A supplier diversity roundtable discussion with P&G

Don McKneely, founder and CEO of Busi­ness News Group, recently had the opportu­nity to sit down with Procter & Gamble’s Keith Harrison, global product supply offi­cer; Rick Hughes, vice president, global pur­chases; and Icy Williams, associate director, corporate supplier diversity, following P&G’s 13th Annual Supplier Diversity Awards Lun­cheon & Networking Symposium. He asked them about P&G’s continued commitment to diversity and the challenges corporations and MBEs face in the rapidly changing busi­ness environment.

KEITH HARRISON, GLOBAL PRODUCT SUPPLY OFFICER

MBN USA: As in previous years, P&G’s Awards Luncheon & Networking Sympo­sium includes leaders from numerous spend pools. In addition, much attention is given to rewarding these units for not only their spend, but also their involvement in supplier diversity. What is the driving force? How do you get so many members of the organization to accept ownership for P&G’s diversity com­mitment?

HARRISON: For P&G, diversity is a fundamental business strategy — our belief is that diversity will provide better decisions, product ideas, consumer insights and busi­ness results every single time. This includes diversity in our supplier base — and ensuring that we are using our external spend to drive economic inclusion in the U.S., which in turn enables broader ability and desire to purchas­es our products. Our company leadership — and our purchasing organization — under­stands this and feels a strong sense of owner­ship to deliver on our commitments to our stakeholders.

MBN USA: Much of your innovation comes from suppliers. In your keynote speech at the symposium, you mentioned a program titled, “Connect and Develop.” Briefly tell us how that works and which diverse suppliers contribute to it.

HARRISON: Connect & Develop is a term P&G coined several years ago with an eye to bring increasing innovation into P&G so we could in turn commercialize this to deliver consumer value. At first it started with product ideas that were partial­ly or fully formed, which we could com­mercialize quickly to better meet consumer needs. Over a few years this has grown to include connecting more broadly around the world and includes not only product ideas, but cost innovation ideas, supply chain innovation, commercial or business model innovations. Our key suppliers play a sig­nificant role in this effort, whether MBE or not. We have a goal that 50 percent of our innovations will come from external sources and fully expect 50 percent of those to come from our supplier base. Many of the MBEs who present at our supplier diversity celebration are engaged in deliver­ing innovation to businesses. It is an expec­tation of all of our suppliers.

MBN USA: What do you see are the chal­lenges, if any, in meeting your goal of a spend of $2.5 to $3 billion with diverse suppliers by 2010? What steps are being taken to achieve this goal?

HARRISON: There are many chal­lenges to accomplish our goals; they are very challenging goals that we have set. Probably most challenging will be to continue to engage MBEs in view of the changes that are occur­ring in our business — rapid cost increases, faster growth outside the U.S. than inside the U.S., the need to consolidate our supplier base, and the need to continue to eliminate waste and unnecessary costs in our supply networks. As we tell our MBEs, we’ll face challenging times in the future, and the best will get stronger and grow, and the suppliers who are not providing us with world-class supply capa­bility will likely not remain suppliers to P&G in the future.

RICK HUGHES, VICE PRESIDENT, GLOBAL PURCHASES

MBN USA: P&G’s spend with diverse suppliers remains strong and continues to grow. How have lower costs from other parts of the world affected P&G’s purchasing strate­gy and subsequently, diversity spend?

HUGHES: We have sourced products from all regions of the world since the early 1990s, so the concept of “global sourcing” is not a new one for P&G. We continue to source not just on price or cost but base sourcing deci­sions on total value, including factors such as total cost of ownership, innovation that a sup­plier provides, their service and responsiveness and quality of products/services provided, social responsibility principles, environmental impact. In many cases our MBEs provide us with the best value proposition. In other situa­tions, we may need to work with an MBE to improve their competitiveness in a world mar­ket. The industries and markets in which we buy are highly dynamic, so P&G needs to con­tinue to understand where the best value is, and ensure our suppliers do likewise.

