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Measuring the Impact and Return on Investment for Supplier Diversity Initiatives

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Measuring the Impact and Return on Investment for Supplier Diversity Initiatives

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  1. <?xml version="1.0"?><AllQuestions /> <?xml version="1.0"?><Settings><answerBulletFormat>Numeric</answerBulletFormat><answerNowAutoInsert>No</answerNowAutoInsert><answerNowStyle>Explosion</answerNowStyle><answerNowText>Answer Now</answerNowText><chartColors>Use PowerPoint Color Scheme</chartColors><chartType>Horizontal</chartType><correctAnswerIndicator>Checkmark</correctAnswerIndicator><countdownAutoInsert>No</countdownAutoInsert><countdownSeconds>10</countdownSeconds><countdownSound>TicToc.wav</countdownSound><countdownStyle>Box</countdownStyle><gridAutoInsert>No</gridAutoInsert><gridFillStyle>Answered</gridFillStyle><gridFillColor>0,0,0</gridFillColor><gridOpacity>100%</gridOpacity><gridTextStyle>Keypad #</gridTextStyle><inputSource>Response Devices</inputSource><multipleResponseDivisor># of Responses</multipleResponseDivisor><participantsLeaderBoard>5</participantsLeaderBoard><percentageDecimalPlaces>0</percentageDecimalPlaces><responseCounterAutoInsert>No</responseCounterAutoInsert><responseCounterStyle>Oval</responseCounterStyle><responseCounterDisplayValue># of Votes Received</responseCounterDisplayValue><insertObjectUsingColor>Blue</insertObjectUsingColor><showResults>Yes</showResults><teamColors>User Defined</teamColors><teamIdentificationType>None</teamIdentificationType><teamScoringType>Voting pads only</teamScoringType><teamScoringDecimalPlaces>1</teamScoringDecimalPlaces><teamIdentificationItem></teamIdentificationItem><teamsLeaderBoard>5</teamsLeaderBoard><teamName1></teamName1><teamName2></teamName2><teamName3></teamName3><teamName4></teamName4><teamName5></teamName5><teamName6></teamName6><teamName7></teamName7><teamName8></teamName8><teamName9></teamName9><teamName10></teamName10><showControlBar>Slides with Get Feedback Objects</showControlBar><defaultCorrectPointValue>100</defaultCorrectPointValue><defaultIncorrectPointValue>0</defaultIncorrectPointValue><chartColor1>187,224,227</chartColor1><chartColor2>51,51,153</chartColor2><chartColor3>0,153,153</chartColor3><chartColor4>153,204,0</chartColor4><chartColor5>128,128,128</chartColor5><chartColor6>0,0,0</chartColor6><chartColor7>0,102,204</chartColor7><chartColor8>204,204,255</chartColor8><chartColor9>255,0,0</chartColor9><chartColor10>255,255,0</chartColor10><teamColor1>187,224,227</teamColor1><teamColor2>51,51,153</teamColor2><teamColor3>0,153,153</teamColor3><teamColor4>153,204,0</teamColor4><teamColor5>128,128,128</teamColor5><teamColor6>0,0,0</teamColor6><teamColor7>0,102,204</teamColor7><teamColor8>204,204,255</teamColor8><teamColor9>255,0,0</teamColor9><teamColor10>255,255,0</teamColor10><displayAnswerImagesDuringVote>Yes</displayAnswerImagesDuringVote><displayAnswerImagesWithResponses>Yes</displayAnswerImagesWithResponses><displayAnswerTextDuringVote>Yes</displayAnswerTextDuringVote><displayAnswerTextWithResponses>Yes</displayAnswerTextWithResponses><questionSlideID></questionSlideID><controlBarState>Expanded</controlBarState><isGridColorKnownColor>True</isGridColorKnownColor><gridColorName>Yellow</gridColorName><AutoRec></AutoRec><AutoRecTimeIntrvl></AutoRecTimeIntrvl><chartVotesView>Percentage</chartVotesView><chartLabelsColor>0,0,0</chartLabelsColor><isChartLabelColorKnownColor>True</isChartLabelColorKnownColor><chartLabelColorName>Black</chartLabelColorName><chartXAxisLabelType>Full Text</chartXAxisLabelType></Settings> <?xml version="1.0"?><AllAnswers /> Measuring the Impact and Return on Investment for Supplier Diversity Initiatives

