The best‐practice supplier diversity program at Caterpillar

Abstract

Purpose -The purpose of this paper is to profile the successful implementation of a corporate-wide supplier diversity program utilized by Caterpillar, Inc., one of the Fortune 500 companies. Caterpillar's supplier diversity program can be a blue-print for other companies which would like to accomplish the corporate mission of promoting the free enterprise system by prohibiting restraints of trade, unfair practices, reciprocity, or abuse of economic power. Design/methodology/approach -To comply with stricter government regulations demanding a diverse supplier base and match a supplier base to changing customer demographics, a growing number of purchasing organizations have launched supplier diversity programs. Despite such a trend and abundant theory about the supplier diversity program, there is a paucity of case-based research that can explain what it takes to become a supplier diversity champion. To fill the void left by previous studies, the paper conducted an in-depth analysis of Capterpillar's best-practices and unearthed its secret behind the success. Findings -Through Caterpillar's case, it was found that a supplier diversity program could not only help save sourcing cost, but also enhance quality at the source. Thus, it offers long-term competitive advantages. Also, a key to the successful supplier diversity program is the buying firm's ability to adapt to new cultural change that breaks the ties with "good old boys networks". Originality/value -The paper elaborated on six different strategic initiatives that provided equal contractual opportunity to historically underutilized but qualified suppliers such as small, small disadvantaged, or women-owned small businesses and leveraged such opportunity to create a strategic sourcing advantage. Other organizations that wish to develop supplier diversity programs may consider these strategic initiatives and emulate Caterpillar's success.

How Buyers' Attitudes Toward Supplier Diversity Affect Their Expenditures with Ethnic Minority Businesses

“…From an economic perspective, supplier diversity is the apparatus by which LPOs can obtain valuable product and process insights from EMBs, which can help them obtain a sustainable competitive edge over their competitors that utilize more homogenous, typically White‐owned suppliers that may not necessarily be in tune with what minority consumers desire (Adobor & McMullen, 2007, 2014; Slater, Weigand, & Zwirlein, 2008). The literature also states that EMBs can be more flexible and provide lower minimum‐order quantities in a cost‐effective manner and quicker turnaround times as compared to larger firms, which improves supply chain efficiency while also reducing risk for LPO buyers (Min, 2009). A recent study in the U.K. also found that minority firms have significant innovation to offer potential LPO customers (Nathan, 2015).…”

Organizational implications of a comprehensive approach for cloud-storage sourcing

“…Multi-sourcing improves up-stream order-volume flexibility that might be needed due to unforeseen demand surges (Ramasesh et al 1991). Supplier diversity could stem from other factors as well (e.g., complying with governmental regulation), as given in Min (2009). At the same time, too many service providers increase administrative costs and prevent the development of a long-term partnership (Dahel 2003).…”

Supplier Developmet: Theories and Practices

“…Here they found that such diversity in supplier base is beneficial for buyer. They also found that culture of organization plays major role on supplier diversity and organizations with constructive cultures for diversity had higher minority sourcing and organization with defensive culture have less minority sourcing [58].…”