

From my perspective, some of the biggest current barriers to supplier diversity in the marketplace include,

Complex certification processes: Certification processes for diverse suppliers can vary across regions and industries, and they can be complex and time-consuming. The requirements and costs associated with certification (as opposed to classification) may pose challenges for smaller or newer diverse businesses, limiting their ability to participate in supplier diversity programs. Wouldn’t it be great if we had a global standard on certifications?

Capacity and resources: Some diverse suppliers may face challenges in building the necessary capacity and resources to meet the requirements of larger contracts or to compete with more established suppliers. Limited access to capital, technology, training and mentorship can hinder supplier growth and competitiveness.

Implicit bias and stereotypes: Unconscious biases and stereotypes can influence decision-making processes, potentially leading to the underrepresentation of diverse suppliers. Preconceived notions about their capabilities, reliability or scalability can create barriers to their inclusion in procurement opportunities.

Limited access to opportunities: Diverse suppliers often face challenges in accessing procurement opportunities, especially in industries or sectors where established relationships and networks play a significant role. Limited access to information about bidding processes, contract opportunities and supplier databases can create barriers for diverse suppliers.

Addressing these barriers requires a multi-faceted approach involving streamlined certification processes, targeted capacity-building programs, inclusive procurement practices and collaborative efforts among stakeholders. By actively working to overcome these barriers, organisations can foster a more inclusive and diverse supplier base, driving positive change in the marketplace.

What advice do you have for companies that have limited procurement staff or are just getting started in supplier diversity?

For companies with limited procurement staff or those starting to consider supplier diversity, here are some key pieces of advice.

Start small and scale up: Begin by focusing on a specific category or area where supplier diversity can have a meaningful impact. Starting small allows you to gain experience, refine processes and build momentum before expanding your efforts to other areas of procurement.

Leverage external resources: Seek external resources and partnerships to support your supplier diversity efforts. Collaborate with supplier diversity advocacy organisations, industry association, and government agencies that can provide guidance, best practice and networking opportunities.

Educate and raise awareness: Invest in educating your procurement staff and key stakeholders about the importance and benefits of supplier diversity. Provide training sessions, workshops and resources to help enhance their understanding and commitment to the initiative.

Measure and report progress: Establish metrics and tracking mechanisms to measure and report on your supplier diversity progress. Regularly communicate your achievements and challenges to internal stakeholders and external partners to demonstrate your commitment and drive accountability.

Remember, supplier diversity is a journey, and it takes time to build relationships, refine processes and drive meaningful change. By taking these steps and remaining committed to the initiative, companies with limited procurement staff or those starting out can make significant progress in advancing supplier diversity within their organisations. So, don’t wait, go for it!

You are speaking at this year’s ProcureCon Australia event. Can you share what the audience can expect to hear from you and what excites you about this event?

Yes, I am speaking at ProcureCon Australia on the topic of supplier diversity, and if you’ve read this far, you’ll know what to expect to hear from me.

I believe supplier diversity is not just a moral imperative but also a strategic advantage. It enables organisations to build stronger relationships, foster innovation and ensure long-term sustainability in an increasingly diverse and interconnected business landscape. I believe that supplier diversity is more relevant and necessary than ever before. In today's business landscape, organisations are recognising the importance of diversity and inclusion in all aspects of their operations, including their supply chains.

What excites me about events like ProcureCon Australia is that they provide valuable opportunities for professionals in the procurement field to come together, share knowledge and learn from industry experts. The event offers a platform for networking, exchanging ideas, and staying updated on the latest trends and best practices in procurement. It can be an exciting and enriching experience for attendees to gain insights, engage in discussions and enhance their professional development in the procurement space.

I look forward to meeting everyone at this year’s ProcureCon.

Hear more from Tim Richter at Hilton, Sydney, Australia, on 14 May, 3:30PM "Knowledge Café 1: How to increase diversity with your suppliers?". Find out more here