  2. To view this presentation, visit: https://fs18.formsite.com/rlayton/form21/secure_index.html Reginald K. Layton Supplier Diversity & BusinessDevelopment Executive Director

  3. Today’s Discussion • Introduction • Value Proposition • Knowing what to measure • Surveillance Systems • The Impact Calculation • The ROI Calculation The alignment of strategy, resources and best practices enhances return on investment in supplier diversity initiatives

  4. Value Proposition… Why Bother?

  5. Our business expands with it Supplier Diversity Expands Our Revenue Johnson Controls has received $6 billion in new business by offering diverse business solutions to customers

  6. Our performance is enhanced with it Supplier Diversity Strengthens ourSupply Base

  7. Knowing What to Measure

  8. Knowing What to Measure

  9. Internal External Knowing What to Measure • Driving Forces: • Contribution to Sales • Enhancing customer satisfaction • Facilitating proactive responses to diversity subcontracting requirements • Enhancing customer relations in diversity sensitive markets • Contribution to Cost Savings • Enhances ability to meet customer diverse business expectations without sacrificing profits or increasing cost • Driving Forces: • Contribution to Brand • Develops stronger barriers against competitors with weak supplier diversity initiatives • Proactively differentiate ourselves from competitors • Proactively position ourselves as industry leaders Returns Zone Opportunistic Value Compass • Driving Forces: • Contribution to Sustainability • Meets needs of special interest consumer advocacy groups • Economically equips historically under-utilized population groups • Driving Forces: • Contribution to Supply Chain Efficiency when: • Incumbents have poor performance • Refuse to follow Johnson Controls’ business processes • Lack engineering/design capability • Refuse to participate in cost reduction strategies • Are located in unfavorable locations relative to our facilities Problem Resolution Impact Zone Layton Value Compass Model

  10. Internal External Knowing What to Measure • Driving Forces: • Contribution to Sales • Enhancing customer satisfaction • Facilitating proactive responses to diversity subcontracting requirements • Enhancing customer relations in diversity sensitive markets • Contribution to Cost Savings • Enhances ability to meet customer diverse business expectations withoutsacrificing profits or increasing cost • Driving Forces: • Contribution to Brand • Develops stronger barriers against competitors with weak supplier diversity initiatives • Proactively differentiate ourselves from competitors • Proactively position ourselves as industry leaders Returns Zone Opportunistic Value Compass • Driving Forces: • Contribution to Sustainability • Meets needs of special interest consumer advocacy groups • Economically equips historically under-utilized population groups • Driving Forces: • Contribution to Supply Chain Efficiency when: • Incumbents have poor performance • Refuse to follow Johnson Controls’ business processes • Lack engineering/design capability • Refuse to participate in cost reduction strategies • Are located in unfavorable locations relative to our facilities Problem Resolution Impact Zone Layton Value Compass Model

  11. Internal External Examples of What to Measure • Driving Forces: • Contribution to Sales • Diverse Spend • Supplier Diversity-based Sales Volume • Diverse spend on Customer Projects • Contribution to Cost Savings • Top Project Conversion to Diverse Suppliers • Driving Forces: • Contribution to Brand • Market Place Recognition • Association Engagement • Dual Certification Returns Zone Opportunistic Value Compass • Driving Forces: • Contribution to Sustainability • Wage & Salary Impact • Employment Impact • Diverse Supplier Executive Training • Corporate Plus Sponsorship • Multi-corporation Capacity Building • Mentor/Protégé • Driving Forces: • Contribution to Supply Chain Efficiency: • Profile System Usage • Supplier Profile Matches to Projects • Best Practice Implementation • Performance Awards • 2nd Tier • International Supplier Diversity Problem Resolution Impact Zone Layton Value Compass Model

  12. Billion Dollar Roundtable BDR is comprised of only 18 U.S. corporations that each spend more than $1 billion annually with minority- and women-owned businesses on a first tier basis.

