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What’s the Difference Between a Tier I and a Tier II Supplier Diversity Spend?

As many know, XONEX Relocation is proud to be certified by the Women’s Business Enterprise National Council as a Women’s Business Enterprise. I’m lucky enough to get to go to all the conferences. It’s a great group of people and we learn a lot from each other about supplier diversity and its impact on organizations. As such, I get asked a lot of questions about Tier I and Tier II supplier diversity spending in organizations. So much so that I recently wrote a whitepaper on supplier diversity trends. We received a lot of good feedback and it dawned on me that a blog post on Tier I and Tier II spending would be of interest to our blog readers. 

The reason why there are so many questions about tier spending in diversity programs is because so many more companies are starting to acknowledge  that  supplier diversity spending is strategic. It opens doors to different talent, benefits communities and opens companies up to new networks. As companies realize the benefits of supplier diversity programs, more are moving to incorporating both Tier I and Tier II spends.

A Tier I supplier diversity spend represents the direct relationship between a company and its diverse supplier. A Tier II spend, however, counts for when the company’s direct supplier contracts with other diverse suppliers and reports that spend back to the company. The number of suppliers that a company chooses to use has no bounds and, if those companies also have a supplier diversity program, then the growth can be substantial.

More companies are including Tier II spending in their supplier diversity goals in an attempt to find more ways to grow their supplier diversity programs. Further, by putting some of the responsibility for diversity on suppliers, companies take some of the pressure off of the procurement and supplier diversity departments. Further, the web like nature of Tier II spends open up more networks, in more places, much more quickly for the business.

To illustrate how important the Tier II spend is becoming, I was recently at a Women’s Business Enterprise National Council (WBENC) conference and I stopped by the BMW booth to have a quick chat.  I was happy to hear that they would be hosting their second annual Tier 1 Supplier Diversity Matchmaker Conference. The goal for this event is to deliver a concept that broadens the message of supplier diversity to Tier 1 automotive suppliers and showcases BMW’s commitment to supplier diversity. The event would also include information about Tier II spending, as well as encouragement for BMW’s suppliers to embrace supplier diversity in their own businesses.  I was impressed at their dedication and understanding that their global success comes from committed partners who understand that supporting inclusive procurement and supplier development opportunities will lead to future success.

So that, in a nut shell, is what tiered supplier diversity spending is all about. Stay tuned for more information as the trend continues to grow.

Do you have a supplier diversity program? Please share your take below.

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RICK CALANNI
VP of Business Development Northeast Region

 

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