Supplier Diversity Reporting in Utility Industry
An year of perseverance, hard work, intense discussions and night outs has come to an end and the results, I would say, have been impressive. In fact, the go-live for this transformational ERP program was the smoothest one I have witnessed in my 10 year long career. The client was from utility industry located in Las Vegas & had a customer base of approximately 2 million including residential, commercial and industrial customers .They provided natural gas service to parts of Arizona, Nevada, and California. The program was to modernize the financial and supply chain systems along with providing a robust reporting solution which would not only meet their reporting needs but also cater to the various regulatory reporting requirements of the utility industry. I was very closely involved in various aspects of developing a reporting solution for the client and the area of reporting which caught my attention was 'Diversity Reporting'. In this blog I will try to explain what Supplier Diversity Reporting is all about and how we addressed these reporting needs for our client.
Supplier Diversity - A historical background
It all started off in the early 1950's when the US government started its initiatives as a part of affirmative action and set-aside program wherein a percentage of all its contract spend was set aside for socially and economically disadvantaged groups. By 1970's this translated into benefits, in terms of lucrative contracts, to all private contractors who would subcontract a part of their work to these disadvantaged groups. These kind of governmental action in turn triggered private players to come into this as well. Slowly several organizations were developed to help minorities in the world of business.
Primary Diver - Utility Supplier Diversity Program (California Public Utilities Commission)
In the utility industry too there were several organizations which were formed by state governments and one such entity was the California Public Utilities Commission (CPUC). Utility companies operating in the West/South West USA and serving any part of California are regulated by CPUC. One of the key programs launched and monitored closely by CPUC is Utility Supplier Diversity Program. The primary goal of this program is to ensure that each of the participating utilities procure at least 21.5% of its procurement from women, minority and disabled veteran-owned business enterprises.
Impact on Procure-To-Pay (P2P) Process
Having understood the background about the importance of supplier diversity, let us look at how it impacts the P2P process for an organization.
Supplier On-Boarding: The first step towards ensuring appropriate diversity spend is to ensure that the supplier base of an organization is adequately diverse. To achieve this the organization has to proactively reach out to such supplier groups and make it easier for them to get enrolled as a supplier with the organization. It is in this context that tools like Oracle iSupplier portal helps immensely. Not only does it ensure that such diverse suppliers (who do not have the financial wherewithal to implement EDI/XML based infrastructure) are easily on-boarded, but also helps in capturing their diversity business classification along with their certifying agency information and the certification expiration dates.
Sourcing Process: Apart from having a streamlined supplier on-boarding mechanism, another aspect which enables diverse supplier spend is the visibility of the supplier information during the sourcing. Oracle sourcing allows the sourcing buyer to research on the supplier background (diversity classification, past invitations sent to a supplier, past awards to a supplier) and take proactive measures to invite suppliers from diverse backgrounds. When coupled with Sourcing optimization, the evaluation team can run various simulations based on supplier diversity to ensure the right mix of Suppliers are awarded the contract. Moreover buyers can include the supplier business classification as a scoring criteria for the quote evaluation.
Enable Reporting : Based on the above information which becomes available in a centralized place and the actual purchasing , invoicing and payment data organizations can draw reports which can help them track their diversity spends on a monthly, quarterly and yearly basis. Some of the commonly prevalent reporting areas which we implemented for our client to enable achieving the appropriate diversity spend are explained below.
Diversity Reports/Reporting Areas
a) Diverse Supplier Spend Report: This report is primarily a summary report which helps organizations to monitor product spend versus services spend for individual/all suppliers for a given time duration. It also provides the capability to filter suppliers belonging to specific diverse categories (Women, Minority, Small Business, and Disabled Veteran). Besides this, the report gives us a percentage figure which compares the diverse spend to the total spend by the organization which helps an organization to closely track their diversity spends.
b) Diverse Supplier Spend Report by Division: The purpose of this report is to track the dollars spent on minority sub-types (like Hispanic, Asian, African American etc.) across various divisions in an organization. The report further divides the dollars spent into men and women owned. These kind of reports help an organization to determine the focus areas for sourcing their goods and services.
c) Diverse Supplier Invoices Report: This is a detailed report which provides information pertaining to individual invoices and PO's that make up the dollar spent on individual diverse suppliers. It also provides the certifying agency information along with the diversity classification for each supplier.
d) Supplier Diversity Certifying Agencies Report: This report helps in tracking individual diverse supplier payments made during specified time duration along with the certifying agency name which certified the supplier. It provides the flexibility to get the listing of all suppliers certified by a particular agency as well.
e) Diverse Supplier Certification Tracking Report: It is not only enough for an organization to collate information pertaining to diversity certification, but also important to track the diversity certificate expiry for its diverse suppliers. This will enable obtaining the latest certification documents from these suppliers and avoid the risk of incorrect spend classification. Diverse Supplier Certification report helps in tracking this information with an option to run the report for a specified date range.