  13. Knowing What to Measure

  14. Knowing What to Measure Chapters in BDR book provide excellent examples

  15. Internal External Knowing What to Measure • Driving Forces: • Contribution to Sales • Enhancing customer satisfaction • Facilitating proactive responses to diversity subcontracting requirements • Enhancing customer relations in diversity sensitive markets • Contribution to Cost Savings • Enhances ability to meet customer diverse business expectations without sacrificing profits or increasing cost • Driving Forces: • Contribution to Brand • Develops stronger barriers against competitors with weak supplier diversity initiatives • Proactively differentiate ourselves from competitors • Proactively position ourselves as industry leaders Returns Zone 1 3 Opportunistic 4 6 4 6 10 12 Value Compass 5 6 • Driving Forces: • Contribution to Sustainability • Meets needs of special interest consumer advocacy groups • Economically equips historically under-utilized population groups • Driving Forces: • Contribution to Supply Chain Efficiency when: • Incumbents have poor performance • Refuse to follow Johnson Controls’ business processes • Lack engineering/design capability • Refuse to participate in cost reduction strategies • Are located in unfavorable locations relative to our facilities Problem Resolution 4 1 3 5 6 8 10 12 Impact Zone Layton Value Compass Model Chapters in BDR book provide excellent examples

  16. Surveillance Systems • Anything you need to quantify can be measured in some way …that is superior to not measuring it at all. • Gilb’s Law

  17. Surveillance Systems (Advanced Dashboard) Spend Analysis Team Activity Supplier Development Targeted Opportunity Program Engagement Center Activity Profiles Reviewed Supplier Reviews Spend by Division Active Diverse Classifications Supplier Count Outreach Supplier Development International Strategy International Second Tier Stages

  18. Diverse Supplier Profile Segment Surveillance Systems (Up Close) Track number of minority, women and total number of employees Track sources of MBE registrations

  19. Impact Calculation

  20. Survey Data Economic impact of Johnson Controls’ diverse suppliers

  21. The ROI Calculation

  22. Supplier Diversity Program Cost Data Typical Annual Budget (Six Person Team) $1.35 Million Total [Gain from Investment (Contribution factor)] – Cost of Investment ROI = Cost of Investment

  23. ROI Calculation (over 15 year period) Return on Investment Formula: [Gain from Investment (Contribution factor)] – Cost of Investment ROI = Cost of Investment ROI = ROI + ROI + ROI Total Revenue Enhancement Cost Savings Value Compass Element |

  24. ROI Calculation (over 15 year period) Return on Investment Formula: [Gain from Investment (Contribution factor)] – Cost of Investment ROI = Cost of Investment [Incremental Revenue (Supplier Diversity Contribution)] – Supplier Diversity Budget ROI = Supplier Diversity Budget Say supplier diversity was just 1% of the contribution to incremental revenue $6 Billion x(1% Contribution Factor) - $9.5 million (15 years) ROI = $9.5 million Johnson Controls

  25. ROI Calculation (over 15 year period) Return on Investment Formula: [Gain from Investment (Contribution factor)] – Cost of Investment ROI = Cost of Investment [Incremental Cost Savings (Supplier Diversity Contribution)] – Supplier Diversity Budget ROI = Supplier Diversity Budget Say supplier diversity was just 1% of the contribution to incremental revenue $6 Billion x(1% Contribution Factor) - $9.5 million (15 years) ROI = $9.5 million Johnson Controls 526% = 35.06% per year ROI = 15 years Johnson Controls |

  26. Summary • Supplier Diversity transactions need to create value for a corporation and for society in a way that brings measurable economic benefits. • Diverse suppliers benefitting from corporate supplier diversity initiatives need be willing to disclose outcomes in terms of capacity after project implementations. • These metrics may include factors such as people employed, payroll amount increases, revenue growth, customer growth, and/or specific capability improvements and so on. Measuring Impact

  27. Summary • Supplier Diversity can help enhance value in terms of impact and return on investment • No investments….No return • Activities, gains and costs must be tracked and allocated to activities in order to benefit from value chain strategies Analyzing Impact and ROI for supplier diversity is possible The Impact and ROI problem is not as unique as you might think You have more data than you think You need less data than you think The analysis is simpler than you might think

  28. To view this presentation, visit: https://fs18.formsite.com/rlayton/form21/secure_index.html Reginald K. Layton Supplier Diversity & BusinessDevelopment Executive Director

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