MBN USA: In a March 2007 interview with MBN USA where you were featured as Chief Procurement Officer, you mentioned that diverse suppliers “were being positioned to join alliances and partnerships with foreign entities to source goods and materials over­seas, bring them to United States, add value and resell them to P&G.” How many suppliers have been successful in working within this global framework? What have been the bene­fits?

HUGHES: We have a number of suppli­ers where we have introduced them to non-
U.S. owned entities, and the MBE and foreigncompany have forged a working relationship. This takes a variety of forms — in some cases joint ventures are created, strategic alliances may result — or simply a strong customer-supplier linkage. This is occurring in every spend pool, and discussions are underway for a number of new opportunities for our MBE partners. The benefits range from access to technology that might have been otherwise unavailable, providing immediate access to a non-U.S. company to P&G or other U.S. busi­ness opportunities, cash/capital infusions, per­sonnel exchange opportunities, or enabling one partner or another to expand into an adja­cent business area.

MBN USA: P&G is known for having a world-class supplier diversity program. At a recent conference, P&G was named by other major corporations as one they would like to emulate. A strong driving force has been your emphasis on making your supplier base reflect your customer base. As you move to a more global presence, how are you accomplishing that goal?

HUGHES: P&G is focused on being the most in-touch company in the world. We invest more than $200 million a year in con­sumer research and interact with more than four million consumers annually to better understand how to meet their needs. We then communicate these consumer needs to our supplier base so they understand what is hap­pening in our markets — and why — and can respond accordingly. We have a growing port­folio of products in emerging geographies, so our supplier base is changing to reflect that growth. MBEs understand this and we are working with them to position themselves to be able to take advantage of that growth. Of course, our U.S. business is still large and has growth potential, so we continue to look for how we can connect the MBE spend to increase minority economic buying power to grow our business accordingly.

ICY WILLIAMS, ASSOCIATE DIRECTOR, CORPORATE SUPPLIER DIVERSITY

MBN USA: P&G has strong suppliers in a number of areas. How do you help these suppliers remain sustainable, but not rely too heavily upon P&G as a key customer?

WILLIAMS: Supplier diversity is a cor­porate imperative and maintaining a sustain­able supply base is important to achieving company business goals. Our diverse suppliers are part of the company supply network bring­ing products and services to our customers and consumers. Through our Purchasing organiza­tion we rely on utilizing our purchasing core skills and methodologies known to majority suppliers with our diverse supplier to build capacity, capability and diversification of busi­ness model. This integration drives supplier diversity into daily work for all and is not seen as extra work.

MBN USA: This symposium included a presentation by Melvin J. Gravely, based on his new book “Getting to the Next Level.” Clearly, this is a priority for P&G as it relates to its diverse suppliers. What do you believe are the most important pieces of information suppliers can gain from Mr. Gravely’s advice?

WILLIAMS: Rick Hughes stated, “We are facing challenging times, and the best will get stronger and grow, and the suppliers who are not providing us with world class supply capabilities will likely not remain in our sup­ply base.” Mel’s presentation dealt with all the elements of Rick’s statement and a key mes­sage from Mel was “It is not enough to be ‘me too,’ but sustainability is about being ‘me only.’”

MBN USA: Despite the emphasis on global suppliers, we know that P&G makes a concerted effort to maintain and even grow relationships with suppliers within your region to help grow the local (and state) economy. How is this done without denying the need to drive down costs?

WILLIAMS: Our local and national approach has the same emphasis; determine the total value and then source for the best sup­plier to meet the business need. Since P&G wanted to know and understand the local inclusion impact, we have developed a local supplier diversity plan that is tracked and reported on a quarterly basis as our national plan. Our local plan with diverse suppliers uti­lizes our same purchasing skills and method­ologies provided to national suppliers to build capacity and capability to ever changing busi­ness needs.